Hitachi Integrated Report 2017
Year ended March 31, 2017

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 and financial 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 andtrends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause
actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based uponcurrent assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as ofthe 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 and equipment
investment in Hitachi’s major markets, particularly Japan, Asia, the United Statesand Europe, as well as levels of demand in the major industrial sectors Hitachi
serves;• exchange rate fluctuations of the yen against other currencies in which Hitachi
makes significant sales or in which Hitachi’s assets and liabilities are denominated;• uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or
long-term financing;• uncertainty as to general market price levels for equity securities, declines in which
may require Hitachi to write down equity securities that it holds;• fluctuations in the price of raw materials including, without limitation, petroleum andother materials, such as copper, steel, aluminum, synthetic resins, rare metals andrare-earth minerals, or shortages of materials, parts and components;• the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term
contracts for which Hitachi uses the percentage-of-completion method to recognize
revenue from sales;• credit conditions of Hitachi’s customers and suppliers;• fluctuations in product demand and industry capacity;• uncertainty as to Hitachi’s ability to implement measures to reduce the potential
negative impact of fluctuations in product demand, exchange rates and/or price ofraw materials or shortages of materials, parts and components;• uncertainty as to Hitachi’s ability to continue to develop and market products thatincorporate new technologies on a timely and cost-effective basis and to achievemarket acceptance for such products;• increased commoditization of and intensifying price competition for products;• uncertainty as to Hitachi’s ability to attract and retain skilled personnel;• uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy tostrengthen its Social Innovation Business;• uncertainty as to the success of acquisitions of other companies, joint ventures andstrategic alliances and the possibility of incurring related expenses;

Hitachi, Ltd. Integrated Report 2017

• uncertainty as to the success of restructuring efforts to improve management
efficiency by divesting or otherwise exiting underperforming businesses and tostrengthen competitiveness;• the potential for significant losses on Hitachi’s investments in equity-method
associates and joint ventures;• general socioeconomic and political conditions and the regulatory and tradeenvironment of countries where Hitachi conducts business, particularly Japan,
Asia, the United States and Europe, including, without limitation, direct or indirect
restrictions by other nations on imports and differences in commercial andbusiness customs including, without limitation, contract terms and conditions andlabor relations;• uncertainty as to the success of cost structure overhaul;• uncertainty as to Hitachi’s access to, or ability to protect, certain
intellectual property;• uncertainty as to the outcome of litigation, regulatory investigations and other legal
proceedings of which the Company, its subsidiaries or its equity-method associates
and joint ventures have become or may become parties;• the possibility of incurring expenses resulting from any defects in products orservices of Hitachi;• the possibility of disruption of Hitachi’s operations by natural disasters such as
earthquakes and tsunamis, the spread of infectious diseases, and geopolitical andsocial instability such as terrorism and conflict;• uncertainty as to Hitachi’s ability to maintain the integrity of its information systems,
as well as Hitachi’s ability to protect its confidential information or that of its
customers; and• uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its
employee benefit-related costs.
The factors listed above are not all-inclusive and are in addition to other factors
contained in other materials published by Hitachi.

Contents
02-03

Hitachi’s History of Transformation

04-07

Our Business Model

08-13

CEO Message

14-17

Strategic Focus
Moving Forward with the 2018 Mid-term Management Plan

18-27

Value Creation
Case 01 Lumada
Case 02 Robotics
Case 03 Water

28-45

Management & GovernanceIndependent Outside Directors/Directors/Executive Officers/
Corporate Governance/Risk Management/Compliance/
Messages from Independent Outside Directors

46-79

Performance
Financial
Environmental
Societal

80-81

Corporate Data / Stock Information

CASE 01

CASE 02

CASE 03

LumadaRobotics

Water

Hitachi, Ltd. Integrated Report 20171

Hitachi’s History of Transformation (From Fiscal 2007)
Before Fiscal 20092012 Mid-term Management Plan

Financial Crisis
Registered Biggest-Ever
Annual Loss

Achieved Stable
Management Base

• Made five listed companies* wholly
owned consolidated subsidiaries* Hitachi Information Systems, Hitachi Software
Engineering, Hitachi Systems & Services, Hitachi Plant
Technologies, and Hitachi Maxell• Withdrew from consumer PC business• Raised funds through the issuance of
new shares• Transferred businesses in LCD panelsand hard disk drives• Stopped in-house production offlat-panel TVs• Started Hitachi Smart Transformation
Project to reform cost structure• Increased number of non-Japanese
directors, independent outside directors
became majority• Introduced in-house company system(Billions of yen)
10,00020.6%(Adjusted) Operating income (left scale)
EBIT*1 (left scale)EPS*2 (right scale)Total Hitachi, Ltd. stockholders’ equity ratio

18.8%

8,000

14.3%

15.7%

11.2%
6,000

4,000

2,000

0

–2,000–4,000

2007

2008

2009

2010

*1 Earnings before interest and taxes: Income (loss) from continuing operations before income tax, less interest income, plus interest charges.
*2 Earnings per share.
*3 Figures are US GAAP through fiscal 2012, with IFRS being introduced in fiscal 2013.

2

Hitachi, Ltd. Integrated Report 20172011

2015 Mid-term Management Plan

Achieved Growthand Reform• Achieved new record high in adjusted
operating income and EBIT
• Achieved new record high in operating
cash flow margin (for Manufacturing,Services and Others.)

2018 Mid-term Management Plan

Becoming an Innovation Partner
for the IoT Era
1 Accelerating the Social Innovation Business• Strengthen four focus business domains• Launch Lumada IoT platform and reinforce in-house
implementation structure• Strengthen Hitachi’s Front functions• Expand product and digital solutions business in North
America through customer channels obtained throughSullair acquisition• Established joint venture with Mitsubishi
Heavy Industries, Ltd. in thermal power
generation systems business• Hitachi Data Systems Corporation acquired
Pentaho Corporation, a big-data analytics
software company in the United States

2 Strengthening the Management Base
• Accelerate decision making through the introduction of
the business unit (BU) system• Close or streamline low profitability businesses• Review the capitalization policies of such Group
companies as Hitachi Transport System, Ltd.,
Hitachi Capital Corporation, and Hitachi Koki Co., Ltd.

• Established a joint venture with Johnson
Controls Inc. in the air-conditioning
systems business• Acquired the signaling and rolling stock
operations of Finmeccanica S.p.A.
(now Leonardo S.p.A.)

(Yen)

30.7%

150

24.0%

23.7%

21.2%

21.8%
120

90

60

30

0

–210

2012

2013

2014

2015

2016

–240
(FY)

IFRS＊3

Hitachi, Ltd. Integrated Report 20173

OUR BUSINESS MODELOUR FOUNDATION
Hitachi’s business is supported by shared company values that have stood the testof time and by collaborative creation with its stakeholders.

46–79

PERFORMANCE

Ready to Engage in Collaborative Creation
Revenues*1

9,162.2

Net income attributable to Hitachi, Ltd.
stockholders*1
billion yen

R&D expenditures*1

323.9

231.2

billion yen

Number of patents owned*3

billion yen

Consolidated number of employees*2

303,887

93,992Business locations in

68

Total assets*2

9,663.9

Open innovation (research collaboration)
partners*465 research institutes outside Japan
243 research institutes in Japan
Instilling of the Hitachi Group Identity
in employees

countries and regions*5

78.8%*1 Fiscal 2016 figures.
*2 Numbers as of the end of March 2017.
*3 Number of patents owned in Japan, the United States, China, Germany, and South Korea as of the end of December 2016.
*4 Open innovation is Hitachi s attempt to go beyond organizational frameworks and create broadly shared bodies of knowledge and technology toward
the development of new technologies and products. These figures are for industrial-academic R&D partnerships, as of fiscal 2016.
*5 Hitachi, Ltd. and consolidated subsidiary business locations (as of the end of March 2017).

Hitachi Group Identity
Throughout its 100 year history, the Hitachi Group has passed on its Mission and its Values to generations of
employees and external stakeholders.
The Vision has been created based on the Mission and the Values.
It is an expression of what the Hitachi Group aims to become in the future.

4

Hitachi, Ltd. Integrated Report 2017

billion yen

OUR STRATEGYAn Innovation Partner for the IoT Era
Under the 2018 Mid-term Management Plan, Hitachi will accelerate collaborative
creation with customers and partners through the advanced Social Innovation
Business, with a focus on the trend toward digitalization that is significantly changing
society and industry. Leveraging three strengths—the operational technology wehave amassed since our founding, IT, and products/systems—we deliver innovations
to society and customers.

14–17

STRATEGIC FOCUS

Four Focus Business Domains

Growth Strategies and Investments

Front
Power/Energy

Industry/Distribution/Water

Nuclear Energy
Power
Energy Solutions

Industry & Distribution
Water

Urban

Building Systems
Railway Systems
Urban Solutions

Finance/Public/Healthcare

Finance Systems
Government, Public
Corporation & Social
Infrastructure
Healthcare
Defense Systems

Platform

IoT Platform

Products
Social Infrastructure & Industrial Systems

Industrial Products

5

Automotive Systems

Hitachi Automotive Systems, Ltd.
Clarion Co., Ltd.

Electronic Systems & Equipment

Construction Machinery

Hitachi High-Technologies Corporation
Hitachi Kokusai Electric Inc.

Hitachi Construction Machinery Co., Ltd.

Smart Life & Ecofriendly Systems

Hitachi Appliances, Inc.
Hitachi Consumer Marketing, Inc.

High Functional Materials & Components

Hitachi Metals, Ltd.
Hitachi Chemical Company, Ltd.

OUR VALUE CREATION
Creating value to fulfill our Mission—contributing to society through the developmentof superior, original technology and products—has underpinned our businessdevelopment for more than a century. Hitachi’s R&D program focuses on products
and services that help to resolve social issues.

18–27

VALUE CREATIONKey Business Segments for Social Contributions
Information & Telecommunication Systems
Hitachi provides IT services that address customers’ diverse needs by combining Hitachi’s
extensive expertise in a diverse range of business fields, including financial services, withadvanced information technology. Our services cover the entire life cycle of systems, ranging fromconsulting to system integration, operation, maintenance, and other support.

To help resolve issues confronting society and our customers, we provide IT solutions to support datautilization on a global basis.
A storage system

Locations of our business operations:

Over

100

countries and regions

Social Infrastructure & Industrial Systems
Hitachi has a long and proven track record of high reliability in supporting people’s daily lives
through such products and services as rolling stock and train management systems, power plants
and transmission and distribution systems, elevators and escalators, and water solutions. It alsooffers industrial solutions and equipment to enhance the sophistication of production facilities.
Hitachi utilizes digital technologies to provide optimum solutions in addressing the issues anddiversifying needs of customers worldwide.
Through our OT (operational technology) and IT, Hitachi offers comprehensive water solutions on
a global scale, such as seawater desalination equipment, monitoring and control systems, design andconstruction of water treatment plants, and operation and maintenance of plants.
A seawater desalination system

Installation of water solutions:

1,800

sites

Electronic Systems & Equipment
Drawing on the Hitachi Group’s advanced technologies, Hitachi provides systems supporting theinformation society, including semiconductor manufacturing equipment, measurement and analysis
equipment, broadcasting and video systems, and healthcare solutions that support healthy lifestyles.

Particle therapy mitigates the burden on the body and allows patients to maintain their qualityof life, and it is expected to make its mark in pediatric oncology, which entails great physical strain.
The global share of Hitachi’s highly reliable particle therapy system has been rising.
Hokkaido University Hospital’s particle beamcancer therapy system

Number of operating particle therapy facilities:

3 in Japan, 4 in the United States(as of June 30, 2017)6

Construction Machinery
Leveraging decades of technological expertise and know-how, Hitachi offers solutions that address
the needs of a broad range of industries, including civil engineering and construction, building andstructural demolition, and mining and excavation. Hitachi also handles the sale, servicing, andmaintenance of hydraulic excavators and other construction machinery to provide integrated
solutions globally.
Hitachi Construction Machinery’s hydraulic excavators, wheel loaders, and dump trucks are used atconstruction sites and mines around the world.

Hitachi Construction Machinery’s ultralarge
hydraulic excavator and mining dump truck

Global share of hydraulic mining excavator market:

Approximately

30%

High Functional Materials & Components
Hitachi draws on its wealth of technological expertise and know-how to provide a variety of materials
and components—such as semiconductor- and display-related materials, synthetic resin products,
specialty steels, magnetic materials, casting components, and wires and cables—that enableadvanced functions in products for such sectors as autos, IT and consumer electronics, and industrial
and social infrastructure. Business operations are focused in Asia, North America, and Europe.
Hitachi Chemical’s molded plastic rear door module achieves a substantial reduction inweight compared to conventional steel products. Japan’s first plastic rear door module(according to Hitachi Chemical findings) has been made into reality, taking advantage ofresin’s superior workability to enable designs not possible with steel without sacrificing
rigidity and strength.
Hitachi Chemical’s molded plastic rear door module

Weight of molded plastic rear door module:

30% reduction(compared to steel)Automotive Systems
To contribute to the realization of an affluent society by creating new value-added systems,
products, and services through the harmonization of people, vehicles, and society, Hitachi isaccelerating its technological development in the fields of environment and safety. We will further
develop our Advanced Vehicle Control System, integrating our safety and information technologies
with the Hitachi Group’s social infrastructure services to meet society’s needs for environmental
conservation, accident elimination, and traffic congestion reduction.
Hitachi Automotive Systems’ air flow sensor is widely used by automakers around the world andcommands the highest global share. It accurately measures the volume and temperature of the air
intake and contributes to a more efficient engine.
Hitachi Automotive Systems’ air flow sensor

Global share of air flow sensor market:

Approximately40%(as of March 31, 2016)

Smart Life & Ecofriendly Systems
Hitachi’s home appliances, lighting and housing equipment, and refrigerating and air-conditioning
solutions deliver new value and lifestyle innovations to society and people around the world.
Hitachi also helps reduce environmental impact by making an ongoing effort to improve products’energy efficiency.

Hitachi Appliances markets various home appliances products in over 120 countries and regions. By
providing home appliances in accordance with each country’s and region’s needs, we continue tocontribute to improving quality of life.
Hitachi Appliances’ robot cleaner “minimaru”

Home appliance products:

Sold in Over120

countries and regions

Note: We conduct a broad range of business activities from product development to production, sales, and servicing in eight segments in all, including “Others,” in addition to the above.
Hitachi, Ltd. Integrated Report 2017

7

CEO
MESSAGE
Toshiaki Higashihara
President & CEO

In fiscal 2017, Hitachi shifts into high gear. Our Social
Innovation Business will leverage our digital technology tocreate new value around the world.

“What kind of company will Hitachi be ten years from now?”
My thoughts on this topic are clear: “Hitachi must be the kind of company whose very
name is synonymous with innovation.”
Hitachi delivers innovations that answer society’s challenges. With our talented team andproven experience in global markets, we can inspire the world. This is our Vision, and it is
up to us to make it a reality—to help establish a sustainable global society through ourbusiness operations.

8

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Shifting into high gear

CEO Message

Hitachi is currently moving forward with its 2018 Mid-term Management Plan, targetingfiscal 2018. In the first year of the plan, fiscal 2016, we enacted a range of reforms to lay astrong foundation for future growth. Strong organic growth in individual businesses drove
revenues, adjusted operating income, EBIT, and net income attributable to Hitachi, Ltd.
stockholders to levels exceeding the forecasts we announced at the beginning of the fiscal
year. The company’s ROA* and free cash flow have improved, and all promises made to themarket have been fulfilled.

Fiscal 2016 Results and Fiscal 2017 Projections

FY 2016

FY 2017 (plan)

9,162.2

9,050.0

Adjusted operating income

587.3

630.0

Ratio to revenues

6.4%

7.0%

EBIT

475.1

580.0

Ratio to revenues

5.2%

6.4%

Net income attributable to

231.2

300.0

Revenues

Strategic Focus

Billions of yen

Hitachi, Ltd. stockholders

Management & GovernanceValue Creation

Internal reforms included work on the selection and concentration of businesses. We
made decisive progress on deconsolidating our three listed subsidiaries (Hitachi Transport
System, Ltd., Hitachi Capital Corporation, and Hitachi Koki Co., Ltd.) and enacting
structural reforms for less profitable businesses. We also continued our transition from a
product-out organizational structure to a market-driven one, and our launch of the Lumada
IoT platform will enable us to create enormous new value moving forward.
In fact, we are currently redesigning our entire business model around the axis of
Lumada. Many businesses around the world provide consulting, products, or system
integration (SI) separately, but we believe that only Hitachi can deliver full, end-to-end
solutions, from exploring customer issues to constructing and maintaining actual systems.
Our shareholders tell us that they agree with this assessment of our strengths and ourapproach to reform. They are voicing their approval of our strategic direction and urging us
to move swiftly toward realizing its potential. We are determined to live up to these
expectations. In fiscal 2017, we will shift into high gear, accelerating our activities in arange of fields globally in order to leap ahead.

Hitachi, Ltd. Integrated Report 20179

Performance* ROA (Return on assets) = Net income ÷ Total assets (Average between the end of the current fiscal year and the end of the previous fiscal year) x 100

Optimizing our business portfolio with a redesigned balance sheet
In Hitachi’s last Integrated Report, I wrote of the clear distinction we saw between businesses tobe reinforced and those to move away from, and promised that we would focus on leveraging
our digital technology in our Social Innovation Business. To keep that promise, in fiscal 2016 we
assessed which businesses we would need to move away from, including through divestituresof our listed subsidiaries. As we shift into high gear for fiscal 2017, we will remain focused on
the synergies within the Hitachi Group and maintain a medium- to long-term perspective as ourambitious M&A initiatives add to our corporate value.
Our 2018 Mid-term Management Plan includes investment expenses of 1 trillion yen, nearly
double the equivalent figure in the previous plan. We are proud of the superior human capitaland technology that we already command, but one of our pressing challenges is to further
strengthen our resources and develop maintenance businesses as opportunities expand anddigitalization progresses in regions where we have not yet established a significant presence.
This will be one of the issues informing our strategic M&A activity going forward.
Our acquisition of the US air compressor manufacturer Sullair in July 2017 is an excellent
example of intra-Group synergy of this sort. Sullair has a customer base of around 4,000
companies, and we are now well positioned to offer these companies not only existing Hitachi
products but also new digital solutions incorporating Lumada. To take another example,
Hitachi’s purchase of the UK elevator sales, installation, maintenance, and servicing company
Temple Lifts Ltd. will allow us to strongly expand our elevator business, previously centeredaround China and Japan, into the United Kingdom and the rest of Europe—another step
toward global growth.
Of course, if each business unit and company within the Group pursues its own profit andengages in its own M&A activity in isolation, this will not necessarily improve the efficiency of thebalance sheet of the Group as a whole. Recognizing this, in April 2017 Hitachi established an
Investment Strategy Division directly under the CEO to coordinate and optimize asset allocationand efficiency for all Hitachi businesses. This division will examine investment opportunities andset priorities in accordance with companywide strategies.
In this uncertain age, Hitachi will also strive to implement rigorous risk management responsive
to global trends—for example, establishing an energy mix sensitive to geopolitical risks andenvironmental problems. Another high priority will be redesigning our balance sheet alongsidecontinuous review of our portfolio to ensure they continue to meet current requirements.
10

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Uniting the Hitachi Group for stronger cash-generating capability

Strategic Focus

CEO Message

Alongside these Group-wide efforts to optimize our business portfolio and redesign our balance
sheet, I believe that the mindset of our employees regarding costs and cash is also vital to ourongoing development.
Hitachi has historically been steeped in a mindset oriented toward monozukuri, meaningawareness of issues such as the need to reduce manufacturing costs at the factory level.
As a global company, however, we must earn and generate cash if we are to surpass ourcompetitors. It did not seem to me that sufficient attention was paid to this within the company.
To convey my focus in this area, I have been holding town hall meetings for employees at
locations around the world. Three years have now passed since I became president, and I feelthat my ideas have taken firm root throughout the company. As Hitachi prepares to shift toward
its Social Innovation Business leveraging digital technology, it is gratifying to see a significant
improvement in employee awareness of costs and cash—not to mention a new determination to
pursue improvements in these areas.
Currently, with the Hitachi Smart Transformation Project, we are benchmarking our global
competitors’ cost structure targets for each business in order to plan ways to maximize ourgross margin and optimize selling, general, and administrative (SG&A) expenses, and to improve
our cash conversion cycle (CCC) across manufacturing, services, and other areas of ourbusiness. Moving forward, by leveraging digital technology through Lumada, we will advanceour visualization and optimization of work processes across the entire Group, with the goal offurther transforming cost structures and enhancing our cash-generation capabilities.

Hitachi Smart Transformation Project

70 days

Reduced lead time by sharing order
receipt information between Frontand manufacturing divisions.

FY 2016

26.0%

FY 2018

Over

28%

Reduced costs of purchased items
through cost design from the designand development stage.

C/F
Improvement

FY 2016

19.6%

FY 2018

20%

Value Creation

72.2 days

FY 2018

SG&A Expenses to Revenues

Standardized operations to control
increase in SG&A resulting fromstrengthening Front.

Management & Governance

FY 2016Gross Margin

P/L
Improvement

Hitachi, Ltd. Integrated Report 201711

Performance

CCCPursuing shareholder returns with stronger corporate governanceThis increased awareness of cash generation among Hitachi’s employees can partly be
attributed to the stronger structure of the Board of Directors. Our shareholders have come totake an increasing interest in governance in recent years, from the monitoring and auditing
functions of the Board of Directors to its members’ effectiveness and management transparency.
We are proud of our proactive approach to corporate governance. In 2012, we established ourguidelines three years before Japan’s national Corporate Governance Code was released, andwe continue to pursue meaningful improvement to our governance. For example, dismissal of
the CEO and selection of a successor were added to the duties of the directors in 2016. Our
independent outside directors come from many different countries and boast front-line
experience in a range of fields. Naturally, they also hold Hitachi to global standards in areas
such as profitability and strategy execution. Their observations during Board discussions arealways stimulating, and they offer clear prescriptions to help Hitachi win globally—for example,
executing certain initiatives more rapidly to address conditions at low-performing businesses. It
is palpably clear that a positive cycle is being established, in which the Board’s objectives are
effectively communicated to the executive officers, including myself, who put those objectives
into effect in business operations.
Regarding shareholder return, our 2018 Mid-term Management Plan pursues this alongside
investment for future growth. The plan sets a hard goal of reaching 400 billion yen in annual net
income in fiscal 2018. In addition to that steady expansion, we are pursuing cash-flow reform toachieve stable growth in the dividend per share as the core of our approach to generateshareholder return. In fiscal 2016, we introduced stock options as a part of compensation
packages, allowing management to share the benefits and risks of stock-price movements evenmore closely with shareholders. Taking a medium- to long-term perspective, we aim to realize
further sustainable improvements in corporate and shareholder value.

Hitachi’s sustainability management
The task of a business has traditionally been to increase profits and give back to shareholders
and society. On the other hand, businesses today are also expected to achieve symbiosis withsociety—to manage sustainability. In 2015, the United Nations identified 17 Sustainable
Development Goals (SDGs)* targeting the most pressing issues that face the global community.
The following year, the groundbreaking Paris Agreement entered into force, aiming to enhance
global efforts to mitigate climate change and its effects. Clearly, companies are being asked toplay an ever-greater role in resolving global-scale issues through their business activities.
Hitachi’s Social Innovation Business is exactly this—sustainability management throughbusiness activities, considering the human experience and the global environment from along-term perspective and aiming to realize a sustainable society and improved quality of life.
We will continue to lead in responding to the issues facing society through our Social Innovation
Business as we actively contribute to achieving the SDGs and other global targets.

* Adopted by the United Nations in September 2015, the SDGs consist of 17 goals and 169 targets.

12

Hitachi, Ltd. Integrated Report 2017

Our Business Model

THE FUTURE IS OPEN TO SUGGESTIONSManagement & GovernanceValue Creation

Strategic Focus

CEO Message“What is a ‘Social Innovation Business’?”
After we declared that we would focus on our Social Innovation Business, which combines
our strengths in OT (operational technology), IT, and products, this became another question I
was frequently asked by customers and shareholders. In the seven years since that announcement, our Social Innovation Business has chalked up a sustained and undeniable record ofsuccess. As we enter the IoT era, with digital technology and innovation already combining totransform the structure of business and manufacturing, our Social Innovation Business is
attracting more attention than ever. OT has been one of Hitachi’s strengths since its founding.
Our IT experience, too, has been cultivated for more than 50 years. Our Social Innovation
Business fuses these with digital technologies like big data analysis and AI, arousing highexpectations in the market. We see this as our past achievements and current initiatives bear
fruit globally.
In April 2017, as part of building a medium- to long-term foundation for our Social Innovation
Business, we established a Future Investment Division. Questions around how to improve ourcorporate value or how to develop the human capital to give us the leadership we will need in the
future are vital, but they cannot be answered without an understanding of the tides ofnext-generation technology and social change, or an exploration of which fields Hitachi should
strengthen its presence in over the longer term in response to these trends. The Future
Investment Division was created to meet this challenge by considering such matters in a unified
approach across multiple projects. Within the division, leaders from multiple projects including
cutting-edge robotics and AI work alongside project members, creating the innovations andbusinesses needed to drive the company’s next generation while still upholding the “pioneer
spirit” that has been part of Hitachi since the company’s founding.
Hitachi is a gathering of professionals with diverse experience, knowledge, skills, and ideas.
It is also a company with numerous businesses and productlines that make the world better. As CEO of Hitachi, byleveraging those strengths into One Hitachi, I will develop
the company into one which always goes one step beyond
when creating value.
The slogan of Hitachi’s current global brand campaign is
THE FUTURE IS OPEN TO SUGGESTIONS. This represents
our determination to contribute to building the future throughopen innovation arising from collaborative creation with ourcustomers and partners.
I invite you to keep watching Hitachi as we shift intohigh gear to leap ahead.
August 2017

Hitachi, Ltd. Integrated Report 201713

Performance

Toshiaki Higashihara
President & CEO
Hitachi, Ltd.

STRATEGIC
FOCUS
Moving Forward with the 2018 Mid-termManagement Plan

1 Major Fiscal 2016 Results
2 Making Steady Progress
3 Growth Strategies for Fiscal 2018

in Four Focus Business Domains
4 Strengthening the Front
5 Further Strengthening Lumada
6 Global Business Expansion
7 Deepening Our Engagement in theSocial Innovation BusinessIn fiscal 2016, Hitachi, Ltd. cleared its targets for revenues, adjusted operating income, EBIT, and net
income attributable to Hitachi, Ltd. stockholders.*1 The foundation is now clearly in place for further
growth into the future.
Building on the approaches put in place during fiscal 2016, the company will now pursue further
development of its Social Innovation Business, aiming to become an Innovation Partner for the IoT Era.

1 Major Fiscal 2016 Results
Promoting the
Empowerment of GrowthBusinesses

Launched Lumada IoT platform and reinforced in-house
implementation structure.
Strengthened on a priority basis four focus business domains.

Focus Business Domains

Business

Power/Energy

Power

Developed and started trial operation of 5.2 MW offshore wind power
generation system.
Accelerated the expansion of wind power business in Japan and Asia.

Social Infrastructure &Industrial Systems

Railway

Made smooth progress in integration of Hitachi Rail Italy S.p.A. andcontinued collaboration with Ansaldo STS S.p.A.
Implemented measures to achieve over 10% annual growth in global
railway business.

Social Infrastructure &Industrial Systems

Building

Completed development of standardized elevators for Asia and the
Middle East.
Expanded business by strengthening sales and maintenance bases in
Asia, the Middle East, and Europe.

Social Infrastructure &Industrial Systems

Financial

Utilized blocchain and other emerging technologies in Asia market.
Achieved steady growth of SI financial sector business in Japan.

Information &Telecommunication
Systems

Urban

Finance/Public/
Healthcare

Business Segments

Selection andConcentration of Hitachi
Businesses

Reviewed the capitalization policies of such Group companies as
Hitachi Transport System, Ltd., Hitachi Capital Corporation, andHitachi Koki Co., Ltd.

Business Structure
Reforms

Implemented of business structure reforms, such as closure andstreamlining of low profitability businesses (e.g., communication
products, overseas plant EPC* 2), resulting in an improvement ofapproximately 40 billion yen in operating income over fiscal 2015.

*1 Targets set for the first phase of the 2018 Mid-term Management Plan, with results measured as of May 2016.
*2 EPC: Engineering, procurement, and construction.

14

Hitachi, Ltd. Integrated Report 2017

Revenues

Adjusted Operating Income
Ratio(trillion yen)

10.0

Net Income Attributable to
Hitachi, Ltd. Stockholders

(%)

(%)

Over
8.0

10.0

9.1

EBIT Ratio

6.3

Our Business Model

2 Making Steady Progress(billion yen)

Over
8.0

Over
400.0

6.4
5.3

5.2

231.2
172.1

FY 2018(target)FY 2015 FY 2016

Our Growing Front Business(Front Revenue Ratio)

FY 2018(target)Global Business Expansion(Overseas Revenue Ratio)

(%)

36

40

38

FY 2015 FY 2016

Over
55
48

FY 2015 FY 2016

Stronger Cash Generation(Operating Cash-Flow Margin)*1

(%)

Over
9.0

8.6

48

FY 2018(target)FY 2018(target)CEO Message

FY 2015 FY 2016

Asset Profitability
Improvement (ROA)*1 *2

(%)

(%)

Over
5.0

7.1
3.3

FY 2015 FY 2016

FY 2018(target)FY 2015 FY 2016

FY 2018(target)FY 2015 FY 2016

FY 2018(target)FY 2015 FY 2016

Strategic Focus

2.6

FY 2018(target)Annual Exchange Rates
Average Annual Rate

FY 2015

FY 2016

FY 2018 (forecast)

JPY/USD

120

108

110

JPY/EUR

133

119

120

*1 Figures for Manufacturing, Services and Others.
*2 Return on assets (ROA) = [Net income] ÷ [Total assets (average from end of previous to end of current fiscal year)] × 100.

4,000.0 billion yen

8%(FY 2016 result)(FY 2018 target)(FY 2018 target)

Power/Energy

Industry/Distribution/Water

Urban

Finance/Public/Healthcare

Revenues (billion yen)

Revenues (billion yen)

Revenues (billion yen)

Revenues (billion yen)

1,460.0

1,320.0

1,238.6

1,083.8
495.7
FY 2016590.0

FY 2018(target)We are addressing electric power
reforms in Japan, including retail market
liberalization and unbundling of power
generation and transmission, as well as
the distributed power and renewableenergy fields.

Platform/Products

703.0

770.0

FY 2016

FY 2018(target)We are engaging in plant optimization andrebuilding supply chains using digitaltechnologies.

Revenues (billion yen)

FY 2016

FY 2018(target)We aim to enhance quality of life by putting
digital technologies to use to achievecommunities with convenient, comfortable,
and eco-friendly lifestyles.

Management & Governance

Adjusted operating income ratio

3,521.3 billion yen

FY 2016

FY 2018(target)We pursue growth through FinTech andsolutions ready for Japan’s “My
Number” taxpayer ID system.

Adjusted operating income ratio

6,714.5

7,160.0

8%(FY 2016 result)(FY 2018 target)(FY 2018 target)
Hitachi, Ltd. Integrated Report 201715

Performance

Revenues

Front

Value Creation

3 Growth Strategies for Fiscal 2018 in Four Focus Business Domains

4 Strengthening the Front
To accelerate the global expansion of its Social Innovation Business, Hitachi is strengthening the
Front functions of its operations, the point where it provides value directly to customers.
Establishment of the global front
Establish “global front” management organization launched in April 2017 to accelerate global expansion of Social
Innovation Business.

New employment
Consultants, system engineers, maintenance personnel, other resources newly employed (1,000 in Japan, 1,000
overseas in fiscal 2016).

Human resource training
Global front staffing increased, staff development accelerated through building of global certification system.

M&A to strengthen Front functions
Business growth through M&As to strengthen Front functions, targeting customer channels, maintenance sites,
product business, and other areas.
Investments to Strengthen Front
Italy

Ansaldo STS

November 2015

Turnkey business entry, expansion of global business

TurkeyKurt & Kurt

April 2017

Medical device sales expansion in Europe, Middle EastUSA

Sullair

July 2017

Acquisition of US customer channels and business expansion

UK

Temple Lifts

April 2017

Elevator maintenance business entry in Europe

5 Further Strengthening Lumada
Hitachi is making full use of OT (operational technology) and IT as it builds out its Social
Innovation Business to provide advanced infrastructural systems on a global scale.
In May 2016, Hitachi began offering Lumada, its IoT platform that helps drive the Social
Innovation Business, to customers.
Strengthening
Our Digital andLumada Businesses
End-to-End, Integrated Solutions

Open Ecosystems

Global Front

Strengthening the Front
on a Global Scale

Americas

Growth Strategies
in Four Focus Domains

Power/Energy		

EMEA/CIS

APAC

China

Industry/Distribution/
Urban
Water		

Japan

Finance/Public/
Healthcare

Lumada represents a distillation of the deep OT- and IT-driven solutions that Hitachi has
brought to market over many years.
Through collaborative creation with customers, we provide them with end-to-end solutions
covering everything from analysis of management issues to buildout planning, value verification,
rollout of equipment and systems, and operation and maintenance.
Furthermore, by building a track record of use cases with wide applicability, both from internal
company cases and from collaborative creation cases launched with customers and partnercompanies, we are accelerating our provision of value to customers.
16

Hitachi, Ltd. Integrated Report 2017

Europe

FY 2016 Revenues

FY 2018 Revenues

0.97 trillion yen

1.15 trillion yen

NorthAmerica
Automotive systems
Industrial products
Urban mobility

China
Elevators/escalators
Healthcare
Construction machinery

FY 2016 Revenues

FY 2018 Revenues

0.93 trillion yen

1.1 trillion yen

Asia

FY 2016 Revenues

FY 2018 Revenues

1.14 trillion yen

1.46 trillion yen

Finance (FinTech)
Industrial products

FY 2016 Revenues

FY 2018 Revenues

0.93 trillion yen

1.22 trillion yen

CEO Message

Railway systems
Nuclear energy
Energy solutions

Our Business Model

6 Global Business Expansion

FY 2016 Revenues

FY 2018 Revenues

48% (actual)

55% (target)
Strategic Focus

Overseas Revenues Ratio

7 Deepening Our Engagement in the Social Innovation BusinessContributing to the Achievement of the SDGs* Through the Social Innovation Business

Management & GovernanceValue Creation

Hitachi will contribute to the achievement of
the United Nations Sustainable Development
Goals (SDGs), which came into force inJanuary 2016, through its Social Innovation
Business by broadening our perspective oncommon global issues and gaining a deeper
awareness of those issues.
Initiatives have already begun, as various
business units (BUs) have launchedworkshops aimed at enhancing understanding
26–27 Value Creation Case 03: Waterof the SDGs.
As a company engaged in many different
businesses, we are in a good position to makea broad contribution to reaching the SDGs,
and we plan henceforth to undertake concretedeliberations on specific initiatives.
* Adopted by the United Nations in September 2015, the SDGs consist of 17

Hitachi, Ltd. Integrated Report 201717

Performancegoals and 169 targets.

VALUE
CREATION

CASE 01

OUR INSIGHT AND STRATEGY
Becoming an Innovation Partner for the IoT Era is a key part of Hitachi’s 2018 Mid-termManagement Plan. The Lumada IoT platform will help Hitachi pursue new value throughcollaborative creation with customers.

New Value Through Collaborative Creation
with Customers
Across the world, from North America to Europe andChina, the creation of innovation through digitaltechnology is accelerating. In Japan, too, as part of its“Society 5.0” program,*1 the government has taken thelead in driving a revolution in services and business andtransformation of industry structure through digitalization.
Amid these rapid changes, in May 2016 Hitachi launchedthe Lumada* 2 IoT platform. Based on the two key ideas ofcollaborative creation and connections, Lumada isdesigned to create value through the company’s Social
Innovation Business by connecting customer value chains
and resolving business issues.
Lumada is a distillation of Hitachi’s rich and extensive
experience in OT (operational technology) and IT solutions,and as such is Flexible, Intelligent, Composable, andSecure. Recognizing that customers usually prefer to makethe best possible use of systems that are already deployed
and operational, we have prioritized composability as aparticular strength: the ability to flexibly combine Lumada

with existing systems. Lumada is also easy to link withother IoT platforms and systems, allowing it to support a
broad range of industries and customer cases. That
Lumada is made up of proven, commercialized, and highly
trustworthy technology is another advantage. This
technology includes Pentaho, an integrated analysis
software package that can bring together diverse datastored in a variety of formats and apply analysis frommultiple perspectives, and Hitachi AI Technology/H, amultipurpose AI.
*1 Society 5.0: An umbrella term for several related initiatives designed to createa Super Smart Society that will respond to social needs efficiently andmeticulously by merging cyberspace and the physical realm at a high level.
The term implies a revolution driven by innovations in science and technology
creating a successor to the hunter-gatherer, pastoral-agrarian, industrial, andinformation-based models of society.
*2 Lumada: A name created by combining the words illuminate and data,
reflecting the fact that Lumada sheds light on large quantities of data to reveal
hidden connections and provide customers with valuable business insights.

The Lumada IoT Platform
FlexibleIntelligent

OT Assets
Machine Data

Edge

Stream Data
Processing
HSDP*3
Device Control

SecureIT Assets

IoT Platform Lumada

Data Collection

Human Data

Composable

Analytics

StudioPentaho
Artificial Intelligence
AT/H*4

Dashboard Builder
Workflow Designer
Core

Business Data

Asset Avatars (Assets’ Digital Twins) *5
Data Lake HCP *6
Foundry
HAF/EDC Execution Management Infrastructure*7*3 HSDP: Hitachi Streaming Data Platform. *4 AT/H: Hitachi AI Technology/H. *5 Digital Twin: The concept of using digital information about a product to build its
duplicate (twin) in a visual space. The concept has been proposed by NASA for its next-generation aircraft development. *6 HCP: Hitachi Content Platform.
*7 HAF/EDC: Hitachi Application Framework/Event-Driven Computing.

18

Hitachi, Ltd. Integrated Report 2017

Our Business ModelI
LumadaSI Business
Build platform forcustomer datautilization

Apply Hitachi Group cases
to customers

Lumada business
FY 2016 (Result)

Increase the number ofcustomer cases

Utilize Lumada
within Hitachi Group

Expand toa global scale

Lumada Business Growth Model

Lumada Promotion Framework

Hitachi designed Lumada to be the ultimate tool forpursuing new value in collaborative creation withcustomers, and intends to grow the Lumada businessthrough a combination of three monetization models.
First, Hitachi will provide individual systems tocustomers through the Lumada SI (Systems Integration)
Business. As this business gains experience andknowledge, it will develop new customer cases that can beused to grow the Lumada Core Business, creating“solution cores,” blueprints allowing Hitachi to provide
leading-edge digital solutions—the second monetization
model. Adoption of these ideas internally will also drive
improvement in management indicators across the entire
Hitachi Group, allowing monetization in a third way.
In the Lumada SI Business, Hitachi develops anddelivers data infrastructure customized to meet individual
customer requirements. The Lumada Core Business,meanwhile, is a service business in which Hitachi
improves management indicators and resolves customer
issues by utilizing artificial intelligence to convert
customer data into value. Because the Lumada Core
Business allows the nimble, global deployment of solution
cores created in the Lumada SI business, customer cases
can be optimized for more general application in a variety
of industries. The Lumada Core Business is expected to
expand rapidly. Meanwhile, applying Lumada within the
Hitachi Group and its entire value chain will makeproduction sites smarter, reducing manufacturing costs
and optimizing inventory management.
Hitachi expects the combination of these three models
to help the Lumada business as a whole exceed 1 trillion
yen in revenue for fiscal 2018.

The Hitachi Insight Group, an elite team including OT and IT
specialists from Hitachi, Ltd., Hitachi Data Systems
Corporation, and other Hitachi Group IT businesses, isplaying a central role in promoting the Lumada business.
Since beginning operations in May 2016 at its headquarters
in Santa Clara, California, the Hitachi Insight Group has
welcomed hundreds of world-class new hires. Particularemphasis was placed on hiring people with experience in
key positions at leading Silicon Valley enterprises.
In April 2017, the research team Insights Laboratory
was established. Gathering together researchers,
designers, data scientists, and solutions architects from awide variety of fields, Hitachi is accelerating the pace ofinnovative collaborative creation by working with customers
to develop new ideas, design systems, and demonstrateconcepts and value.
Additionally, to promote front-led collaborative creation
with customers, in February 2017, Hitachi named a Chief
Lumada Officer (CLO), a newly created position, for eachbusiness unit. CLOs are responsible for promoting the useof Lumada in such reforms as increasing the efficiency ofwork processes. The CLOs also share information distilledfrom the on-site experience of the leading Lumada
businesses. Their role is to develop new business models
within the Hitachi Group. CLOs will deepen links to the
Hitachi Insight Group and promote the expansion of thesolutions business and the creation of customer cases
within the Hitachi Group.

Hitachi, Ltd. Integrated Report 2017

Strategic Focus

Bring smart
technologies to
production sites

II
LumadaCore Business

Value Creation

Improvement ofbusiness KPIs

FY 2018 (Target)

1,050 billion yen

Management & GovernanceIII

CEO Message

900 billion yen

19

Performance

Lumada Business Growth ModelLumada Development Case Studies
As of March 2017, Hitachi has collected and published 203
Lumada customer cases, mainly involving the industrial
sector, representing successful collaborative creation withcustomers. We divide the types of value customers
typically seek to create into four categories—boostingsales, cost optimization, risk mitigation, and costvisualization—and roughly half of the customer cases
published as of fiscal 2016 were for cost visualization (92of the 203 total cases). Cost visualization is a crucial
gateway to the use of Lumada: by letting customers
directly experience the value of the platform, it encourages
its application in other areas, allowing even greater results
to be achieved.
One client of Hitachi Consulting Corporation, a leading
beverage maker, had seen its costs mount considerably
due to residual odors on some of its products, dependingon the quality of water used. The Lumada platform was
employed to collect and manage all of the client’s waterrelated information, from intake to drainage, and to clarify
water quality maintenance and its costs, enabling Hitachi
to offer a proposal on a new filtration system andapproaches to managing its facilities.
Hitachi used the solutions gained from this customer
case in proposals made not only to beverage makers but
also to other businesses for which water quality
management was an issue. We were able to sign contracts
with customers in a variety of industries as a result,including water, food, and papermaking.
Through Front-led collaborative creation withcustomers, this project contributed to resolving issues thatthey faced; it also drove the development of new solutions.
Hitachi will continue to expand the Lumada Core Businessby leading collaborative creation with customers from the
Front and capturing new customer cases.
Proactively advancing the use of Lumada within the
Hitachi Group has also allowed us to improve ourmanagement indicators and therefore our enterprise value.
Lumada has proven useful in the realm of cost structurereform, which has long been a focus for Hitachi. Establishing20

Hitachi, Ltd. Integrated Report 2017a Lumada workplace dedicated to the Hitachi Group andmaking full use of analytics and artificial intelligence allows
work processes to be visualized and optimized and makes
supply chains more efficient from end to end.
As of the end of March 2017, there are 23 Group
companies participating in this program, including Hitachi,Ltd., Hitachi Chemical Company, Ltd., and Hitachi Metals,Ltd., demonstrating the value of using actual data fromproduction sites.
Customer Cases (As of the end of March 2017)
Risk mitigation
27 cases

Boosting sales
41 cases

Risk assessments
Quality improvement

Total
203 cases

Cost visualization
92 cases
Loss cost visualization
Real-time alerts

Behavioral analysis
Organizational
revitalization

Cost optimization
43 casesPlan optimization
Higher productivity
Maintenanceimprovements

Typical Customer Cases
Boosting
sales

Optimize promotions based on
customer attributes andbehavioral history

Number of customers
increased by morethan 10%Adopted by companies including a professional baseball team
Analyze employee work activities
and reflect in improvement
measures

Order rate improvedby 27%

Adopted by call centers and financial institutions
Cost
optimization

Predictive failure diagnostic
service for large-scale aircompressors

Operational efficiency
improved by 20%

Monitoring of 250 domestic and 20 overseas facilities
Predictive failure diagnostic
service for medical equipment(superconductive MRI)

Downtime reducedby 16%

Introduced by about 90% of customers purchasing superconductive MRI

Risk
mitigation

Analyze the operating
condition of manufacturing
equipment to detect signs of
product defects

Spoilage expenses
reduced by 75%

Adopted by electrical equipment manufacturers

Our Business Model

Executive Interview

Giving Birth to New Value
with Our Customers

CEO Message

Keiji Kojima

Since unveiling Lumada in May 2016 at the largest IoTevent in North America, Informa’s Internet of Things
World, we have received a great deal of valuable
feedback on Hitachi’s strategy in discussions withcustomers around the world.
My impression is that customers outside Japan inparticular admire our concept of collaborative creation
with customers, calling it “highly unique.” Because
Lumada is based on Hitachi’s long experience in the SI
industry, constant and careful attention to customer needs
is fundamental to the business. Our goal is not simply to
spread an IoT platform—we want to use Lumada
alongside customers to resolve their issues. In my view,
our customers’ understanding that this is our starting
position is the reason so many of them have highexpectations for Lumada.
In the IoT society, what customers seek is notproducts but the resolution of business issues. Hitachi isaiming to pivot to a results-based business model, andLumada is central to that.

Santa Clara, California, where the Hitachi Insight Group isbased, is now home to many accomplished Silicon Valleyveterans—people who play a leading role in the world of
IT. In the US, this sort of talent is known as “rock star”
human capital.
Most of these “rock stars,” it seems to me, share our
feeling that the IoT solutions offered by pure IT vendors arelimited by a lack of knowledge of products and equipment.
The Hitachi Insight Group is where they can fully exercise
their creativity to make new breakthroughs.
And their dynamism is astounding. As soon as theyjoin the company, they crisscross the world, visiting
production sites in Japan or holding in-person discussions
with key figures for their work. New ideas and proposals
come in a constant stream.
What we wanted from these new members of ourorganization was speed and the kind of culture andenvironment that makes speed possible. The work
environments they create and the way they do theirwork has a big impact on existing employees. The
power they have to change both organizations andmarkets is palpable.

Hitachi’s extensive product catalog and long experience
with IT solutions puts it in an advantageous position within
the IoT market. We are intimately familiar with a wide rangeof products and equipment, from production facilities andrailroads to construction machinery. Our Group is also richin knowledge and experience regarding the evolutionary
stages of OT, such as operational controls for trains. IT-only
vendors do not have these strengths.
As long as there are products and equipment in theworld, enterprises will grapple with issues like how tomanage their assets more efficiently and how to reduce thecosts of management. This means that Lumada will be able
to contribute to a rapidly expanding range of markets. It is
not restricted to the bounds of any particular industry. At
the same time, carefully selecting markets where bigger
results can be achieved more quickly will be crucial tohelping the Lumada business grow.

The Next Challenge: Worldwide Expansion

Management & Governance

Hitachi’s Position in the Rapidly Growing
IoT Market

Value Creation

World-Class Human Capital Reforming
Organizations and Markets

Going forward, I believe that Lumada’s challenge will be tostrengthen its service delivery globally. Within Japan, theGroup’s services division is well developed, and Hitachi’s
ability to provide complete, end-to-end solutions, including
ongoing maintenance, is highly valued by customers. We
aim to strengthen our delivery channels to allow us todeliver the same level of service elsewhere in the world.
Once this framework is in place for Lumada, we expect the
rapid expansion witnessed in Japan to be repeated on a
global scale.

Hitachi, Ltd. Integrated Report 201721

Performance

Collaborative Creation with Customers
Drives True Competitiveness Overseas

Strategic Focus

Senior Vice President and Executive Officer
CEO of Services & Platforms Business Unit
Hitachi, Ltd.

OUR ACHIEVEMENTS

cost structures since 2011, Omika Works has embraced thechallenge of revolutionizing design and manufacturing byusing IoT technology to the best possible effect. To
eliminate wasted effort and advance optimization of
production planning through visualization of the entire
production process, Omika Works not only transitioned to ahigh-efficiency production model linking four separate
systems—the Progress and Operation Monitoring System,
the Work Improvement Support System, the Modular
Design System, and the Factory Simulator—it also
implemented a “Sense, Think, Act” cycle for information
about the “three Ms”: man, machine, and material. Together,
these measures reduced production lead time forrepresentative products*1 by 50%.

Omika Works, Hitachi, Ltd.

The wide-ranging development of Hitachi’s Lumada
Core Business, in which accumulated customer
cases and internal deployment studies are offered
as solutions to customers facing similar issues, isvital for expansion of the Lumada business as awhole. The high-efficiency production model
established at Hitachi’s Omika Works is one
example of this cycle. Having dramatically reduced
production lead times through IoT technology, thismodel is now attracting significant attention among
Lumada’s solution cores.

*1 These representative products are control devices for power and social industry
sectors, accounting for roughly 20% of total production at Omika Works.

High-Efficiency Production Through IoTOmika Works has supplied systems for social infrastructure
like power generation, railways, and water supply for half acentury. High reliability is a must for social infrastructure,
and Omika Works is unique in addressing customer
requirements with exacting care at every stage of theprocess, from development of hardware and software to
maintenance and service. Omika Works is a high-mix,
low-volume manufacturer, meaning that its products arecustom-made for each individual client.
The common wisdom around mass-production
factories is that, with standardized product specifications
and manufacturing procedures, efficiency can be increased
relatively easily through automation. At a plant like Omika
Works, however, specifications differ by order,
specifications and delivery dates are subject to frequentchange, and production tends to rely on a greater
proportion of highly skilled workers. For factories like this,improving efficiency through optimization and automationof manufacturing processes is generally held to be difficult.
Nevertheless, as part of the Hitachi Smart
Transformation Project, which has been reforming Group

Progress andOperation
Monitoring System

Performs unified analysis and visualization of
production progress and equipment
operations to allocate production resources
optimally and promote timely improvements
when delivery delays are expected

Work Improvement
Support System

Facilitates work improvement and shortens
the work improvement cycle byautomatically extracting processes where
actual and expected work times differ anddisplaying work videos and instructions

Modular Design
SystemStandardizes shared portions of existing
individual product designs as modules,
reducing the number of parts that must be
designed individually and shortening design
lead time

Factory
Simulator

Responds to production plan updates suchas changes to order quantities or delivery
dates by automatically preparing a feasible
optimized production plan and adjusting
part procurement details

Omika Works High-Efficiency Production Model

Think
1

Progress and Operation
Monitoring System (RFID
Production Monitoring*2)

2

3Work Improvement
Support System

Dynamic monitoring of the “three Ms”

Bottleneck work analysis/countermeasures

Internal tags

Bottleneck
work

4

Modular Design (MD)System
Rapid design
Feedback system

Countermeasure proposals
On-site workflow forecasts

MD methods

On-site workflow
visualization

Database storage

Sense
Omika Works
production line

Factory Simulator

Act

RFID

RFID

Work video

RFID

Work video

Work video*2 RFID: Radio Frequency Identification. A noncontact, automatic detection technology that reads information via radio waves from media such as tags and cards
containing IC chips and small antennas.

22

Hitachi, Ltd. Integrated Report 2017

Our Business Model
CEO Message
Strategic Focus

To bring the results achieved using IoT at Omika Works
within reach of a broad range of customers pursuing
improvements in their business, in July 2017, versions of
the Progress and Monitoring Operation System and Work
Improvement Support System were made available as
Lumada solution cores for the manufacturing field,
generalized to ensure applicability to a wider range of
production facilities. Many customers have already joined
our training program introducing the Omika Works IoT
implementation case study, and manufacturing reform
through collaborative creation with Hitachi is spreading,particularly among high-mix, low-volume manufacturers.

*1 Mass customization: Realizing mass-production levels of productivity even in
high-mix, low-volume manufacturing.
*2 Faster factory control cycle: Deploying a process control system that uses
identification tags to grasp the production process more accurately, enabling
both reliable identification of bottlenecks and swift remedies.

Value Creation

Hitachi’s IoT: From Omika to the WorldManagement & GovernanceIn order to enjoy the benefits of these IT systems to theutmost, hands-on manufacturing knowledge is vital.
Manufacturing involves a chain of connected systems,
from order acceptance through engineering (design),
procurement, production, quality assurance, andmaintenance. Instead of attempting to improve eachsystem individually, adopting the optimal approach for theentire process is crucial. Omika Works’ OT allows it toprecisely understand the interdependencies between
these systems and know how to appropriately address
challenges arising in the “three M” areas. Establishedusing OT accumulated over many years, this new
production model can now be developed for inclusion
among the solution cores Hitachi provides to the
manufacturing industry.

In May 2017, the machine tool manufacturer Okuma
Corporation embarked on a collaborative creation projectaiming to build on the results achieved at Omika Works andestablish an advanced production model that supports
mass customization.*1 An experimental model was set up
at Okuma’s new Dream Site 2 factory. Machine tools are aclassic example of a high-mix, low-volume manufactured
product, created by processing and assembling thousands
or even tens of thousands of components according todiverse customer specifications. Recognizing thisopportunity, Hitachi and Okuma will continue working on
new generations of factory technology through integrationof their manufacturing know-how and collaborative creationon the themes “visualization of production” and “a fasterfactory control cycle.”*2
In recent years, the manufacturing industry has seencustomer needs diversify due to the rapid development ofdigital technology. Increasingly, manufacturers are calling for
production systems that can respond to these diverse needs
quickly and increasing productivity by making the best use of
the “three M” resources on hand has become a challenge.
Through collaborative creation with customers, Hitachi willcontinue to identify management challenges and provide
customers with solutions that enable them to digitize thesupply chain and production activity from an end-to-end
perspective and to improve management indicators.

Hitachi, Ltd. Integrated Report 201723

Performance

Accumulated Operational Technology
Generates Results

VALUE CREATIONCASE 02

Robotics

OUR INSIGHT AND STRATEGYAs an Innovation Partner for the IoT Era, Hitachi is also active in robotics research anddevelopment—sharing the future with customers, drafting a vision for the use of robotics drawn
from projections of ideal future societies, and seeking to create a comfortable and fulfilling world inwhich humans and robots enjoy a symbiotic relationship.

Robotics Solutions for the IoT Era
Robots raise quality of life and contribute to efficiency andsafety improvements not just in manufacturing but
throughout our daily lives by performing tasks that are
difficult for humans and compensating for labor shortages.
In the future, robots are expected to be able to connect
with each other to gather necessary information, learn forthemselves, and work in an ever-broadening range of fields.
Since unveiling a computer-controlled, artificiallyintelligent robot in 1970, Hitachi has integrated the fruits of
its ongoing technical research and development in this field
into a wide variety of products. In the 1980s, we helped
drive adoption of industrial robots, pioneering technicaldevelopments as part of a national project. In the 1990s,

our attention turned to the practical applications ofrobotics, with development focused on how robots could
play a role in the community, including the fields of public
services, medicine, and welfare. Since the turn of the
century, Hitachi has concentrated its efforts on humanoid
robots like EMIEW that are specifically designed forsymbiotic coexistence with humans.
Going forward, Hitachi will continue to draw on its
long-cultivated robotics technology and experience as it
puts the Lumada IoT platform to work in a wide variety offields, collaboratively creating with customers new
businesses, societies, and lifestyles in which humans androbots can symbiotically coexist.

Overview of EMIEW3 and Hitachi’s robotics IT platform
Robot (field operations)

Robotics IT platform (intelligence, analysis, operations)

Conversation

Wide area
network

Behavioral apps

Emergency operations

Action agenda

Knowledge supply

Data collection/analysis

Intelligent processing

Autonomous
mobility

LinkedBusiness system

Sensing

Product info

Customer service manual

Staff allocation

Surveillance camera

Map

The left side of the diagram depicts on-site locations, such as public facilities and stores. The right side depicts thecomputing environment.
The robotics IT platform (top right), responsible for the robot s intelligence processing and operational control, is linked
to business systems (bottom right) and controls multiple EMIEW3s installed on-site and connected via the network.
Receiving instructions from the robotics IT platform, each EMIEW3 can perform a variety of services, such as interactingwith and guiding customers. Information recognized by an EMIEW3 through its various sensors is sent to the robotics IT
platform, where it is stored and used to improve the precision of EMIEW3 operations.

24

Hitachi, Ltd. Integrated Report 2017

OUR ACHIEVEMENTS
multilingual support and autonomous operation, as well as
in banks and commercial facilities that handle multiple
complex services in a single branch. Through field trials at
airports, train stations, and commercial facilities, we willcontinue collaborating with customers to create newpractical applications for EMIEW3.

CEO Message

EMIEW stands for Excellent Mobility and Interactive
Existence as Workmate, directly reflecting Hitachi s goalof a robot that can exist in symbiosis with humans,
moving fluidly and communicating through speech.
EMIEW2, announced in 2007, was able to move at thepace of a fast-walking human, and combined a numberof functions to allow it to interact and guide customers,such as autonomous movement, the ability to detecthuman voices in noisy environments, functions torecognize objects based on data on the internet, and theability to search for objects using multiple networked
cameras within a facility as eyes. EMIEW3 inherits thebest of EMIEW2 s abilities while adding new functionalityof its own, and its announcement in 2016 is anothermilestone in robot evolution toward symbiotic
coexistence with their human creators.

Strategic Focus

Hitachi has long promoted the development of robots thatcoexist symbiotically with humans, aiming to create robot
services with rich communicative abilities that can safely
and symbiotically coexist with humans.
Unveiled in 2016, EMIEW3 agglomerates Hitachi’s
decades of knowledge and experience into a robot
featuring high levels of both information processing andautonomy. The robotics IT platform, responsible for
information processing and control of the robot itself, islocated in the cloud. It connects to the robot in real time,enabling it to perform advanced support services likeinteracting with and guiding customers. EMIEW3 canidentify customers in need of support and approach themon its own initiative, share information with other EMIEW3
units, and hand off service tasks to other parties whennecessary. EMIEW3 is equipped with a function to regain astanding position by itself in the unlikely event that it should
fall over.
Hitachi aims to use EMIEW3 for guidance services in
airports, train stations, and other situations that may require

PMORPH2: A Robot to Investigate Fukushima Daiichi

Value Creation* PMORPH2 was developed with the Subsidy Project of Decommissioning
and Contaminated Water Management by Ministry of Economy, Trade, andIndustry (METI).

Management & Governance

Hitachi-GE Nuclear Energy, Ltd. (Hitachi-GE) is working
toward the decommissioning of Tokyo Electric Power
Company’s Fukushima Daiichi Nuclear Power Station. Sincejoining the International Research Institute for Nuclear
Decommissioning (IRID), founded in 2013 with the aim ofdeveloping the necessary technology for thisunprecedentedly difficult decommissioning project,
Hitachi-GE has advanced its research and development
efforts toward this goal.
In March 2017, PMORPH2—a robot to investigate thebasement floor inside the Unit 1 Primary Containment Vessel(PCV) developed by Hitachi-GE in its role as a member of

IRID—was sent into the Fukushima Daiichi Nuclear Power
Station Unit 1 PCV to investigate the condition of the fueldebris (melted and fallen nuclear fuel) within the vessel.*
Based on technology developed by the Hitachi Group,
PMORPH2 is able to pass through a narrow pipe roughly 10
cm in diameter, and has the unique ability to transform from astraight, thin shape like the letter “I” into the shape of theletter “U” in order to maneuver stably inside the PCV.
The investigation was carried out by taking
measurements and photographs at five locations 10 times
over five days. Due to sediment inside the PCV, it did not
succeed in photographing the fuel debris itself, but the rangeof data it obtained will be used in future explorations ofmethods for removing the fuel debris.

Hitachi-GE Nuclear Energy, Ltd.
Satoshi Okada, PhD
Senior Engineer, Nuclear Equipment Design Department, Nuclear Engineering and
Product Division

In highly radioactive areas, electronics are of limited use. As a result, whenusing a robot to investigate the PCV interior, the skill of the operator is also
a vital element. The key to a successful probe is harmonious teamwork
between human and robot. The road to decommissioning is daunting, but
this investigation result has allowed us to take another step toward that goal.
At Hitachi-GE, developers do not just improve by sharing and discussing
ideas internally—they also collect information from around the world to use
when developing new technology.

Hitachi, Ltd. Integrated Report 201725

Performance

EMIEW3: The Humanoid Robot

Our Business Model

Hitachi’s latest robotics technology addresses the needs of today’s society andaims at a symbiotic coexistence of humans and robots.

VALUE CREATIONCASE 03

Water

OUR INSIGHT AND STRATEGY
Water is one of the focus areas for Hitachi’s Social Innovation Business. Hitachi aims to become
a comprehensive water service provider, responsive to the needs of the market and its customers.
The water business unit seeks to resolve water-related issues by providing end-to-end solutions
worldwide, from design and construction of purification, desalination, and sewage treatment plants
to the building, operation, and maintenance of monitoring and control systems.
Changing Markets and Sustainable
Development Goals

Demand for water resources is increasing rapidly, driven by
population growth, economic expansion, and urbanization.
The Organization for Economic Cooperation andDevelopment estimates that by 2050 world water demand
will have increased on the order of 55% in response to
growth in manufacturing, thermal power generation, andhome use. The market for seawater desalination plants inparticular is expected to double in size by 2020.
Hitachi has supplied water-related products andsystems to more than 200 sites in 40 countries and regions
around the world. We are currently expanding globally, withfocus areas including the ASEAN countries and India, whererising populations are fueling major market growth; theMiddle East and Africa, where the need to secure drinking

water is acute; and North America, where increasing
attention is paid to drought countermeasures.
Some water-related challenges are global in scope.
Two of the United Nations’ Sustainable Development Goals(SDGs) deal specifically with water: Goal 6, “Ensure accessto water and sanitation for all,” and Goal 14, “Conserve andsustainably use the oceans, seas, and marine resources.”
Hitachi is determined to leverage its technology to supply
safe and affordable water to people throughout the world,
provide sewage treatment and other sanitary facilities, andconstruct systems enabling more efficient use of water.
Additionally, we will continue striving to reduce marine
pollution and help achieve the SDGs.

Business Rollout in Response to Regional Needs
Seawater desalination/
advanced water treatment projects(including focus areas)

Activities
Expand business in seawater
desalination and advanced sewage
treatment fields(respond to needs through superior technologies)

ODA projects

Engineering bases

Developing countries, emerging countries

North America

Urbanization, population growth
Putting in place large-scale infrastructures
Financial challenges, business customs

Droughts (US West, South)
Advanced sewage treatment(nitrogen removal)

Steadily promote and expand large-scale
projects(ODA projects, partnerships using unique
technologies)

Roll out business with close community
ties by strengthening Front Engineering(Singapore, USA)

Saudi Arabia

USA

Japan

Iraq
India

Palau
Maldives
Singapore

TuvaluNauru
Vanuatu

BrazilSouth Africa

Island countries, resorts
Small, compact
Package proposals (water landscapefacilities, pools, etc.)

26

Hitachi, Ltd. Integrated Report 2017

Shipboard plants
Small, compact
Environment resistant (vibration, salt damage)OUR ACHIEVEMENTS

CEO Message
Strategic Focus

Value Creation

In 2016, at the request of the New Energy and Industrial
Technology Development Organization (NEDO), Hitachi
began an integrated seawater desalination and water reusesystem demonstration project in eThekwini, formerly known
as Durban, South Africa.
eThekwini is on the Indian Ocean coast and has apopulation of roughly 3.6 million. Its water shortages are dueto the concentration of this population in urban areas and its
lack of precipitation. Seawater desalination was the firstpotential solution to be investigated, but conventional systems
require high-pressure pumps to force seawater throughreverse osmosis (RO) membranes, and these pumps consume
a great deal of electricity. With electricity costs rising sharply inSouth Africa of late, this proved a significant hurdle.
Meanwhile, Hitachi’s interest in developing andaccumulating operational and administrative knowledge
about the water business, with a particular orientation toward
international development, had seen the company work with
Toray Industries, Inc. and other partners to establish the
Global Water Recycling and Reuse Solution Technology
Research Association in 2010. Under contract from NEDO,
and in collaboration with the municipal government of
Kitakyushu and other partners, Hitachi opened Water Plaza
Kitakyushu, moving forward with pilot experiments for a newenergy-efficient desalination technology Hitachi had
developed and dubbed “RemixWater.”
Kitakyushu had experience in the water businessthrough public-private partnerships, particularly inSoutheast Asia, and took the initiative in inviting researchersand observers from around the world to visit and study at
Water Plaza Kitakyushu. Hitachi’s RemixWater system wasof great interest to the delegation from eThekwini, and thecurrent demonstration project was the eventual result.
By diluting seawater with treated sewage, RemixWater
reduces the desalination pump pressure, cutting the energy
consumption of the system as a whole by around 30%. The
burden on the environment is also reduced, with the water
ultimately discharged into the ocean almost exactly as diluteas seawater. For this demonstration project, Hitachi will installa new RemixWater system in eThekwini’s existing sewage
treatment facilities, sufficient to desalinate 6,250 m3 ofseawater per day—enough for around 25,000 people. The
demonstration period is planned to last until November 2020.

Hitachi believes that to resolve social issues like those
identified by the SDGs, it is crucial not only to provide
technology but also to nurture human capital rooted in eachregion. Since 2009, with the support of South Africa’s
Department of Science and Technology (DST), Hitachi has
run the Hitachi-DST Scholarship Program for South African
Engineers, which aims to support the development ofyoung engineers in South Africa. Since fiscal 2015, Hitachi
has contributed to the development of young human capitalin South Africa by inviting around five engineers from thewater treatment field to Japan each year, where they spend
around two months observing Japan’s cutting-edge
advanced water treatment technology and participating intechnical training at Hitachi’s factories and other facilities.
Hope Joseph, a fiscal 2016 training program
participant who is based in eThekwini, says, “Water Plaza
Kitakyushu was very interesting as it showcased theRemixWater plant, which uses technology with low
environmental impact—energy-saving as well as costeffective. The program also changed my views as anengineer, making me realize that structured institutional
mechanisms are required for the success of a project aswell as technology.” Joseph now holds presentations toshare what she learned in Japan with her co-workers backhome. There is great interest in South Africa in private
initiatives to nurture human capital, and Hitachi’s steps inthis direction are welcomed warmly.

Workshop participants paying a courtesy visit to the mayor of Kitakyushu(Hope Joseph is fifth from the right).
Management & Governance

Seawater Desalination Initiatives in South Africa

Nurturing Young Engineers in South Africa

The SDG Workshop in the Water Business Unit
To grasp the evolution of market needs from a perspective
centered on the UN Sustainable Development Goals,
Hitachi held an internal workshop for water business unit
engineers, with external experts also invited to participate,on the theme “Expanding business potential byunderstanding needs from an SDG-centric perspective.”
One issue explored at the workshop was how the businessshould recognize regional social issues surrounding
products and services, with seawater desalination in South
Africa used as an example. Hitachi will continue to bothraise awareness of the SDGs and develop its waterbusiness in order to help resolve social issues.

A sewage treatment plant in eThekwini is the planned site of the RemixWater
demonstration project.
Hitachi, Ltd. Integrated Report 201727

Performance

Enhancing Regional Autonomy ThroughWater Initiatives

Our Business Model

As a comprehensive water service provider rooted in each individual region, Hitachi takes social
issues into account when considering market and customer needs and supplying technology. It
also promotes a variety of local initiatives, including participation in business planning and humancapital development.

MANAGEMENT &Independent Outside Directors* As of June 30, 2017
01 Baba Kalyani

02 Cynthia Carroll

03 Sadayuki Sakakibara

1972 Joined Bharat Forge Limited
1983 Joint Managing Director, Bharat Forge Limited
1994 Managing Director, Bharat Forge Limited
1997 Chairman & Managing Director,
Bharat Forge Limited (Currently in office)2016 Director, Hitachi, Ltd.

1991 General Manager, Foil Products, Alcan Inc.
1996 Managing Director, Aughinish Alumina Ltd.,
Alcan Inc.
1998 President, Bauxite, Alumina and Speciality
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 of the Board,
Toray Industries, Inc.
2010 Chairman of the Board andRepresentative Member of the Board, Toray Industries, Inc.
2013 Director, Hitachi, Ltd.
2014 Chairman of the Board, Toray Industries, Inc.
2015 Chief Senior Advisor and Chief Senior Counselor,
Toray Industries, Inc.
2017 Senior Advisor, Toray Industries, Inc. (Currently in office)04 George Buckley

05 Louise Pentland

06 Harufumi Mochizuki

1993 Chief Technology Officer, Motors, Drives and Appliances,
Emerson Electric Company
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 andChief 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(Retired in December 2015)
Director, Hitachi, Ltd.

1997 Admitted as a Solicitor (UK)2001 Senior Legal Counsel, Nokia Networks,
Nokia Corporation2007 Vice President, Acting Chief Legal Officer andHead 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.
Director, Hitachi, Ltd.
Senior Vice President and Chief Legal Officer,
PayPal Holdings, Inc.
2016 Executive Vice President,
Chief Business Affairs and Legal Officer,
PayPal Holdings, Inc. (currently in office)2002 Director-General for Commerce and Distribution Policy,
Minister’s Secretariat,
Ministry of Economy, Trade and Industry of 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 and Industry of Japan
2010 Special Advisor to the Cabinet of Japan(Retired in September 2011)
Senior Advisor 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)07 Takatoshi Yamamoto

08 Philip Yeo

09 Hiroaki Yoshihara

1995 Managing Director, Morgan Stanley Japan Limited
1999 Managing Director and Vice Chairman,
Tokyo Branch, Morgan Stanley Japan Limited
2005 Managing Director and Vice Chairman,
UBS Securities Japan Co., Ltd.
2009 Managing Director, CASIO COMPUTER CO., LTD.
2011 Advisor, CASIO COMPUTER CO., LTD. (Retired in June 2012)2016 Director, Hitachi, Ltd.

1970 Joined Ministry of Defense of Singapore
1979 Permanent Secretary, Ministry of Defense of Singapore
1986 Chairman, Economic Development Board of 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, Government of Singapore(Retired in August 2011)
Chairman, SPRING Singapore (Currently in office)2012 Director, Hitachi, Ltd.

Chair of the Nominating Committee
Chair of the Compensation Committee

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

* As all of outside directors meet the independence criteria defined by the Company and those provided by Japanese stock exchanges where the Company is listed,
they are referred to as independent outside directors in this report.

28

Hitachi, Ltd. Integrated Report 2017

Our Business Model
CEO Message
06
05

01
09

04
03

07

10
02

12

Strategic Focus

GOVERNANCE

08

13
11

Directors As of June 30, 2017
10 Kazuyuki Tanaka

11 Hiroaki Nakanishi

Nominating Committee

1977 Joined Hitachi Chemical Company, Ltd.
2005 Executive Officer, Hitachi Chemical Company, Ltd.
2006 Senior Executive Director, Hitachi Media Electronics Co., Ltd.
Representative Director and President,
Hitachi Media Electronics Co., Ltd.
2008 Vice President and Executive Officer,
Hitachi Chemical Company, Ltd.
2009 Representative Executive Officer, President & Chief Executive Officer,
Hitachi Chemical Company, Ltd.
Director, Representative Executive Officer, President & Chief
Executive Officer, Hitachi Chemical Company, Ltd.
2016 Chairman of the Board, Hitachi Chemical Company, Ltd.
(Currently in office)Director, Hitachi, Ltd.

1970 Joined Hitachi, Ltd.
2003 Vice President and Executive Officer
2004 Senior Vice President and Executive Officer
2005 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.
2016 Chairman of the Board and Representative Executive Officer,
Hitachi, Ltd.

Audit Committee

13 Toshiaki Higashihara
1977 Joined Hitachi, Ltd.
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.
2016 President & CEO and Director, Hitachi, Ltd.

Value Creation

Representative Executive Officer

Management & Governance

12 Toyoaki Nakamura
1975 Joined Hitachi, Ltd.
2006 General Manager, Finance Department
2007 Senior Vice President and Executive Officer
Senior Vice President, Executive Officer and Director
2009 Senior Vice President and Executive Officer
2012 Executive Vice President and Executive Officer(Retired in March 2016)2016 Director

Compensation Committee

Each Committee is composed of the following members (chair names underlined)
Nominating Committee:
Harufumi Mochizuki, Cynthia Carroll, Sadayuki Sakakibara, Hiroaki Nakanishi
Audit Committee:
Hiroaki Yoshihara, Harufumi Mochizuki, Takatoshi Yamamoto, Kazuyuki Tanaka, Toyoaki Nakamura
Compensation Committee:

Hitachi, Ltd. Integrated Report 201729

Performance

Harufumi Mochizuki, Sadayuki Sakakibara, Takatoshi Yamamoto, Toshiaki Higashihara

Executive Officers
As of June 30, 2017

President & CEO

Executive Vice Presidents and Executive Officers

Toshiaki Higashihara*

Masakazu Aoki*

Ryuichi Kitayama*

Yutaka Saito*

Keiichi Shiotsuka*

Overall management

Assistant to the President andindustrial products business

Assistant to the President,
marketing & sales, and social
innovation business promotion

Assistant to the President andIoT business

Assistant to the President andsystems & services business

Senior Vice Presidents and Executive Officers

Koji Tanaka*Toshikazu Nishino*

Shinichiro Omori

Toshiaki Kuzuoka*

Keiji Kojima

Assistant to the President andnuclear energy business

Assistant to the President andmanagement strategies

Cost structure reform, information
technology strategies and supply
chain management (MONOZUKURI
and quality assurance)

Corporate communications
and CSR, legal matters, risk
management and corporate
auditing

Services & platforms business

Hiroshi Sato

Yasuo Tanabe

Yoshitaka Tsuda

Alistair Dormer

Mitsuaki Nishiyama*

Building systems businessGovernments & external relations

Marketing & sales and social
innovation business promotion

Railway systems business

Finance and corporate pension
systemVice Presidents and Executive Officers
Hiroyuki Ugawa

Kenji Urase

Ryuichi Otsuki

Atsushi Oda

Yoshihiko Kawamura

Business for industry &distribution sectors

Water business

Services & platforms business

Power business

Investment strategies andstrategies for next generation
business

Kenichi Kokubo

Keizo Kobayashi

Setsuo Shibahara

Akira Shimizu

Norihiro Suzuki

Regional strategies (China)

Urban solutions business

Systems & services businessGovernments & external relations

Research & development

Katsuya Nagano

Hidenobu Nakahata

Tadashi Namura

Isao Narukawa

Masaaki Nomoto

Business for government,
public corporation and social
infrastructure systems

Human capitalMarketing & sales (business forfinancial institutions, government,
public corporation and social
infra­structure systems, healthcare
business and defense systems
business)

Marketing & sales (nuclear energy
business, power business andenergy solutions business)

Energy solutions business

Kentaro Masai

Yasushi Manabe

Mamoru Morita

Tsugio Yamamoto

Masaya Watanabe

Railway systems business

Marketing & sales (business forindustry & distribution sectors,
water business, building systems
business, railway systems businessand urban solutions business)

Management strategies

Business for financial institutions

Healthcare business

Representative Executive Officer
Hiroaki Nakanishi*
GeneralNote: Executive officers are listed by position and in Japanese alphabetical order within each grouping.
* Denotes executive officers who are representative executive officers.

30

Hitachi, Ltd. Integrated Report 2017

oversight of Group companies. In these ways, Hitachi isworking to increase corporate value.
Starting in June 2015, Japan’s Corporate Governance
Code applies to companies listed on stock exchanges inJapan. Hitachi agrees with the basic approach of the Code,which is that the Code’s appropriate implementation willcontribute to the development and success of companies,
investors and the Japanese economy as a whole throughindividual companies’ self-motivated actions so as toachieve sustainable growth and increase corporate value
over the medium to long term. Moving forward, Hitachi will
work to further strengthen corporate governance.

CEO Message

Hitachi and its listed subsidiaries are “Companies with
Nominating Committee, etc.” defined under the Companies
Act of Japan. By demarcating responsibilities for
management oversight and those for the execution ofbusiness operations, Hitachi is working to create aframework for nimble operations, while making management
highly transparent.
In addition, Hitachi is executing business strategies
formulated to enable the Group to demonstrate its collective
strengths. Moreover, some of Hitachi’s directors andexecutive officers serve concurrently as directors or executive
officers at Group companies, thereby strengthening integrated
management of the Group and improving management

Our Business Model

Corporate GovernanceInitiatives to Strengthen Corporate Governance
1 Realizing quick, highly transparent management

2 Accelerating global management and strengthening

Hitachi transitioned to a Company with
Committee System (now called a Company
with Nominating Committee, etc.) in June 2003.

Increased number of independent outside
directors including non-Japanese directors;
independent outside directors became
majority in June 2012.

Major Aims

Major Aims

Make management highly transparent by demarcating
responsibilities for management oversight and those for the
execution of business operations

Reflect global, diverse viewpoints in management,
further strengthen oversight function

Composition of Board of Directors

Nominating Committee: Determines director candidates

Independent
outside directors

4

9

Audit Committee: Audits execution of directors
and executive officers

Directors(non-executive)

7

2

Compensation Committee: Determines remuneration
for directors and executive officers

Directors(serving concurrently as
executive officers)

2

2

Independent outside director

Director

Non-Japanese directors

Value Creation

June 2017 (13 elected)

Management & Governance

June 2011 (13 elected)

Female directors

Hitachi, Ltd. Integrated Report 201731

Performance

Composition of Each Committee (June 2017)

Chairman (Independent outside director)

Strategic Focus

oversight function

3

Appropriate implementation of the Corporate Governance Code

Implementing all of the principles of the Corporate Governance CodeAnalysis and Evaluation of the Effectivenessof the Board of Directors
In evaluating the Board’s effectiveness for the fiscal year
ended March 31, 2017, questionnaires were distributed to
all directors, and each of them carried out aself-assessment of the Board regarding its composition,
decision-making process, contribution to the company,
operational and support systems for the Board, and otheraspects. Based on the results of these evaluations, theBoard analyzed and evaluated its effectiveness as awhole, considering comparison to the results for the fiscal
year ended March 31, 2016.
The Board assessed that the Board members arediverse and make use of their knowledge and expertise to

speak out, having vigorous discussions especially on
matters related to business strategies such as the
Mid-term Management Plan toward medium/long-term
growth of corporate value. The Board, therefore,
concluded that the effectiveness of the Board as a wholeis being maintained.
Based on the suggestions made by each director
with an aim to maintain and improve the functions of theBoard, the Company will make Board discussions related
to business strategies more effective and improve themethod of information provision to help directors further
expand their contribution.

Corporate Governance Framework

Accounting Auditors

Report

Audit

General Meeting of
Shareholders

Senior Executive
Committee
ReportPresident & CEO

Appointment
Appointment/
Oversight

Executive Vice Presidents andExecutive Officers/Senior Vice
Presidents and Executive Officers

Board of Directors

Nominating Committee
Audit

Compensation
Committee

Internal
Auditing
OfficeAudit Committee

Executive
Officer
Department
in charge

Executive
Officer
Department
in charge

ReportAudit

32

Hitachi, Ltd. Integrated Report 2017

Department
in charge

Department
in charge

Attendance at meetings of the Board of Directors by eachindependent outside director in the fiscal year ended March 31, 2017
Attendance*

Attendance rate

Baba Kalyani

6 out of 7 days

86%

Concurrent Officer Positions at Other Companies

Cynthia Carroll

8 out of 8 days

100%

Sadayuki Sakakibara

8 out of 8 days

100%

In order for directors to secure the time necessary tounderstand the Company’s business and prepare for andattend Board of Directors meetings, the Company considers
it desirable for its directors not to hold concurrent officer
positions (director, corporate auditor, or executive officer) in
more than four other listed companies.

George Buckley

8 out of 8 days

100%

Louise Pentland

8 out of 8 days

100%

Harufumi Mochizuki

8 out of 8 days

100%

Takatoshi Yamamoto

7 out of 7 days

100%

Philip Yeo

8 out of 8 days

100%

Hiroaki Yoshihara

8 out of 8 days

100%

Our Business Model
CEO Message

In regard to the election of an independent outside
director, Hitachi’s Nominating Committee considers thefollowing criteria for independence. In addition, theCommittee also considers whether the independent
outside director has outstanding character and insight andwhether the independent outside director has worked in aleadership position in such fields as business, law, administration, accounting or education, or has experience atpolicy-making levels.
In regard to the independence of an independent
outside director, the Company considers an independent
outside director to be independent unless:• His or her immediate family member is, or has been within
the last three years, a director or an executive officer of theCompany or any of its subsidiaries;• He or she is currently an executive director, an executive
officer, or an employee of a company that has madepayments to, or received payments from, the Company forproperty or services in an amount which, in any of the last
three fiscal years, exceeds 2% of any of the companies’
consolidated gross revenues;• He or she has received during any of the last three fiscal
years more than ¥10 million in direct compensation for hisor her service as a specialist in law, accounting or tax, or
as a consultant from the Company, other than director
compensations; or• He or she serves as an executive officer or director of a
not-for-profit organization, and the Company’s
discretionary charitable contributions 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.

Management & Governance

Name

Qualification for Independent Outside Directors
and Criteria for Independence

Strategic Focus

The Board of Directors approves basic management policy
for the Hitachi Group and supervises the execution of theduties of executive officers and directors in order to sustainably enhance corporate value and shareholders’ common
interests. The basic management policy includes the
Mid-term Management Plan and annual budget compilation.
The Board of Directors focuses on strategic issues related tothe basic management policy as well as other items to beresolved that are provided in laws, regulations, the Articles ofIncorporation, and Board of Directors Regulations. As ofJune 21, 2017, the Board of Directors was made up of 13
directors, two of whom concurrently serve as executive
officers. Hitachi aims to reinforce the oversight function of
the Board of Directors, of which nine independent outside
directors, including non-Japanese, account for the majority,reflecting their global and diverse viewpoints. The term ofoffice for directors is one year.
Within the Board of Directors, there are three statutory
committees—the Nominating Committee, the Audit
Committee, and the Compensation Committee—with
independent outside directors accounting for the majorityof members of each committee. The Board of Directors
meetings were held on 8 days during the fiscal year ended
March 31, 2017, and the attendance rate of directors atthese meetings was 99%. The attendance rates for eachindependent outside director were as shown in the tablebelow. To assist with the duties of the Board of Directors
and each committee, staff who are not subject to orders
and instructions from executive officers are assigned.

Value Creation

Board of Directors* Based on the number of days Board meetings were held during each independent
outside director s term of office.

Furthermore, Hitachi formulated and published
Corporate Governance Guidelines outlining the frameworkof corporate governance, such as the function andcomposition of the Board of Directors, qualifications for
directors, criteria for assessing the independence ofindependent outside directors, and rules on those serving
concurrently as officers at other companies.
Corporate Governance Guidelines of Hitachi, Ltd.

Hitachi, Ltd. Integrated Report 201733

Performance

http://www.hitachi.com/IR-e/corporate/governance/guidelines.html

Independent outside directors and reasons for appointment

Baba Kalyani

Mr. Kalyani is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising the executionof 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 a major global company.

Cynthia Carroll

Ms. Carroll is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising the executionof 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 is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising theexecution of duties by executive officers and others from an independent perspective based on his rich experience andinsight as the top executive of a major global company.

George Buckley

Mr. Buckley is 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 Board of Directors based on his rich experience and insight as the top executive of major global companies.

Louise Pentland

Ms. Pentland is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising theexecution of duties by executive officers and others from an independent perspective as well as reflecting her global
viewpoint to the Company’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 is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising theexecution of duties by executive officers and others from an independent perspective based on his rich experience andinsight in the area of public administration, etc.

Takatoshi Yamamoto

Mr. Yamamoto is 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 based on a broad range of insight in businessand management gained through his experience in the area of corporate analysis and global corporate management.

Philip Yeo

Mr. Yeo is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising the executionof 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 broad experience and insight in such areas as public administration.

Hiroaki Yoshihara

Mr. Yoshihara is expected to reinforce the functional aspects of the Company’s Board of Directors by supervising the execution ofduties by executive officers and others from an independent perspective as well as reflecting his global viewpoint to the Company’s Board of Directors based on his rich experience and insight in the area of global corporate management and accounting.

(1) Nominating Committee
The Nominating Committee has the authority to determine
proposals submitted to the general meeting of shareholders
for the election and dismissal of directors. The Nominating
Committee consists of four directors, three of whom are
independent outside directors.
The Nominating Committee meetings were held on 10
days during the fiscal year ended March 31, 2017.

Composition of the Board of Directors and each committee(as of June 21, 2017)
Number of
persons

Independent
outsidedirectors*
Directors

13

9

4

Director

Nominating
Committee

431

Independent
outsidedirector

Audit Committee

5

3

2

Independent
outsidedirector

Compensation
Committee

431

Independent
outsidedirector(2) Audit Committee
The Audit Committee has the authority to audit the executionof duties of directors and executive officers and to determine
on proposals submitted to the general meeting ofshareholders for the election and dismissal of accounting
auditors. The Audit Committee consists of five directors,
including three independent outside directors and one
standing Audit Committee member.
The Audit Committee meetings were held on 16 days
during the fiscal year ended March 31, 2017.

(3) Compensation Committee
The Compensation Committee has the authority todetermine remuneration policies for directors and executive
officers and remuneration for individuals (including amountsof remuneration) based on them. The Compensation
Committee consists of four directors, three of whom are
independent outside directors.
The Compensation Committee meetings were held on
4 days during the fiscal year ended March 31, 2017.
34

Hitachi, Ltd. Integrated Report 2017

Chair

Board of Directors* Hitachi has issued notifications identifying all outside directors as independent outside
directors to each of the stock exchanges in Japan where the Company is listed.

Committee members

Nominating
Committee

Harufumi Mochizuki (Chair), Cynthia
Carroll, Sadayuki Sakakibara, Hiroaki
Nakanishi

Audit
Committee

Hiroaki Yoshihara (Chair), Harufumi
Mochizuki, Takatoshi Yamamoto,Kazuyuki Tanaka, Toyoaki Nakamura

Compensation Harufumi Mochizuki (Chair), Sadayuki
Committee
Sakakibara, Takatoshi Yamamoto,Toshiaki Higashihara

The Compensation Committee, of whose members morethan half are independent outside directors, sets forth thepolicy on the determination of compensation details for
directors and executive officers and, based on this policy,
the amount of compensation, etc., of each director andexecutive officer, pursuant to applicable provisions of theCompanies Act.

Basic Policy
Compensation for directors and executive officers shall be
determined in accordance with the following basic policy.
• Compensation shall be such that it enables the company
to attract necessary personnel to achieve an improvement
in corporate value through global business growth.
• Compensation shall be commensurate with the roles andresponsibilities of directors and executive officers.
• Compensation for directors shall be such that it enables
them to exercise functions of supervision of management
effectively.
• Compensation for executive officers shall be such that it
enables them to contribute to sustained improvement incorporate value through the execution of business, andemploys an appropriate balance between short-term
performance and medium- and long-term performance.
• The level of compensation shall be determined taking into
account compensation levels at other companies, as wellas economic and market trends.
• The Compensation Committee utilizes external experts togain expert advice and an objective viewpoint, if necessary,for considering the details and amounts of compensation.

Strategic Focus

Director and Executive Officer
Compensation(ii) Executive officers
Compensation for executive officers consists of basic
remuneration, performance-linked compensation, andmedium- and long-term incentive compensation. The higher
position the executive officer holds, the higher the proportionof variable pay (the sum of the performance-linked
compensation and the medium- and long-term incentive
compensation, not including basic remuneration as fixedpay) is as a portion of total annual compensation.
• ​Basic remuneration is decided by adjusting a basic amountto reflect the results of an assessment. The basic amountis set in accordance with the relevant position.
• ​The performance-linked compensation is decided within
the range of 0%–200% of the basic amount based on
financial results and individual performance. The basic
amount is set within the range of about 25%–35% of thetotal annual compensation of each executive officer inaccordance with the relevant position.
• ​Medium- and long-term incentive compensation is stock
options as stock-based compensation, with share priceconditions (stock acquisition rights with the strike price of¥1). The number of stock acquisition rights to be granted isdetermined within the range of about 10%–40% of thetotal annual compensation of each executive officer inaccordance with the relevant position. The number ofstock acquisition rights that may be exercised will be
determined within the range of 0%–100% of the stockacquisition rights granted in accordance with theconditions. As for expatriates, cash awards based on thevalue of Hitachi’s share price with similar conditions aresubstituted for the stock options.

Value Creation

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, through discussion from diverse viewpoints.
This committee consists of 10 members as of June 21,
2017: the President & CEO, six executive officers serving
as executive vice presidents, and three executive officers
serving as senior vice presidents.

Management & Governance

Senior Executive Committee

Our Business Model(i) Directors
Compensation for directors consists of basic remuneration
and a year-end allowance.
• ​Basic remuneration is decided by adjusting a basic amountto reflect full- or part-time status, committee membershipand position, travel from place of residence, etc.
• Year-end allowance is a predetermined amount equivalent
to about 20% of the director’s annual basic remuneration,
but may be reduced depending on financial results.
A director concurrently serving as an executive officer does
not receive any compensation as a director.

CEO Message

Compensation Structure

Executive officers decide on matters delegated to themby the Board of Directors and execute Hitachi’s businessaffairs within the scope of assignments determined by
the Board of Directors. As of June 21, 2017, Hitachi has
36 executive officers.

(iii) Miscellaneous
The compensation structure for directors and executive
officers was re-examined starting with compensation for
the fiscal year ended March 31, 2009, and the retirement
allowance was abolished.

Hitachi, Ltd. Integrated Report 201735

Performance

Executive Officers

The amount of compensation for directors and executive officers for the fiscal year ended March 31, 2017, is as follows:
Amount of compensation
Total amount of each type (millions of yen)
Total amount ofcompensation, etc.
(millions of yen)Monthly
remuneration

Year-end allowance andperformance-linked
compensation

Medium- and long-term
incentive compensation

Number of persons

Directors (excluding
independent outside directors)

75*1

69*1

6

−

4*3

Independent outside directors

308*2

290*2

17

−

10

Category

Executive officers

2,569

1,386

982

200

33

Total

2,953

1,747

1,005

200

47

*1 The amount of compensation to directors (excluding independent outside directors) includes the basic remuneration for two directors who retired due toexpiration of their term of office at the close of the 147th Annual General Meeting of Shareholders held on June 22, 2016.
*2 The amount of compensation to independent outside directors includes the basic remuneration for one independent outside director who retired due toexpiration of his term of office at the close of the 147th Annual General Meeting of Shareholders held on June 22, 2016.
*3 The number of directors indicated excludes two directors who concurrently serve as executive officers.

In addition, directors or executive officers whose compensation from Hitachi and its subsidiaries is not less than ¥100 million
and the amount of their compensation are as follows:(Millions of yen)
Total amount of each type
Incentive
Total amount ofcompensation, etc.

Basic
remuneration

Shortterm*4

Medium- andlong-term*5

Year-end
allowance

209

102

70

37

−

57

40

10

−

1

−

−

−

Name

Company

Category

Toshiaki Higashihara

Hitachi, Ltd. (The Company)

Executive
officer* 6

Hitachi, Ltd. (The Company)

Executive
officer

Hitachi High-Technologies
Corporation (consolidated
subsidiary)

Director

Hitachi Capital Corporation(consolidated subsidiary)* 7

Director

1

−

−

−

Hitachi, Ltd. (The Company)

Executive
officer

49

39

10

−

Hitachi Kokusai Electric Inc.
(consolidated subsidiary)

Director

7

−

−

1

Hitachi Construction MachineryCo., Ltd. (consolidated subsidiary)

Director

5

−

−

1

Hitachi, Ltd. (The Company)

Executive
officer

57

40

10

−

3

−

−

0

Ryuichi Kitayama

Yutaka Saito

Koji Tanaka

110

113

112

Hitachi Chemical Company, Ltd.
(consolidated subsidiary)

Director

Toshikazu Nishino

Hitachi, Ltd. (The Company)

Executive
officer

113

61

41

10

−

Alistair Dormer* 8

Hitachi Rail Europe Ltd.
(consolidated subsidiary)* 9

Executive
chairmanand CEO

146

67

40

38

−

Hiroaki Nakanishi

Hitachi, Ltd. (The Company)

Executive
officer* 6

189

97

67

24

−

*4 Collective term for compensation from the Company and consolidated subsidiaries paid depending on financial results and individual performance in the short term.
*5 Medium- and long-term incentive compensation for executive officers of the Company is stock options as stock-based compensation.
*6 Although they concurrently served as director for the fiscal year ended March 31, 2017, Toshiaki Higashihara and Hiroaki Nakanishi did not receive
compensation as director.
*7 The amount of compensation from Hitachi Capital Corporation is only for the period when it was a consolidated subsidiary of Hitachi, Ltd. during the fiscal year
ended March 31, 2017.
*8 Although he concurrently served as an executive officer of the Company for the fiscal year ended March 31, 2017, Alistair Dormer did not receive compensation as
an executive officer of the Company.
*9 The basic remuneration paid in pounds is converted into yen using the average exchange rate for each quarter of the fiscal year ended March 31, 2017. Incentive
compensation paid in pounds is converted into yen using the average exchange rate for the fiscal year ended March 31, 2017.

36

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Internal Control over Financial Reporting
To ensure the reliability of consolidated financial reporting, theGroup develops and uses control documents ranging fromcompany-level to business process controls based on theguidelines determined by our J-SOX Committee.
Business units within Hitachi, Ltd. and major Group
companies have developed mechanisms to objectively

perform assessments. The J-SOX Committee officecollects the results of the assessments performed by eachbusiness unit and company, and assesses the effectivenessof internal control across the entire Group.

Financial
Services Agency

CEO Message

Hitachi Group Internal Control Assessment Framework (As of April 1, 2017)

Hitachi, Ltd. President and CFO
Internal
ControlReportReportReportJ-SOX Committee
J-SOX Committee’s Office

Audit
Committee

ReportCollaboration

Internal Auditing
OfficeReportBusiness Units andMajor Group Companies

Independent
Auditors
External
Audit

ReportStrategic Focus

Subsidiary Companies

Toward a More Integrated “Tripartite Audit” Function
We are working to further enhance the effectiveness of theinternal control exerted through the integrated work of a“tripartite audit” function comprising the Audit Committee;
our internal audit sections, principally, the Internal Audit
Office; and external auditing firm. Through close

communication, the three share information about risks
and evaluation of risk responses, secure transparency inthe audit process, and improve the effectiveness ofinternal control systems.

2 Improving efficiency and transparency in audit processes with a risk-based approach

Status report on internal audit

Audit Committee
Audit Committee audit
on risk-based approach

Request for detailed internal audit of issues identified
by Audit Committee
Exchange of opinions
regarding audit time, fee,risk evaluation, etc.

Report on importantfinancial and accounting
findings

Internal audit section(Internal Audit Office)Management & Governance

1 Leveling of audit methods

Regular business-site-levelinternal audits

Sharing of risk information
Status report on
accounting audit

Auditing firm

Identification of issues through internal
control audit and evaluation of severity offraud risk, etc.

Accounting audit centered on
accuracy and reliability offinancial statements

Hitachi, Ltd. Integrated Report 201737

Performance

Goals

Value Creation

Improving Internal Control through a “Tripartite Audit” Function

Accountability
In accordance with its disclosure policy, Hitachi isimplementing the fair and appropriate disclosure of suchinformation as management strategies and financial
information. In addition, Hitachi is aggressively conducting
dialogues through such means as meetings withshareholders and investors, investor relations (IR) events,
and the general meeting of shareholders.
In fiscal 2016, we held quarterly financial results
briefings as well as corporate strategy meetings
presenting our new 2018 Mid-term Management Plan.
We also hosted the seventh annual Hitachi IR Day, where
divisional managers from each business unit explained
their business strategies and management policies under
the plan. Feedback from institutional investors andanalysts was positive, with comments including “Hitachi
IR Day has become a well-established IR event,” and“Direct briefings from CEOs of business units about theirbusiness strategies are important opportunities for thoseof us in the capital market to deepen our understandingof Hitachi’s various businesses, and we very much hope
they will continue.”
We also held briefings to explain our newly
constructed IoT platform “Lumada,” and members ofsenior management continued their practice of visiting
institutional investors and analysts in North America,
Europe, and Asia twice a year to explain corporate
management policies and business direction, for a
combined total of around 700 meetings. In addition, we
hosted numerous company information sessions tailored
to individual investors to deepen their understanding of
Hitachi. We are doing our best to report to members ofsenior management and to reflect this in management
and operations.

38

Hitachi, Ltd. Integrated Report 2017

We also post briefing materials and businessperformance as well as stock price trend charts in a timely
manner on our IR website. Aiming to continuously enhance
our information disclosure, we introduced a new
responsive design on our website for improved browsing
convenience from smartphones and tablets.
Information for shareholders and investors
http://www.hitachi.com/IR-e/

Major information disclosure publications

Financial results/Quarterly financial results
Annual securities reports/Quarterly reports
Business reports/Interim business reports
Hitachi Group sustainability reports

Given the close relation of our business to social infrastructure, we are enhancing our business continuity plans (BCPs)
to ensure that the impact of risks does not disrupt ourbusiness and thereby significantly affect society. In
December 2006, we issued the Hitachi Group Guidelines forDeveloping Business Continuity Plans (Overview) inJapanese. In fiscal 2010 this was translated into English andChinese for distribution to all Hitachi Group companies
worldwide to ensure our response readiness for large
disasters and other risks.
When the Great East Japan Earthquake struck in March
2011, our BCPs enabled quick responses and swift decision
making. However, issues emerged, including identification of
secondary and other suppliers, cloud storage andmultiplexing of production information, and the need tosecure alternate transportation and fuel sources. Based on
the lessons learned from this disaster, in October 2011 wereleased and distributed new versions of the Hitachi Group
Guidelines for Developing Business Continuity Plans forindividual departments to further improve our BCPs.
By the end of fiscal 2011, Hitachi Group operations inJapan had completed their preparation and review of BCPs
for both large earthquakes and novel strains of influenza as
appropriate to their operations.
On top of these efforts, Hitachi, Ltd. has held annual
earthquake drills simulating a major seismic event at key
operations in Japan since fiscal 1998. In March 2017,
Hitachi Chemical held drills under the direction of its head
office general manager, with managers at the head officeand the Nabari Works striving to improve their risk
management skills and identify possible areas for improvement in their BCPs.
Hitachi appointed personnel with responsibility for risk
response policies at its main overseas bases in fiscal 2013.
By the end of that year, around 300 companies had
prepared BCPs with the goal of completing them for key
operations. These BCPs are aimed at strengthening ourability to respond to business risks, including large disasters,
novel strains of influenza, political instability, and social
disruption, as well as acts of terrorism. Moving forward, we
intend to further expand the scope of our BCPs.

Improving Safety for Employees Sent toDangerous Regions
Responding to the hostage incident in Algeria in January
2013, then President Hiroaki Nakanishi reinforced his policy
in February 2013 of ensuring the safety of employees sent tocountries and areas at higher risk. Survey missions of
in-house and outside experts are now sent beforehand toareas at high risk of war, terrorism, and other threats. Even
after employees are dispatched to such areas, we conduct
additional local surveys every six months as a means ofconfirming the effectiveness of our safety policies. In fiscal
2016, with the threat of terrorism expanding around theworld, we introduced a range of safety measures, including
providing timely alerts to employees. This underscores ourcommitment to ensuring the safety of our employees
working around the globe. Hitachi is also contributing tosafety measures at other Japanese corporations operating
outside Japan. To help enhance collaboration between theprivate 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. Since 2014 Hitachi has taken part in public-private
kidnap incident preparatory training exercises.

Hitachi, Ltd. Integrated Report 2017

Value Creation

Creating BCPs in Key Operations Worldwide

Management & GovernanceStable Provision of Products and Services

CEO Message

We have a deep involvement in social infrastructures inplaces where the suppliers who are our business
partners can be affected by major earthquakes and othernatural disasters.
These disasters can heavily impact not only ourbusiness operations and those of our suppliers but alsosociety as a whole. To minimize this impact, the procurement divisions in business units and key Group companies
in Japan have created procurement BCPs that (1) standardize
and use generic parts to make procurement as flexible aspossible; (2) cultivate multiple suppliers; (3) distributeproduction across several locations; (4) budget inventory
strategically; and (5) consider substitute products. To see
whether or not procurement BCPs would be effective, we
held desktop exercises to discuss in a group what should bedone during and after a disaster, making further improvements as a result.
In fiscal 2016, all major Group business sites withproduction lines (approximately 200 sites in total) took steps
to maintain and strengthen the procurement BCPs they had
created by the previous fiscal year, thereby contributing to
the continuation of Hitachi’s global operations.

Strategic Focus

Creation of Procurement BCPs

The entire Hitachi Group is reinforcing its risk
management system to address increasingly globalized
and complex risks.
Under Hitachi, Ltd.’s head of risk management, eachbusiness operation assigns an executive as its risk
management officer to manage risks mainly concerned withcompliance, export control, disasters, and crime, and torespond adequately in coordination among the entire Group.
Furthermore, Hitachi is building a comprehensive risk
management system that contains standards andprocedures to objectively evaluate different risks that may
affect business.

39

Performance

Reinforcement of Risk Management System

Our Business Model

Risk Management

Promoting Information Security

Basic Approach to Information Security Governance

Implementing Rigorous Information Security
Hitachi’s chief information officer (CIO) is appointed by thecompany’s president and has the authority and responsibility to implement and operate an Information Security
Management System (ISMS). In fiscal 2016, the role of the
CIO was performed by Hitachi’s senior vice president andexecutive officer. The Information Security Committee,
chaired by the CIO, determines policies and proceduresfor information security and personal information
protection. The Information Security Promotion Council
and other bodies convey decisions internally and to othercompanies in the Hitachi Group. Information security
officers at business sites and companies ensure thatthese decisions are implemented in the workplace.
The Hitachi Group emphasizes two points in information security and personal information protection:(1) Precautionary measures and prompt security
responses
We classify assets to be secured and take safeguarding
measures based on vulnerability and risk analyses. We
also have an emergency manual for security breaches,
based on the assumption that these are inevitable, andnot just possible.
(2) Promoting stronger ethical and security awarenessamong data users
We have prepared a program tailored to Hitachi’s various
personnel levels and are working to raise the prevailingsense of ethics and security awareness throughGroup-wide e-learning. We are also conducting audits to
identify and address problems early on.

Details, including a message from the CIO and alist of third-party assessments and certifications, arecontained in Information Security Report 2016.
Information Security Report 2016
http://www.hitachi.com/csr/download/pdf/securityreport_e.pdf

40

Hitachi, Ltd. Integrated Report 2017

Clearly designate assets to be protected
Evaluate information assets and conduct risk
analysis

Improve user literacy
Supply security
education materials
Educate managers andstaff

Information
assets to beprotected

Implement preventive
techniques
Widely implementadministrative measures
Deploy technologicalprocesses

Establish information security system
Develop rules (security policy)
Create managerial framework
Establish audit and follow-up system
Ensure solid feedback through extensive PDCA
cycles for prevention and accident response

Education on Information Security
Consistently maintaining information security requires all
parties to continually develop their knowledge of information handling and to remain strongly aware of the issues.
For this reason, we hold annual e-learning programs on
information security and personal information protection
for all directors, employees, and temporary employees.
Nearly all of the roughly 40,000 employees at
Hitachi, Ltd. participate in these programs. We offer avariety of courses that have different goals and are
tailored to different target audiences, including new
employees, new managers, and information systemadministrators. In 2012, we also began simulation
training to educate employees about the increasing
trend toward malicious targeted e-mail attacks andother cyberattacks. Employees are sent examples oftargeted e-mail to heighten their awareness of security
through direct experience.
Our educational programs, available to HitachiGroup companies in Japan and other global regions,provide Group-wide education on information security
and personal information protection.

Global Information Security Management

Hitachi, Ltd. has formulated the Three Principles forPreventing Leakage of Confidential Information to ensure
the highest level of care for such information and toprevent leaks and other related incidents. Our policies
ensure that if an incident does occur, damage is promptly
minimized by contacting customers, reporting togovernment agencies, investigating causes, and acting toprevent any recurrence.
Hitachi Group companies take the following IT steps
to prevent information leaks: using encryption softwareand secure PCs; employing electronic document access
control and expiration processing software; maintaining ID
management and access control by building an authentication infrastructure; and filtering e-mail and visited
websites. In response to the recent spate of targetede-mail attacks and other cyberattacks, we are participating in an initiative to share information between theprivate sector and the government. We are alsoenhancing our IT organization by adding more layers to
our leak prevention procedures, including both entry andexit countermeasures.
To ensure the secure exchange of information with
our suppliers, we review their information security
measures based on Hitachi’s own standards before
allowing them access to confidential information. We haveprovided tools to suppliers (procurement partners) for
security education and for checking business informationon computers. In addition, we require suppliers to checkand remove business information from personal
computers to prevent leaks. In the May 2017 global
cyberattack, ransomware that functions like a network
worm affected parts of Hitachi’s in-house system,
temporarily disabling the sending and receipt of e-mails.
No information leaks were detected, however, and there
was no damage to customers or other outside parties
through e-mail sent from the Hitachi Group.

Hitachi Group companies worldwide reinforce theirinformation security in line with our Global Information
Security Administration Rules, which conform to theinternational ISO/IEC 27001 standard. These rules are
distributed from the parent company in Japan to Group
companies around the world. Other security measures
include secure shared services and support from ourregional headquarters in the Americas, Europe, Southeast
Asia, China, and India.

Our Business Model

Preventing Information Leaks

CEO Message

Thorough Information Security Audits
and Inspections

Value Creation

Strategic Focus

The Hitachi Group has developed its approach tosecurity based on the “plan-do-check-act” (PDCA) cycle
for its information security management system. We
conduct annual information security and personal
information protection audits at all Group companies andbusiness units.
The president appoints officers to conduct independent audits. These officers are not allowed to audit theirown units, underlining our commitment to fairness andobjectivity in auditing. There are 222 Hitachi Group
companies in Japan that conduct audits in the same way
as Hitachi, Ltd., and all results are subject to confirmation.
For Hitachi Group companies outside Japan, we use a“common global self-check” approach to ensure
Group-wide auditing and inspections. We implement
Confirmation of Personal Information Protection andInformation Security Management annually for thevoluntary inspection of business unit workplaces. We
conduct monthly Confirmation of Personal Information
Protection and Information Security Management
assessments at 654 operations (as of March 2017) that
handle important personal information. This regularcontrol mechanism ensures ample safety management
and implementation.

Management & GovernanceThree Principles for Preventing Leakage of Confidential
Information
Principle 1 As a general principle nobody can take Confidential
Information out of the Company’s premises.
Principle 2 Any person taking Confidential Information out of theCompany’s premises due to business necessity shallobtain prior approval from the Information Assets
Manager.
Principle 3 Any person taking Confidential Information out of theCompany’s premises due to business necessity shallput in place relevant and appropriate measuresagainst information leakage.
Damage Caused by Ransomware, and Status of Recovery

Hitachi, Ltd. Integrated Report 201741

Performance

http://www.hitachi.com/New/cnews/month/2017/05/170517a.pdf

Compliance

We carry out our business not only in full compliance with legal requirements but also in ways that
ensure socially responsible conduct. Spreading understanding of this among all Hitachi employees
is a fundamental management issue. As economic activity becomes increasingly borderless, there
is a growing need for steps to eradicate bribery, corruption, and other illegal behavior inaccordance with conditions in the countries and regions where we have operations. As a global
company, we are implementing a consistent compliance structure across the entire Hitachi Group.

42

Enhancing Our Compliance Framework

Compliance Reporting System

Based on the Hitachi Group Codes of Conduct, we have
expanded the Hitachi Global Compliance Program. To
comprehensively implement our compliance framework
through this program, we have appointed a senior executive
as the head of risk management for the entire Hitachi Group.
Every business unit and key Group company also has an
executive handling risk management, assisted by acompliance manager. We are also supporting regional Group
companies and have appointed compliance heads in 11
regions globally.
Under this system, policies and measures are sharedthrough the Compliance Management Conference,composed of risk management executives from business
units and key Group companies. In addition, all compliancemanagers meet regularly at the Hitachi Group Compliance
Conference to provide information on compliance and to
confirm implementation of required actions.
The Advisory Committee, consisting of outside experts,
convenes regularly to exchange views on the state ofcompliance initiatives. The insights provided by committee
members are utilized to improve policies and actions.
The internal audit section regularly conductsGroup-wide reviews to verify that each area of compliance isbeing appropriately operated. In cases where the reviews
identify necessary improvements, corrective measures are
swiftly implemented.

Hitachi has instituted a Group-wide whistleblowing system
to prevent illegal and unethical behavior, to promptly addressinfractions, and to enhance our ability to self-regulate.
In this system, reports go directly to the ComplianceDepartment at Hitachi or to an outside attorney. This system
can be used not only by employees within the Hitachi Group,
who are able to report issues through in-house channels, butalso by 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 thoroughinvestigation and checking, and people who have identified
themselves in the reports are informed of the investigation
results. We make every effort to appropriately deal withsituations, including taking remedial action where necessary.

Hitachi, Ltd. Integrated Report 2017

Thorough Export Controls
For basic export control policies, we have adopted the
Hitachi Standards of Corporate Conduct, which state: “Weshall help maintain international peace and security throughcompliance with trade-related laws and regulations.” Weestablished the Corporate Regulations Concerning Security
Export Control based on this policy in 1987. We carry out
strict export control practices in line with relevant laws andregulations, screening all goods and technologies intended
for export against such factors as destination countries andregions as well as intended end use and end users. We
provide guidance and educational support on the formulation of regulations as well as on the establishment offrameworks to Hitachi Group companies in Japan andaround the world to ensure that all Group companies follow
the same export control policies.
At present, as part of our educational program for all
the Group companies, we host workshops on export control
in addition to the annual implementation of an e-learning
program in Japanese, English, and Chinese. Moving
forward, we will continue to make an effort so that export
control is thoroughly enforced throughout the Group.

* The US Foreign Corrupt Practices Act consists of antibribery provisions regarding
foreign government officials and transparent accounting provisions within the
Securities Exchange Act. 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.

Our Business Model
CEO Message

The global expansion of Hitachi’s business activities has
made it necessary for the Group as a whole to build asystem of tax governance in order to comply with indications
made by the tax authorities in each country and respond torisks concerning taxation, such as tax-related legal proceedings. In January 2016, we established a set of tax-related
regulations with which the entire Group must comply.
Additionally, in connection with the globalization of ourbusiness, we are implementing risk management for taxationthat focuses in particular on the points listed below:(1) Group companies strictly comply with all relevant laws
and implement tax management when pursuing theirbusiness activities, bearing in mind such international
tax-compliance standards as the Transfer Pricing
Guidelines for Multinational Enterprises and Tax Administrations of the Organisation for Economic Co-operation
and Development (OECD), as well as that body’s Action
Plan on Base Erosion and Profit Shifting (BEPS).
(2) Group companies effectively, continually, and proactively
manage tax-related issues as socially responsibleorganizations, while maintaining Hitachi brand value andseeking to maximize shareholder value.
(3) Group companies build sincere and positive relations oftrust with the tax authorities in the regions where thecompanies do business, and strive to maintain anddevelop those relations.

Strategic Focus

Hitachi makes thoroughgoing efforts to prevent bribery andcorrupt practices in accordance with the Hitachi Global
Compliance Program.
To deal with global bribery and corruption risks, since
fiscal 2013 we have referred to the Resource Guide to the
US Foreign Corrupt Practices Act* and other documents todevelop various corruption risk scenarios. These were usedas the basis for a survey conducted at almost all HitachiGroup companies outside Japan (roughly 600 companies intotal). By analyzing the survey results, we identified
companies at risk from corruption due to factors such as
high levels of involvement with governmental and related
businesses. These risks were identified at approximately
10% of the companies surveyed, and through closemonitoring of those companies, along with educational andother initiatives, we are working to reduce corruption
worldwide. We will continue to carry out this sort of risk
evaluation regularly.
In 2016, we revised our rules regarding the preventionof bribery and corrupt practices, with changes including an
explicit ban on facilitation payments and clarification of due
diligence procedures for transaction partners.
To ensure awareness of these policies and regulations,
we developed a global e-learning program on preventing
bribery and corrupt practices, making it available in ninelanguages—including Japanese, English, and Chinese—for
use by Group companies worldwide.
In fiscal 2016, there were no incidents in which Hitachi
violated or was penalized under laws or regulations
regarding bribery or corrupt practices.

Implementing Thorough Tax ComplianceFurthermore, following the establishment in April 2017of rules for Group transfer pricing management, Hitachi
manages transfer pricing in accordance with the OECD
Transfer Pricing Guidelines as well as laws and regulations
on transfer pricing in each country or region where Group
companies are located.
Regarding tax compliance, Hitachi acts in accordancewith all applicable laws and regulations. Hitachi did not haveany significant fines or nonmonetary sanctions fornoncompliance with tax laws and regulations in fiscal 2016.

Value Creation

Measures to Prevent Bribery and Corrupt
Practices

Measures to Prevent Unfair Competition

Hitachi, Ltd. Integrated Report 201743

Performance

Management & Governance

Hitachi engages in business based on the principles ofconformance with the law and business ethics and fair anddisciplined competition. The Hitachi Global Compliance
Program was developed based on these principles to ensure
strict compliance with competition laws.
Fiscal 2016 saw two incidents in the United States ofplea agreements related to cartel activities, and one in Japanof a cease and desist order related to collusion.
Hitachi takes these incidents very seriously and willcontinue strengthening its educational and institutional
efforts to eliminate violations of competition laws.

Messages fromIndependent
Outside Directors
Contributing to Hitachi
Hitachi is a global company with
operations all around the world. My
tasks as a member of the Board of
Directors are to learn and to give
whatever input I can on the issues that
we face. Each country, and eachcompany, has a unique DNA. As abusinessman and entrepreneur, I am
always excited to learn these things. I
have long had respect for Japanesecompanies and how they have growninto international businesses. Hitachi is
one example of such a business,making it interesting for me to see
firsthand how the company works whileproviding input from my own perspective on the areas that I know well—India,
Europe, and North America.

Facing Challenges with
Multiple Strengths
Every company faces challenges
today, and Hitachi is no exception.
There is a high level of disruption intechnology and the digital space thattouches every business. Major
sociopolitical change is taking placeacross the spectrum in every country;
these winds of change are affecting
business like never before. There arealso crises and flashpoints all overwhat has become a very multipolarworld. All of this places tremendous
strain on companies as they determine
what talent they need to create for the
future and how to direct it.
Hitachi faces a particularly
broad range of challenges. The
company is involved in some fields,such as automotive systems andconstruction machinery, that could
be described as low-risk but featurehigh volatility related to technology
change. In other areas, like thenuclear power and railway
businesses, projects can run for
decades, involving governments andmaking it harder to see where costs
will be 15 years down the road. All ofthese different challenges requirevery different management
44

Hitachi, Ltd. Integrated Report 2017

approaches. The task, therefore, isto put the right people, the rightgovernance, and the right level ofrisk analysis and mitigation in place.
I believe that Hitachi has multiple
strengths to help it face these varied
challenges. First is the bandwidth ofits technologies and capabilities interms of products and processes. For
instance, many companies are
involved in IoT development now, butwhat Hitachi is doing with Lumada isahead of the game.
Second is its strong management
team. Hitachi handles corporate
governance very well. There is plentyof openness, with board members andexecutive officers able to express theiropinions freely. The company also has
outside board members from different
countries, as well as female directors,
making it a trendsetter of sorts aswell as a good corporate
governance example.
Third, Hitachi has the ability torecognize how the world is changing
and to take actions to stay ahead ofthose changes, rather than simply
reacting to them after the fact.
We’ve had plenty of forward-looking
discussion about Brexit and the US
presidential election, for example, as
something that could impact
Hitachi’s businesses.

Finding the Right Way
ForwardThis tremendous volume of
discussion is one of Hitachi’s key
tools to prepare it to meet thechallenges of the times. The Hitachi
Board carries out a lot of discussion,
taking a systematic approach to risk
management and ensuring that there
is analysis available on all areas
where risk is involved. This analysis
generates options for the company,
allowing it to get a feel for thebusiness environment, the risks, andthe growth opportunities. Of course,
Hitachi is involved in hundreds ofdifferent businesses, and it would bevery difficult for any one person tounderstand it all, but frequent anddetailed discussions let us get amore comprehensive feel of thebusiness environment.
On the level of its local
operations around the world,
Japanese managers used to run
global operations, but Hitachi is now
changing to place more operations inlocal managers’ hands. All it takes issome cultural adjustments and an
open mindset. Hitachi is certainly
headed in the right direction.

Baba Kalyani

Our Business Model
CEO Message

Takatoshi Yamamoto

unified audit structure for the entire
Group, including overseas entities.
Hitachi will need to mitigate various
risks as it continues to strengthen its
audit structure.
The second area is verifyingthat executive officers reflectboard-level discussions in both theiractions and the results achieved. By
monitoring and verifying how board
discussions influence Hitachi’s
operations, the company’s directors
will be able to ensure the effectiveness of the board on which they
serve. We independent outside
directors must construct bettermeans of assurance in this area.

A Roadmap to Becomea Truly Global Player

Hitachi, Ltd. Integrated Report 2017

Strategic Focus

I regard Hitachi’s corporate
governance highly. In 2016, Hitachi
increased management transparency
further by explicitly including
dismissal of the CEO and selection ofa successor among the responsibilities of the board of directors in its
corporate governance guidelines.
Nevertheless, in the course of
supervising and auditing Hitachi overthe past year as an outside director
and a member of the Audit
Committee, I noted opportunities forfurther improvement.
The first is audit structure.
Hitachi encompasses almost 900
Group companies, including those
newly consolidated through mergers
and acquisitions, and it makes
roughly half of its revenue outside
Japan. For the efficient andappropriate auditing of such a large
and diverse enterprise, further
structural improvements arenecessary. Hitachi’s “tripartite audit”
function, made up of the Audit
Committee, the Internal Auditing
Office, and an auditing firm, is
top-class within Japan, but in 2017
Hitachi began working to establish
tripartite audits for each Group
company as part of constructing a

Value Creation

Including my time as a financial
analyst, I have been an observer ofHitachi’s management for more than
30 years. Hitachi’s performance has
wavered at times, but the company is
now entering a new stage, aiming tobecome a truly major global player
and an “Innovation Partner for the IoTEra.” Although it is one of Japan’s
leading enterprises, in terms of
profitability Hitachi is not yet excelling.
To rank among the competition as atruly global player, Hitachi must
realize sustainable growth ofenterprise value by strengthening its
earnings ability. All executive officers
from the CEO down must understandthe concept of enterprise value,
including from an ESG perspective;
management decisions must be
based on a clear, ongoing estimationand evaluation of current and future
value. As an independent outside
director, my mission is to use my longprofessional experience in corporate
analysis in the capital markets to help
Hitachi’s management develop
sustainable enterprise value andimprove its corporate governance.

To make Hitachi a truly global playerthat satisfies diverse stakeholders,
and to develop ways to further
increase its enterprise value, thefollowing five points are vital: (1)bold and swift management
decision-making and execution,
including an ongoing review of theGroup’s business portfolio; (2)improved capital and asset
efficiency; (3) higher profitability tomeet global standards; (4) improved
coordination and administration formergers and acquisitions and major
projects; and (5) more effective useof Hitachi’s diverse and global
human capital by management,
including development of the next
generation of executive officers.
Achieving the goals of the 2018
Mid-term Management Plan will be an
important milestone, but when
considering the company’s long-term
development, Hitachi must lookbeyond this plan. Hitachi is at asignificant juncture, and whether it
can become a truly major global
player depends on which path it now
follows. As a director, I will continue
to monitor and supervise Hitachiclosely, contributing all that I can to
the realization of that goal and to theimprovement of the company’s
enterprise value.

Management & GovernanceFurther Strengthening
Corporate Governance45

Performance

Hitachi’s Challenge,
My Mission

PERFORMANCE

48 Financial

46

48

Segment Information

50

Financial and Non-Financial Highlights

52

10-Year Financial Data

54

Operating and Financial Review

60

Consolidated Statement of Financial Position

62

Consolidated Statement of Profit or Loss

63

Consolidated Statement of Comprehensive Income

64

Consolidated Statement of Changes in Equity

65

Consolidated Statement of Cash Flows

Hitachi, Ltd. Integrated Report 201766

Summarized Consolidated Statement of Financial
Position by Manufacturing, Services and Othersand Financial Services

67

Summarized Consolidated Statement of Profit or
Loss by Manufacturing, Services and Others andFinancial Services

67

Summarized Consolidated Statement of Cash
Flows by Manufacturing, Services and Others andFinancial Services

Our Business Model
Value Creation

Strategic Focus

Toward a Low-Carbon Society
Realization of a Resource Efficient Society
Harmonized Society with Nature

74 Societal
Supply Chain Management
Labor Practices
Communicating CSR Initiatives
and Material Issues

Management & Governance

74
76
79

Hitachi, Ltd. Integrated Report 201747

Performance

69
72
73

CEO Message

68 Environmental

Segment Information
Revenues

Information & Telecommunication Systems

Main Products and Services

Revenues and Profit

Systems integration
Consulting
Cloud services
Servers
Storage
SoftwareTelecommunications & network
ATMs(Billions of yen)

Adjusted operating income ratio

Share of Revenues
FY 2016
7.7%

6.6%

6.7%

2,034.0

2,109.3

5.2%

5.2%

1,982.8

FY 2016
A storage system

Social Infrastructure & Industrial Systems

Main Products and Services

Revenues and Profit

Industrial machinery and plants
Elevators
Escalators
Railway systems
Thermal, nuclear and renewableenergy power generation
systems
Transmission & distribution
systems(Billions of yen)

A Class 800 train for the UK Intercity
Express Programme (IEP)Electronic Systems & Equipment

15

16

(FY)

2,331.9

2,066.2
5.3%

4.3%

14

3.5%

–0.9%

15

16

Revenues and Profit

Semiconductor manufacturing
equipment
Measurement and analysis
equipment
Advanced industrial products
Medical equipment(Billions of yen)
6.4%
5.6%
1,131.6

3.3%

1.2%

Main Products and Services

30

％

23

％

Overseas Revenue Ratio
FY 2016

(FY)

39

％

Share of Revenues
FY 2016
7.0%

5.9%
5.7%
1,127.6％

Share of Revenues
FY 2016

2,333.1

20

Overseas Revenue Ratio

3.9%

14

EBIT ratio

5.7%
1,170.3

12％

Overseas Revenue Ratio
FY 2016
Hokkaido University Hospital s particle
beam cancer therapy system

Construction Machinery

14

48

Hitachi, Ltd. Integrated Report 2017

16

(FY)

Main Products and Services

Revenues and Profit

Share of Revenues

Hydraulic excavators
Wheel loaders
Mining machinery(Billions of yen)

FY 2016

815.7

758.3

60
7

753.9

7.4%
7.3%

Hitachi Construction Machinery's
ultralarge hydraulic excavator andmining dump truck

15

14

3.4%
3.5%

Overseas Revenue Ratio

3.0%

3.0%

FY 2016

15

16

(FY)

70

％

％

％

Adjusted operating income ratio

High Functional Materials & Components

Main Products and Services

Revenues and Profit

Share of Revenues(Billions of yen)

FY 2016

Hitachi Metals Nd-Fe-B NEOMAX®
magnets

Semiconductor- anddisplay-related materials
Printed wiring boards andrelated materials
Automotive parts(molded plastic products, etc.)
Energy storage devices
Specialty steels
Magnetic materials andcomponents
High-grade casting components
Wires and cables

Automotive Systems

Main Products and Services

Revenues and Profit

Engine management systems
Electric powertrain systems
Drive control systems
Car information systems(Billions of yen)

1,529.4

1,564.0

1,464.6

9.8%
8.4%

8.1%
7.9%

8.1%

EBIT ratio

14

％

8.2%

FY 2016

16

(FY)

5.1%

992.2
6.6%
5.7%

FY 2016
3.7%

14

15

16

10

(FY)

Main Products and Services

Revenues and Profit

Share of Revenues

Refrigerators
Washing machines
Vacuum cleaners
Room air conditioners
Air-conditioning equipment(Billions of yen)

FY 2016

57
6

754.2
681.0
6.2%

％

Overseas Revenue Ratio

5.4%

Hitachi Automotive Systems motor fora hybrid vehicle％

Share of Revenues
FY 2016

1,001.1

57

557.3
5.7%

Strategic Focus

936.9

15

％

％
Value Creation

4.6%

Overseas Revenue Ratio

Hitachi Appliances robot cleaner
minimaru

3.5%

14

15

4.0%

16

FY 2016

(FY)

20

％

Financial Services*2

Revenues and Profit

Share of Revenues

Revenues and Profit

Share of Revenues(Billions of yen)

FY 2016(Billions of yen)

FY 2016

1,274.2

6

1,252.7

4.0%
4.2%
3.3%

3.2%

3.4%
3.2%
653.7

15

16

％
10.9%

Overseas Revenue Ratio
FY 2016

14

356.2

(FY)

26

12.8%

12.7%

12.4%

11.9%
179.2

FY 2016

14

15

16

％

Overseas Revenue Ratio

9.9%

％

2

365.3

Management & Governance

Others*1

3.8%

(FY)

36

％

*1 From fiscal 2016, the Others (Logistics and Other Services) has been renamed to the Others due to conversion of Hitachi Transport System, Ltd. into
an equity-method associate on May 19, 2016.
*2 As Hitachi Capital Corporation was converted into an equity-method associate as of October 3, 2016, there is no company which belongs to the Financial
Services Segment. Accordingly, only the result for the first half of fiscal 2016 was recorded in this segment for fiscal 2016.
Hitachi, Ltd. Integrated Report 201749

Performance

14

CEO Message

Overseas Revenue Ratio

6.2%

Smart Life & Ecofriendly Systems

Our Business Model

Revenues

Financial and Non-Financial Highlights

Revenues / Overseas sales ratio

Operating income (Adjusted operating income) /Operating income (Adjusted operating income) ratio / EBIT / EBIT ratio(Billions of yen)(%)

12,00060

800

810,000

50

600

6

8,000

40

400

4

6,000

30

200

2

4,000

20

0

0

2,000

10

–200

–2

0

–400

0

07

08

09

10

11

12

13

14

13

U.S. GAAP

14

15

16

(FY)

(Billions of yen)

07

(%)

08

09

IFRS

Asia
North America
Revenues ( Japan
Overseas sales ratio (right scale)

Europe

10

11

12

13

14

13

U.S. GAAP

Other Areas) (left scale)

14

15

–4

16 (FY)IFRS

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

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

Cash flows(%)(Billions of yen)
900

30
20

450

10
0

0

–10
–20

–450

–30
–40
–50

07

08

09

10

11

12

13

14

13

U.S. GAAP
ROE

15

16 (FY)

–900

07

08

09

IFRS

10

11

12

13

14

13

U.S. GAAP

ROA

14

15

16 (FY)IFRSCash flows from operating activities
Free cash flows

Cash flows from investing activities

Capital expenditures*1 / Depreciation

R&D expenditures / R&D expenditures as a percentage ofconsolidated revenues(Billions of yen)(Billions of yen)

1,000

500

5

800

400

4

600

300

3

400

200

2

200

100

1

0

07

08

09

10

11

12

U.S. GAAP
Capital expenditures50

14

Depreciation

Hitachi, Ltd. Integrated Report 2017

13

14

13

14

15

IFRS

16

(FY)

0

07

(%)

08

09

10

11

U.S. GAAP

12

13

14

13

14

15

16 (FY)IFRS

R&D expenditures (left scale)R&D expenditures as a percentage of consolidated revenues (right scale)0CO2 emissions from factories and offices*3(%)（ kt-CO 2）
50

Our Business Model

Rate of reduction in CO2 emissions from use of products
and services*2

4,000

40

3,000

30
2,000

1,000

12

13

14

15

16

0

(FY)

12

13

14

15

Number of employees* 4*5

Global number and ratio of female managers*6

16

(FY)

(People)(People)(%)

40,0004,000

830,0003,000

620,0002,000

410,000

1,000

2

12

Male

Female

13

14

15

16

0

(FY)

12

Number (left)

Occupational accident rate at companies surveyed in Japan

13

14

15

16

(FY)

15

16

(CY)

0

Ratio (right)

Value Creation

0

Strategic Focus

100

CEO Message

20

Number of registered patents

300

15,0000.20

200

10,000

0.10

100

5,000

0

0

0

12

13

Occupational accident rate (left)

14

15

Companies surveyed (right)

16

(FY)

12

Japanese patents

13

14

Foreign patents*7*1 In line with IFRS standards, capital investment is stated exclusive of investment in lease assets classified as finance leases.
*2 This new indicator is calculated from fiscal 2016 onward as a percentage of the fiscal 2010 amount.
*3 Fiscal 2016 figure includes a materials company that became a consolidated member of the Hitachi Group that year. *4 Number of full-time employees*5 Hitachi, Ltd. *6 No data available for fiscal 2012. *7 Total number of patents registered in the United States, Europe, and China. The number of patents
registered in Europe is based on European patent applications under European Patent Convention (EPC).

Hitachi, Ltd. Integrated Report 201751

Performance

0.30

Management & Governance(%)

10-Year Financial Data

U.S. GAAPFor the year:

Revenues

FY 2007

FY 2008

FY 2009

FY 2010

FY 2011

FY 2012FY 2013¥11,226,735 ¥10,000,369¥8,968,546¥9,315,807¥9,665,883¥9,041,071¥9,563,791

Operating income

345,516

127,146

202,159444,508

412,280

422,028

538,288

EBIT (Earnings before interest and taxes)

335,729(275,239)

77,815443,812573,218

358,015585,662

Net income (loss) attributable to
Hitachi, Ltd. stockholders(58,125)(787,337)(106,961)

238,869

347,179

175,326

264,975

Cash flows from operating activities

791,837

558,947

798,299

841,554447,155

583,508

439,406

Cash flows from investing activities(637,618)(550,008)(530,595)(260,346)(195,584)(553,457)(491,363)

Free cash flows

154,219

8,939

267,704

581,208

251,571

30,051(51,957)

Cash flows from financing activities(185,556)

284,388(502,344)(584,176)(167,838)(180,445)

32,968Cash dividends declared

19,947

9,971‒

36,13336,727

47,69050,711

Capital expenditures(Property, plant and equipment)

969,087

788,466

546,326

556,873649,234

742,537

849,877

Depreciation (Property, plant and equipment)

541,470

478,759441,697382,732

360,358

300,664

329,833

R&D expenditures

428,171416,517372,470

395,180

412,514341,310351,426

Total assets

10,530,847

9,403,709

8,964,464

9,185,629

9,418,526

9,809,230

11,016,899

Property, plant and equipment

2,653,918

2,393,946

2,219,804

2,111,270

2,025,538

2,279,964

2,342,091

Total Hitachi, Ltd. stockholders' equity

2,170,612

1,049,951

1,284,658

1,439,865

1,771,782

2,082,560

2,651,241

Interest-bearing debt

2,531,506

2,820,109

2,367,143

2,521,551

2,396,454

2,370,079

2,823,049

Number of employees

347,810

361,796359,746

361,745

323,540

326,240

320,725

Basic¥(17.48)¥(236.86)¥(29.20)¥52.89¥76.81¥37.28¥54.86

Diluted(17.77)(236.87)(29.20)

49.38

71.86

36.29

54.85

At year-end:

Per share data:
Net income (loss) attributable to
Hitachi, Ltd. stockholders:Cash dividends declared
Total Hitachi, Ltd. stockholders' equity

6.0

3.0

‒

8.0

8.0

10.0

10.5

652.95315.86287.13318.73382.26431.13549.02

5.6

Financial ratios:
Operating income ratio

3.1

1.3

2.3

4.8

4.3

4.7

EBIT ratio

3.0

‒2.8

0.9

4.8

5.9

4.0

6.1

Return on revenues

‒0.5

‒7.9

‒1.2

2.6

3.6

1.9

2.8

Return on equity (ROE)

‒2.5

‒48.9

‒9.2

17.5

21.6

9.1

11.2

Return on assets (ROA)

0.5

‒8.0

‒0.9

3.3

4.4

2.5

3.5

D/E ratio(Including non-controlling interests) (times)

0.76

1.29

1.04

1.03

0.86

0.75

0.73

Total Hitachi, Ltd. stockholders' equity ratio

20.6

11.2

14.3

15.7

18.8

21.2

24.1

Notes: 1 In order to be consistent with financial reporting principles and practices generally accepted in Japan, operating income is presented as total revenues lesscost 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 and impairment 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 theCompany 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 prioryears have been restated to reflect the current year's presentation.
5 Effective from fiscal 2014, a part of the thermal power generation systems business is classified as a discontinued operation in accordance with the provisionof 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 this classification, Revenues and Operating income for fiscal 2013 are reclassified.
6 ROA (Return on Assets) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) x 100

52

Hitachi, Ltd. Integrated Report 2017

Our Business Model

IFRSMillions of yen

FY 2014

For the year:

FY 2013¥9,761,970

Revenues¥9,666,446

FY 2014

FY 2015

FY 2016¥9,774,930 ¥10,034,305¥9,162,264

600,479

Adjusted operating income

604,798

641,325

634,869

587,309551,018

EBIT

691,230

534,059

531,003475,182

241,301

Net income attributable to
Hitachi, Ltd. stockholders

413,877

217,482

172,155

231,261

447,348

Net cash provided by operating activities

306,777

451,825

812,226

629,582(610,255)

Net cash used in investing activities(550,179)(612,545)(730,799)(337,955)(162,907)

Free cash flows(243,402)(160,720)

81,427

291,627

250,335

Net cash provided by (used in) financing activities

228,840

233,206(26,467)(209,536)

57,944

Cash dividends declared

50,711

57,94457,93962,764

848,716

Capital expenditures(Property, plant and equipment)

491,170

431,201

528,551

377,545

349,614

Depreciation (Property, plant and equipment)

331,228

350,783

366,547

302,757

335,515

R&D expenditures

354,487

334,814

333,730

323,963

CEO Message

Millions of yen

Total assets

11,098,191

12,433,727

12,551,005

9,663,917

2,564,105

Property, plant and equipment

2,258,933

2,472,497

2,500,226

1,998,411

2,930,309

Total Hitachi, Ltd. stockholders' equity

2,668,657

2,942,281

2,735,078

2,967,085

3,354,616

Interest-bearing debt

3,033,985

3,557,356

3,604,455

1,176,603

333,150

Number of employees

323,919

336,670

335,244

303,887

Yen

Strategic Focus

At year-end:
12,395,379

Yen

Per share data:

Basic¥85.69¥45.04¥35.65¥47.9049.93

Diluted

85.66

45.00

35.62

47.88

12.0
606.87

Cash dividends declared
Total Hitachi, Ltd. stockholders' equity

10.5

12.0

12.0

13.0

552.62609.35566.48614.56%%

6.2

Adjusted operating income ratio

6.3

6.6

6.3

6.4

5.6

EBIT ratio

7.2

5.5

5.3

5.2

2.5

Return on revenues

4.3

2.2

1.7

2.5

8.6

Return on equity (ROE)

17.5

7.8

6.1

8.1

3.1

Return on assets (ROA)

5.0

2.9

2.4

3.0

0.78

D/E ratio(Including non-controlling interests) (times)

0.78

0.83

0.87

0.29

23.6

Total Hitachi, Ltd. stockholders' equity ratio

24.0

23.7

21.8

30.7

Management & Governance

Financial ratios:

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 less cost of sales and selling, general administrative expenses.
The Company believes that this is useful to investors in comparing the Company's financial results with those ofother Japanese companies.
2 A part of the thermal power generation systems business is classified as a discontinued operation in accordancewith the provision of IFRS 5, Non-current Assets Held for Sale and Discontinued Operations, which was nottransferred 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.
3 From fiscal 2013, capital investment is stated exclusive of investment in lease assets classified as finance leases.
4 ROA (Return on Assets) = Net income / Total Assets (Average between the end of current fiscal year and the endof previous fiscal year) x 100

Hitachi, Ltd. Integrated Report 201753

Performance¥49.97

Value Creation

Earnings per share attributable to
Hitachi, Ltd. stockholders:Operating and Financial Review

Operating Results
Effective from April 1, 2016, the Company changed thename of the Others (Logistics and Other services)segment to the Others segment.

Summary
Billions of yen
Years ended March 31:

Revenues

2016

2017

Percentchange¥10,034.3¥9,162.2

–9%

EBIT

531.0

475.1

–11%

Income fromcontinuing operations,
before income taxes

517.0

469.0

–9%

Net income attributable
to Hitachi, Ltd.
stockholders

172.1

231.2

34%

Analysis of Statement of Operations
Revenues decreased 9% to ¥9,162.2 billion, as comparedwith the year ended March 31, 2016. This was due mainly
to lower revenues in the Information & Telecommunication
Systems, High Functional Materials & Components, Smart
Life & Ecofriendly Systems, Others and Financial Services
segments. This decrease was partially offset by higher
revenues in the Electronic Systems & Equipment segment.
Cost of sales decreased 9% to ¥6,782.6 billion, as
compared with the year ended March 31, 2016, and theratio of cost of sales to revenues was 74%, which was thesame level as the year ended March 31, 2016. Gross profit
decreased 8% to ¥2,379.5 billion, as compared with theyear ended March 31, 2016.
Selling, general and administrative expenses decreased¥148.0 billion to ¥1,792.2 billion, as compared with the year
ended March 31, 2016, and the ratio of selling, general andadministrative expenses to revenues was 20%, ascompared with 19% for the year ended March 31, 2016.

54

Hitachi, Ltd. Integrated Report 2017

Other income increased ¥43.2 billion to ¥100.7 billion andother expenses increased ¥4.6 billion to ¥146.5 billion, as
compared with the year ended March 31, 2016. The details
are as follows.
Net gain on sales and disposal of fixed assets improvedby ¥19.5 billion, as compared with the year ended March
31, 2016, to a gain of ¥15.0 billion.
Impairment losses increased ¥23.8 billion to ¥68.5 billion,
as compared with the year ended March 31, 2016. This
mainly reflected impairment losses on software for sale andother intangible assets in the Information &Telecommunication Systems segment.
Net gain on business reorganization and others increased¥26.1 billion to ¥81.3 billion, as compared with the year
ended March 31, 2016, reflecting the partial sale of theshares of Hitachi Transport System, Ltd. in the Others
segment and the sale of Hitachi Koki Co., Ltd. shares in theElectronic Systems & Equipment segment.
Special termination benefits decreased ¥20.8 billion to¥24.6 billion, as compared with the year ended March
31, 2016.
Expenses related to competition law and others
decreased ¥15.5 billion to ¥6.7 billion, as compared with theyear ended March 31, 2016.
Financial income (excluding interest income)decreased ¥3.5 billion to ¥7.0 billion and financial
expenses (excluding interest charges) decreased ¥4.0
billion to ¥26.2 billion, as compared with the year ended
March 31, 2016.
Share of loss of investments accounted for using theequity method was ¥47.1 billion, a deterioration of ¥47.3
billion as compared with the year ended March 31, 2016,
mainly reflecting the posting of an impairment loss inconnection with the uranium enrichment business at an U.S.
equity-method associate in the Social Infrastructure &Industrial Systems segment.
EBIT decreased ¥55.8 billion to ¥475.1 billion, as
compared with the year ended March 31, 2016.

Our Business Model

Operations by Segment
The following is an overview of results of operations bysegment. Revenues for each segment include intersegment
transactions. Segment profit is measured by EBIT.

Strategic Focus

CEO Message(Information & Telecommunication Systems)
Revenues decreased 6% to ¥1,982.8 billion, as comparedwith the year ended March 31, 2016, due mainly to thenegative impact of foreign currency translation causing
lower sales from overseas subsidiaries and to lower sales
from ATMs for overseas markets.
Segment profit decreased ¥32.6 billion to ¥76.4 billion, as
compared with the year ended March 31, 2016, due mainly
to the posting of business structural reform expenses,
despite the effect of business structural reform centered on
the telecommunications & network business, improvementin profitability of the social infrastructure-related information
systems, among other positives.

Hitachi, Ltd. Integrated Report 2017Management & GovernanceValue Creation(Social Infrastructure & Industrial Systems)
Revenues were ¥2,331.9 billion, which was the same level
as the year ended March 31, 2016. This mainly reflected
decreases in revenues in the elevators and escalators
business due to the negative impact of foreign currencytranslation, and in the power and energy business becauseof the absence of a large project posted for the year ended
March 31, 2016, despite substantial revenue growth in therailway systems business due to the acquisition of thebusinesses of AnsaldoBreda S.p.A. (excluding a part of its
operations), the acquisition of Ansaldo STS S.p.A. (both ofwhich are in Italy), and an increase in revenues for the U.K.
Segment loss was ¥19.9 billion, a deterioration of ¥49.1
billion from the year ended March 31, 2016, due mainly tothe posting of an impairment loss regarding the uranium
enrichment business of an equity-method associate in the
U.S. and lower earnings in the elevators and escalators
business because of the negative impact of foreign
currency translation.

55

Performance

Interest income increased ¥0.8 billion to ¥12.9 billion
and interest charges decreased ¥6.9 billion to ¥19.0
billion, as compared with the year ended March 31,
2016.
Income from continuing operations, before income taxes
decreased ¥47.9 billion to ¥469.0 billion, as compared withthe year ended March 31, 2016.
Income taxes decreased ¥40.0 billion to ¥125.1 billion,
as compared with the year ended March 31, 2016, due
mainly to recording tax expenses in the year ended
March 31, 2016 in connection with the partial transfer ofshares of Hitachi Transport System, Ltd. and Hitachi
Capital Corporation.
Loss from discontinued operations decreased ¥51.1
billion to ¥5.9 billion, as compared with the year ended
March 31, 2016.
Net income increased ¥43.2 billion to ¥338.0 billion, as
compared with the year ended March 31, 2016.
Net income attributable to non-controlling interests
decreased ¥15.8 billion to ¥106.7 billion, as compared withthe year ended March 31, 2016.
As a result of the foregoing, net income attributable to
Hitachi, Ltd. stockholders increased ¥59.1 billion to ¥231.2
billion, as compared with the year ended March 31, 2016.

(Electronic Systems & Equipment)
Revenues increased 4% to ¥1,170.3 billion, as comparedwith the year ended March 31, 2016, due mainly toincreased revenues at Hitachi Koki Co., Ltd. because of theacquisition of Germany-based metabo Aktiengesellschaft,despite a decrease in revenues at Hitachi Kokusai ElectricInc. mainly owing to lower sales of telecommunicationequipment and video surveillance systems in Japan.
Segment profit increased ¥2.4 billion to ¥66.7 billion, as
compared with the year ended March 31, 2016, due
mainly to higher earnings at Hitachi High-Technologies
Corporation due to firm sales of semiconductor production
equipment and higher earnings at Hitachi Koki Co., Ltd.
because of the increased revenues, despite a decrease inearnings at Hitachi Kokusai Electric Inc. mainly because ofa decline in revenues and the posting of businessstructural reform expenses.
(Construction Machinery)
Revenues decreased 1% to ¥753.9 billion, as comparedwith the year ended March 31, 2016, due mainly to thenegative impact of foreign currency translation caused byappreciation of the yen, despite the recovery of demand forhydraulic excavators in China and India.
Segment profit decreased ¥3.1 billion to ¥22.7 billion, as
compared with the year ended March 31, 2016, due mainly
to the absence of a gain on business reorganization andothers related to the sale of shares of UniCarriers Holdings
Corporation recorded for the year ended March 31, 2016,
despite the effect of business structural reforms, decreases
in business structural reform expenses and an improvement
in exchange gain or loss.
(High Functional Materials & Components)
Revenues decreased 6% to ¥1,464.6 billion, as comparedwith the year ended March 31, 2016, due mainly to a fall inrevenues at Hitachi Metals, Ltd. due to the negative impactof foreign currency translation causing a fall in sales fromoverseas subsidiaries and a decline in demand associatedwith the slower economies in China and emerging countries
in Asia.
Segment profit decreased ¥30.2 billion to ¥123.3 billion,
as compared with the year ended March 31, 2016, due
mainly to the decrease in revenues and the absence ofgains on business reorganization and others related to thesales of equity interest in Hitachi Tool Engineering, Ltd. by
Hitachi Metals, Ltd. in the year ended March 31, 2016.

56

Hitachi, Ltd. Integrated Report 2017

(Automotive Systems)
Revenues decreased 1% to ¥992.2 billion, as comparedwith the year ended March 31, 2016, due mainly to negative
impact of foreign currency translation, despite sales growthparticularly in North America and China, where demand forautomobiles was firm.
Segment profit increased ¥11.8 billion to ¥65.8 billion, as
compared with the year ended March 31, 2016, due mainly
to posting of gain on sales and disposals of fixed assets
despite the decline in revenues.
(Smart Life & Ecofriendly Systems)
Revenues decreased 18% to ¥557.3 billion, as comparedwith the year ended March 31, 2016, due mainly to theeffect of reorganization of the air-conditioning systems
business with an equity-method associate that is a joint
venture with Johnson Controls Inc.
Segment profit decreased ¥10.1 billion to ¥31.8 billion, as
compared with the year ended March 31, 2016, due mainly
to the effect of a decline in revenues from the reorganizationof the air-conditioning systems business and the absence ofa gain on business reorganization and others in association
with the reorganization of the air-conditioning systems
business recorded in the year ended March 31, 2016.
(Others)
Revenues decreased 48% to ¥653.7 billion, and segment
profit decreased ¥19.9 billion to ¥20.6 billion, as comparedwith the year ended March 31, 2016, respectively. This wasdue mainly to the conversion of Hitachi Transport System,
Ltd. to an equity-method associate.
(Financial Services)
As Hitachi Capital Corporation was converted to an
equity-method associate as of October 2016, there is nocompany which belongs to the Financial Services
segment. Accordingly, only the results for the period inwhich said company was a consolidated subsidiary arerecorded. As a result, revenues decreased 51% to¥179.2 billion, and segment profit decreased ¥23.8
billion to ¥22.8 billion, as compared with the year ended
March 31, 2016, respectively.

2017

Percentchange¥ 5,231.5¥4,757.6–9%4,802.7

4,404.5–8%

Asia2,112.3

1,860.7–12%

North America

1,280.3

1,144.0–11%

Europe

951.1

972.6

2%

Other Areas

459.0

427.1

–7%

Total Revenues¥10,034.3¥9,162.2

–9%

Japan
Overseas Revenues
SubtotalJapan
Revenues in Japan decreased 9% to ¥4,757.6 billion, as
compared with the year ended March 31, 2016. This wasdue to lower revenues across all segments, particularly in
the Others segment, reflecting the conversion of Hitachi
Transport System, Ltd. to an equity-method associate andin the Financial Services segment in which Hitachi Capital
Corporation was converted to an equity-method associate.
Overseas
Overseas revenues decreased 8% to ¥4,404.5 billion, as
compared with the year ended March 31, 2016, and theratio to total revenues was 48%, which was the same level
as the year ended March 31, 2016.

Our Business Model
CEO Message

2016

Years ended March 31:(Europe)
Revenues in Europe increased 2% to ¥972.6 billion, as
compared with the year ended March 31, 2016. This wasdue mainly to higher revenues in the Social Infrastructure &Industrial Systems segment, reflecting substantial growth in
the railway systems business, and the Electronic Systems &Equipment segment, in which Hitachi Koki Co., Ltd.
recorded increased revenues due to the acquisition of
metabo Aktiengesellschaft, despite lower revenues in the
Others and the Financial Services segments, etc.

Strategic Focus

Billions of yen(Other Areas)
Revenues in other areas decreased 7% to ¥427.1 billion, as
compared with the year ended March 31, 2016. This wasdue mainly to lower revenues in the Smart Life & Ecofriendly
Systems and the Others segments, despite higher revenues
in the Social Infrastructure & Industrial Systems segment,
reflecting increased revenues in the railway systems
business, and the Electronic Systems & Equipment
segment, reflecting increased revenues by Hitachi HighTechnologies Corporation.

Value Creation

The following is an overview of revenues attributed togeographic areas based on customer location.

(North America)
Revenues in North America decreased 11% to ¥1,144.0
billion, as compared with the year ended March 31,
2016. This was due mainly to lower revenues in the
Information & Telecommunication Systems, High
Functional Materials & Components and Others
segments, despite higher revenues in the Social
Infrastructure & Industrial Systems segment.

Management & Governance(Asia)
Revenues in Asia decreased 12% to ¥1,860.7 billion, as
compared with the year ended March 31, 2016. This wasdue mainly to lower revenues in the Social Infrastructure &Industrial Systems segment, reflecting reduced revenues inthe elevators and escalators business, particularly in China,
the Others segment in which Hitachi Transport System, Ltd.
was converted to an equity-method associate, and the
Smart Life & Ecofriendly Systems segment due to thereorganization of the air-conditioning systems business,despite higher revenues in the Electronic Systems &Equipment and the Construction Machinery segments.

Hitachi, Ltd. Integrated Report 201757

Performance

Revenues by Geographic Area

Summary of Financial Condition, etc.
Liquidity and Capital Resources
Our management considers maintaining an appropriate levelof liquidity and securing adequate funds for current andfuture business operations to be important financial
objectives. Through efficient management of working capitaland selective investment in new plants and equipment, we
are working to optimize the efficiency of capital utilization
throughout our business operations. We endeavor to
improve our group cash management by centralizing suchmanagement among us and our overseas financial
subsidiaries. Our internal sources of funds include cash
flows generated by operating activities and cash on hand.
Our management also considers short-term investments tobe an immediately available source of funds. In addition, weraise funds both in the capital markets and from Japaneseand international commercial banks in response to ourcapital requirements. Our management s policy is to financecapital expenditures primarily by internally generated funds
and to a lesser extent by funds raised through the issuanceof debt and equity securities in domestic and foreign capital
markets. In order to flexibly access funding, we maintain ourshelf registration with the maximum outstanding balance of¥300.0 billion.
We maintain commitment line agreements with a numberof domestic banks under which we may borrow in order toensure efficient access to necessary funds. These
commitment line agreements generally provide for a oneyear 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 ending on July 29, 2019. As of March 31, 2017, ourunused commitment lines totaled ¥599.0 billion, includingthese of ¥400.0 billion which the Company maintained.

58

Hitachi, Ltd. Integrated Report 2017

We receive debt ratings from Moody s Japan K.K.
(Moody s), Standard & Poor s Rating Japan (S&P), as wellas Rating and Investment Information, Inc. (R&I). Our debt
ratings as of March 31, 2017 were as follows.
Long-term

Short-term

Moody sRating Company

A3

P–2

S&P

A–

A–2

R&I

A+

a–1

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

Cash Flows
Billions of yen
Years ended March 31:

2016

2017

Net cash provided by operating activities¥ 812.2¥ 629.5

Net cash used in investing activities(730.7)(337.9)Net cash used in financing activities(26.4)(209.5)

Effect of exchange rate changes
on cash and cash equivalents(57.3)(16.1)

Change in cash and cash equivalents

(2.3)

65.9

701.7

699.3

¥ 699.3¥ 765.2

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

(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2017 increased by¥43.2 billion, as compared with the year ended March 31,
2016. Trade payables increased by ¥111.5 billion in the year
ended March 31, 2017, as compared with the decrease of¥1.6 billion in the year ended March 31, 2016. However,change in trade receivables and change in inventories
decreased net cash flow by ¥143.7 billion and ¥67.0 billion,
respectively. As a result of the foregoing, net cash provided
by operating activities was ¥629.5 billion in the year ended
March 31, 2017, a decrease of ¥182.6 billion comparedwith the year ended March 31, 2016.

*1 The sum of the purchase of property, plant and equipment, thepurchase of intangible assets and the purchase of leased assets, lessthe proceeds from sale of property, plant, equipment and intangible
assets, the proceeds from sale of leased assets and the collection oflease receivables

equity amounted to ¥2,967.0 billion, an increase of ¥232.0
billion from March 31, 2016. This is due mainly to theposting of net income attributable to Hitachi, Ltd.
stockholders, despite the impact of converting Hitachi
Capital Corporation into an equity-method associate. As aresult, the ratio of total Hitachi, Ltd. stockholders equity tototal assets as of March 31, 2017 was 30.7%, comparedwith 21.8% as of March 31, 2016.
Non-controlling interests as of March 31, 2017 was¥1,129.9 billion, a decrease of ¥260.5 billion from March
31, 2016.
Total equity as of March 31, 2017 was ¥4,096.9 billion, adecrease of ¥28.5 billion from March 31, 2016. The ratio ofinterest-bearing debt to total equity was 0.29, comparedwith 0.87 as of March 31, 2016.

Value Creation

Strategic Focus

CEO Message

As of March 31, 2017, total assets amounted to ¥9,663.9
billion, a decrease of ¥2,887.0 billion from March 31, 2016.
This was due mainly to the conversion of Hitachi Capital
Corporation and Hitachi Transport System, Ltd. into equitymethod associates and the sale of Hitachi Koki Co., Ltd.
Cash and cash equivalents as of March 31, 2017 amounted
to ¥765.2 billion, an increase of ¥65.9 billion from theamount as of March 31, 2016.
As of March 31, 2017, total interest-bearing debt, thesum of short-term debt and long-term debt, amounted to¥1,176.6 billion, a decrease of ¥2,427.8 billion from March
31, 2016. As of March 31, 2017, short-term debt,
consisting mainly of borrowings from banks and commercial
paper, amounted to ¥196.3 billion, a decrease of ¥675.0
billion from March 31, 2016. As of March 31, 2017, current
portion of long-term debt amounted to ¥190.2 billion, adecrease of ¥461.2 billion from March 31, 2016. As of
March 31, 2017, long-term debt (excluding current portion),
consisting mainly of debentures, and loans principally frombanks and insurance companies, amounted to ¥790.0
billion, a decrease of ¥1,291.5 billion from March 31, 2016.
As of March 31, 2017, total Hitachi, Ltd. stockholders

Management & Governance(Cash Flows from Financing Activities)
The net cash outflow from a change in short-term debt
increased by ¥164.0 billion compared with the year ended
March 31, 2016. Proceeds related to long-term debt*2
were ¥115.5 billion, a decrease of ¥65.1 billion comparedwith the year ended March 31, 2016. As a result of theforegoing, net cash used in financing activities was ¥209.5
billion in the year ended March 31, 2017, an increase in net
cash outflow of ¥183.0 billion compared with the year
ended March 31, 2016.

Our Business Model

Assets, Liabilities and Equity*2 The proceeds from long-term debt, less the payments on
long-term debt

As a result of the above items, as of March 31, 2017,
cash and cash equivalents amounted to ¥765.2 billion, net
increase of ¥65.9 billion from March 31, 2016. Free cash
flows, the sum of cash flows from operating and investing
activities, represented an inflow of ¥291.6 billion in the year
ended March 31, 2017, an increase in net cash inflow of¥210.2 billion from the year ended March 31, 2016.

Hitachi, Ltd. Integrated Report 201759

Performance(Cash Flows from Investing Activities)
Net amount of investments related to property, plant andequipment*1 was ¥462.6 billion, a decrease of ¥189.7 billion
as compared with the year ended March 31, 2016.
Proceeds from sale of investments in securities and otherfinancial assets (including investments in subsidiaries andinvestments accounted for using the equity method)
increased by ¥111.1 billion compared with the year ended
March 31, 2016, reflecting partial sales of the shares ofHitachi Transport System, Ltd. and Hitachi Capital
Corporation, and the sale of all shares of Hitachi Koki Co.,
Ltd. Purchase of investments in securities and otherfinancial assets (including investments in subsidiaries andinvestments accounted for using the equity method) was¥177.3 billion, a decrease of ¥19.3 billion compared with theyear ended March 31, 2016, in which the acquisition of thebusinesses of AnsaldoBreda S.p.A. (excluding a part of its
operations), the acquisition of Ansaldo STS S.p.A., and theacquisition of Pentaho Corporation were conducted. As aresult of the foregoing, net cash used in investing activitieswas ¥337.9 billion in the year ended March 31, 2017, adecrease of ¥392.8 billion compared with the year ended
March 31, 2016.

Consolidated Statement of Financial Position
March 31, 2017 and 2016

Millions of yen

Assets2016

2017

699,315¥ 765,242

2,992,770

2,433,149

Current assets
Cash and cash equivalents
Trade receivables
Lease receivables¥

338,758

42,365

1,299,855

1,225,907

Other current assets

541,857

535,943

Total current assets

5,872,555

5,002,606

Investments accounted for using the equity method

676,960

691,251

Investments in securities and other financial assets

1,329,974

719,704

727,485

38,646

Property, plant and equipment

2,500,226

1,998,411

Intangible assets

1,070,403

919,201

Other non-current assets

373,402

294,098

Total non-current assets

6,678,450

4,661,311¥12,551,005¥9,663,917

Inventories

Non-current assets

Lease receivables

Total Assets

60

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Millions of yen

Liabilities

2016

2017

871,417¥ 196,357

651,518

190,233

Current portion of long-term debt
Other financial liabilities¥

280,048274,270

Trade payables

1,451,918

1,402,233

Other current liabilities

1,739,315

1,657,766

Total current liabilities

4,994,216

3,720,859

Long-term debt

2,081,520

790,013

Other financial liabilities

115,155

53,422Retirement and severance benefits

783,670

635,684

Other non-current liabilities

450,874

366,944

Total non-current liabilities

3,431,219

1,846,063

8,425,435

5,566,922

Common stock

458,790458,790

Capital surplus

586,790

577,573

Total Liabilities

Strategic Focus

Non-current liabilities

Equity1,609,761

1,793,570

Accumulated other comprehensive income

83,543141,068

Treasury stock, at cost

(3,806)(3,916)

2,735,078

2,967,085

1,390,492

1,129,910

4,125,570

4,096,995¥12,551,005¥9,663,917

Total Hitachi, Ltd. stockholders' equity
Non-controlling interests
Total Equity
Total Liabilities and Equity

Management & Governance

Retained earnings

Value Creation

Hitachi, Ltd. stockholders' equity

Hitachi, Ltd. Integrated Report 201761

Performance

Short-term debt

CEO Message

Current liabilities

Consolidated Statement of Profit or Loss
Years ended March 31, 2017 and 2016

Millions of yen

2016

2017

¥10,034,305¥ 9,162,264

Cost of sales(7,459,073)(6,782,677)

Gross profit

2,575,232

2,379,587(1,940,363)(1,792,278)

634,869

587,309

Other income

57,539100,742

Other expenses(141,881)(146,568)

Financial income

10,615

7,091

Financial expenses(30,295)(26,206)

Revenues

Selling, general and administrative expenses
Adjusted operating income

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

156(47,186)

531,003475,182

Interest income

12,02812,923

Interest charges(25,991)(19,014)517,040

469,091(165,206)(125,112)

351,834

343,979(57,081)(5,950)EBIT (Earnings before interest and taxes)

Income from continuing operations, before income taxes
Income taxes
Income from continuing operations
Loss from discontinued operations
Net income¥

294,753¥

338,029

Net income attributable to:62

Hitachi, Ltd. stockholders

172,155

231,261

Non-controlling interests

122,598

106,768

Hitachi, Ltd. Integrated Report 2017

Consolidated Statement of Comprehensive Income
Our Business Model

Years ended March 31, 2017 and 2016

Millions of yen

Net income

2016

2017

¥ 294,753¥338,029

Other comprehensive income (OCI)
Net changes in financial assets measured at fair value through OCI(50,323)59,934Remeasurements of defined benefit plans(140,844)

46,086(4,275)(1,887)(195,442)

104,133

Total items not to be reclassified into net income

Foreign currency translation adjustments(190,099)(64,761)

Net changes in cash flow hedges

32,78521,303

Share of OCI of investments accounted for using the equity method(26,239)

1,166

Total items that can be reclassified into net income(183,553)(42,292)

Other comprehensive income (OCI)(378,995)

61,841¥ (84,242)¥399,870

Hitachi, Ltd. stockholders(127,557)

299,397

Non-controlling interests

43,315

100,473

Comprehensive income (loss)

Strategic Focus

Items that can be reclassified into net income

Management & GovernanceValue Creation

Comprehensive income (loss) attributable to:

Hitachi, Ltd. Integrated Report 201763

Performance

Share of OCI of investments accounted for using the equity method

CEO Message

Items not to be reclassified into net income

Consolidated Statement of Changes in Equity
Years ended March 31, 2017 and 2016

Millions of yen

2016
Accumulated
otherTotal Hitachi, Ltd.
comprehensive Treasury stock, stockholders'
Non-controllingincomeat costequityinterests

Commonstock

CapitalsurplusRetainedearnings

As of March 31, 2015

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

Reclassified into
retained earnings‒‒

18,030(18,030)

‒

‒

‒

‒

Total equity

Net income‒‒

172,155‒‒

172,155

122,598

294,753

Other comprehensive loss

‒

‒

‒

(299,712)‒(299,712)(79,283)(378,995)

Cash dividends‒‒(57,941)‒‒(57,941)(39,502)(97,443)

Changes in treasury stock

‒

(4)

‒

‒

(264)

(268)

‒

(268)

Equity transactions and
other

‒

(21,622)

‒

185

‒

(21,437)

32,618

11,181

Total changes in equity‒(21,626)

132,244(317,557)(264)(207,203)

36,431(170,772)

As of March 31, 2016

¥458,790¥586,790¥1,609,761¥ 83,543¥(3,806)¥2,735,078¥1,390,492¥4,125,570

Millions of yen

2017

64

Accumulated
otherTotal Hitachi, Ltd.
comprehensive Treasury stock, stockholders'
Non-controllingincomeat costequityinterests

Commonstock

CapitalsurplusRetainedearnings

As of March 31, 2016

¥458,790¥586,790¥1,609,761¥ 83,543¥(3,806)¥2,735,078¥1,390,492¥4,125,570

Reclassified into
retained earnings‒‒

10,486(10,486)

‒

‒

‒

‒

Net income‒‒

231,261‒‒

231,261

106,768

338,029

Other comprehensive
income (loss)

‒

‒

‒

68,136‒

68,136(6,295)61,841

Cash dividends‒‒(57,938)‒‒(57,938)(38,283)(96,221)

Changes in treasury stock

‒

(15)

‒

‒

(110)

(125)

‒

(125)

Equity transactions andotherTotal equity‒(9,202)

‒

(125)

‒

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

Total changes in equity‒(9,217)

183,80957,525(110)

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

As of March 31, 2017

¥458,790¥577,573¥1,793,570¥141,068¥(3,916)¥2,967,085¥1,129,910¥4,096,995

Hitachi, Ltd. Integrated Report 2017

Consolidated Statement of Cash Flows
Our Business Model

Years ended March 31, 2017 and 2016

Millions of yen

2016

2017

¥ 294,753¥ 338,029

Cash flows from operating activities
Net income
Depreciation and amortization

507,790415,183

Change in trade receivables(53,092)(196,824)

Change in inventories

44,342(22,731)

Change in trade payables(1,602)

111,589

Other

20,035(15,664)

812,226

629,582

Purchase of property, plant and equipment(369,494)(316,116)

Purchase of intangible assets(116,438)(101,034)

Purchase of leased assets(539,420)(292,943)

22,632

52,208Net cash provided by (used in) operating activities

CEO Message

Adjustments to reconcile net income to net cash provided by operating activities

23,834

14,539Collection of lease receivables

326,497

180,726

Proceeds from sale (purchase) of investments in securities andother financial assets (including investments in subsidiaries andinvestments accounted for using the equity method), net(58,756)

71,653Other(19,654)

53,012(730,799)(337,955)

81,427

291,627

Change in interest-bearing debt

110,821(118,314)

Dividends paid to stockholders(57,907)(57,935)

Dividends paid to non-controlling interests(41,671)(36,508)

Other(37,710)3,221(26,467)(209,536)

Effect of exchange rate changes on cash and cash equivalents(57,348)(16,164)

Change in cash and cash equivalents(2,388)65,927

701,703699,315¥ 699,315¥ 765,242

Net cash provided by (used in) investing activities
Free cash flows

Value Creation

Proceeds from sale of leased assets

Net cash provided by (used in) financing activities

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

Hitachi, Ltd. Integrated Report 2017Management & GovernanceCash flows from financing activities

65

Performance

Proceeds from sale of property, plant and equipment,
and intangible assets

Strategic Focus

Cash flows from investing activities

Summarized Consolidated Statement of Financial Position by
Manufacturing, Services and Others and Financial Services
Years ended March 31, 2017 and 2016
Billions of yen

2016
Manufacturing,Servicesand Others

Financial
Services¥4,995.6

2017

Total

Manufacturing,Servicesand Others

Financial
Services

Total¥1,256.8¥ 5,872.5¥5,002.6‒¥5,002.6

660.9

157.0

699.3

765.2

‒

765.2

2,472.0710.7

2,992.7

2,433.1‒

2,433.1

AssetsCurrent assets
Cash and cash equivalents
Trade receivables

45.6

311.9

338.7

42.3

‒

42.3

1,291.5

3.7

1,299.8

1,225.9‒

1,225.9

525.3

73.3

541.8

535.9

‒

535.9

4,922.3

1,834.6

6,678.4

4,661.3‒

4,661.3

Investments accounted for using
the equity method

676.3

20.4

676.9

691.2

‒

691.2

Investments in securities andother financial assets

681.6

675.9

1,329.9

719.7

‒

719.7

Lease receivables
Inventories
Other current assets
Non-current assets

38.2

729.8

727.4

38.6

‒

38.6

Property, plant and equipment

2,193.6307.5

2,500.2

1,998.4‒

1,998.4

Intangible assets

1,007.7

62.6

1,070.4

919.2

‒

919.2

324.6

38.1

373.4

294.0

‒

294.0

¥9,917.9¥3,091.4¥12,551.0¥9,663.9‒¥9,663.9¥4,095.5¥1,323.2¥ 4,994.2¥3,720.8‒¥3,720.8

Short-term debt

529.8

497.6

871.4

196.3

‒

196.3

Current portion of long-term debt

234.9

485.6

651.5

190.2

‒

190.2

Other financial liabilities

265.5

40.1

280.0

274.2

‒

274.2

1,379.0228.9

1,451.9

1,402.2‒

1,402.2
1,657.7

Lease receivables

Other non-current assets
Total Assets
Liabilities and Equity
Current liabilities

Trade payables

1,686.1

70.8

1,739.3

1,657.7‒

Non-current liabilities

2,038.0

1,421.1

3,431.2

1,846.0‒

1,846.0

Long-term debt

750.3

1,356.2

2,081.5

790.0

‒

790.0

Other financial liabilities

85.0

28.7

115.1

53.4

‒

53.4

Retirement and severance benefits

774.1

9.5

783.6

635.6

‒

635.6

Other current liabilities

428.5

26.6

450.8

366.9

‒

366.9

6,133.5

2,744.4

8,425.4

5,566.9‒

5,566.9

Hitachi, Ltd. stockholders' equity

2,540.8

201.3

2,735.0

2,967.0‒

2,967.0

Non-controlling interests

1,243.5

145.7

1,390.4

1,129.9‒

1,129.9

Total Equity

3,784.3

347.0

4,125.5

4,096.9‒

4,096.9

Total Liabilities and Equity¥9,917.9¥3,091.4¥12,551.0¥9,663.9‒¥9,663.9¥1,515.0¥2,339.5¥3,604.4¥1,176.6‒¥1,176.6

Total Hitachi, Ltd. stockholders'equity ratio

25.6%

6.5%

21.8%

30.7%

‒

30.7%

D/E ratio (including non-controllinginterests) (times)

0.40

6.74

0.87

0.29

‒

0.29

Other non-current liabilities
Total Liabilities

Interest-bearing debt

66

Hitachi, Ltd. Integrated Report 2017

Our Business Model

Summarized Consolidated Statement of Profit or Loss by
Manufacturing, Services and Others and Financial Services
March 31, 2017 and 2016
Billions of yen

2016
Financial
Services¥9,833.9¥365.3

2017

Total

Manufacturing,Servicesand Others

Financial
Services

Total¥10,034.3¥9,053.3¥179.2¥9,162.2

Adjusted operating income

586.8

45.2

634.8

566.8

21.3

587.3

EBIT

490.2

46.6

531.0

458.1

22.8

475.1

Income from continuing operations,
before income taxes

476.9

46.6

517.0

452.4

22.8

469.0

Net income attributable
to Hitachi, Ltd. stockholders

152.1

19.7

172.1

227.8

9.7

231.2

CEO Message

Revenues

Manufacturing,Servicesand Others

Summarized Consolidated Statement of Cash Flows by Manufacturing,Services and Others and Financial Services
March 31, 2017 and 2016
Billions of yen

2016

¥

Total

(7.4)

¥ 812.2¥ 638.7¥

Financial
Services

Total

2.2

¥ 629.5

Cash flows from investing activities(518.7)(218.8)(730.7)(153.2)(274.6)(337.9)

Free cash flows

324.4(226.2)

81.4

485.5

(272.4)

291.6

Cash flows from financing activities(262.7)265.4(26.4)(367.1)117.5(209.5)

Effect of exchange rate changes
on cash and cash equivalents(55.5)(1.8)(57.3)(14.0)(2.1)(16.1)

6.1

37.3

(2.3)

104.3

(157.0)65.9

Cash and cash equivalents
at beginning of year

654.7

119.7

701.7

660.9

157.0

699.3

Cash and cash equivalents
at end of year

¥ 660.9¥ 157.0¥ 699.3¥ 765.2‒¥ 765.2

363.5(264.8)

113.3

213.8

(109.2)

100.2

Change in cash and cash equivalents

Core free cash flows

Strategic Focus¥ 843.1

Financial
Services

Value Creation

Cash flows from operating activities

2017
Manufacturing,Servicesand Others

Hitachi, Ltd. Integrated Report 2017Management & GovernanceNotes: 1 The consolidated financial statements by Manufacturing, Services and Others and Financial Services represent
unaudited financial information prepared by the Company for the purpose of this supplementary information.
2 Total figures exclude inter-segment transactions.
3 As Hitachi Capital was converted into an equity‒method associate as of October 3, 2016, there is no company thatbelongs to Financial Services. Accordingly, there is no balance of total assets, total liabilities and total equity in thesummarized consolidated statement of financial position for Financial Services as of March 31, 2017.
In addition, only the results for the first half of fiscal 2016 were recorded in the summarized consolidated statement of
profit or loss for Financial Services and only the cash flows for the first half of fiscal 2016 and the decrease in cash
and cash equivalents owned by Hitachi Capital as of the date were recorded in the summarized consolidated
statement of cash flows for Financial Services.
4. Core free cash flows are operating cash flows plus collection of investments in leases less cash outflows forthe purchase of property, plant and equipment, intangible assets, software, and assets to be leased.

67

Performance

Manufacturing,Servicesand Others

Environmental Performance
The world’s population, which was 7.3 billion in 2015, is projected to grow to 9.7 billion by 2050 and to 11.2 billion
by 2100.* Global GDP is also continuing to expand, aggravating a host of environmental problems, including
global warming caused by higher CO2 emissions from fossil fuel consumption, the depletion of resources due toincreased demand, and ecosystem destruction. Global-scale efforts are being made to develop approaches thatlighten the burden on the environment so that a prosperous planet can be passed on to future generations.
Hitachi strives to achieve a more sustainable society by addressing environmental problems, which pose amajor challenge for society, based on its corporate mission of contributing to society through the developmentof superior, original technology and products.
* According to World Population Prospects: The 2015 Revision, published by the United Nations.

The Environmental Vision and Hitachi Environmental Innovation 2050
As global warming, resource depletion,
ecosystem destruction, and otherenvironmental issues grow more serious,
companies face increasing demands andexpectations to reduce the environmental
burden of their business activities.
The Intergovernmental Panel on
Climate Change (IPCC) concluded that
limiting global warming “below 2°C relative
to pre-industrial levels” would require “40
to 70% global anthropogenic GHG
emissions reductions by 2050 compared to2010.” The Paris Agreement adopted in
December 2015 at the 21st Conference of
the Parties (COP21) to the United Nations
Framework Convention on Climate
Change—and which came into force inNovember 2016—set ambitious targets,
including a global long-term target of
keeping global warming to below 2°C andefforts to limit the increase to 1.5°C.
Environmental targets have also been set in
the Sustainable Development Goals(SDGs)—the centerpiece of the 2030
Agenda for Sustainable Development,
adopted by the United Nations in 2015—
whose Goal 13 reads: “Take urgent action
to combat climate change and its impacts.”
In the light of these global trends andour own management policy, we created an
Environmental Vision to better define thekind of society that Hitachi envisions from along-term perspective. Our Environmental
Vision envisions a low-carbon society; aresource efficient society; a harmonizedsociety with nature. To achieve such asustainable society, we established a set oflong-term environmental targets called
Hitachi Environmental Innovation 2050.

68

Hitachi, Ltd. Integrated Report 2017

Hitachi Environmental Innovation 2050
http://www.hitachi.com/environment/vision/innovation2050.html

Our Business Model

Toward a Low-Carbon Society
We seek to reduce CO2 emissions by 80% compared to fiscal 2010 levels by fiscal 2050 to realize the drop in
global anthropogenic GHG emissions that was deemed necessary in the IPCC’s Fifth Assessment Report. We
will attain this target throughout our value chain. First, this will be achieved by decreasing emissions during
the usage stage of our products and solutions, which account for a substantial share of emissions in thevalue chain. We will contribute to our customers and to society by developing innovative technologies andsolutions, as well as enhancing the efficiency of our products and supplying low-carbon energy. At the sametime, we will also work to cut down on emissions at the production stage of our business activities.

Reduction of CO 2 Emissions During Use

35% CO2 emissions reduction rate by promoting environmentallyconscious designs and expanding sales of products and services
with high energy-saving functions.
Reduction in CO2 Emissions
FY 2010 (base year)
CO2
emissions
Functionsize*

From base year

100％ 35 %reduction＝

FY 2016CO2emissions
Function
size

65％

＝

Strategic Focus

Hitachi is improving the environmental performance of its products
and services with the hope of contributing to the resolution ofenvironmental challenges through the development andpopularization of products and services with high environmental
value. We strike a balance between improving functionality andreducing the environmental burden by using, as our index, thereduction rate per product and service function of CO2 emissions
during usage and of the volume of resources used during the life
cycle. The group of products that demonstrate a high level ofpotential in solving environmental issues are the targets of a planto achieve a 40% reduction in CO2 emissions by fiscal 2018(compared to fiscal 2010 products). In fiscal 2016, we attained a

CEO Message

Improved Environmental Performance in Products and Services* Major functions of products correlated to CO 2 emissions.

Environmentally Conscious Design Assessments
keeping abreast of environmental regulations and ascertaining theenvironment-related needs of our stakeholders. We conduct life
cycle assessments focusing on our main, priority products toquantitatively evaluate their burden on the global environment insuch areas as the consumption of mineral resources, fossil fuels,
and water resources, as well as their impact on global warming
and air pollution. The results of such life cycle assessments aredisclosed to our stakeholders and utilized in improving the designof next-generation products.

Value Creation

We conduct Environmentally Conscious Design Assessments for
all products and services involving a design process to ensure
environmentally conscious design and development. Thirty
environment-related areas are assessed for their impact on climatechange, resource depletion, and environmental pollution(ecosystem degradation) at each stage of the product life cyclewith a view to reducing the environmental burden. To meet the IEC
62430* criteria for environmentally conscious design, in addition to
implementing these assessments, we are advancing
environmentally conscious design and development by integrating
this process into our existing management system, such as by* The standard developed by the International Electrotechnical Commission
concerning environmentally conscious design for electrical and electronic products.

Products and Solutions that Help Create a Low-Carbon Society

An oil-immersed transformer (left) and molded transformer.

Energy savings

26

MWh/year* Comparison of loss between Hitachi’s silicon steel transformer andamorphous transformer (3,000 kVA capacity, 22 kV/6.6 kV, 50 Hz models
at 40% load factor).

Hitachi, Ltd. Integrated Report 201769

Performance

Transformers convert the high-voltage electricity produced at power
plants into low-voltage electricity that can be used more safely. Since
voltage is applied to the coil where electricity is flowing so thatelectricity can be used at any time, the occurrence of no-load loss
(standby power) in which power is lost even when electricity is not
being used cannot be avoided. Decreasing the no-load loss oftransformers that operate 24 hours a day, 365 days a year, over amean lifespan of about 25 years could lead to huge energy savings.
Hitachi Industrial Equipment Systems Co., Ltd. uses anamorphous alloy with outstanding magnetic properties in the ironcores around which coils are wound. This has resulted in an annual
reduction of about one-fifth in no-load loss compared with previous
silicon steel transformers* and an annual reduction of 26 MWh in
total loss, including load loss, during use.

Management & Governance

Reducing CO2 Emissions Through Energy Savings
Amorphous Transformers

Reducing CO2 Emissions with Renewable Energy
Down-wind Turbine System
Hitachi has installed 162 wind turbines in Japan (as of February
28, 2017) and is actively developing this business to contribute to
the growth of the renewable energy sector. In Hitachi’s originaldown-wind system, the rotor is on the downwind side of thetower. The system’s weather vane effect enables turbines toswitch to the free-yaw operation mode in blackout conditions,such as during storms, preventing the dangers posed by crosswind. The characteristic makes the down-wind system very safe.
Down-wind turbines also generate energy efficiently by capturing
upward blowing winds in mountainous and hilly areas.
At a new wind power plant of the Aoyama-Kogen Wind Farm
Corporation, located on the Aoyama plateau in Mie Prefecture,
Hitachi supplied 40 down-wind turbines. The output is 80 MW, thelargest in Japan.*1 Hitachi is also taking part in research for the
Fukushima Floating Offshore Wind Farm Demonstration Project of
the Agency for Natural Resources and Energy, Ministry of
Economy, Trade, and Industry.

A 5 MW floating wind turbine(courtesy of the Fukushima Offshore Wind Consortium).

330 kt-CO /year*

CO2 emissions
reduction amount22(amount for the 162 wind power
turbines installed by Hitachi)*1 According to a list of wind power generation facilities installed in Japan(as of March 31, 2016), compiled by the New Energy and Industrial
Technology Development Organization (NEDO).
*2 Comparison with LNG thermal power generation. Calculated from the life cycle
CO 2 emissions for each type of power generation listed in the Evaluation ofLife Cycle CO 2 Emissions of Power Generation Technologies, published by theCentral Research Institute of Electric Power Industry (July 2010).

Reducing CO2 Emissions During Transport
Railway Systems
Among the various modes of transportation, railways have among
the lowest CO2 emissions. As a comprehensive railway systems
integrator, Hitachi is a global provider of railcar and transportsystems, including signaling and train management systems, andwill continue to deliver total railway systems for greater efficiency
and environmental consciousness.
Hitachi’s aluminum A-train rolling stock is lighter thanstainless steel rolling stock, for example, enabling trains to run
at high speeds with less energy. Outside of Japan, A-train
production has also begun in a UK plant and additional orders
have been received for 63 AT-300 cars for a railway insouthwest England. Together with an order received in July
2015, the total is for 236 cars (36 trains).
The use of silicon carbide (SiC) in carriage inverters reduces
energy loss during operation and cuts mass and volume by 40%.
Energy savings are achieved through both lower electrical energy
use and the contribution of these inverters to lighter rolling stock.

An AT-300 train for a UK railway company.

CO2 emissions pertransport unit
(passenger)

Railway
emissionsare about

1
7

those ofautomobiles** From Ministry of Land, Infrastructure, Transport, and Tourism data on CO 2
emissions in the transportation sector.

Reducing CO2 Emissions by Improving Automobile Fuel Efficiency
Lithium-Ion Battery Packs
Automobile CO2 emissions are a major environmental issue, andfuel efficiency is being improved through various technologies.
Hitachi Automotive Systems, Ltd. has developed a 48Vlithium-ion battery pack for mild hybrid vehicles. An output density
1.5 times existing levels has been achieved by improving thematerial composition of the positive and negative electrodes andincreasing the amount of lithium that can be stored per unit ofweight. This not only enhances the motor’s torque performance forassisting acceleration but also enables the recovery of substantial
regenerative energy when decelerating and reduces energy loss.
Hitachi contributes to reduced CO2 emissions throughimproved automobile fuel efficiency by providing storage batteries
and other energy-saving automobile parts.

70

Hitachi, Ltd. Integrated Report 2017

A 48V lithium-ion battery pack for mild hybrid vehicles.

48V lithium-ion battery packenergy density

1.5

times previous
product

CEO Message

With these efforts the energy use per unit has been decreased
32% compared with fiscal 2010 at the company’s main plants in
Ibaraki Prefecture, contributing to a significant reduction in electric
power costs.

Tsuchiura Works East Building and the Hitachi UH03 hydraulic excavator,
which is included in the list of Japan’s Mechanical Engineering Heritage.

Energy use per unit

32

% reduction comparedwith fiscal 2010

Reduction in Energy Use per Unit

Activity
amount*2

From base year

100％ 12 %reduction＝

We are promoting the use of solar, wind, and other forms ofrenewable energy. During the 2016 fiscal year, Hitachi produced
2,925 MWh of renewable energy for its own use. Hitachi
Computer Products (America), Inc. proactively uses renewableenergy to power its factory, purchasing 8,769 MWh during fiscal
2016. In Japan, we contracted for 1,000 MWh/year of GreenPower through Japan Natural Energy Co., Ltd. to provide powerfor offices, showrooms, and exhibitions.

CO2 Emissions(kt-CO2/year)
5,000

4,000

3,845
3,453

3,355

3,311

3,085

＊

3,000

Management & Governance

FY 2005 (base year)
Energy used
1.75 GL*1

Introducing Renewable Energy

Value Creation

We are working to reduce energy use per unit—an indicator ofenergy efficiency—by systematically improving efficiency, such as
by installing high-efficiency equipment and devices, from LED
lighting to inverter air conditioners, at each facility. In fiscal 2016,
we achieved an improvement of 12% (from a base year of fiscal
2005), against a target of 15%. Part of the reason for not hitting
the target was because of a decline in sales in energy intensive
business divisions, which contracted the denominator in
calculating energy use per unit.
The increase in the total volume of CO2 emissions was due tothe fact that a materials company in the Americas newly became amember of the consolidated Hitachi Group in fiscal 2016. There
was a general decline in regions other than the Americas.
We will continue to harness our expertise in control and IT
technologies to actively pursue energy conservation measures at
our factories and offices and promote the efficient use of energy.

Strategic Focus

Reduction of CO 2 Emissions During the Production StageFY 2016
Energy used
1.95 GL
Activity
amount

88％

2,000

＝

*1 Energy volume used both in and outside the organization (SCOPE 1 and 2).
*2 A value closely related to the emission factor numerators (environmental
burden) of energy use from business activities (for example, production
quantity, output, building floor space, and number of employees).

1,000

0

2012

Japan

Rest of Asia

2013

2014

2015

China

Americas

2016

(FY)

Europe* Includes 958 kt-CO 2/year emitted by a materials company that became
a consolidated member of the Hitachi Group in fiscal 2016.
Notes:• The CO 2 electrical power conversion factor uses the 2005 emission
coefficients for individual countries published by the International Energy
Agency (IEA) in the 2010 edition of CO 2 Emissions from Fuel Combustion.
• Energy-related CO 2 emissions were 1,296 kt-CO 2 (SCOPE 1) and 2,549
kt-CO 2 (SCOPE 2).

Hitachi, Ltd. Integrated Report 201771

Performance

Hitachi Construction Machinery Co., Ltd. uses a network ofJapanese and international affiliates centered on four main plants
in Japan to produce construction machinery and its principal
components. Together with energy reductions during use as theseproducts switch to electric or hybrid power, efforts throughout the
network are also being made to reduce energy consumption in the
manufacturing stage.
The entire Hitachi Construction Machinery Group continues toimplement energy-saving measures and promote greater efficiency
in plant and office lighting and air-conditioning. Several locations
have also introduced IoT technology to further reduce energy
consumption and raise productivity. Specifically, by adopting theEnergy and Equipment Management Service, a key solution
concept under Hitachi’s Lumada IoT platform to comprehensively
control energy data and equipment across multiple businessfacilities, they are able to efficiently analyze and manage electric
power data gathered from equipment at each plant. Energy usage
by the machine tools, robots, and other production equipmentused in plants is finely controlled, reducing standby power andincreasing energy efficiency.

Our Business Model

Reducing CO2 Emissions Through Greater Efficiency with IoT
Building Eco-Factories with Lumada

Realization of a Resource Efficient Society
Together with our customers and society, Hitachi will do its utmost through its business operations to help
build a society that uses water and other resources efficiently. We will expand circulative uses of water byfurther advancing the entire range of water treatment technologies involved in water use from seawater
desalination and other forms of fresh water generation to sewage treatment.
We also aim to improve our usage efficiency of water and other resources by 50% compared to fiscal 2010
levels by fiscal 2050. To achieve this target, we will create products that last longer and use less resources,
make thoroughgoing efforts to collect and recycle used products, reduce the volume of water used in the
production process such as through purification and reuse, and engage in other efforts.

Improving Usage Efficiency of Water and Other Resources
Water Conservation

Reduction in Water Usage per Unit

Hitachi uses water in such production processes as cleaning,cooling, and painting. To reduce water usage through greater
efficiency, we are enhancing our level of water management byinstalling flow meters at more locations, introducing wastewater
treatment devices to increase the use of recycled water, andupgrading water supply facilities at our business sites.
Different countries and regions are affected by water-related
issues in different ways, so we devise appropriate
countermeasures for each region. Our business sites in China,
India, and the Philippines, for example, are striving to reducethe volume of water used by strengthening measures against
water leakage.

Reducing Waste Volume
For fiscal 2016, we set a target of a 12% reduction (from a baseyear of fiscal 2005) for waste and valuables generated per unit,
bettering this by achieving a 13% reduction. Every business site is
reducing waste through onsite recycling of byproducts and scrap
from the production process and efforts to curb use of packing
materials during transport. Under the Zero Emission initiative,
which seeks to minimize landfill disposal, 98 business sites
achieved their zero emission goal* as of fiscal 2016.

FY 2005 (base year)
Amountused 56.62
million m3
Activity
amountFY 2016
From base year

100％ 27 %reduction＝

Amountused 41.34
million m3
Activity
amount73％＝

Reduction in Waste and Valuables Generated per Unit
FY 2005 (base year)
Amountgenerated
1,518 kt
Activity
amountFY 2016
From base year

100％ 13 reduction＝%

Amountgenerated
1,336 kt
Activity
amount87％＝* Defined as a final disposal rate (landfill disposal/waste and valuables) of lessthan 0.5% in any given fiscal year.
Zero Emission Sites
http://www.hitachi.com/environment/activities/data/zeroemission.html

Creating a Resource Efficient Society Through Business
Water Solutions to Protect Global Water Resources
Water covers 70% of the earth’s surface, but only 0.01% of
it is potable. Demand for water, however, is on the rise
globally, with more than 40% of the world’s population
expected to face severe water shortages by 2050.
Hitachi has acquired an extensive record in the waterbusiness as it strives to become a comprehensive water
service provider. We have supplied equipment to around 700
water purification plants and 900 sewage treatment plants inJapan, and over 200 sites in some 40 countries and regions
around the world. We continue building on this experience toprovide a variety of water infrastructure globally.
We are currently moving forward on IoT-based,
optimized, and highly efficient water business solution
offerings, including water supply and sewage systems andseawater desalination plants. For example, our energy-

72

Hitachi, Ltd. Integrated Report 2017

efficient seawater desalination plant dilutes seawater withtreated sewage to lower the salt concentration, reducing thepump pressure required for the desalination process andcutting energy consumption by approximately 30%.

Our Business Model

Harmonized Society with Nature
We strive to minimize Hitachi’s impact on natural capital, which bestows the benefits of nature on humankind
by assessing ecosystem impact and advancing measures to minimize the burden at each stage of Hitachi’svalue chain. Moreover, we are preserving the ecosystem through our products and services, such as our air
and water purification systems and environmental monitoring systems. We also endeavor to minimize theenvironmental burden of our factories and offices.

Ecosystem Assessments and Their Implementation

CEO Message

the burden (negative impact) on the ecosystem caused bybusiness activities and maximizing the positive impact, such as byundertaking social contribution activities to protect nature andproviding products and services that preserve the ecosystem.
Regarding impact and other ecosystem preservationassessments, we are deliberating the matter not only within theGroup but also through our participation in activities outside thecompany, such as the biodiversity working group of four Japaneseelectrical and electronic industry associations* and the Japan
Business Initiative for Biodiversity (JBIB).
* The Japan Electrical Manufacturers’ Association (JEMA), Japan Electronics
and Information Technology Industries Association (JEITA), Communications
and Information Network Association of Japan (CIAJ), and Japan Business
Machine and Information System Industries Association (JBMIA).

Strategic Focus

In fiscal 2016 Hitachi created an Ecosystem Preservation Activities
Menu citing the specific activities to be undertaken to promote thepreservation of the ecosystem. We are encouraging each businesssite to advance their own initiatives. This menu was created byadding the pioneering activities of other corporations andorganizations to the list of items that had already been subject toassessment since 2010. It consists of 116 items covering all
aspects of our business operations, including the value chain.
Each business site selects those activities it plans to launch fromthe menu, and the total number of initiatives becomes Hitachi’starget for ecosystem preservation. In fiscal 2016, 144 new
initiatives were launched, far in excess of our initial goal of 30.
In the long term, we seek to minimize the impact on natural
capital and realize a harmonized society with nature by minimizing

Efforts Toward Building a Harmonized Society with Nature

Working together with employees and their families, the HitachiGroup participates in the Japanese Forestry Agency’s Corporate
Forest Program to preserve forests in several locations.
The Group has been conducting tree-planting activities
since 2007 in the Yuyu Forest in Ibaraki Prefecture. Each year
employees and their families gather to plant trees, clear
underbrush, prune, and perform other forest maintenanceactivities. They also take part in activities including environmental
education and handicraft classes using pruned materials.
The Hitachi High-Tech Yasato Forest embarked on a 60-year planin 2005 to cultivate trees. Employees and their families participate in
the work of pruning and thinning to grow a healthy forest.

Hitachi Power Solutions Co., Ltd.
employees at the Yuyu Forest.

Value Creation

Hitachi Group Forestation Activities

Hitachi High-Technologies Corporation
employees at the Yasato Forest.

Integrated Management System for Chemical Substances
Contained in Products
Suppliers

Environmental information
Survey/register

Integrated Management System for Chemical Substances Contained in Products

Registration database

Manage amounts of designatedchemical substances in a productby material and part

Collection database

Manage total amounts ofdesignated chemical substancesby product and businessCommunicate

Customer/society

Environmental information disclosure

Hitachi, Ltd. Integrated Report 201773

Performance

Working closely with suppliers and customers, we gather andmake available information on chemical substances across the
supply chain via the Integrated Management System for Chemical
Substances Contained in Products, which has been in operation
since fiscal 2005. As of March 31, 2017, chemical substanceinformation for more than 1.31 million parts and products was
registered under this integrated management system. In fiscal
2016, we upgraded our system to respond to the shared
information transmission scheme (chemSHERPA) on chemical
substances contained in products.

Management & GovernanceAppropriate Management of Chemical SubstancesSocietal Performance
Companies are increasingly being called upon to create a business framework to advance CSR initiatives
covering not only their own in-house activities but also their value chain.
Hitachi aims to continue fulfilling its social responsibilities throughout the value chain. We thus takemeticulous care in ensuring the compliance, ethical conduct, and fairness of our own activities and those of ourbusiness partners. We also seek to offer safe and rewarding workplaces for all employees based on the belief
that enabling them to fully realize their potential is the source of our sustainable growth.

Supply Chain Management
As a company that procures products and services from suppliers in regions and countries around the world,
we are reviewing our own CSR standards, and auditing and cooperating with the CSR initiatives of our
suppliers. Hitachi is also taking the lead in responding to the issue of conflict minerals by scrutinizing thecountries where raw materials are mined in order to prevent infringements on human rights by countries
engaged in conflict. Keeping abreast of global trends, we will continue to share and strengthen on a Groupwide basis our commitment to fulfilling our social responsibilities throughout the supply chain.

Creating and Sharing Procurement Policies
Our basic procurement policy is contained in the Hitachi
Guidelines for Procurement Activities, drafted in line with
the United Nations Global Compact and which call for theelimination of discrimination in employment andoccupation, the rejection of all forms of child and forcedlabor, and environmental protection activities. Suppliers are
selected strictly in accordance with the guidelines.
In fiscal 2016, we released the Hitachi Group CSR
Procurement Guidelines, a full revision of the 2009 HitachiGroup Supply Chain CSR Deployment Guidebook. This
revision incorporates the provisions of the HitachiGroup Codes of Conduct and also makes references toversion 5.1 of the Electronic Industry Citizenship Coalition(EICC) Code of Conduct, promulgated in January 2016. We
distribute the Guidelines to the approximately 30,000
suppliers of Hitachi business units and Group companies,
from whom we request acknowledgment of suppliers’
understanding in writing.

CSR Supply Chain Management Framework
CSR supply chain management and green procurement
policies and initiatives are discussed within Hitachi’s
Value Chain Integration Division, which is headed by thechief procurement officer (CPO) and reports directly tothe president of Hitachi, Ltd. Policies and initiatives
adopted by the division are shared throughout the Group
via the Hitachi Group CSR Green Procurement
Committee, which includes members from business units
and key Group companies.
In fiscal 2011, we appointed procurement officers tooversee local procurement in China, the rest of Asia,
Europe, and the Americas. We are expanding our suppliersin emerging nations while also strengthening our response
to CSR-related risks expected to arise from the global
expansion of our supply chain.
In fiscal 2015, we introduced a new initiative to provide
information directly to suppliers in a face-to-face format.
The January 2017 CSR and green procurement seminar
held in Shenzhen for Hitachi Group partners in China wasattended by 45 people from 32 companies.
74

Hitachi, Ltd. Integrated Report 2017

Supply Chain Management Organizational Structure
President
Development of CSR/green
procurement policy

Value Chain Integration Division
Procurement office conferences

Conferences for procurement managers

CPO Joint Committee(every two months)

Hitachi Group CSR
Green Procurement
Committee (biannual)Group procurement
strategy conference(biannual)

Regional procurement
conferences (China/Asia/
India: biannual; Europe/
Americas: annual)

Target price conference(biannual)

Implementation by
all procurement members
Business unit procurement members

Major Group company
procurement members

understanding of the challenges our suppliers face.
Starting in fiscal 2017, we will be asking our suppliers to
conduct CSR Monitoring using the updated checklists.
CSR Monitoring (Self-Check) Results
FY

Suppliersin JapanSuppliers
outside Japan

Checklists
collected

2012

57

41

98

2013

55

45

100

2014

0

200

200

2015

0

218

218

2016

198

118

316

Total*

310

724

1,034

CEO Message

To monitor how well Hitachi’s CSR supply chain
management philosophy has been adopted by our
suppliers, since fiscal 2007 we have asked key suppliers to
conduct CSR Monitoring (self-checks) using the JEITA
Supply Chain CSR Deployment Guidebook and detailed
checklists, and in fiscal 2016 we collected checklists from316 suppliers inside and outside Japan.
After analyzing the results, we provide feedback for thebusiness operations related to the suppliers, and then workwith those involved in the operations to resolve supplierrelated issues.
Alongside the revisions made to the Hitachi Group CSR
Procurement Guidelines, the checklists have also been fully
updated to allow us to obtain a more detailed

Our Business Model

Implementation of CSR Monitoring (Self-Checks)* Total also includes self-check results from fiscal 2011.

Implementation of CSR Audits
No major infringements were found at the 20 Asian
suppliers audited in fiscal 2016, but some small areas
needing improvement were noted, such as overtime work
exceeding stipulated rules (19 suppliers), failure to conductperiodic inspections of machinery and equipment (6), andinsufficient management of hazardous waste (9). We havemandated that suppliers affected by these issues submit
improvement action plans and will be working with andadvising them until they complete the planned improvements.

Strategic Focus

Since July 2012, the Hitachi Group Procurement Division
has been auditing the manufacturing bases of suppliers in
China and the rest of Asia. Our audits are based on theinternational SA8000 certification standard developed bySocial Accountability International (SAI), an American CSR
evaluation institution, and are conducted by an EICCrecognized auditor, who checks suppliers’ CSR initiatives
from such perspectives as labor and human rights, healthand safety, the environment, and ethics.

Human Rights Due Diligence in Procurement

Management & GovernanceValue Creationcompanies and the CSR division of Hitachi Asia. The
working group has evaluated human rights risks within the
supply chain, set priorities, and considered measures for
reducing risks.
In fiscal 2016, we published the revised Hitachi GroupCSR Procurement Guidelines based on results obtained
from activities in fiscal 2015 as well as input from a rangeof sources and perspectives, including Hitachi Europe Ltd.,
Hitachi (China), Ltd., and outside experts.

Response to the Conflict Minerals Issue
Each Hitachi Group company is investigating and responding to the issue of conflict minerals in line with our customers’
requests based on Hitachi’s conflict mineral policy.

Hitachi, Ltd. Integrated Report 201775

Performance

Starting in fiscal 2015, the Hitachi Group Procurement
Division began implementing human rights due diligencebased on the Hitachi Group Human Rights Policy. With theconsulting assistance of the nonprofit organization Shift,
we have created a working group centered on the
procurement and CSR divisions at Hitachi, Ltd.—which
serve as the corporate divisions overseeing activities
throughout the Group—and also including the procurement
and CSR divisions of two in-house and four GroupLabor Practices
Hitachi has a human resource strategy that emphasizes the concept of “decent work” (that is, work that ishumane and fulfilling). We make a thoroughgoing and meticulous effort to realize this ideal, actively
pursuing dialogue with all employees on their basic rights and career development and setting up avariety of consultation opportunities as well as mechanisms—just in case—to report compliance abuses.
We also implement a variety of initiatives reflecting the globalization of our business, from promoting
diversity and inclusion in our human capital to globally implementing fair employee evaluation systems
and working conditions.

Global Human Capital Development
Advancing Global Human Capital
Our global human capital management strategy optimizes
both human and organizational performance. One example
of our initiatives is the Global Human Capital Database
covering all Hitachi Group employees, excluding factory
workers outside Japan. This database enables us to fully
ascertain the status of worldwide Group human capital. We
have also built a global grading system that applies to all
managers in the Hitachi Group worldwide, using it as acommon platform for job evaluations throughout the Groupand as a common standard for assessing the value ofmanagement duties.
We began to thoroughly revise our training ofmanagement candidates in fiscal 2015, implementing the
Global Advanced Program for Key Positions (GAP-K) to

Conducting a Global Employee Survey
Since fiscal 2013, we have been conducting an annual
global employee survey called Hitachi Insights as a way ofmeasuring employee engagement.* In September 2016,
the survey was administered for the fourth time. Around
210,000 employees worldwide were sent the survey in oneof 14 different languages, and roughly 180,000 responses
were received.
The results for internal awareness and understandingof the 2018 Mid-term Management Plan and employee
attitudes toward Hitachi’s corporate culture improved in all
14 categories, including those concerning the plan’stargets, compared to the findings of the previous fiscal
year’s survey.

Career Development Initiatives
Hitachi believes that the starting point of careerdevelopment is the work that employees perform on a daily
basis. Based on Hitachi’s Global Performance
Management (GPM), we implement a cycle aimed at thegrowth of each employee through a process in which goals
for daily tasks are set and then pursued, followed by theevaluation of the results to formulate the next objectives.
Along with our workplace-centered initiatives, we also
provide direct support for individual employees through ourcareer development programs. In fiscal 2002 we launchedthe Hitachi Career Development Workshop (H-CDW) as a
76

Hitachi, Ltd. Integrated Report 2017accelerate their development. In fiscal 2016, 23 people
were selected to participate in GAP-K over a three-month
period. Additionally, Hitachi has held the Global Advanced
Program for Leadership Development (GAP-L) in Singapore
every year since fiscal 2012. The program mainly targets
local human resources with potential for leadership at therespective subsidiaries outside Japan. In fiscal 2016, 24
leaders from around the world took part in the program.
Starting in fiscal 2014, we also initiated a globally
standardized training course for general managers and new
managers. To date, around 7,200 people worldwide havetaken part in this course across our Group.

Scores were particularly high for “pride in your company”
and “teamwork,” but those for “resources and support”
remained low from fiscal 2015. Employees may haveexpected Hitachi to do better on the level of staffing as well as
information and resource tools—a situation we will continue
to address by reforming working patterns, introducing new
tools, and deepening communication with employees.
* Hitachi uses the term “engagement” to refer to employees’ understanding of
the company’s strategies and policies, as well as their job satisfaction anddesire to take actions on their own initiative to bring about results.

Group-wide initiative in Japan. Around 9,700 people haveparticipated in the program so far (as of March 31, 2017),
with a focus on technicians, managers, and researchers intheir thirties. According to the January 2016 survey
conducted of the most recent participants, about 80% of
the 422 answers received from group managers and about
70% of the 277 answers from section chiefs agreed that
“H-CDW has been helpful to my career development andwork.” Of the responses from section chiefs, about 60%
reported making use of their workshop experiences inmanaging subordinates.

Developing Women’s Careers
Hitachi, Ltd. has created two key performance indicators(KPIs), announced in fiscal 2013, to enable as many female
employees as possible to take up leadership positions andto participate in management decision making. We
organize a variety of seminars to boost women’s motivation
and also take steps to enhance awareness and create awomen-friendly corporate culture in workplaces as awhole—including managers and male employees.
Employee compensation is set according to eachindividual’s roles and achievements, with no divisions or
differences based on gender or age.

CEO Message

an environment where women and other members of ourvaried workforce can use their skills in leadership andbusiness management. In October 2016, we introduced an
Allowance for Balancing Child Care and Work to further
promote balance between work and child care.
The Diversity Development Project, launched in fiscal
2006 under the president’s direct leadership, was replacedin fiscal 2009 with the Diversity & Inclusion Development
Center, which currently operates under the directsupervision of the Human Capital Group.
Additionally, Hitachi and 17 Group companies jointly
operate the Advisory Committee and the Diversity
Development Council to accelerate awareness acrossHitachi as a whole, including support for diverse humancapital and work-life management.

In November 2016, we hosted the first Global Women’s
Summit for female employees of the Hitachi Group. Held in
the United Kingdom, the event was attended by more than
120 staff members from 25 Group companies around theworld and featured a keynote speech from an external
speaker and workshops on topics ranging fromunconscious bias to individual career development. The
participants also shared stories about their careers and theissues they faced at their workplace.

Strategic Focus

Promoting Diversity and Inclusion
Diversity is the wellspring of innovation and our growthengine. Hitachi regards personal differences—gender,
nationality, work history, age, sexual orientation, andphilosophy—as facets of people’s individuality. By
respecting our employees’ individualities and positioning
them as an advantage, Hitachi frames its diversity andinclusion as conducive to both the individual’s and thecompany’s sustainable growth.
Since the 1990s, we have been at the social forefrontin supporting women and other members of ourmultifaceted workforce. This includes setting up systems tohelp balance work with child and nursing care. Entering
Phase 3 of our diversity management roadmap, we areembracing diversity as a management strategy under theslogan of “Diversity for the Next 100.” This means creating

Our Business Model

Diversity and Inclusion

Goals for Hitachi, Ltd. (KPIs)

Hitachi, Ltd. Integrated Report 2017Management & Governancecompanies, with 40% of senior management positions heldby European personnel. The CEO of global operations is a
London local who has since become an executive officer at
Hitachi, Ltd.

77

Performance

Recruiting Human Capital in Europe
The railway business, which is an important business fieldfor Hitachi, is promoting the recruitment of local humancapital. We shifted the primary site of our railway businessto London in 2014 and built a global operations framework
managed by Hitachi, Ltd. and several other Group

Value Creation

Appoint female executives by fiscal 2015 by promoting from within (including the CSR and Environmental
Strategy Division chief as a corporate officer in April 2015).
Increase the number of female managers in Japan to 1,000 by fiscal 2020 (2.5 times more than at the end of
fiscal 2012).

Occupational Health and Safety
Fundamental Idea for Occupational Health and Safety
Ensuring the health and safety of all employees is the basic principle underlining the Hitachi Group Health and Safety Policy.
This policy is shared by all Hitachi Group companies around the world. Employees work together to create safe, secure
work environments that aim to be accident free.

Hitachi Group Health and Safety Policy
Principle
Policies“Health and Safety Comes First.”
In accordance with our mission, “Contribute to society through the development of superior,original technology and products,” the Hitachi Group will endeavor to ensure safe and healthy
workplaces under the principle of “Health and Safety Always Comes First.”

To accomplish this, we will:
1. Continually be involved in health and safety activities in order to prevent work-related injuries and sickness bydesignating the health and safety of employees as management’s top priority.
2. Comply with the local laws and regulations in each company regarding health and safety.
3. Develop a safe and comfortable work environment by encouraging employees to maintain their own health and taking
a proactive stance on health and safety activities in the workplace.
4. Require an understanding of Hitachi’s principle and the promotion of health and safety awareness from all business
partners of the Hitachi Group.
5. Contribute to the creation of a safe and pleasant society by emphasizing activities that make health and safety a toppriority in all of Hitachi’s business activities.
Revised November 2013

Framework for Promoting Health and Safety
Hitachi views occupational health and safety as vital
preconditions for advancing our business. Manufacturingand maintenance are particularly accident-prone lines ofwork, and we have around 36,000 employees performing
work of this type in Japan. We promote a range of Groupwide occupational health and safety activities globally that
include preventing workplace accidents by setting andapplying minimum safety standards to be observed byGroup manufacturers as well as taking additional measures
tailored to the specific conditions at each company. We
respond quickly when an accident occurs and use lessons
from the incident to make improvements and boost ourlevels of health and safety management.
In accordance with Japanese law, a health and safetycommission—composed of company representatives,
labor-union officials, and employees—is convened every
month to discuss and share information related to such
issues as workplace accident causes and78

Hitachi, Ltd. Integrated Report 2017

countermeasures, the situation regarding employees who
have taken sick leave, and other points of concern. In
2016, we recorded one fatal workplace accident in Japanand two in the rest of Asia.
We built the Hitachi Group Health and Safety Portal
System in 2012 to ensure that the health and safety
performance of every Hitachi Group company in Japan isshared by the entire Hitachi Group. Group-wide information
on work accidents is registered in the system so thatcompanies can track causes and see what preventive
measures have been initiated. To help prevent recurrences,
statistics are kept on types of accidents. Since 2014, wehave carried out initiatives to share information on
workplace accidents globally, including one that tracks andprovides feedback on accidents occurring at Group
companies outside of Japan.

Our Business Model

Communicating CSR Initiatives and Material Issues
Building positive ties with our various business stakeholders is an important management issue that
contributes to achieving not only a sustainable society but also to Hitachi’s sustainable growth.
Hitachi views CSR as being centered on stakeholder engagement and continually implements initiatives inaccordance with a nine-item framework for CSR management. We communicate our achievements throughchannels including the Hitachi Sustainability Report and also engage in stakeholder dialogue to build an evenbetter relationship with society.
Items Covered in the Hitachi Sustainability Report
ThemesMaterial issues

GRI Standards

Realizing sustainable, innovative management

GRI 203: Indirect economic impacts

CEO Message

1 Recognition of social responsibility
Understanding issues through dialogue and taking partin initiatives
2 Corporate governancePursuing management transparency and efficiency
Sharing the Hitachi Group Identity

GRI 205: Anti-corruption
GRI 419: Socioeconomic compliance

Advancing risk management on multiple fronts
Respect for human rights throughout the value chain

GRI 412: Human rights assessment
GRI 408: Child labor
GRI 409: Forced or compulsory labor
GRI 410: Security practices
GRI 411: Rights of indigenous peoples
GRI 414: Supplier social assessment

Respect for workers’ rights

GRI 402: Labor/management relations
GRI 406: Non-discrimination
GRI 407: ‌Freedom of association and collective
bargaining

4 Labor practices

Strategic Focus

3 Human rights

GRI 401: Employment
Achieving a fair and equitable work environment

GRI 402: Labor/management relations
GRI 202: Market presence

Promoting diversity and inclusion

GRI 405: Diversity and equal opportunity

Promoting occupational health and safety

GRI 403: Occupational health and safety

A strategy for growing together with our global humancapitalGRI 404: Training and education

Promoting environmental management

GRI 201: Economic performance

Enhancing environmental management on an ongoingbasis

GRI 302: Energy
GRI 305: Emissions
GRI 306: Effluents and waste
GRI 307: Environmental compliance
GRI 308: Supplier environmental assessment
GRI 404: Training and education

Responding to environmental risks and opportunities

GRI 201: Economic performance

Achieving a low-carbon society

GRI 301: Materials
GRI 302: Energy
GRI 305: Emissions

Achieving a resource efficient society

GRI 303: Water
GRI 306: Effluents and waste

Achieving a harmonized society with nature

GRI 304: Biodiversity

Management & Governance

6 Fair operating practices

Value Creation

5 Environment

GRI 419: Socioeconomic compliance
Promoting work practices in line with international
ethics codes

GRI 205: Anti-corruption
GRI 206: Anti-competitive behavior
GRI 415: Public policy

Engaging in responsible procurement

GRI 204: Procurement practices
GRI 414: Supplier social assessment
GRI 308: Supplier environmental assessment

Pursuing customer satisfaction

GRI 417: Marketing and labeling

Ensuring accessibility to products and services

GRI 417: Marketing and labeling

Ensuring thorough management of quality and safety

GRI 416: Customer health and safety
GRI 418: Customer privacy
GRI 419: Socioeconomic compliance

Promoting sustainable community involvement anddevelopment

GRI 413: Local communities

7 Customers (consumer issues)

9 Review and improvement of CSR activities
Enhancing CSR management
Hitachi, Ltd. Integrated Report 201779

Performance

8 Community involvement and development

Corporate Data / Stock Information
As of March 31, 2017

Corporate Name
Hitachi, Ltd. (Kabushiki Kaisha
Hitachi Seisakusho)
URL
http://www.hitachi.com/
Principal Ofﬁce
6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-8280, Japan

Number of Employees
303,887

Accounting Auditor
Ernst & Young ShinNihon LLC

Number of Shares Issued
Common Stock(including treasury stock)
4,833,463,387 shares

Investor Relations Contacts

Number of Shareholders
381,374

JAPAN
Hitachi, Ltd.
6-6, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8280
TEL: +81-3-3258-1111
E-mail: ir.info.hq@hitachi.com

U.S.A.

Founded1910 (Incorporated in 1920)
Capital Stock458,790 million yen

Administrator of Shareholders
Register
Tokyo Securities Transfer AgentCo., Ltd.
6th Floor, NMF Takebashi Building,
3-11, Kanda Nishiki-cho,
Chiyoda-ku, Tokyo 101-0054, Japan
Stock Exchange Listings
Tokyo, Nagoya

Hitachi America, Ltd.
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: +44-1628-585384

10 Largest Shareholders
Number of Shares(shares)

Percentage ofTotal (%)

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

284,898,000

5.89Japan Trustee Services Bank, Ltd. (Trust Account)

252,038,415

5.21

Hitachi Employees Shareholding Association

105,779,384

2.19

Nippon Life Insurance Company

93,264,995

1.93Japan Trustee Services Bank, Ltd. (Trust Account 5)

88,220,000

1.83Japan Trustee Services Bank, Ltd. (Trust Account 9)84,599,000

1.75State Street Bank and Trust Company 505225

75,789,192

1.57

State Street Bank West Client-Treaty 505234

75,205,327

1.56

The Dai-ichi Life Insurance Company, Limited*1

71,361,222

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

67,992,000

1.41

Name

*1 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. ).

Ratings
Rating Company

80Long-term

Short-term

Moody s Japan K.K. (Moody s)

A3

P–2

Standard & Poor s Ratings Japan (S&P)

A–

A–2

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

A+

a–1

Hitachi, Ltd. Integrated Report 2017

Government andMunicipality

Number of Share Ownership
Shareholders(shares)

Financial Institution and Securities Firm

363

1,538,194,797

376,172

1,156,524,302

Foreign Investor

1,357

2,042,857,017

Other

3,478

95,840,703

4

46,568381,374

4,833,463,387

Individual

Government and Municipality
Total

0.00%
Other

Financial Institution
and Securities Firm

1.98%

31.82%

Shareholder
Composition

CEO Message

Class of Shareholders

Our Business Model

Shareholder Composition

4,833,463,387* Treasury stock is included in Other.

ForeignInvestor

Individual

23.93%

42.27%
Stock Price and Trading Volume

2,400,000

125

2,000,000

100

1,600,000

75

1,200,000

50

800,000

25

400,000

0Strategic Focus

Trading Volume (1,000 shares)

Value Creation

Nikkei Stock Average (225)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

Year ended
March 31,2016

Year ended
March 31,2017High (Yen)

947

843

404

523

547

578

877

939.9

858

679.5

Low (Yen)
Price at endof March

569

230

227

313

360

401

508

660

431

400

591

266

349

433

531

543

762

823.2

526.6

602.5

Management & Governance0Year ended
March 31,2008

* The closing price on March 31, 2007 equals 100.

Website Information
Detailed information is available on the Company s website.
About Hitachi Group

Investor Relations

http://www.hitachi.co.jp/about/corporate/index.

http://www.hitachi.co.jp/IR/index.html#hitachi_ir

html#hitachi_corporate(Japanese)(Japanese)

CSR (Corporate Social
Responsibility)
http://www.hitachi.co.jp/csr/index.html#hitachi_csr(Japanese)

http://www.hitachi.com/corporate/about/index.html

http://www.hitachi.com/IR-e/index.html

http://www.hitachi.com/csr/(English)(English)(English)Hitachi, Ltd. Integrated Report 201781

Performance

Hitachi Stock Price150

Printed in Japan