(Translation)

Annual Securities Report(The 148th Business Term)
From April 1, 2016 to March 31, 2017

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

Hitachi, Ltd.

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

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

Director, Kanto Local Finance Bureau[Filing Date]

June 21, 2017

[Fiscal Year]

The 148th Business Term (from April 1, 2016 to March 31, 2017)[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

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

03-3258-1111[Contact Person]

Masachika Sawada, Manager, Legal Division[Contact Address]

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

03-3258-1111[Contact Person]

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

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

This is an English translation of the Annual Securities Report filed with the Director of the Kanto Local Finance Bureau
via Electronic Disclosure for Investors’ NETwork (“EDINET”) pursuant to the Financial Instruments and Exchange Act ofJapan.
Certain information in “Part I. Information on the Company - II. Business Overview - 4. Risk Factors - Risks Related to
Our American Depositary Shares” is only included in this English translation of the Annual Securities Report for ADSs
holders and not included in the original report.
Certain information in “Part I. Information on the Company - V. Financial Information” in this document incorporates
financial statements prepared in conformity with the International Financial Report Standards (“IFRS”) as issued by theInternational Accounting Standards Board and independent auditor’s report instead of the English translation of the Annual
Securities Report.
The translation of the Internal Control Report, the Independent Auditors’ Report and the Confirmation Letter for theoriginal Annual Securities Report are included at the end of this document.
This English translation of the Annual Securities Report reflected the amendment that was reported in the Amendment Report of
the Annual Securities Report filed with the Director of the Kanto Local Finance Bureau via EDINET on June 19, 2019.
In this document, the terms “we,” “us,” “our” and “Hitachi” refer to Hitachi, Ltd. and consolidated subsidiaries or, as thecontext may require, Hitachi, Ltd. on a non-consolidated basis and the term “the Company” refers to Hitachi, Ltd. on a nonconsolidated basis.
Unless otherwise stated, in this document, where we present information in millions or hundreds of millions of yen, we
have truncated amounts of less than one million or one hundred million, as the case may be. Accordingly, the total of figures
presented in columns or otherwise may not equal the total of the individual items. We have rounded all percentages to thenearest percent, one-tenth of one percent or one-hundredth of one percent, as the case may be.
References in this document to the “Financial Instruments and Exchange Act” are to the Financial Instruments andExchange Act of Japan and other laws and regulations amending and/or supplementing the Financial Instruments andExchange Act of Japan.
References in this document to the “Companies Act” are to the Companies Act of Japan and other laws and regulations
amending and/or supplementing the Companies Act of Japan.

Contents
Part I Information on the Company ……………………………………………………………………………
1
I. Overview of the Company ………………………………………………………………………………
1
1. Key Financial Data …………………………………………………………………………………
1
2. History ………………………………………………………………………………………………
4
3. Description of Business ……………………………………………………………………………
6
4. Information on Affiliates …………………………………………………………………………
8
5. Employees ………………………………………………………………………………………… 17
II. Business Overview ……………………………………………………………………………………… 18
1. Summary of Business Results ……………………………………………………………………… 18
2. Production, Orders Received and Sales …………………………………………………………… 18
3. Management Policy, Economic Environment and Challenges Facing Hitachi Group. …………… 18
4. Risk Factors ………………………………………………………………………………………… 20
5. Material Agreements, etc. ………………………………………………………………………… 28
6. Research and Development ………………………………………………………………………… 29
7. Analyses of Consolidated Financial Condition, Operating Results and Cash Flows ……………… 31
III. Property, Plants and Equipment ……………………………………………………………………… 40
1. Summary of Capital Investment, etc. ……………………………………………………………… 40
2. Major Property, Plants and Equipment …………………………………………………………… 41
3. Plans for Capital Investment, Disposals of Property, Plants and Equipment, etc. ………………… 45
IV. Information on the Company ………………………………………………………………………… 46
1. Information on the Company’s Stock, etc. ………………………………………………………… 46(1) Total number of shares, etc. …………………………………………………………………… 46(2) Information on the stock acquisition rights, etc. ………………………………………………… 46(3) Information on moving strike convertible bonds, etc. …………………………………………… 48(4) Information on shareholder right plans ………………………………………………………… 48(5) Changes in the total number of issued shares and the amount of common stock and other …… 49(6) Shareholders composition ……………………………………………………………………… 49(7) Major shareholders ……………………………………………………………………………… 50(8) Information on voting rights …………………………………………………………………… 52(9) Details of stock option plans …………………………………………………………………… 53
2. Information on Acquisition, etc. of Treasury Stock ……………………………………………… 54
3. Dividend Policy …………………………………………………………………………………… 55
4. Changes in Share Prices …………………………………………………………………………… 55
5. Directors and Senior Management ………………………………………………………………… 56
6. Corporate Governance, etc. ………………………………………………………………………… 66
V. Financial Information …………………………………………………………………………………… 77
VI. Stock-Related Administration for the Company ……………………………………………………… 78
VII. Reference Information on the Company ……………………………………………………………… 79
Part II Information on Guarantors, etc. for the Company ……………………………………………………… 80[Consolidated Financial Statements] …………………………………………………………………………… F-1
Consolidated Financial Statements. ……………………………………………………………………… F-2
Reports of Independent Registered Public Accounting Firm ……………………………………………… F-77
[Internal Control Report (Translation)] ………………………………………………………………………… A-1[Independent Auditors’ Report (Translation)] ………………………………………………………………… A-3[Confirmation Letter (Translation)] …………………………………………………………………………… A-6

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

Fiscal year

Transition
Date
April 1, 2013-

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

Year end
Revenues
Income from continuing
678,498
518,994
517,040
469,091
operations, before income taxes
Net income attributable to413,877
217,482
172,155
231,261
Hitachi, Ltd. stockholders
Comprehensive income
attributable to Hitachi, Ltd.
665,372
337,578(127,557)
299,397
stockholders
Total Hitachi, Ltd.
2,058,708
2,668,657
2,942,281
2,735,078
2,967,085
stockholders’ equity
Total equity
3,157,567
3,868,831
4,296,342
4,125,570
4,096,995
Total assets
9,777,007
11,098,191
12,433,727
12,551,005
9,663,917
Total Hitachi, Ltd.
stockholders’ equity per share
426.18552.62609.35566.48614.56(yen)
Earnings per share attributable
to Hitachi, Ltd. stockholders,
85.69
45.04
35.65
47.90
basic (yen)Earnings per share attributable
to Hitachi, Ltd. stockholders,
85.66
45.00
35.62
47.88
diluted (yen)Total Hitachi, Ltd.
21.1
24.0
23.7
21.8
30.7
stockholders’ equity ratio (%)
Return on equity (%)
17.5
7.8
6.1
8.1
Price earnings ratio (times)
8.9
18.3
14.8
12.6
Net cash provided by operating
306,777
451,825
812,226
629,582
activities
Net cash used in investing(550,179)(612,545)(730,799)(337,955)
activities
Net cash provided by (used in)
228,840
233,206(26,467)(209,536)
financing activities
Cash and cash equivalents at
523,357
560,657
701,703699,315765,242end of year
Number of employees
329,703
323,919
336,670
335,244
303,887[Average number of part-time[48,432][48,592][45,111]
employees, etc.](Notes) 1. Our consolidated financial statements have been prepared in conformity with IFRS since the 146thbusiness term.
2. Revenues do not include the consumption tax, etc.
3. Average number of part-time employees, etc. is not stated for the 148th business term since it was lessthan 10% of the number of employees.

-1-Fiscal year
Year end(Millions of yen, unless otherwise stated)
U.S. GAAP
144th
145th
146th
business term business term business term
March 2013
March 2014
March 2015
9,041,071
9,563,791
9,761,970

Revenues
Income from continuing
344,537
573,691
535,612
operations, before income taxes
Net income attributable to175,326
264,975
241,301
Hitachi, Ltd. stockholders
Comprehensive income
420,680
769,178
525,081
Total Hitachi, Ltd.
2,082,560
2,651,241
2,930,309
stockholders’ equity
Total equity
3,179,287
3,852,464
4,274,313
Total assets
9,809,230
11,016,899
12,395,379
Total Hitachi, Ltd.
stockholders’ equity per share
431.13549.02606.87(yen)
Net income attributable to
Hitachi, Ltd. stockholders per
37.28
54.86
49.97
share, basic (yen)Net income attributable to
Hitachi, Ltd. stockholders per
36.29
54.85
49.93
share, diluted (yen)Total Hitachi, Ltd.
21.2
24.1
23.6
stockholders’ equity ratio (%)
Return on equity (%)
9.1
11.2
8.6
Price earnings ratio (times)
14.6
13.9
16.5
Net cash provided by operating
583,508
439,406
447,348
activities
Net cash used in investing(553,457)(491,363)(610,255)
activities
Net cash provided by (used in)(180,445)
32,968250,335
financing activities
Cash and cash equivalents at
527,632
558,217709,531
end of year
Number of employees
326,240
320,725
333,150[Average number of part-time[48,535][48,391][48,548]
employees, etc.](Notes) 1. Our consolidated financial statements had been prepared in conformity with accounting principles
generally accepted in the United States until the 145th business term. The figures for the 146thbusiness term in the above table are unaudited financial information pursuant to the Financial
Instruments and Exchange Act.
2. Revenues do not include the consumption tax, etc.
3. Effective from the 146th business term, in accordance with the provisions of the Accounting Standards
Codification 205-20 “Presentation of Financial Statements - Discontinued Operations” of the U.S.
Financial Accounting Standards Board, a part of the thermal power generation systems business isclassified as a discontinued operation, which was not transferred to MITSUBISHI HITACHI POWER
SYSTEMS, LTD. for the business integration in the thermal power generation systems with Mitsubishi
Heavy Industries, Co., Ltd. The results of the discontinued operation are reported separately fromcontinuing operations. In line with this classification, “Revenues” and “Income from continuing
operations, before income taxes” for the 145th business term are reclassified.
-2-

(2) Financial data etc. of the Company

Fiscal year
Year end
Revenues
Ordinary income (loss)(Millions of yen, unless otherwise stated)
144th
145th
146th
147th
148th
business term business term business term business term business term
March 2013
March 2014
March 2015
March 2016
March 2017
1,911,529
2,070,147
1,842,126
1,859,605
1,906,532
76,05017,887(300)(20,944)

71,599Net income
57,681
57,85685,26264,934
97,724
Common stock
458,790458,790458,790458,790458,790
Number of issued shares
4,833,463
4,833,463
4,833,463
4,833,463
4,833,463(thousands of shares)
Total net assets
1,298,882
1,373,336
1,399,885
1,378,441
1,497,428
Total assets
3,423,417
3,570,087
3,749,326
3,868,633
4,070,247
Net assets per share (yen)268.89284.39289.92285.50310.10
Dividends per share (yen)
10
10.5
12
12
13
[Of the above, interim
[5]
[5]
[6]
[6]
[6]
dividends per share (yen) ]Net income per share, basic
12.27
11.98
17.66
13.45
20.24
(yen)
Net income per share, diluted
11.94
20.23
(yen)
Stockholders’ equity ratio (%)
37.9
38.5
37.3
35.6
36.8
Return on equity (%)
4.6
4.3
6.1
4.7
6.8
Price earnings ratio (times)
44.3
63.6
46.6
39.2
29.8
Dividend payout ratio (%)
81.5
87.6
68.0
89.2
64.2
Number of employees
33,66533,50031,37537,35335,631(Notes) 1. Revenues do not include the consumption tax, etc.
2. “Net income per share, diluted” is not stated for the 145th, 146th and 147th business terms since there
are no dilutive shares.
3. Average number of part-time employees, etc. is not stated since it was less than 10% of the number of
employees.

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

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

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

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

April, 2002

October, 2002

January, 2003
April, 2003

June, 2003
October, 2004

April, 2006

December, 2006
July, 2007
March, 2009

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

Month/Year

July, 2009

October, 2009
February, 2010
April, 2010

October, 2010
October, 2011
March, 2012

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

April, 2015

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

History

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

3. Description of Business
The Hitachi Group, which is comprised of the Company and 1,252 affiliates (864 consolidated
subsidiaries and 388 equity-method associates and joint ventures.), engages in a broad range of businessactivities, from product development and manufacturing to sales and services, in 8 segments of Information& Telecommunication Systems, Social Infrastructure & Industrial Systems, Electronic Systems &Equipment, Construction Machinery, High Functional Materials & Components, Automotive Systems,
Smart Life & Ecofriendly Systems and Others.
Major business outline for each segment and the positioning of principal affiliated companies aredescribed as follows. The Company mainly engages in manufacturing and sales of products and providing
services in the segments of Information & Telecommunication Systems, Social Infrastructure & Industrial
Systems and Electronic Systems & Equipment.

-6-

(As of March 31, 2017)
Main products and services
Information & Telecommunication
Systems
Systems Integration, Consulting,
Cloud Services, Servers, Storage,
Software, Telecommunications &Network, ATMs
Social Infrastructure & Industrial
Systems
Industrial Machinery and Plants,
Elevators, Escalators, Railway
Systems, Thermal, Nuclear andRenewable Energy Power
Generation Systems, Transmission& Distribution Systems
Electronic Systems & Equipment
Semiconductor Processing
Equipment, Test and Measurement
Equipment, Advanced Industrial
Products, Medical Electronics
Equipment
Construction Machinery
Hydraulic Excavators, Wheel
Loaders, Mining Machinery
High Functional Materials &Components
Semiconductor and Display
Related Materials, Circuit Boards
and Materials, Automotive Parts(Molded Plastics, etc.), Energy
Storage Devices, Specialty Steels,
Magnetic Materials andComponents, High Grade Casting
Components and Materials, Wires
and Cables
Automotive Systems
Engine Management Systems,
Electric Powertrain Systems, Drive
Control Systems, Car Information
Systems
Smart Life & Ecofriendly Systems
Air-Conditioning Equipment,
Room Air Conditioners,
Refrigerators, Washing Machines

Positioning of principal affiliated companies
Manufacturing[Consolidated subsidiaries]
Hitachi Information & Telecommunication
Engineering, Ltd.
Hitachi-Omron Terminal Solutions, Corp.
Hitachi Computer Products (America), Inc.
Hitachi Financial Equipment System (ShenZhen) Co., Ltd.
[Consolidated subsidiaries]
Hitachi-GE Nuclear Energy, Ltd.
Hitachi Industrial Equipment Systems Co.,Ltd.
Hitachi Elevator (China) Co., Ltd.
[Equity-method associates]
MITSUBISHI HITACHI POWER
SYSTEMS, LTD.
[Consolidated subsidiaries]
Hitachi High-Technologies Corporation
Hitachi Kokusai Electric Inc.

Sales and services[Consolidated subsidiaries]
Hitachi Solutions, Ltd.
Hitachi Systems, Ltd.
Hitachi Consulting Corporation
Hitachi Data Systems Corporation
Hitachi Payment Services Private Limited[Consolidated subsidiaries]
Hitachi Building Systems Co., Ltd.
Hitachi Industry & Control Solutions, Ltd.
Hitachi Plant Construction, Ltd.
Hitachi Plant Services Co., Ltd.
Hitachi Power Solutions Co., Ltd.
Hitachi Rail Europe Ltd.
Horizon Nuclear Power Limited[Consolidated subsidiaries]
Hitachi Construction Machinery Co., Ltd.
[Consolidated subsidiaries]
Hitachi Chemical Company, Ltd.
Hitachi Metals, Ltd.

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

[Consolidated subsidiaries][Consolidated subsidiaries]
Hitachi Appliances, Inc.
Hitachi Consumer Marketing, Inc.
Hitachi Consumer Products (Thailand), Ltd. [Equity-method associates]
Johnson Controls-Hitachi Air
Conditioning Holding (UK) Ltd
Others[Consolidated subsidiaries][Consolidated subsidiaries]
Optical Disk Drives, Property
Hitachi-LG Data Storage, Inc.
Hitachi Life, Ltd.
Management
Hitachi Urban Investment, Ltd.
Hitachi America, Ltd.
Hitachi Asia Ltd.
Hitachi (China), Ltd.
Hitachi Europe Ltd.
Hitachi India Pvt. Ltd.
Hitachi Information & Telecommunication
Systems Global Holding Corporation(Notes) 1. Hitachi America, Ltd., Hitachi Asia Ltd., Hitachi (China), Ltd., Hitachi Europe Ltd. and Hitachi India Pvt. Ltd. are the
Hitachi Group’s regional supervising company for Americas, Asia, China, Europe and India, and they sell the HitachiGroup’s products.
2. In addition to the table above, the major equity-method associates are Hitachi Capital Corporation and Hitachi Transport
System, Ltd.

-7-

4. Information on Affiliates(1) Consolidated subsidiaries(As of March 31, 2017)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

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

1,350

Information &Telecommunication
Systems

100.0

Hitachi-Omron
Terminal Solutions,Corp.

Shinagawaku, Tokyo

8,500

Information &Telecommunication
Systems

55.0

Hitachi Solutions,Ltd.

Shinagawaku, Tokyo

20,000Information &Telecommunication
Systems

100.0

Hitachi Systems, Ltd.

Shinagawaku, Tokyo

19,162

Information &Telecommunication
Systems

100.0

-8-

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

(As of March 31, 2017)
Company name

Hitachi Computer
Products (America),
Inc.

**Hitachi Consulting
Corporation**Hitachi Data
Systems
Corporation

Location

Oklahoma,
U.S.A.

Texas,U.S.A.

California,
U.S.A.

Commonstock

Principal business(Thousands of Information &US dollars) Telecommunication

14,000 Systems(Thousands of Information &US dollars) Telecommunication

816,951 Systems(Thousands of Information &US dollars) Telecommunication

931,651 Systems

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

(Thousands of Information &US dollars) Telecommunication

Hitachi Payment
Services Private
LimitedChennai,
India(Thousands of Information &Indian rupee) Telecommunication

Hitachi Building
Systems Co., Ltd.

Chiyodaku, Tokyo

3,480 Systems

47,500 Systems

Social5,105 Infrastructure &Industrial Systems-9-

Ownership
percentage ofvoting rights(%)

Relationship

The Company
supplies parts forcomputer peripherals.
The Company’s[100.0]
Directors, Executive
100.0
Officers or employees
concurrently holdposition of directors orofficers.
The Company
outsources consulting
services. The[100.0] Company’s Directors,
100.0 Executive Officers or
employees concurrently
hold position of
directors or officers.
Sales company for theCompany’s storage,
etc. The Company’s[100.0] Directors, Executive
100.0 Officers or employees
concurrently holdposition of directors orofficers.
Manufacturing andsales company in[100.0] China for the Hitachi
100.0 Group’s information
products such as
ATMs.
Offering the HitachiGroup's payment
services for finantial
institutions in India.
[97.5] The Company’s
100.0 Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
Design, manufacturing,sales, installation andmaintenance ofthe elevators andescalators theCompany developed.
100.0
The Company’s
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2017)
Company nameLocation

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

Hitachi-GE Nuclear
Energy, Ltd.

Hitachi,
IbarakiSocial5,000 Infrastructure &Industrial Systems

80.0

Hitachi Industrial
Equipment Systems
Co., Ltd.

Chiyoda-ku,
Tokyo

Social
10,000 Infrastructure &Industrial Systems

100.0

Hitachi Industry& Control Solutions,Ltd.

Hitachi,
IbarakiSocial3,000 Infrastructure &Industrial Systems

100.0

Hitachi Plant
Construction, Ltd.

Toshimaku, Tokyo

Social3,000 Infrastructure &Industrial Systems

100.0

Hitachi Plant Services ToshimaCo., Ltd.
ku, Tokyo

Social3,000 Infrastructure &Industrial Systems

100.0

-10-

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

(As of March 31, 2017)
Company nameLocation

Commonstock

Principal businessSocial4,000 Infrastructure &Industrial Systems

Hitachi Power
Solutions Co., Ltd.

Hitachi,
Ibaraki

Hitachi Elevator(China) Co., Ltd.

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

London,U.K.

**Horizon Nuclear
Power Limited*Hitachi HighTechnologies
Corporation

Gloucester,U.K.

Minato-ku,
Tokyo(Thousands Socialof Sterlingpounds) Infrastructure &878,181 Industrial Systems(Thousands Socialof Sterlingpounds) Infrastructure &876,000 Industrial Systems

7,938Electronic Systems& Equipment-11-

Ownership
percentage ofvoting rights(%)

Relationship

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

51.8

The Company sells andpurchases informationequipment and powerrelated parts throughthis company. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.

(As of March 31, 2017)
Company name

*Hitachi Kokusai
Electric Inc.

Location

Minato-ku,
TokyoCommonstock

10,058Principal businessElectronic Systems& Equipment***Hitachi Construction
Machinery Co., Ltd.

Taito-ku,
Tokyo

81,576*Hitachi Chemical
Company, Ltd.

Chiyoda-ku,
TokyoHigh Functional
15,454 Materials &Components*Hitachi Metals, Ltd.

Minato-ku,
TokyoHigh Functional
26,283 Materials &Components*Clarion Co., Ltd.

Chuo-ku,
Saitama,
Saitama

20,346

Automotive
Systems

Hitachi Automotive
Systems, Ltd.

Hitachinaka,Ibaraki

15,000Automotive
Systems

Construction
Machinery-12-

Ownership
percentage ofvoting rights(%)

Relationship

The Company
purchases
electronic equipment
and parts, etc. The[0.0]
Company’s Directors,
51.8
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company’s
Directors, Executive[0.6] Officers or employees
51.5 concurrently holdposition of directors orofficers.
The Company
purchases electronicmaterials and parts,
energy storage
devices and systems,[0.1]
etc. The Company’s
51.4
Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.
The Company
purchases specialty
steel products,
magnetic materials andapplications, functional
components and[0.5] equipment, and wires,53.5 cables, and related
products. The
Company’s Directors,
Executive Officers or
employees concurrently
hold position of
directors or officers.
The Company
64.0 supplies parts for car
navigation systems, etc.
The Company
purchases parts forrailway vehicles, etc.
The Company’s
100.0 Directors, Executive
Officers or employees
concurrently holdposition of directors orofficers.

(As of March 31, 2017)
Company nameLocation

Commonstock

Principal business

Hitachi Automotive
Systems Americas,
Inc.

Kentucky,
U.S.A.

Hitachi Appliances,
Inc.

Minato-ku,
Tokyo

Smart Life &20,000 Ecofriendly
Systems

Hitachi Consumer
Marketing, Inc.

Minato-ku,
Tokyo

Smart Life &3,000 Ecofriendly
Systems

Hitachi Consumer
Products (Thailand),Ltd.

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

Hitachi-LG Data
Storage, Inc.

Minato-ku,
Tokyo9,262 Others

Hitachi Life, Ltd.

Hitachi,
Ibaraki

1,000 Others(Thousands of
US dollars) Automotive

86,278 Systems-13-

Ownership
percentage ofvoting rights(%)

Relationship

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

(As of March 31, 2017)
Company nameLocation

Hitachi Urban
Investment, Ltd.

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

New York,
U.S.A.

Hitachi Asia Ltd.

Singapore

Commonstock

Principal business

Ownership
percentage ofvoting rights(%)

2,000 Others

100.0(Thousands of
US dollars) Others

100.0(Thousandsof Singapore
dollars) Others

100.0(Thousands of
US dollars) Others

100.0

2,288,946

186,231

Hitachi (China), Ltd.

Beijing,China

226,380-14-

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

(As of March 31, 2017)
Company name

Hitachi Europe Ltd.

Hitachi India Pvt. Ltd.

Location

Maidenhead,
U.K.

Commonstock

Principal business(Thousandsof Sterlingpounds) Others

263,349

of
New Delhi, (Thousands
Indian rupee) Others
India
344,000**Hitachi
Information &California,
Telecommunication
U.S.A.
Systems Global
Holding Corporation(Thousands of
US dollars) Others

1,402,257

Ownership
percentage ofvoting rights(%)

Relationship

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

Others- 825 companies(Notes) 1. The unit of amounts and currency shown in the “Common stock” column are in millions of yen, unlessotherwise specified.
2. Companies with two asterisks (**) in the “Company name” column are specified subsidiaries.
3. Companies with one asterisk (*) in the “Company name” column submit Securities Registration
Statement or Annual Securities Report.
4. The name of segment in which the companies classified is shown in the “Principal business” column.
5. The amounts in brackets in upper row of the “Ownership percentage of voting rights” column represent
the percentage of voting rights owned indirectly by subsidiaries, of the total ownership percentage.
6. Companies with negative net worth are shown below, along with the amount of liabilities in excess ofassets.
Hitachi Power Europe GmbH¥89,410 million
Hitachi Vehicle Energy, Ltd.
¥41,606 million-15-(2) Equity-method associates and joint ventures(As of March 31, 2017)
Company nameLocation

Commonstock

Principal business

MITSUBISHIHITACHI POWER
SYSTEMS, LTD.

Nishi-ku,
Yokohama,
Kanagawa

Johnson ControlsHitachi Air
Conditioning
Holding (UK) Ltd

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

Minato-ku,
Tokyo

9,983

*Hitachi Transport
System, Ltd.

Koto-ku,Tokyo

16,802 Logistics services

100,000

SocialInfrastructure &Industrial Systems

General leasing,installment sales,
and other financial
services

Ownership
percentage ofvoting rights(%)

Relationship

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

Others- 384 companies(Notes) 1. The unit of amounts and currency shown in the “Common stock” column are in millions of yen, unlessotherwise specified.
2. Companies with one asterisk (*) in the “Company name” column submit Securities Registration
Statement or Annual Securities Report.
3. The names of segment in which MITSUBISHI HITACHI POWER SYSTEMS, LTD. and Johnson
Controls-Hitachi Air Conditioning Holding (UK) Ltd are classified are shown in the “Principal
business” column.
4. Companies with negative net worth are shown below, along with the amount of liabilities in excess ofassets.
Agility Trains West (Holdings) Limited¥74,366 million
Agility Trains East (Holdings) Limited¥73,954 million
GE-Hitachi Nuclear Energy Holdings LLC¥20,140 million-16-

5. Employees(1) Consolidated basis(As of March 31, 2017)
Number of employees
74,919
Information & Telecommunication
Systems[16,311]74,616Social Infrastructure & Industrial
Systems[10,367]
19,409
Electronic Systems & Equipment[2,939]23,848Construction Machinery[-]
48,528High Functional Materials &Components[-]
33,979Automotive Systems[-]
11,705
Smart Life & Ecofriendly Systems[-]
14,267
Others[3,398]2,616
Corporate (Head Office and others)[2,616]
303,887
Total[35,631](Note) The number in brackets in the lower row of the “Number of Employees” column is the number of
employees of the Company included in each of the numbers in the upper row.
Name of segment(2) The Company
Number of employees
Average age
Average length of service
35,631
41.4
18.6 years(Note) Average annual salary includes bonuses and extra wages.

(As of March 31, 2017)
Average annual salary¥8,498,582(3) Relationship with labor union
The Company’s labor union, Hitachi Workers Union, is a member of the Japanese ElectricalElectronic & Information Union.
The relationship between management and labor unions in the Hitachi Group is stable and smooth.

-17-II. Business Overview
1. Summary of Business Results
See “7. Analyses of Consolidated Financial Condition, Operating Results and Cash Flows.”
2. Production, Orders Received and Sales
The Hitachi Group does not present production and orders received in amount or volume terms foreach segment since it produces and sells a wide variety of products, there are variety of specifications insame kinds of products and certain products are mass-produced.
Regarding sales, see “7. Analyses of Consolidated Financial Condition, Operating Results and Cash
Flows.”
3. Management Policy, Economic Environment and Challenges Facing Hitachi Group(1) Management Policy
Amid intensifying competition in global markets, the Hitachi Group has been expanding its
business through development of Hitachi and its related companies (subsidiaries and affiliatedcompanies). Hitachi aims to achieve further development by delivering competitive products andservices, thus creating higher value for customers. By taking full advantage of the diverse resources ofthe Hitachi Group, while at the same time reviewing and restructuring businesses, Hitachi aims tobolster its competitiveness and achieve growth in global markets. This process will be consistent with
Hitachi’s basic management policy, which is to increase shareholder value by meeting the expectationsof customers, shareholders, employees and other stakeholders.
By fully capitalizing on the business base it has built over the years, the Hitachi Group aims toachieve sustainable growth through global expansion of the Social Innovation Business to provide
solutions driven by collaborative creation with customers in a range of areas, including Power / Energy,
Industry / Distribution / Water, Urban Development, and Finance / Government & Public / Healthcare.
At the same time, the Hitachi Group will work to establish an even more solid management base bypushing ahead with ongoing business portfolio reforms and cost structure reforms. Under the "2018 Mid-term Management Plan," the Hitachi Group utilizes the following indicatior targets to measureperformanc in terms of meeting its starategic and operational goals: adjusted operating income (margin)(Note 1); EBIT (margin) (Note 2); net income attributable to Hitachi, Ltd. stockholders; front revenue
ratio (Note 3); overseas revenue ratio; operating cash flow margin (Note 4); and return on assets (ROA)(Note 5).
(Notes) 1. Adjusted operating income is presented as revenues less cost of sales as well as selling,
general and administrative expenses. Adjusted operating income margin is the ratio
calculated by dividing adjusted operating income by revenues.
2. EBIT represents earnings before interest and taxes, which is presented as income fromcontinuing operations, before income taxes less interest income plus interest charges. EBIT
margin is the ratio calculated by dividing EBIT by revenues.
3. Front revenue ratio is the ratio of revenues from front-line busiensses to total revenues.
4. Operating cash flow margin is the ratio calculated by dividing operating cash flows by
revenues.
5. Return on assets (ROA) is the ratio of net income to average total assets of the beginning ofand the end of fiscal year.

(2) Economic Environment
We conduct business operations such as manufacturing, marketing, and research and development
activities throughout the world. Therefore, the economic conditions in global markets where the HitachiGroup conducts business, in particular Japan, Asia, North America and Europe, affect its results ofoperations.
During the year ended March 31, 2017, in the U.S., consumer spending and housing investment
remained firm due to improving employment, and capital expenditure recovered. While the foreignexchange market remained unsettled in Europe, partly due to the result of Brexit referendum, theEuropean economy grew at a moderate pace with the help of firm consumer spending. The Chinese
economy continued steady growth due to the supports by infrastructure investments made by the-18-

government. In emerging markets, economies continued to experience difficult circumstances as their
growth stagnated amid turmoil in the foreign exchange market, despite a slight recovery in crude oil andresources prices. The Japanese economy remained sluggish until early November due to the yen’s
appreciation. However, subsequent correction of yen appreciation and a rally in consumer spending put
the Japanese economy on track to recovery.
(3) Business and Financial Challenges Facing Hitachi Group
While the forecast of the world economy still remains uncertain, the Hitachi Group will promote
the following measures under the “2018 Mid-term Management Plan” in order to realize further growth
as a partner that resolves issues facing customers in the era of the Internet of Things (IoT) where all“things” are connected to the Internet.
- The Hitachi Group’s businesses have been divided into four fields: (i) “Power and Energy,” (ii)“Industry, Distribution and Water,” including industrial products and solutions business, (iii)“Urban,” including smart life & ecofriendly systems and automotive systems in addition to railway
and building systems and (iv) “Finance, Public and Healthcare,” focused on IT. Through integrated
management in each business field, we will carry out growth strategies with a broader perspective
and generate synergies within each field.
- We will utilize the Lumada IoT platform to develop new solutions, while also providing highly
targeted services to help solve issues faced by customers and in today’s increasingly complex society.
- We will accelerate business growth in the global market by establishing a “front” business structurethat allows us to rapidly provide optimum products and services tailored to customer needs andbusiness environments in each region and country.
- We will implement targeted investment in line with our growth strategy, improve capital efficiency
and establish our position in artificial intelligence and other strategic fields over the medium and longterm.
- We will continuously strive to optimize our business portfolio from the perspective of the growthpotential, profitability and competitiveness of businesses, by carrying out reorganization, including
partnerships with other companies, withdrawals and disposal by sale.
- In order to secure the necessary funds for the growth of the Hitachi Group, we will extend cost
restructure reforms, such as fixed cost reduction, to strengthen our cash-generating capabilities.
- By strengthening research and development to share issues with customers and create new solutions
together, we will further reinforce the role of R&D in bolstering the Hitachi Group’s profitability.
- To maximize the capabilities of diverse human resources, we will promote productivity andimplement wide-ranging reforms to work practices by creating working environments that allow
more flexible work choices and by improving operational efficiency.
- By providing our customers with high-quality and safe products and services, we will further gain thereliability in the Hitachi Group from society, and increase the value of the Hitachi brand.
- We will ensure compliance with laws and international social standards and dedication to corporate
ethics based on a firm commitment to eradicating misconduct within the Hitachi Group, andcontinuously strive to contribute to the environment and the communities.
(4) Fundamental Policy on the Conduct of Persons Influencing Decision on the Company’s Financial andBusiness Policies
The Group invests a great deal of business resources in fundamental research and in thedevelopment of market-leading products and businesses that will bear fruit in the future, and realizing
the benefits from these management policies requires that they be continued for a set period of time. For
this purpose, the Company keeps its shareholders and investors well informed of not just the businessresults for each period but also of the Company’s business policies for creating value in the future.
The Company does not deny the significance of the vitalization of business activities andperformance that can be brought about through a change in management control, but it recognizes thenecessity of determining the impact on company value and the interests of all shareholders of thebuying activities and buyout proposals of parties attempting to acquire a large share of stock of theCompany or a Group company by duly examining the business description, future business plans, past
investment activities, and other necessary aspects of such a party.
There is no party that is currently attempting to acquire a large share of the Company’s stocks nor
is there a specific threat, neither does the Company intend to implement specified so-called anti-19-

takeover measures in advance of the appearance of such a party, but the Company does understand that
it is one of the natural duties bestowed upon it by the shareholders and investors to continuously
monitor the state of trading of the Company’s stock and then to immediately take what the Company
deems to be the best action in the event of the appearance of a party attempting to purchase a large shareof the Company’s stock. In particular, together with outside experts, the Company will evaluate thebuyout proposal of the party and hold negotiations with the buyer, and if the Company deems that saidbuyout will not maintain the Company’s value and is not in the best interest of the shareholders, thenthe Company will quickly determine the necessity, content, etc., of specific countermeasures andprepare to implement them. The same response will also be taken in the event a party attempts toacquire a large percentage of the shares of a Group company.
4. Risk Factors
We conduct business on a global scale across a broad range of business areas and utilize sophisticated,
specialized technologies to carry out our operations. Therefore, we are exposed to risks attributable to theeconomic environment, risks inherent in individual industrial sectors and business lines and risks related toour operations. Investment in our securities also involves risks. The following risks are based on theassumption we consider reasonable as of the filing date of this report.
Risks Related to Operations
Economic Trends
Our business is influenced by the global economy and economic conditions in certain regions orcountries. We are affected by downward economic trends in the U.S., Europe, China, emerging countries
and Japan. Such economic conditions could cause decline in consumer spending or capital investment andsubsequently reduced demand for our products and services, which could adversely affect our business,financial condition, and results of operations.
Currency Exchange Rates Fluctuations
Since we conduct business in many foreign countries, our business activities are exposed to risks fromfluctuations in foreign currency exchange rates. We sell products, provide services and purchase raw
materials and components in local currencies. Therefore, fluctuations in foreign currency exchange rates
may result in lower revenues or higher costs in yen to us and thus affect our results of operations, which arereported in Japanese yen. Our price competitiveness, and thus our results of operations, may be harmed if
we seek to increase prices in local currencies to compensate for lower revenues or to increase prices in yen
to absorb the higher cost. In addition, since we hold assets and liabilities denominated in foreign currencies,
fluctuations in foreign currency exchange rates may adversely affect our financial condition presented inJapanese yen through foreign currency translation. While we take measures to reduce the risks fromfluctuations in foreign currency exchange rates, such measures may not be effective.

-20-

Access to Liquidity and Long-term Financing
Our primary sources of funds are cash flows from operations, borrowings from banks and otherinstitutional lenders, and funding from capital markets, such as offerings of commercial paper and otherdebt securities, as well as equity securities. We need liquid funds to pay our operating expenses, theprincipal of and interest on our debt and dividends on our capital stock. We also need long-term financing
to fund, among other things, capital expenditures and research and development expenses. We currently
believe our cash flows from operations, borrowings from banks and other institutional lenders and funding
from the capital markets can provide sufficient funding for our operations and other liquidity needs.
However, a global economic downturn could adversely affect our cash flows from operations, businessresults and financial condition and may adversely affect our credit ratings. If our ratings are downgraded,
our ability to obtain additional financing on terms we consider favorable may be negatively affected.
Our reliance on banks and institutional lenders exposes us to risks related to rising interest rates, andwe may need to increase our reliance on external sources of funding. An increased reliance on debt
instruments may adversely affect our credit ratings, which might affect our ability to successfully obtain
additional financing on terms we consider favorable. The inability to successfully obtain such financing
may increase our financing costs, and therefore could adversely affect our financial condition and results ofoperations.
Furthermore, failure of one or more of our major lenders or a decision by one or more of them tochange the terms and conditions of their loans or to stop lending to us could have an adverse effect on ouraccess to funding.
Marketable Securities Risks
We invest in marketable securities to maintain or promote our business or other relationships withother companies. These marketable securities are exposed to the risk of declining stock market prices. Suchdeclines may require that we write down equity securities that we hold. Further, contractual and otherobligations may require us to maintain our holdings of these securities despite declining share prices andthis may lead to material losses.
Material and Component Procurement
Our manufacturing operations rely on external suppliers for supplies of materials, parts, components
and services of adequate quality and quantity, delivered in a timely manner at a reasonable price. External
suppliers may not have sufficient capacity to meet all of our needs during periods of excess demand.
Shortages of materials, parts, components and services may cause a sharp rise in their prices. In addition,
prices of certain raw materials, parts and components which we purchase in local currencies, principally the
U.S. dollar and the euro, could be adversely affected by fluctuations in foreign currency exchange rates.
Increases in the market price of petroleum and other materials, such as copper, steel, synthetic resins, rare
metals and rare-earth minerals, can increase our production costs and may adversely affect our results ofoperations. Conversely, decreases in commodity prices, such as for raw materials, parts and components,
can result in write-downs of inventory.
If natural disasters disrupt the operations of our suppliers and damage supply chains, it may adversely
affect our production. Although we generally maintain multiple sources of supply and work closely with
our suppliers to avoid supply-related problems, such problems, including shortages and delays, may
continue to occur, which could harm our business, financial condition and results of operations.

-21-

Estimates, Fluctuations in Cost and Cancellation of Long-term Contracts
We enter into a substantial number of long-term contracts, particularly in connection with theconstruction of infrastructure systems. When the outcome of a construction can be estimated reliably, we
recognize revenue and expenses by reference to the stage of completion of the contract activity. In this case,
we recognize revenue in an amount equal to estimated total revenue from the arrangement multiplied by thepercentage that costs incurred to date bear to estimated total costs at completion based upon the mostrecently available information. When the outcome of a construction cannot be estimated reliably, we
recognize revenue only to the extent of contract costs incurred that it is probable will be recoverable, andrecognize contract costs as expenses in the period in which such costs are incurred. The revenue recognition
for such long-term contracts requires us to make significant assumptions about estimates of total contract
costs, remaining costs to completion, total contract revenues, contract risks and other factors. We charge
any anticipated losses on fixed price contracts to operations when we are able to estimate such losses.
While we employ our best judgment based on available information, there can be no assurance that theseestimates will, ultimately, prove to be correct. We regularly review these estimates and adjust them as wedeem necessary. Fluctuations in costs can occur for a variety of reasons, many of which are beyond ourcontrol. In addition, we or our counterparties may cancel these contracts. These factors would require us torevise our initial assumptions regarding a particular contract, and may adversely affect our business,financial condition and results of operations.
Credit Risks Arising from Business Transactions
We make transactions with diverse customers and suppliers in Japan and other countries. We sell our
products to certain customers on credit and pay in advance for products or services provided by certain
suppliers. While we take measures to manage counterparty credit risk, such as regularly monitoring credit
conditions of such customers or suppliers and setting a limit on transaction amount according to their credit
conditions, credit deterioration or failure of one or more of them could adversely affect our financial
condition, results of operations and cash flows.
Supply and Demand Balance
Oversupply in the markets in which we compete may lead to declines in sales prices, revenues andprofitability. In addition, adjustment to demand may force us to dispose of excess supply or obsolete
equipment or reduce production, which can result in losses. For example, the imbalance between supply
and demand in construction machinery, automotive equipment and semiconductor processing equipment
industries and a resultant deterioration in market conditions could negatively affect our businesses, financial
condition and results of operations.
Rapid Technological Innovation
New technologies are rapidly emerging in the segments in which we conduct business, with the paceof technological innovation. The development of new and advanced technologies, the continuous, timely
and cost-effective incorporation of such technologies into products and services and the effective marketingof such products and services are indispensable to remaining competitive. While introducing such products
and services requires significant resource commitment to research and development, there can be noassurance that our research and development will be successful. Failure in our endeavors to develop andincorporate such advanced technologies into products and services in a timely manner, or to achieve market
acceptance for such products and services, may negatively affect our business, financial condition andresults of operations.

-22-

Intense Competition
We are subject to intense competition in many of the markets in which we operate, and this may
adversely affect our results of operations. The industrial sectors and business lines in which we are engaged
are experiencing increasingly intense competition. We compete with diverse competitors ranging from huge
global corporations to specialized companies. Competitors are increasingly manufacturing products,
including sophisticated electronic products, in low-cost jurisdictions. Low-cost manufacturing and theglobalization of world markets have accelerated the commoditization of certain products, which has
resulted in increasingly intense price competition for many of our products. To succeed in this competitiveenvironment, we believe that our products and services must be price competitive. The commoditization ofsuch products affects our ability to set prices for our products. If we are unable to charge comparable prices
to those of our competitors, our competitiveness and overall profitability may be harmed. On the other
hand, charging comparable prices to those of our competitors may require us to sell products at a loss. Our
products must also be competitive in terms of engineering sophistication, quality and brand value. We must
introduce our products and services to the markets in a timely manner. There can be no assurance that the
products or services that we offer will be competitive. The failure of such products or services to becompetitive may negatively affect our business, financial condition and results of operations.
Dependence on Specially Skilled Personnel
We believe recruiting and retaining additional people who are highly skilled in connection with ouroperations is indispensable to remaining competitive. However, the number of skilled personnel is limited
and the competition for attracting and maintaining such personnel is intense. We cannot ensure that we will
be able to successfully attract new or maintain our current skilled personnel.
Our Strategy to Strengthen Our Social Innovation BusinessOur business strategy seeks to build our business portfolio and achieve a stable and profitable businessstructure mainly by strengthening our Social Innovation Business, which supplies advanced social
infrastructure supported by information and communication technology. We plan to devote significant
resources including capital expenditures and R&Ds and are making investments in mergers and acquisitions
and in new projects to strengthen our Social Innovation Business. In addition, we attempt to design suitableorganizational structure for promoting our Social Innovation Business more effectively in response tomarket changes. To implement this strategy, we have incurred and may continue to incur considerable
expenses. Our efforts to implement this strategy may be unsuccessful or less successful than we currently
anticipate. Even if these efforts are successful, there is no assurance that we will be able to sustain or
increase profitability.
Acquisitions, Joint Ventures and Strategic Alliances
In every operating sector, we depend to some degree on acquisitions of other companies, joint venturesand strategic alliances with outside partners to design and develop key new technologies and products, tostrengthen competitiveness by scaling up and to expand into new regions through acquiring local bases or
distribution channels. Such transactions are inherently risky because of the difficulties in integrating
operations, technologies, products and personnel and achieving return of the investment. Integration issues
are complex, time-consuming and expensive and, without proper planning and implementation, could
adversely affect our business. Decisions made by or the performance of alliance partners that we cannot
control or adverse business trends may also negatively affect the success of our alliances. We may incur
significant acquisition, administrative and other costs in connection with these transactions, including costs
related to integration or restructuring of acquired businesses. If it is expected that the amount invested isirrecoverable due to a decline in the profitability of an investee, we may incur siginificant losses, including
impairment loss for goodwill. There can be no assurance that these transactions will be beneficial to ourbusiness or financial condition. Even assuming these transactions are beneficial, there can be no assurance
that we will be able to successfully integrate acquired businesses or achieve all or any of the initial
objectives of these transactions.

-23-

Restructuring of Our BusinessOur business strategy seeks to build our business portfolio and achieve a stable and profitable businessstructure in part by:・ closing unprofitable operations;・ divesting our subsidiaries and affiliated companies;
・ reorganizing production bases and sales networks; and・ selling select assets.
Our restructuring efforts may not be implemented in a timely manner or at all, including due togovernmental regulations, employment issues or a lack of demand in the M&A market for businesses wemay seek to sell. In addition, we have listed subsidiaries and from time to time the interests of these listed
subsidiaries’ shareholders may conflict with our interests. Such conflicts of interest may result indifficulties in timely implementing group-wide policies, including mergers, company splits and othersimilar transactions to which the listed subsidiaries are parties. Restructuring efforts may also bring about
unintended consequences, such as negative customer or employee perceptions, and have caused and may
continue to cause us to incur significant expenses and other costs, including additional impairment losses on
our fixed assets and intangible assets, write-offs of inventory and losses on the disposal of fixed assets andlosses related to the sale of securities.
Current and future restructuring efforts may be unsuccessful or less successful than we presently
anticipate and may adversely affect our business, financial condition and results of operations.
Worsening of Business Performance of Equity-Method Associates and Joint Ventures
We use the equity-method to account for a number of associates and joint ventures. If one or more ofsuch associates or joint ventures, accounted for using the equity-method, records a loss during a given
period, we must record that loss in a manner proportionate to our ownership interest in our consolidated
financial statements. In addition, if the carrying amount of our equity-method investments in associates orjoint ventures is below the recoverable amount of the investments, we could be required to record an
impairment loss.
Our Overseas Growth Strategies
We seek to expand our business, including our Social Innovation Business, in overseas markets as partof our business strategy. Through such overseas expansion, we aim to increase our revenues, reduce ourcosts and improve profitability. In many of these markets, we face barriers in the form of long-standing
relationships between our potential customers and their local suppliers. In addition, various factors inforeign countries where we operate may adversely affect our overseas business activities. These factors
include:・ changes in regulations relating to investments, exports, tariffs, antitrust, anti-bribery, consumer andbusiness taxation, intellectual property, foreign trade and exchange controls, environmental andrecycling requirements;
・ differences in commercial and business customs such as contract terms and conditions;・ labor relations;・ public sentiment against Japan and local residents’ sentiment against us; and・ other political and social factors as well as economic trends and currency exchange rate fluctuations.
Because of these factors, there can be no assurance that we will be able to achieve the aims of ouroverseas growth strategy. This may adversely affect our business growth prospects and results ofoperations.
Overhaul of Cost Structure
We implement “the Hitachi Smart Transformation Project,” which promotes cost reductions bythoroughly overhauling our cost structure across the Group including procurement, production andadministrative operations. We seek to stabilize earnings and generate cash flows by improving ourmanagement efficiency through the Project. The Project may be less successful than we currently
anticipate. Even if the Project is successful, there is no assurance that we will be able to sustain or increase
profitability.

-24-Intellectual Property
We depend in part on proprietary technology and our ability to obtain patents, trademarks and otherforms of intellectual property rights covering our products, product design, manufacturing processes andsoftware-based services in Japan and other countries. The fact that we hold such intellectual property rights
does not ensure that they will provide a competitive advantage to us. Various parties may challenge,
invalidate or circumvent our patents, trademarks and other intellectual property rights. There can be noassurance that claims allowed on any future patents will be sufficiently broad to protect our technology.
Effective patent, copyright and trade secret protection may be unavailable or limited in some of the markets
in which we operate, and our trade secrets may be vulnerable to disclosure or misappropriation by
employees, contractors and other persons.
We design many of our products to include software or other intellectual property licenses from third
parties. Competitors may not make their protected technology available to us, or may make it available tous only on unfavorable terms and conditions. There can be no assurance that we will be able to maintain alicense for such intellectual property if obtained, for economic or other reasons, or that such intellectual
property will give us the commercial advantages that we desire.
From time to time, we are sued or receive notices regarding patent and other intellectual property
claims. Whether or not these claims have merit, they may require significant resources to defend against
and may divert management attention from our business and operations and result in harm to our
reputation. In addition, a successful infringement claim and our inability to obtain the license for the
infringed technology or substitute similar non-infringing technology may adversely affect our business.
Litigation and Regulatory Investigations
We face risks of being involved in litigation and alternative dispute resolution and regulatory
investigation and actions in connection with our operations. Lawsuits or any other legal procedures forresolving disputes and regulatory actions may seek payment of large, indeterminate amounts or otherwise
limit our operations, and their existence and magnitude may remain unknown for substantial periods oftime.
In the past several years, we have been the subject of several investigations of alleged antitrust
violations in relation to certain product markets in Japan, Europe and North America, etc. and received
claims for damages from our customers, etc., which may have adverse effects on our financial condition or
profitability. See “Consolidated Financial Statements－Notes to Consolidated Financial Statements－(30)Commitments and Contingencies.” These investigations or disputes may result in significant penalties orcompensation for damages, etc. Such substantial legal liability or regulatory action could have an adverse
effect on our business, results of operations, financial condition, cash flows, reputation and credibility.
In addition, our business activities are subject to various governmental regulations in countries where
we operate, which include investment approvals, export regulations, tariffs, antitrust, anti-bribery,
intellectual property, consumer and business taxation, foreign trade and exchange controls, andenvironmental and recycling requirements. These regulations limit, and other new or amended regulations
may further limit, our business activities or increase operating costs. In addition, the enforcement of such
regulations, including the imposition of fines or surcharges for violation of such regulations, may adversely
affect our results of operations, financial condition, cash flows, reputation and credibility.
Product Quality and Liability
We increasingly provide products and services utilizing sophisticated technologies, including but notlimited to components of power stations. Reliance on external suppliers reduces our control over quality
assurance. The occurrence of defects in our products and services could negatively affect our reputation for
quality of products and services, expose us to liability for damages caused by such defects and negatively
affect our ability to sell certain products. A significant product defect could adversely affect our results ofoperations, financial condition and future business prospects.

-25-

Significant Disasters and Similar Events
We have many facilities, including our R&D facilities, manufacturing facilities and our headquarters
in Japan. Historically, Japan has experienced numerous natural disasters such as earthquakes, tsunamis andtyphoons. Natural disasters in the future may have a significantly adverse affect on an array of ourcorporate activities, from production to sales. We also have overseas facilities in Asia, the U.S. and Europe,
which are also subject to similar natural disasters. Natural disasters in each of the areas may cause damage
on certain of our plants and offices and the operations of our suppliers and customers. Such significant
natural disasters may directly damage or destroy our facilities, which could disrupt our operations, delay
new production and shipments of existing inventory or result in costly repairs, replacements or other costs,
all of which would result in significant losses. Furthermore, even if such significant natural disasters do notdirectly affect our facilities, they could result in disruptions in distribution channels or supply chains. The
spread of infectious diseases and geopolitical and social instability, such as terrorism, crime, civil
disturbance and conflict, etc., may also disrupt our operations, render our employees unable to work, reduce
consumer demand for our products or disrupt our supply and distribution channels. In addition, we are notinsured against all potential losses, and even losses that insurance covers may not be fully covered and may
be subject to challenges of or delays in payment. Direct and indirect disruption of our operations as a resultof natural disasters or other events could have a negative impact on our operating activities, results ofoperations and financial condition.
Dependence on Information Systems
With the increased importance of information systems to our operating activities, disruptions in such
systems due to computer viruses and other factors could have a negative impact on our operating activities,
results of operations and financial condition.
Management of Confidential Information
We maintain and manage personal information obtained from our customers, as well as confidential
information relating to our technology, research and development, or R&D, production, marketing andbusiness operations and those of our customers and clients, in various forms. Although we have
implemented controls to protect the confidentiality of such information, there can be no assurance that suchcontrols will be effective. Unauthorized disclosures of such information could subject us to complaints or
lawsuits for damages or could otherwise have a negative impact on our business, financial condition, resultsof operations, reputation and credibility.
Employee Retirement Benefits
We have a significant amount of employee retirement benefit costs that we derive from actuarial
valuations based on a number of assumptions. Inherent in these valuations are key assumptions used inestimating pension costs including mortality, withdrawal and retirement rates, changes in wages and thediscount rate. We are required to make judgments regarding the key assumptions by taking into accountvarious factors including personnel demographics, market conditions and expected trends in interest rates.
Although management believes that its key assumptions are reasonable in light of the various underlying
factors, there can be no assurance that the key assumptions will correspond to actual results. If our key
assumptions differ from actual results, the consequent deviation of actual pension costs from estimatedcosts may have an adverse effect on our financial condition and results of operations. A decrease in the
discount rate may result in an increase in the amount of projected benefit obligations. In addition, we may
change these key assumptions, such as the discount rate. Changes in key assumptions may also have an
adverse effect on our financial condition and results of operations.

-26-

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

-27-

5. Material Agreements, etc.
Cross License Agreement
Country

Item undercontract

Contract
description

U.S.A.

Information
handling
systemsCrosslicense ofpatents

Hitachi, Ltd.
(The Company)

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

Allproducts
and services

Crosslicense ofpatents

Hitachi, Ltd.
(The Company)

EMC Corporation

U.S.A.

Information
handling
systemsCrosslicense ofpatents

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

GE-Hitachi
Nuclear Energy
Americas LLC

U.S.A.

NuclearreactorsystemsCrosslicense ofpatents andtechnology

Party

Party

Hitachi, Ltd.
(The Company)

International
Business Machines
Corp.

-28-

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

6. Research and Development
The Hitachi Group (the Company and consolidated subsidiaries) is conducting business in a broad
range of fields, from information and telecommunications systems to financial services. The Hitachi Group
places priority on allocating R&D resources on the Social Innovation Business, a core business of the
Hitachi Group, and makes efforts for continuing and developing business.
In order to strengthen the global competitiveness of the business, the Hitachi Group works in R&D
activities to identify, share and resolve the customers’ problems, and is focusing on developing competitive
products and services to lead globalization of operations. In addition, the Hitachi Group conducts advanced
research to cultivate future core businesses.
The Hitachi Group also works to improve the efficiency of R&D through close coordination between
the R&D divisions of the Company and group companies. Furthermore, the Hitachi Group is actively
expanding collaborations with universities and other research institutions as well as with outside firms.
The Company has established an R&D framework to accelerate global growth through the Social
Innovation Business. In order to support the global growth, it aims to promote R&D that can meet local
needs quickly by expanding R&D facilities and personnel in North America, Europe, China, Asia, India andSouth America and accelerating locally-led R&D. The Company reorganized its R&D facilities in Japanand overseas to establish an R&D structure comprising the “Global Center for Social Innovation,” which
discovers customers’ issues and creates new solutions in collaboration with customers, the “Center forTechnology Innovation,” which creates innovative products and services and supports development of new
solutions by applying and integrating technology platforms in focused areas, and the “Center for
Exploratory Research,” which cultivates new areas through exploratory basic research based on our creative
vision in the form of open innovation. With this R&D structure, the Company aims to further promote R&D
that will contribute to solving customers’ issues.
The Hitachi Group’s R&D expenditures for the fiscal year ended March 31, 2017 were ¥323.9 billion,
3.5% of revenues. A breakdown of R&D expenditures by segment is shown below.
(Billions of yen)Segment

AmountInformation & Telecommunication Systems

50.1

Social Infrastructure & Industrial Systems

48.7

Electronic Systems & Equipment

53.6

Construction Machinery

19.0

High Functional Materials & Components

46.1

Automotive Systems

70.6

Smart Life & Ecofriendly Systems

6.9

Others5.4

Financial Services

0.0

Corporate Items

23.0
Total

323.9

Notable achievements of R&D activities in the fiscal year ended March 31, 2017 are as follows.
-

Development of basic artificial intelligence technology that enables logical dialogue in Japanese(Information & Telecommunication Systems segment)
In the field of basic artificial intelligence (AI) technology, we developed technology that enables
application, in Japanese and other languages, of the function that analyzes huge volumes of articles andso forth and presents both affirmative and negative opinions on specific issues by applying deeplearning (a neural network machine learning model based on the mechanism of nerve cells). This had
previously been possible only in English.
-29-

-

Development of basic technology for identification of metabolite differences in urine between healthy,
breast cancer and colorectal cancer groups (Others segment)
We succeeded in developing a technology that distinguishes breast cancer and colorectal cancer
patients from healthy persons based on differences in the amount of specific metabolites from acomprehensive analysis of urine metabolites such as sugar and lipids. (Research result supported fromthe “Acceleration Transformative Research for Medical innovation (ACT-M)” of the Japan Agency for
Medical Research and Development)-

Development of humanoid robot and robotics IT platform for customer services (Social Infrastructure &Industrial Systems segment)
We have developed a humanoid robot, "EMIEW3," enhanced with functions to resume a standing
position if fallen over in order to efficiently provide customer services and guidance.We also developed
robotics platform that can conduct remote voice, image and language processing and monitor andcontrol multiple robots placed in various locations, and identify people requiring assistance and share
information between multiple robots to ensure smooth service continuation.

-

D e ve l op me nt of fi n ge r ve i n au t hen t i ca t i o n u s i n g s m ar t p h o n e c am e ra ( I n f o rm at i o n &Telecommunication Systems segment)
We developed technology for realizing finger vein authentication with a smartphone, without using
a dedicated infra-red sensor, by developing image processing technology to emphasize the specific colorof the finger veins using the color information of the fingers captured by a standard smartphone camera
and by developing technology to enhance the authentication accuracy through detecting the positioning
and inclination of the fingers and compensating for the inclination and size of each finger.

-

Development of lensless-camera technology for easily adjusting focus of video images after image
capture (Information & Telecommunication Systems segment)
We developed a lenseless-camera technology that enables focus to be adjusted after video image
capture using thin film imprinted with concentric-circle pattern, instead of a lense, and rapid Fouriertransform which enables cameras to be made cheaper, thinner, and lighter by eliminating the need for alens. This will enable a wider range of applications on mobile devices, cars, robots, and so forth.

-Development of image-analysis technology with AI for real-time people-detection and tracking(Information & Telecommunication Systems segment)
We developed an image-analysis technology that has realized rapid detection and an improvementin tracking performance of a particular person by applying AI to surveillance camera image analysis to
identify more than 100 related to 12 types of appearance characteristics such as sex, age, carried items
and clothing, and 10 movements as well as analyzing the entire image of the body in real time.

-30-

7. Analyses of Consolidated Financial Condition, Operating Results and Cash Flows(1) Summary of Economic Environment and Business Strategy, etc.
1) Economic Environment
See “3. Management Policy, Economic Environment and Challenges Facing Hitachi Group ‐ (2)Economic Environment.”
2) Business Strategy
See “3. Management Policy, Economic Environment and Challenges Facing Hitachi Group ‐ (3)Business and Financial Challenges Facing Hitachi Group.”3) Business Reorganization
We continuously reorganize our business in order to further focus our business resources on theSocial Innovation Business. The important business reorganizations conducted in the year ended March
31, 2017 are as follows:
The Company entered into an agreement to transfer a part of shares of Hitachi Transport System,
Ltd. stocks owned by the Company to SG Holdings Co., Ltd. in March 2016, and transferred them in
May 2016. Hitachi Transport System, Ltd. is accounted as the Company’s equity-method associatefollowing the share transfer.
The Company entered into an agreement to transfer a part of shares of Hitachi Capital Corporation
stocks owned by the Company to Mitsubishi UFJ Financial Group, Inc. and Mitsubishi UFJ Lease &Finance Co., Ltd. in May 2016, and transferred in October 2016. Hitachi Capital Corporation is
accounted as the Company’s equity-method associate following the share transfer.
In January 2017, the Company concluded an agreement to subscribe under certain conditions to atender offer for the common shares, etc. of Hitachi Koki Co., Ltd. to be conducted by HK Holdings Co.,
Ltd., all issued shares of which is held entirely by a related investment fund that is indirectly owned andoperated by Kohlberg Kravis Roberts & Co. L.P. The Company transferred all of its shares in Hitachi
Koki Co., Ltd. by subscribing to the tender offer in March 2017. As a result of the transfer of shares,
Hitachi Koki Co., Ltd. ceased to be a subsidiary of the Company.
In April 2017, the Company concluded an agreement with Accudyne Industries (hereinafter referred
to as “Accudyne”) regarding the Company’s acquisition of the Sullair business, which is operated by
Accudyne’s subsidiaries with certain related assets, and which manufactures and sells air compressors
under the “Sullair” brand. The business acquisition date has yet to be determined.
In April 2017, the Company concluded a basic agreement with HKE Holdings G.K. (hereinafterreferred to as “HKE”), all issued shares of which is held entirely by a related investment fund that isindirectly owned and operated by Kohlberg Kravis Roberts & Co. L.P. and with HVJ Holdings Inc.
(hereinafter referred to as “HVJ”), which is invested by funds that are managed, operated, and provided
with information and the like by Japan Industrial Partners, Inc. regarding (i) a tender offer (hereinafterreferred to as “the tender offer”) scheduled to be conducted by HKE for the common shares of Hitachi
Kokusai Electric Inc. (hereinafter referred to as “Hitachi Kokusai”) (hereinafter referred to as “the shareof Hitachi Kokusai”), and a share consolidation of the share of Hitachi Kokusai, and the acquisition oftreasury shares by Hitachi Kokusai, through which Hitachi Kokusai becomes a wholly-owned subsidiaryof HKE, (ii) an absorption-type company split of the thin-film process solutions business of Hitachi
Kokusai (hereinafter referred to as “the company split”), whereby HKE will be the company succeedingin absorption-type split, to be conducted by HKE and Hitachi Kokusai after Hitachi Kokusai becomes awholly-owned subsidiary of HKE, and (iii) the transfer by HKE of 20% of the share of Hitachi Kokusai
to the Company and 20% of the share of Hitachi Kokusai to HVJ that is scheduled to take place after thecompany split, and other transactions that are incidental or related to those transactions. The abovetransactions (i) through (iii) are to be completed until March 31, 2018.
(2) Changes in the year ended March 31, 2017
Effective from April 1, 2016, the Company changed the name of the “Others (Logistics and Other
services)” segment to the “Others” segment.

-31-

(3) Results of Operations
Year ended
March 31, 2016(billions of yen)

Year ended
March 31, 2017(billions of yen)

Year overyear change

Revenues

10,034.3

9,162.2

91%

EBIT (Note)

531.0

475.1

89%

Income from continuing operations,
517.0
469.0
91%
before income taxes
Net income attributable to Hitachi, Ltd.
172.1
231.2
134%
stockholders(Note) EBIT represents earnings before interest and taxes, which is presented as income from continuing
operations, before income taxes less interest income plus interest charges.
1) Analysis of Statement of Operations
Revenues decreased 9% to ¥9,162.2 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, 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 the ratio of cost of sales to revenues was 74%, which was the same level as the year ended March
31, 2016. Gross profit decreased 8% to ¥2,379.5 billion, as compared with the year 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 and administrative
expenses to revenues was 20%, as compared with 19% for the year ended March 31, 2016.
Other income increased ¥43.2 billion to ¥100.7 billion and other expenses increased ¥4.6 billion to¥146.5 billion, as compared with the year ended March 31, 2016, respectively. The details are as
follows.
Net gain on sales and disposal of fixed assets improved by ¥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 and other 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 the shares 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 the year 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, respectively.

-32-

Share of loss of investments accounted for using the equity method was ¥47.1 billion, adeterioration of ¥47.3 billion as compared with the year ended March 31, 2016, mainly reflecting theposting of an impairment loss in connection with the uranium enrichment business at an U.S. equitymethod 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.
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, respectively.
Income from continuing operations, before income taxes decreased ¥47.9 billion to ¥469.0 billion,
as compared with the 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 thepartial transfer of shares of Hitachi Transport System, Ltd. and Hitachi Capital Corporation.
Loss from discontinued operations decreased ¥51.1 billion to ¥5.9 billion, as compared with theyear 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 with the 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.
2) Operations by Segment
The following is an overview of results of operations by segment. Revenues for each segment
include intersegment transactions. Segment profit is measured by EBIT.
(Information & Telecommunication Systems)
Revenues decreased 6% to ¥1,982.8 billion, as compared with the year ended March 31, 2016, due
mainly to the negative 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 ofbusiness structural reform centered on the telecommunications & network business, improvement in
profitability of the social infrastructure-related information systems, among other positives.
(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 currency translation, and in the power and energy business because of the absence ofa large project posted for the year ended March 31, 2016, despite substantial revenue growth in therailway systems business due to the acquisition of the businesses of AnsaldoBreda S.p.A (excluding apart of its operations), the acquisition of Ansaldo STS S.p.A. (both of which are in Italy), and anincrease 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 to the posting of an impairment loss regarding the uranium enrichment business of anequity-method associate in the U.S. and lower earnings in the elevators and escalators business becauseof the negative impact of foreign currency translation.

-33-

(Electronic Systems & Equipment)
Revenues increased 4% to ¥1,170.3 billion, as compared with the year ended March 31, 2016, due
mainly to increased revenues at Hitachi Koki Co., Ltd. because of the acquisition of Germany-based
metabo Aktiengesellschaft, despite a decrease in revenues at Hitachi Kokusai Electric Inc. mainly
owing to lower sales of telecommunication equipment 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 ofsemiconductor production equipment and higher earnings at Hitachi Koki Co., Ltd. because of theincreased revenues, despite a decrease in earnings at Hitachi Kokusai Electric Inc. mainly because of adecline in revenues and the posting of business structural reform expenses.
(Construction Machinery)
Revenues decreased 1% to ¥753.9 billion, as compared with the year ended March 31, 2016, due
mainly to the negative impact of foreign currency translation caused by appreciation of the yen, despite
the recovery of demand for hydraulic 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 and others related to the sale ofshares of UniCarriers Holdings Corporation recorded for the year ended March 31, 2016, despite theeffect 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 compared with the year ended March 31, 2016, due
mainly to a fall in revenues at Hitachi Metals, Ltd. due to the negative impact of foreign currencytranslation causing a fall in sales from overseas subsidiaries and a decline in demand associated with theslower 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 of gains on business reorganizationand others related to the sales of equity interest in Hitachi Tool Engineering, Ltd. by Hitachi Metals,
Ltd. in the year ended March 31, 2016.
(Automotive Systems)
Revenues decreased 1% to ¥992.2 billion, as compared with the year ended March 31, 2016, due
mainly to negative impact of foreign currency translation, despite sales growth particularly in North
America and China, where demand for automobiles 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 inrevenues.
(Smart Life & Ecofriendly Systems)
Revenues decreased 18% to ¥557.3 billion, as compared with the year ended March 31, 2016, due
mainly to the effect 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 reorganization of the airconditioning systems business and the absence of a gain on business reorganization and others inassociation with the reorganization of the air-conditioning systems business recorded in the year ended
March 31, 2016.

-34-

(Others)
Revenues decreased 48% to ¥653.7 billion, and segment profit decreased ¥19.9 billion to ¥20.6
billion, as compared with the year ended March 31, 2016, respectively. This was due mainly to theconversion 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 no company which belongs to the Financial Services segment. Accordingly, only the results forthe period in which said company was a consolidated subsidiary are recorded. 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.
3) Revenues by Geographic Area
The following is an overview of revenues attributed to geographic areas based on customer location.
Japan
Revenues in Japan decreased 9% to ¥4,757.6 billion, as compared with the year ended March 31,
2016. This was due to lower revenues across all segments, particularly in the Others segment, reflecting
the conversion of Hitachi Transport System, Ltd. to an equity-method associate and in the Financial
Services segment in which Hitachi Capital Corporation was converted to an equity-method associate.
Overseas(Asia)
Revenues in Asia decreased 12% to ¥1,860.7 billion, as compared with the year ended March
31, 2016. This was due mainly to lower revenues in the Social Infrastructure & Industrial Systems
segment, reflecting reduced revenues in the 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 the reorganization of the airconditioning systems business, despite higher revenues in the Electronic Systems & Equipment andthe Construction Machinery segments.
(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.
(Europe)
Revenues in Europe increased 2% to ¥972.6 billion, as compared with the year ended March 31,
2016. This was due 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 theacquisition of metabo Aktiengesellschaft, despite lower revenues in the Others and the Financial
Services segments, etc.

-35-

(Other Areas)
Revenues in other areas decreased 7% to ¥427.1 billion, as compared with the year ended March
31, 2016. This was due 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 High-Technologies Corporation.
As a result of the foregoing, overseas revenues decreased 8% to ¥4,404.5 billion, as comparedwith the year ended March 31, 2016, and the ratio to total revenues was 48%, which was the samelevel as the year ended March 31, 2016.
(4) Summary of Financial Condition, etc.
1) Liquidity and Capital Resources
Our management considers maintaining an appropriate level of liquidity and securing adequate
funds for current and future business operations to be important financial objectives. Through efficientmanagement of working capital and selective investment in new plants and equipment, we are working to
optimize the efficiency of capital utilization throughout our business operations. We endeavor to improve
our group cash management by centralizing such management among us and our overseas financial
subsidiaries. Our internal sources of funds include cash flows generated by operating activities and cashon hand. Our management also considers short-term investments to be an immediately available sourceof funds. In addition, we raise funds both in the capital markets and from Japanese and internationalcommercial banks in response to our capital requirements. Our management’s policy is to finance capital
expenditures primarily by internally generated funds and to a lesser extent by funds raised through theissuance of debt and equity securities in domestic and foreign capital markets. In order to flexibly accessfunding, we maintain our shelf registration with the maximum outstanding balance of ¥300.0 billion.
We maintain commitment line agreements with a number of domestic banks under which we may
borrow in order to ensure efficient access to necessary funds. These commitment line agreements
generally provide for a one-year term, renewable upon mutual agreement between us and each of thelending banks, as well as another commitment line agreement with a contract term of three years endingon July 29, 2019. As of March 31, 2017, our unused commitment lines totaled ¥599.0 billion, includingthese of ¥400.0 billion which the Company maintained.
We receive debt ratings from Moody’s Japan K.K. (Moody’s), Standard & Poor’s Rating Japan(S&P), as well as Rating and Investment Information, Inc. (R&I). Our debt ratings as of March 31, 2017
were as follows.
Rating Company
Moody’s
S&P
R&I

Long-term
A3
AA+

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

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

-36-2) Cash Flows(Cash Flows from Operating Activities)
Net income in the year ended March 31, 2017 increased by ¥43.2 billion, as compared with theyear 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 compared with the year
ended March 31, 2016.
(Cash Flows from Investing Activities)
Net amount of investments related to property, plant and equipment* was ¥462.6 billion, adecrease of ¥189.7 billion as compared with the year ended March 31, 2016. Proceeds from sales ofinvestments in securities and other financial 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 of Hitachi Transport System, Ltd. andHitachi Capital Corporation, and the sale of all shares of Hitachi Koki Co., Ltd. Purchase of investments
in securities and other financial assets (including investments in subsidiaries and investments accounted
for using the equity method) was ¥177.3 billion, a decrease of ¥19.3 billion compared with the year
ended March 31, 2016, in which the acquisition of the businesses of AnsaldoBreda S.p.A (excluding apart of its operations), the acquisition of Ansaldo STS S.p.A., and the acquisition of Pentaho
Corporation were conducted. As a result of the foregoing, net cash used in investing activities was¥337.9 billion in the year ended March 31, 2017, a decrease of ¥392.8 billion compared with the year
ended March 31, 2016.
* The sum of the purchase of property, plant and equipment, the purchase of intangible assets andthe purchase of leased assets, less the proceeds from sale of property, plant, equipment andintangible assets, the proceeds from sale of leased assets and the collection of lease receivables(Cash Flows from Financing Activities)
The net cash outflow from a change in short-term debt increased by ¥164.0 billion compared withthe year ended March 31, 2016. Proceeds related to long-term debt** were ¥115.5 billion, a decrease of¥65.1 billion compared with the year ended March 31, 2016. As a result of the foregoing, net cash usedin 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.
** 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.
3) Assets, Liabilities and Equity
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 equity-method 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 the amount as of March 31, 2016.

-37-

As of March 31, 2017, total interest-bearing debt, the sum 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 portionof long-term debt amounted to ¥190.2 billion, a decrease 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 from banks 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’ equity amounted to ¥2,967.0 billion, an
increase of ¥232.0 billion from March 31, 2016. This is due mainly to the posting of net income
attributable to Hitachi, Ltd. stockholders, despite the impact of converting Hitachi Capital Corporation
into an equity-method associate. As a result, the ratio of total Hitachi, Ltd. stockholders’ equity to total
assets as of March 31, 2017 was 30.7%, compared with 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, a decrease of ¥28.5 billion from March 31,
2016. The ratio of interest-bearing debt to total equity was 0.29, compared with 0.87 as of March 31,
2016.
(5) Important Accounting Policies and Estimates
The preparation of the consolidated financial statements in conformity with IFRS requires ourmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Management considers that certain
accounting estimates to be critical, and that their significance to the financial statements and thepossibility that future events affecting the estimate may differ significantly from management’s current
assumptions could have a material impact on the presentation of our financial condition, changes infinancial condition or results of operations. First, the estimates require us to make assumptions about
matters that are highly uncertain at the time the accounting estimates are made. Second, there could be
different estimates that we reasonably could have used for the accounting estimate in the current period,or changes in the accounting estimate that are reasonably likely to occur as time proceeds. Details ofimportant accounting policies and estimates are described in “Consolidated Financial Statements －Notes to Consolidated Financial Statements －(3) Summary of Significant Accounting Policies.”(6) Forward-Looking Statements
Certain statements found in “3. Management Policy, Economic Environment and Challenges
Facing Hitachi Group,” “4. Risks Factors” and “7. Analyses of Consolidated Financial Condition,
Operating Results and Cash Flows” and other descriptions in this report may constitute “forwardlooking 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 eventsand 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 and trends may identify “forwardlooking statements.” Such statements are based on currently available information and are subject tovarious risks and uncertainties that could cause actual results to differ materially from those projected or
implied in the “forward-looking statements” and from historical trends. Certain “forward-looking
statements” are based upon current assumptions of future events which may not prove to be accurate.
Undue reliance should not be placed on “forward-looking statements,” as such statements speak only asof the date of this report.

-38-

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

-39-III. Property, Plants and Equipment
1. Summary of Capital Investment, etc.
The Hitachi Group (the Company and consolidated subsidiaries) selectively invests in R&D andproduct fields expected to grow over the long term, and it also invests to streamline manufacturing process,etc. and to improve the reliability of its products.
Capital investment (based on the amount recorded as tangible fixed assets and the investment
property) in the fiscal year ended March 31, 2017 was ¥377.5 billion. A breakdown of capital investment
by segment is as follows. Effective from April 1, 2016, the Company changed the name of the "Others(Logistics and other services)" segment to the "Others" segment.

Segment

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

Information &Telecommunication
Systems

31.6

64

Social Infrastructure &Industrial Systems

63.1

103

Electronic Systems &Equipment

23.4

117

Construction Machinery

14.0

59

High Functional Materials& Components

99.9

116

Automotive Systems

50.4

70

Smart Life & Ecofriendly
Systems

5.7

34

Others

17.9

32

Financial Services

67.5

51

Main purpose of investment
Data center equipment, streamline
development and production of other products
Facility for nuclear power generation system,
streamline development and production ofother products, antiseismic reinforcement
Increase production of semiconductor
processing equipment, streamline development
and production of products
Streamline production of construction
machinery
Increase and streamline production of highgrade metal products, magnetic materials, high-grade functional components and wires andcables, etc.
Increase production of automotive equipment,
etc.
Streamline development and production of
products
Transportation facilities, system development
facilities
Assets for leasing business (computers andother information-related equipment, industrial
machinery and machine tools, vehicles andmedical equipment related to leaseagreements)-

Subtotal
373.9
72
Corporate Items &3.5
42
Eliminations
Total
377.5
71
(Notes) 1. The figures in the above table include the amount of the tangible fixed assets leased under finance leasetransactions and the investment property, each of which is recorded as property, plant and equipment
and other non-current assets, respectively.
2. These investments were mostly financed with the Hitachi Group’s own capital.

-40-

2. Major Property, Plants and Equipment
The Hitachi Group (the Company and consolidated subsidiaries) engages in diverse business
operations in Japan and overseas. It discloses information on major property, plants and equipment
represented in breakdown by segment and major facilities of the Company and consolidated subsidiaries.
The situation at the end of the fiscal year ended March 31, 2017 is as follows.
(1) Breakdown by Segment(As of March 31, 2017)
Book value (Millions of yen)Segment

Information &Telecommunication
Systems

Land[Area inthousandsof m2]
28,648[1,584]Social Infrastructure &91,610Industrial Systems[12,489]

Electronic Systems &29,663Equipment[1,042]

Construction Machinery
High Functional
Materials &Components
Automotive Systems

55,849[10,684]
81,362[17,011]
51,191[5,909]Smart Life &8,487

Ecofriendly Systems[2,257]

OthersSubtotal
Corporate Items &Eliminations
Total

36,346[2,246]383,156[53,222](22,826)[969]
360,330[54,191]

Buildings
andstructures

Machineryand vehicles

Tools,
furnitureandfixturesOther

71,52022,79849,593

20,616

1,510

194,685

74,919133,078

48,49023,277

8,640

77,033382,128

74,61654,002

15,844

13,285

2,904

3,085

118,783

19,409104,700

62,3008,466

57,126

3,702

292,143

23,848140,528

223,272

26,675

1,750

41,716515,30348,52874,194

139,658

20,854

1,273

23,561

310,731

33,97914,286

14,576

8,924

133

1,224

47,63011,70564,231

6,179

16,241

1,036

762

124,795

14,267

656,539

533,117

167,315

93,478

152,593 1,986,198

301,271

30,703

405

4,358

(450)

687,242

533,522

171,673

93,028Constructionin progress

23

Total

Number of
employees

12,213

2,616

152,616 1,998,411

303,887(Notes) 1. The “Book value - Other” column includes the amount of finance lease assets, etc.
2. The figures in the above table include ¥64,992 million of operating lease assets for leasing business.
3. The figures in the above table include ¥22,752 million of finance lease assets leased externally.
4. Except for the figures in the above table, there are operating lease assets leased, mainly machinery, etc.
The annual lease fee for such assets was ¥121,135 million.

-41-

(2) The Company(As of March 31, 2017)
Facility(Main location)

Segment

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

Financial
Institutions
Business Unit,
SystemGovernment &development
Public Corporation Information & facilities,
Business Unit and Telecommuni- manufacturing
Information &cationfacilities forCommunication Systems
servers,
Technology
mainframes,
Business Division
etc.
(Kawasaki,
Kanagawa)
Research &Development
Group
Others
R&D facilities(Kokubunji,
Tokyo)
Railway Systems Social
Manufacturing
Business Unit
Infrastructure facilities for(Kudamatsu,& Industrial railway
Yamaguchi)
Systems
vehicles, etc.
Corporate Hospital
MedicalGroup
Corporatefacilities(Hitachi, Ibaraki)
Nuclear Energy
Manufacturing
Business Unit,facilities forSocialPower Business
Infrastructure power
Unit, and Energy& Industrial generating
Solutions Businessequipment,
Systems
Unit
etc.
(Hitachi, Ibaraki)
Manufacturing
Healthcare
Electronic
facilities for
Business Unit
Systems &medical(Taito-ku, Tokyo) Equipment
equipments
Head Office(Chiyoda-ku,
Tokyo)
Area Operations(Osaka, Osaka)
IT Services
Division(Chiyoda-ku,
Tokyo)

15,148[551]

48,8181,963

22,2291,569

369

90,09814,513

6,017
[776]

13,977

3,817

3,249

-

317

27,379

2,665

846
[666]

14,134

5,100

1,334

9

410

21,834

2,140

63
[53]

15,276

11

1,611

407

22

17,393

1,444

9,761
[3,332]

3,256

699

792

720

67

15,298

1,640

6,614
[93]

5,020

523

1,620

669

710

15,1592,935

Corporate

Other facilities

5,230
[866]

6,781

379

2,358

-

-

14,7501,025

Corporate

Other facilities

8,288
[50]

5,875

13

387

3

-

14,568

1,314

OthersSystemdevelopment
facilities

[-]

1,609

0

10,492-367

12,469

416

635
[206]

5,678

1,448

404

270

0

8,438

1,885

Manufacturing
facilities forindustiralmachinery andplants,Services &SocialInfrastructure switchboards
Platforms
Business Unit
& Industrial and calculation(Hitachi, Ibaraki) Systems
controlequipment,
systemdevelopment
facilities-42-

(3) Domestic subsidiaries(As of March 31, 2017)
Facility(Main location)

Segment

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

9,495[2,538]28,33044,219

6,398

0

5,625

94,067

8,682

Manufacturing
facilities forhigh grade
steel

8,542
[1,104]

7,852

24,037

2,280

-

5,998

48,709

1,516

Manufacturing
facilities forconstruction
machinery

12,330[495]

15,585

3,959

118

-

4

31,998282

Manufacturing
facilities forconstruction
machinery

5,840[5,068]

11,534

11,753

1,422

-

319

30,8693,057

Electronic
Systems &Equipment

Manufacturing
facilities forsemiconductor
processing
equipment andtest andmeasurement
equipment,
etc.

82
[115]

15,879

2,548

4,706

-

806

24,023

2,314

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

Manufacturing
facilities forcircuit board
materials, etc.

4,539
[683]

7,753

10,216

680

29

743

23,960

1,701

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

7,711
[108]

10,150

519

1,164

-

476

20,020

1,788

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

High
Functional
Materials &Components

Manufacturing
facilities forsemiconductormaterials, etc.

891
[454]

9,312

7,564

541

42

797

19,147

939

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

High
Functional
Materials &Components

Manufacturing
facilities forwires andcables andlubberproduct, etc.

4,739
[1,163]

8,671

2,185

665

162

1,438

17,860

1,374

HitachiConstruction
Machinery Co.,
Construction
Ltd., Hitachinaka
Machinery
Works(Hitachinaka,Ibaraki)

Manufacturing
facilities forconstruction
machinery

1,998
[214]

7,550

6,511

60

-

-

16,120251

Hitachi HighTechnologies
Corporation,
Naka Area(Hitachinaka,Ibaraki)-43-

(4) Overseas subsidiaries(As of March 31, 2017)
Subsidiary(Main location)

Segment

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

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

55,278[4,430]

285

1

1,035

-

70,573 127,172

776[5,710]17,98937,509

3,782

-

2,812

62,868

4,273

3,185
[488]

9,014

25,473

2,577

-

3,603

43,852

3,115

[-]

-

18,864

13,973

2,845-

35,682

6,019

382[1,242]7,201

16,075

4,877

1

6,373

34,9093,650

256(Note) The figures for Horizon Nuclear Power Limited and Hitachi Data Systems Corporation are presented inconsolidated basis of each company.

-44-

3.Plans for Capital Investment, Disposals of Property, Plants and Equipment, etc.
The Hitachi Group (the Company and consolidated subsidiaries) engages in diverse operations inJapan and overseas, and has not decided on specific plans to newly install or expand each of facilities as ofthe end of the fiscal year. For this reason, it discloses amounts of capital investment by segment.
The amount of capital investment for the fiscal year ending March 31, 2018 will be ¥350.0 billion(new installation and expansions, based on the amount recorded as tangible fixed assets and the investment
property), and a breakdown by segment is as follows.
Segment
Information &Telecommunication Systems

Amount(Billions of yen)

Main purpose of investment

35.0

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

Social Infrastructure &Industrial Systems

80.0

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

Electronic Systems &Equipment

20.0

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

Construction Machinery

15.0

Streamline production of construction machinery,
antiseismic reinforcement

High Functional Materials& Components

120.0

Increase and streamline production of specialty steel
products and functional components and equipment,
increase production of magnetic materials, streamline
production of wires, cables, and related products, R&D
facilities

Automotive Systems

60.0

Increase production of automotive equipment, etc.

Smart Life & Ecofriendly
Systems

10.0

Streamline development and production of products,
delivery center

Others10.0

System development facilities

Subtotal

350.0

-

0.0

-

350.0

-

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

-45-

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

Total number of shares authorized to
be issued (shares)

Common stock

10,000,000,000

Total

10,000,000,0002) Issued shares
Class

Number of sharesissued as of the endof fiscal year (shares)(March 31, 2017)

Number of sharesissued as of thefiling date (shares)(June 21, 2017)

Commonstock

4,833,463,387

4,833,463,387

Total

4,833,463,387

4,833,463,387

Stock exchange on which
the Company is listed

Tokyo, Nagoya

Description
The number of shares
per one unit of sharesis 1,000 shares.

--(Note) The "Number of shares issued as of the filing date" does not include shares issued upon exercise of stock acquisition rightsfrom June 1, 2017 to the filing date.

(2) Information on the stock acquisition rights, etc.
The stock acquisition rights which the Company issued are as follows.
As of the end of fiscal year
(March 31, 2017)

Name
Number of stock acquisitionrightsNumber of stock acquisitionrights held by the Company
Class of shares to be issued
upon exercise of stockacquisition rights
Number of shares to be issued
upon exercise of stockacquisition rights
Amount to be paid in upon
exercise of stock acquisitionrightsThe First
Exerciseperiod of stock
StockacquisitionrightsAcquisition
Issue
price
for
shares issued
Rights ofupon
exerciseofstock
Hitachi,acquisition rights and amountLtd.
of capitalization
Conditions for the exercise ofstock acquisition rights
Matters regarding acquisitionof stock acquisition rights
through transfer
Matters regarding substitute
payment
Matters regarding grant ofstock acquisition rights uponorganizational restructuring

24,219As of the end of thelast month ended
before the filing date
(May 31, 2017)
21,898－－

Common stock

Common stock

2,421,900 shares (Note 1)

2,189,800 shares (Note 1)¥1 per share¥1 per share

From July 15, 2016
to July 14, 2046

From July 15, 2016
to July 14, 2046

Issue price: ¥269 (Note 2)
Amount of capitalization:(Note 3)Issue price: ¥269 (Note 2)
Amount of capitalization:(Note 3)(Note 4, 5)(Note 4, 5)

Acquisition of stockacquisition rights throughtransfer shall be subject tothe approval of the Board of
Directors.

Acquisition of stockacquisition rights throughtransfer shall be subject tothe approval of the Board of
Directors.

－－(Note 6)-46-

(Note 6)

As of the end of fiscal year
(March 31, 2017)

Name
Number of stock acquisitionrightsNumber of stock acquisitionrights held by the Company
Class of shares to be issued
upon exercise of stockacquisition rights
Number of shares to be issued
upon exercise of stockacquisition rights
Amount to be paid in upon
exercise of stock acquisitionrightsThe
Exercise period of stock
Secondacquisition rights
Stock
Acquisition Issue price for shares issued
Rights ofupon exercise of stock
Hitachi,acquisition rights and amountLtd.
of capitalization
Conditions for the exercise ofstock acquisition rights－

Matters regarding acquisitionof stock acquisition rights
through transfer
Matters regarding substitute
payment
Matters regarding grant ofstock acquisition rights uponorganizational restructuring

As of the end of thelast month ended
before the filing date
(May 31, 2017)
22,906－－－

Common stock－

2,290,600 shares (Note 1)－¥1 per share－

From April 27, 2017
to April 26, 2047－

Issue price: ¥368.6 (Note 2)
Amount of capitalization:(Note 3)－(Note 4, 5)－

Acquisition of stockacquisition rights throughtransfer shall be subject tothe approval of the Board of
Directors.

－

－

－

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

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

Any fraction less than one stock acquisition right will be rounded down.
c. In case the TSR/TOPIX Growth Rate Ratio is less than 80%
No Allotted Rights may be exercised.
-47-

6. In the event that the Company engages in a merger (only if the Company is to be dissolved as a result of the merger),an absorption-type company split or incorporation-type company split (in each case, only if the Company is to be a
split company), or share exchange or share transfer (in each case, only if the Company is to be a wholly-owned
subsidiary) (hereafter all of which are collectively referred to as “Corporate Reorganization”), then stock acquisitionrights for the entities specified under Article 236, Paragraph 1, Item 8 (a) through (e) of the Companies Act (suchentity hereinafter referred to as the “Reorganized Company”) shall be issued to the Stock Acquisition Right Holders
holding stock acquisition rights remaining in effect (the “Remaining Stock Acquisition Rights”) immediately prior to
the effective date of the Corporate Reorganization (hereinafter respectively referring to an effective date of absorptiontype merger in case of an absorption-type merger, a date of incorporation of a company incorporated through aconsolidation-type merger in case of a consolidation-type merger, an effective date of absorption-type company split
in case of an absorption-type company split, a date of incorporation of a company incorporated through anincorporation-type company split in case of an incorporation-type company split, an effective date of a share exchange
in case of a share exchange, or a date of incorporation of a wholly owning parent company incorporated through sharetransfer). However, these stock acquisition rights shall be granted only if provisions for issuing the stock acquisitionrights of the Reorganized Company in accordance with the following conditions are included in an absorption-typemerger agreement, a consolidation-type merger agreement, an absorption-type company split agreement, anincorporation-type company split plan, a share exchange agreement, or a share transfer plan.
(1) The number of stock acquisition rights of the Reorganized Company to be issued
The number of stock acquisition rights equal to the number of Remaining Stock Acquisition Rights held byrespective Stock Acquisition Right Holders shall be issued.
(2) The class of shares of the Reorganized Company to be issued upon exercise of stock acquisition rights
Common shares of the Reorganized Company shall be issued.
(3) The number of shares of the Reorganized Company to be issued upon exercise of stock acquisition rights
The number shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights, taking into account the conditions and other factors concerning Corporate Reorganization.
(4) Amount of assets to be contributed upon the exercise of stock acquisition rights
The amount of assets contributed upon the exercise of stock acquisition rights to be issued shall be amountderived by multiplying the amount to be paid in per share to be delivered upon exercise of stock acquisitionrights of the Reorganized Company (the “Post-reorganization Exercise Price”) prescribed below by the numberof shares of the Reorganized Company to be issued determined in accordance with paragraph (3) of this section.
The Post-Reorganization exercise price shall be one yen.
(5) Exercise period of stock acquisition rights
The exercise period of stock acquisition rights shall be from the later of the first day of the exercise period ofstock acquisition rights or the effective date of the Corporate Reorganization to the expiration date of theexercise period of stock acquisition rights.
(6) Matters concerning common stock and capital reserve to be increased due to the issuance of shares upon theexercise of stock acquisition rights
The matters shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights.
(7) Restrictions on acquisition of stock acquisition rights through transfer
The acquisition of stock acquisition rights through transfer shall be subject to the approval of the ReorganizedCompany.
(8) Conditions for the exercise of stock acquisition rights
The matters shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights.
(9) Matters concerning the acquisition of stock acquisition rights
The matters shall be determined in accordance with terms and conditions of Remaining Stock Acquisition
Rights.

(3) Information on moving strike convertible bonds, etc.
Not applicable.
(4) Information on shareholder right plans
Not applicable.

-48-

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

Date

Change in Balance of Change in Balance ofBalance of thecommon common capital
capitaltotal number of
stock
stock
reserve
reserveissued shares(Millions (Millions (Millions (Millions(shares)of yen)of yen)of yen)of yen)From April 1, 2012
(Note) 195,678,070 4,833,463,387
31,015
458,790
31,015to March 31, 2013
From April 1, 2013
- 4,833,463,387
458,790
to March 31, 2014
From April 1, 2014
- 4,833,463,387
458,790
to March 31, 2015
From April 1, 2015
- 4,833,463,387
458,790
to March 31, 2016
From April 1, 2016
- 4,833,463,387
458,790
to March 31, 2017
(Note) Changes due to conversion of convertible bonds with stock acquisition rights into stocks.

176,757
176,757
176,757
176,757
176,757(6) Shareholders composition(As of March 31, 2017)
Status of shares (one unit of stock: 1,000 shares)
Foreign corporations,
Financial
Class of Government
etc.
Individuals
Financial instruments
Othershareholders
andand others
institution
business
institution
Nonmunicipality
Individuals
operator
individuals

Total

Number ofsharesless than one
unit (shares)

Number ofshare-

2

237

72

46

1,393,987

144,176

0.00

28.97

3.00

2,873

917

141

305,293309,535-

89,947 2,042,197

471

1,140,875

4,811,699

21,764,387

0.01

23.71

100.00-holders
Shareownership(units)Ownership
percentageof shares

1.87

42.44

(%)

(Notes) 1. Of 5,460,572 shares of treasury stock, 5,460 units are included in the “Individuals and others” column,
while 572 shares are included in the “Number of shares less than one unit” column.
2. Of the shares registered in the name of Japan Securities Depository Center, Incorporated (account for
managing stocks whose shareholders have not transferred titles), 26 units are included in the “Other
institution” column and 827 shares are included in the “Number of shares less than one unit” column.

-49-

(7) Major shareholders(As of March 31, 2017)
Name

Address

The Master Trust Bank ofJapan, Ltd. (Trust Account)
Japan Trustee Services Bank,
Ltd. (Trust Account)Hitachi Employees’
Shareholding Association
Nippon Life Insurance
Company
Japan Trustee Services Bank,
Ltd. (Trust Account 5)
Japan Trustee Services Bank,
Ltd. (Trust Account 9)
State Street Bank and Trust
Company 505225(Standing proxy: Mizuho Bank,
Ltd.)
State Street Bank West ClientTreaty 505234(Standing proxy: Mizuho Bank,Ltd.)
The Dai-ichi Life Insurance
Company, Limited
Japan Trustee Services Bank,
Ltd. (Trust Account 7)

11-3, Hamamatsucho 2-chome,
Minato-ku, Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
6-6, Marunouchi 1-chome, Chiyodaku, Tokyo
6-6, Marunouchi 1-chome, Chiyodaku, Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo
P.O. Box 351
Boston, Massachusetts 02101 U.S.A.
(15-1, Konan 2-chome, Minato-ku,
Tokyo)
1776 Heritage Drive, North Quincy,
MA 02171, U.S.A.
(15-1, Konan 2-chome, Minato-ku,
Tokyo)
13-1, Yurakucho 1-chome, Chiyodaku, Tokyo
8-11, Harumi 1-chome, Chuo-ku,
Tokyo

Total

-

Share
Ownership(shares)

Ownership
percentage to thetotal number ofissued shares (%)

284,898,000

5.89

252,038,415

5.21

105,779,384

2.19

93,264,995

1.93

88,220,000

1.83

84,599,000

1.75

75,789,192

1.57

75,205,327

1.56

71,361,222

1.48

67,992,000

1.41

1,199,147,535

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

Mitsubishi UFJ Trust and Banking Corporation and threeother persons
May 23, 2011
237,294,613 shares
5.24%

-50-

Holders
BlackRock Japan Co. Ltd and nine other persons
Date on which the duty to file report March 31, 2014
Number of shares
255,857,172 shares
Ownership percentage to the total
5.29%
number of issued shares(Note) The amendment to the report shown in the table above was filed by BlackRock Japan Co. Ltd. andseven other persons, and is available for public inspection. The amendment states that the number ofshares and the ownership percentage to total number of issued shares increased to 307,755,969
shares and 6.31% respectively. The date on which the duty to file the amendment is April 14, 2017.
Holders
Date on which the duty to file report
Number of shares
Ownership percentage to the total
number of issued shares

Sumitomo Mitsui Trust Bank, Limited and two otherpersons
July 31, 2014
244,372,374 shares
5.06%

-51-

(8) Information on voting rights
1) Issued sharesClassification(As of March 31, 2017)
Number of voting
Description
rightsNumber of shares (shares)

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

-

-

-

-

-

-

-

-

-

-

-

Common stock

5,626,000

Shares with full voting right (others)

Common stock

4,806,073,000

Shares less than one unit

Common stock

21,764,387--

Number of issued shares

4,833,463,387--

Total number of voting rights-

4,806,073

4,806,073--(Note) The “Shares with full voting right (others)” column includes 26,000 shares registered in the name of Japan
Securities Depository Center, Incorporated (account for managing stocks whose shareholders have nottransferred titles) and 26 voting rights for those shares.
2) Treasury stock, etc.
(As of March 31, 2017)

Name ofshareholder

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

Address

Number of
Ownership
shares held
percentage to
Number ofunder the Total shares
the total
shares held
under own name names of held (shares) number ofothersissued shares(shares)(shares)(%)

6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo
1-12, Minato 1-chome,
Chuo-ku, Tokyo
1-11, Oroshishinmachi 3chome, Higashi-ku, Niigatashi, Niigata
5-3, Takinogawa 5-chome,
Kita-ku, Tokyo
3268, Nagaoka,
Ibarakimachi,
Higashiibaraki-gun, Ibaraki
4-1, Koishikawa 5-chome,
Bunkyo-ku, Tokyo--52-

5,460,000-

5,460,000

0.11

10,000-10,000

0.00

1,000

-

1,000

0.00

88,000-88,0000.00

52,000-52,0000.00

15,000-15,0000.00

5,626,000-

5,626,000

0.12

(9) Details of stock option plans
Stock option plans in accordance with the Article 409 of the Companies Act
Date of resolution

June 29, 2016

Category and number of person to whom
stock acquisition rights will be granted
Class of shares to be issued upon exerciseof stock acquisition rights
Number of shares to be issued upon
exercise of stock acquisition rights
Amount to be paid in upon exercise ofstock acquisition rights

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

Exercise period of stock acquisition rights
Conditions for the exercise of stockacquisition rights
Matters regarding acquisition of stockacquisition rights through transfer

Common stock
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."

Matters regarding substitute payment－

Matters regarding grant of stockacquisition rights upon organizational
restructuring

See "(2) Information on the stock acquisition rights, etc."

Date of resolution

April 6, 2017

Category and number of person to whom
stock acquisition rights will be granted
Class of shares to be issued upon exerciseof stock acquisition rights
Number of shares to be issued upon
exercise of stock acquisition rights
Amount to be paid in upon exercise ofstock acquisition rights

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

Exercise period of stock acquisition rights
Conditions for the exercise of stockacquisition rights
Matters regarding acquisition of stockacquisition rights through transfer

Common stock
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."
See "(2) Information on the stock acquisition rights, etc."

Matters regarding substitute payment
Matters regarding grant of stockacquisition rights upon organizational
restructuring－
See "(2) Information on the stock acquisition rights, etc."-53-

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

Number of shares (shares)

Treasury stock acquired during the
fiscal year ended March 31, 2017

Total amount (yen)271,523

152,647,189

Treasury stock acquired during the33,07020,490,769
current period (Note)(Note) The number of treasury stock acquired due to requests to purchase stock less than one unit shares from June
1, 2017 to filing date is not included.
(4) Status of the disposition and holding of acquired treasury stock
Fiscal year ended March 31, 2017Classification
Acquired treasury stock which wasoffered to subscribers
Acquired treasury stock which wascanceled
Acquired treasury stock which wastransferred due to merger, shareexchange or company split
Others (Acquired treasury stock
which was transferred upon exerciseof stock acquisition rights, andwhich was sold due to requests fromshareholders holding shares less than
one unit shares to sell additional
shares)Total number of treasury stock held

Current period (Note)

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

-

-

-

-

-

-

-

-

-

-

-

58,88042,567,954

65,10046,695,906

5,460,572-

5,428,542-(Note) The follwings are not included: the number of treasury stock which was transferred upon exercise of stock
aquisition rights from June 1, 2017 to the filing date; the number of treasury stock which was sold due torequests from shareholders holding less than one unit shares to sell additional shares from June 1, 2017 to
the filing date; and the number of treasury stock acquired due to purchase requests from shareholders
holding shares less than one unit shares from June 1, 2017 to the filing date.

-54-

3. Dividend Policy
The Company views enhancement of the long-term and overall interests of shareholders as animportant management objective.
The industrial sector encompassing energy, information systems, social infrastructure and otherprimary businesses of the Company is undergoing rapid technological innovation and changes in market
structure. This makes vigorous upfront investment in R&D and plant and equipment essential for securingand maintaining market competitiveness and improving profitability. Dividends are therefore decided
based on medium-to-long term business plans with an eye to ensuring the availability of internal funds forreinvestment and the stable growth of dividends, with appropriate consideration of a range of factors,
including the Company’s financial condition, results of operations and dividend payout ratio.
The Company provides in its Articles of Incorporation that distribution of surplus will be made toshareholders of record as of March 31 and September 30 of each year and that the company may makefurther distribution of surplus to shareholders of record as of another record date for the purpose of
distributing surplus. The Company also provides in its Articles of Incorporation that the Company may
make distribution of surplus by resolution of its Board of Directors, without resolution at the General
Meeting of Shareholders.
The Company believes that the repurchase of its shares should be undertaken, when necessary, as partof its policy on distribution to shareholders to complement the dividend payout. In addition, the Company
will repurchase its own shares in order to flexibly implement a capital strategy, including businessrestructuring, to maximize shareholder value so far as consistent with the dividend policy. Such action will
be taken by the Company after considering its future capital requirement under its business plans, market
conditions and other relevant factors.
Based on the above policy, annual dividends of ¥13.0 per share were paid for the fiscal year ended
March 31, 2017. At the Board of Directors meeting held on October 28, 2016, it was resolved to pay
interim dividends of ¥6.0 per share, resulting in the total amount of interim dividends of ¥28,968 million.
In addition, at the Board of Directors meeting held on May 12, 2017, it was resolved to pay year-end
dividends of ¥7.0 per share, resulting in the total amount of year-end dividends of ¥33,796 million.
4. Changes in Share Prices(1) Highest and lowest share prices in each of the recent five fiscal years
Fiscal year

144th
145th
146th
147th
148th
business term business term business term business term business term

Year end

March 2013

March 2014

March 2015

March 2016

March 2017

Highest (yen)

578

877

939.9

858.0

679.5

Lowest (yen)

401

508

660

431.0

400.0

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

October
2016

November
2016

December
2016

January2017

February
2017

March
2017

Highest (yen)

562.9

627.4

662.0

677.7

679.5

642.7

Lowest (yen)

461.5

502.8

611.4

633.5

613.0

602.5

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

-55-

5. Directors and Senior Management
Men: 45 persons, Women: 2 persons(Women’s percentage to total number of Directors and Senior Management: 4%)
The Company is a company with Nominating Committee, etc. pursuant to the Companies Act. (See“ 6. Corporate Governance, etc. - (1)Corporate governance - 1) Outline of corporate organizations.”)
Information on its Directors and Executive Officers is as follows.
(1) Directors
Position

Director

Director

Director

Director

Responsibility

NameDate ofbirth

Business experience, including experiencein Hitachi, and functions

10/1983 Joint Managing Director, Bharat Forge
LimitedJan. 7 6/1994 Managing Director, Bharat Forge Limited
Baba Kalyani
1949
8/1997 Chairman & Managing Director, Bharat
Forge Limited (Currently in office)6/2016 Director, Hitachi, Ltd.
10/1991 General Manager, Foil Products, Alcan
Inc.
1/1996 Managing Director, Aughinish Alumina
Ltd., Alcan Inc.
Member of
10/1998 President, Bauxite, Alumina and Speciality
Nov. 13,
Nominating
Cynthia Carroll
Chemicals, Alcan Inc.
1956
Committee
1/2002 President & CEO, Primary Metal Group,
Alcan Inc.
3/2007 CEO, Anglo American plc. (Retired in
April 2013)
6/2013 Director, Hitachi, Ltd.
6/2002 President and Representative Member ofthe Board, Toray Industries, Inc.
6/2010 Chairman of the Board and Representative
Member of the Board, Toray Industries,
Member ofInc.
Nominating
SadayukiMar. 22,6/2013 Director, Hitachi, Ltd.
Committee andSakakibara
1943
6/2014 Chairman of the Board, Toray Industries,
Compensation
Inc.
Committee
6/2015 Chief Senior Advisor and Chief SeniorCounselor, Toray Industries, Inc.
(Currently in office)2/1993 Chief Technology Officer, Motors, Drives
and Appliances, Emerson ElectricCompany
9/1994 President, US Electrical Motors, Emerson
Electric Company
7/1997 President, Mercury Marine Division andCorporate Vice President, Brunswick
Corporation
4/2000 President and Chief Operating Officer,
GeorgeFeb. 23,
Brunswick Corporation
Buckley1947
6/2000 Chairman and Chief Executive Officer,
Brunswick Corporation
12/2005 Chairman of the Board, President andChief Executive Officer, 3M Company
2/2012 Executive Chairman of the Board, 3M
Company (Retired in May 2012)
6/2012 Chairman, Arle Capital Partners Limited(Retired in December 2015)
Director, Hitachi, Ltd.

-56-

Share
Term ofownership
office(shares)(Note 1)1,000

(Note 1)3,000

(Note 1)

36,000(Note 1)

19,000Position

Director

Director

Director

Responsibility

NameDate ofbirth

Business experience, including experiencein Hitachi, and functions

Share
Term ofownership
office(shares)

8/1997 Admitted as a Solicitor (UK)
7/2001 Senior Legal Counsel, Nokia Networks,
Nokia Corporation
9/2007 Vice President, Acting Chief Legal Officer
and Head of IP Legal, Nokia Corporation
7/2008 Senior Vice President and Chief Legal
Officer, Nokia Corporation
6/2009 Admitted to New York State Bar
Association
Apr. 11,2/2011 Executive Vice President and Chief Legal (Note 1)
Louise Pentland
1972
Officer, Nokia Corporation (Retired inMay, 2014)
4/2015 General Counsel, PayPal, eBay Inc.
6/2015 Director, Hitachi, Ltd.
7/2015 Senior Vice President and Chief Legal
Officer, PayPal Holdings, Inc.
9/2016 Executive Vice President and Chief
Business Affairs & Legal Officer, PayPal
Holdings, Inc. (Currently in office)7/2002 Director-General for Commerce andDistribution Policy, Minister’s Secretariat,
Ministry of Economy, Trade and Industryof Japan (“METI”)
7/2003 Director-General, Small and Medium
Enterprise Agency, METI
Member of
7/2006 Director-General, Agency for Natural
Audit
Resources and Energy, METI
Committee,
7/2008 Vice-Minister of Economy, Trade andNominating
Harufumi
Jul. 26,
Industry of Japan
Committee(Note 1)
Mochizuki
1949
8/2010 Special Advisor to the Cabinet of Japan(Chair) and(Retired in September 2011)
Compensation
10/2010 Senior Adviser to the Board, Nippon Life
Committee
Insurance Company (Retired in April(Chair)2013)
6/2012 Director, Hitachi, Ltd.
6/2013 President and Representative Director,
Tokyo Small and Medium Business
Investment & Consultation Co., Ltd.
(Currently in office)12/1995 Managing Director, Morgan Stanley Japan
Limited6/1999 Managing Director and Vice Chairman,
Tokyo Branch, Morgan Stanley Japan
Member of
Limited
Audit
Takatoshi
Oct. 20, 7/2005 Managing Director and Vice Chairman,
Committee and(Note 1)UBS Securities Japan Co., Ltd.
Yamamoto
1952
Compensation
6/2009 Managing Director, CASIO COMPUTER
CommitteeCO., LTD.
6/2011 Advisor, CASIO COMPUTER CO., LTD.
(Retired in June 2012)
6/2016 Director, Hitachi, Ltd.

-57-

2,000

9,000

25,000Position

Responsibility

Director

Name

Philip Yeo

Director

Audit
Committee(Chair)Hiroaki
Yoshihara

Director

Member of
Audit
Committee

Kazuyuki
TanakaChairmanof theBoard

Member of
Nominating
Committee

HiroakiNakanishi

Date ofbirth

Business experience, including experiencein Hitachi, and functions

Share
Term ofownership
office(shares)

6/1970 Joined Ministry of Defense of Singapore
9/1979 Permanent Secretary, Ministry of Defenseof Singapore
1/1986 Chairman, Economic Development Boardof Singapore
2/2001 Chairman, Agency for Science,
Technology and Research of Singapore
4/2007 Senior Advisor for Science andOct. 29,(Note 1)
Technology to the Ministry of Trade &1946
Industry, Singapore (Retired in September2008) Special Advisor in Economic
Development, Prime Minister’s Office,
Government of Singapore (Retired inAugust 2011)
Chairman, SPRING Singapore (Currently
in office)6/2012 Director, Hitachi, Ltd.
11/1978 Joined Peat Marwick Mitchell & Co.
7/1996 National Managing Partner, the Pacific
Rim Practice, KPMG LLP
Feb. 9, 10/1997 The Board Member, KPMG LLP(Note 1)1957 10/2003 Vice Chairman and Global Managing
Partner, KPMG International (Retired in
April 2007)
6/2014 Director, Hitachi, Ltd.
4/1977 Joined Hitachi Chemical Company, Ltd.
4/2005 Executive Officer, Hitachi Chemical
Company, Ltd.
4/2006 Senior Executive Director, Hitachi MediaElectronics Co., Ltd.
6/2006 Representative Director and President,
Hitachi Media Electronics Co., Ltd.
4/2008 Vice President and Executive Officer,
Hitachi Chemical Company, Ltd.
Apr. 29,(Note 1)4/2009 Representative Executive Officer,
1953
President & Chief Executive Officer,
Hitachi Chemical Company, Ltd.
6/2009 Director, Representative Executive Officer,
President & Chief Executive Officer,
Hitachi Chemical Company, Ltd.
4/2016 Chairman of the Board, Hitachi Chemical
Company, Ltd. (Currently in office)6/2016 Director, Hitachi, Ltd.
4/1970 Joined Hitachi, Ltd.
4/2003 General Manager, Global Business
6/2003 Vice President and Executive Officer
4/2004 Senior Vice President and Executive
Officer
6/2005 Senior Vice President and Executive
Officer, Hitachi, Ltd.
Chairman and Chief Executive Officer,
Hitachi Global Storage Technologies, Inc.
Mar. 14, 4/2006 Executive Vice President and Executive(Note 1)
Officer, Hitachi, Ltd. (Retired in December
1946
2006)
4/2009 Executive Vice President and Executive
Officer, Hitachi, Ltd.
4/2010 President, Hitachi, Ltd.
6/2010 President and Director, Hitachi, Ltd.
4/2014 Chairman & CEO and Director, Hitachi,
Ltd.
4/2016 Chairman of the Board and Representative
Executive Officer, Hitachi, Ltd.

-58-

43,0005,000

13,000140,000

Position

Responsibility

Name

Director

Member of
Audit
Committee(Standing)

ToyoakiNakamura

Director

Member ofCompensation
Committee

ToshiakiHigashihara

Date ofbirth

Business experience, including experiencein Hitachi, and functions

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

Share
Term ofownership
office(shares)(Note 1)70,000(Note 1)

63,000429,000(Notes) 1. The term of office of the Directors starts upon the election at the Annual General Meeting of
Shareholders on June 21, 2017 and expires at the close of the Annual General Meeting of Shareholders
for the fiscal year ending March 31, 2018.
2. Messrs. Baba Kalyani, Sadayuki Sakakibara, George Buckley, Harufumi Mochizuki, Takatoshi
Yamamoto, Philip Yeo and Hiroaki Yoshihara and Mses. Cynthia Carroll and Louise Pentland are
directors who fulfill the qualification requirements to be outside directors as provided for in Article 2,
Item 15 of the Companies Act.

-59-

(2) Executive Officers
Position

Responsibility

Name

Representative
Executive
OfficerPresident &CEOOverall management

ToshiakiHigashihara

Date ofbirth

Business experience, including
experience in Hitachi, and functions

See “(1)
See “(1)Directors”
Directors”

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President andindustrial products
business

Masakazu
Aoki

Jun. 23,
1954

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President, marketing
Ryuichi& sales, and social
Kitayama
innovation businesspromotion

Feb. 4,1952

Representative
Executive
Officer
Assistant to the
Executive Vice President and IoTPresident andbusiness
Executive
Officer

Yutaka Saito

Dec. 11,1954

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President andsystems & services
business

Keiichi
Shiotsuka

May. 8,1954

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President andnuclear energy
business

Koji Tanaka

Jan. 22,
1952

4/1977 Joined Hitachi, Ltd.
4/2012 President and Director, Hitachi
Industrial Equipment Systems
Co., Ltd.
10/2014 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/2017 Executive Vice President andExecutive Officer, Hitachi, Ltd.
Chairman of the Board, Hitachi
Industrial Equipment Systems
Co., Ltd.
4/1976 Joined Hitachi, Ltd.
10/2009 Chief Marketing Officer,
Information &Telecommunication Group,
Information &Telecommunication Systems
Company
4/2010 Vice President and Executive
Officer
4/2014 Senior Vice President andExecutive Officer
4/2015 Executive Vice President andExecutive Officer
4/1979 Joined Hitachi, Ltd.
10/2009 President & CEO, Information &Control Systems Company
4/2010 Vice President and Executive
Officer
4/2012 Senior Vice President andExecutive Officer
4/2014 Executive Vice President andExecutive Officer
4/1977 Joined Hitachi, Ltd.
4/2012 Chief Operating Officer, System
Solutions Business, Information& Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2013 Vice President and Executive
Officer
4/2015 Senior Vice President andExecutive Officer
4/2017 Executive Vice President andExecutive Officer
4/1974 Joined Hitachi, Ltd.
5/2006 General Manager, Hitachi
Works, Power Systems
4/2007 Vice President and Executive
Officer
4/2011 Executive Vice President andExecutive Officer

-60-

Share
Term ofownership
office(shares)(Note 2)63,000(Note 2)

10,000(Note 2)32,000(Note 2)28,000(Note 2)

23,000(Note 2)

138,600

Position

Responsibility

NameDate ofbirth

Representative
Executive
Officer
Executive Vice
President andExecutive
Officer

Assistant to the
President andmanagement
strategies

Toshikazu
NishinoJan. 9,1955

Senior Vice
President andExecutive
Officer

Cost structurereform, information
technology strategies
Shinichiro
and supply chain
Omori
management(MONOZUKURI
and quality
assurance)

Feb. 6,1956

Representative
Executive
Officer
Senior Vice
President andExecutive
Officer

Corporate
communications and
CSR, legal matters, Toshiakirisk management
Kuzuokaand corporate
auditing

Nov. 3,
1954

Senior Vice
President andExecutive
Officer

Services &platforms business

Keiji Kojima

Oct. 9,1956

Senior Vice
President andExecutive
Officer

Building systems
business

Hiroshi SatoAug. 3,
1950

Senior Vice
President andExecutive
Officer

Governments &external relations

Yasuo
TanabeOct. 5,
1954

Business experience, including
experience in Hitachi, and functions

Share
Term ofownership
office(shares)

4/1980 Joined Hitachi, Ltd.
4/2010 Senior Manager, Strategy &Project Office, Supervisory
Office for Management Reforms
4/2011 Vice President and Executive(Note 2)
Officer
4/2013 Senior Vice President andExecutive Officer
4/2015 Executive Vice President andExecutive Officer
4/1978 Joined Hitachi, Ltd.
9/2008 General Manager, Corporate
Procurement Division
4/2012 Vice President and Executive(Note 2)
Officer
4/2016 Senior Vice President andExecutive Officer
4/1978 Joined Hitachi, Ltd.
4/2001 General Manager, Legal Division
4/2007 Vice President and Executive(Note 2)
Officer
4/2011 Senior Vice President andExecutive Officer
4/1982 Joined Hitachi, Ltd.
4/2011 General Manager, Hitachi
Research Laboratory
4/2012 Vice President and Executive
Officer
4/2016 Senior Vice President andExecutive Officer
4/1973 Joined Hitachi, Ltd.
4/2004 CIO, Urban Planning andDevelopment Systems, General
Manager of Sales Division
4/2010 Vice President, Board Director,
Hitachi Automotive Systems,
Ltd.
4/2011 Senior Vice President, Board
Director, Hitachi Automotive
Systems, Ltd.
4/2013 President and COO,
Representative Director, Hitachi
Automotive Systems, Ltd.
(Retired in March 2015)
4/2015 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/1978 Joined Ministry of International
Trade and Industry
8/2006 Deputy Director-General,
Economic Affairs Bureau,
Ministry of Foreign Affairs(Retired in March 2010)
6/2010 Joined Hitachi, Ltd.
4/2011 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.

-61-

14,00027,000213,000(Note 2)

23,000(Note 2)

17,000(Note 2)21,000Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Senior Vice
President andExecutive
OfficerMarketing & sales
and social
innovation businesspromotion

Yoshitaka
Tsuda

Jul. 3,
1955

Senior Vice
President andExecutive
Officer

Railway systems
business

AlistairDormerAug. 29,
1963

Representative
Executive
Officer
Senior Vice
President andExecutive
Officer

Finance andcorporate pension
systemMitsuakiNishiyama

Sep. 25,
1956

Vice President
and Executive
OfficerBusiness forindustry &distribution sectors

Hiroyuki
Ugawa

Jun. 19,
1959

Vice President
and Executive
Officer

Water business

Kenji Urase

Jun. 18,
1961

Share
Term ofownership
office(shares)

4/1979 Joined Hitachi, Ltd.
4/2012 Chief Marketing Officer,
Information &Telecommunication Systems(Note 2)Company
4/2014 Vice President and Executive
Officer
4/2017 Senior Vice President andExecutive Officer
2/2001 Director of Business
Development, Alstom Transport
U.K. Ltd.
6/2003 Joined Hitachi Europe Ltd.
10/2009 Managing Director, Hitachi RailEurope Ltd.
9/2012 Executive Chairman and CEO,
Hitachi Rail Europe Ltd.
(Note 2)(Currently in office)4/2014 Global CEO of Rail Systems
business, Hitachi, Ltd.
4/2015 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/1979 Joined Hitachi, Ltd.
4/2008 General Manager, Finance
Department I
4/2011 Executive Officer, Hitachi Cable,
Ltd. (Currently Hitachi Metals,
Ltd.)
6/2012 Executive Officer, Board
Director, Hitachi Cable, Ltd.
4/2013 Vice President and Executive
Officer, Board Director, Hitachi(Note 2)
Cable, Ltd.
7/2013 Vice President and Managing
Officer, Hitachi Metals, Ltd.
4/2014 Vice President and Executive
Officer, Hitachi Metals, Ltd.
(Retired in March 2015)
4/2015 Vice President and Executive
Officer, Hitachi, Ltd.
4/2016 Senior Vice President andExecutive Officer, Hitachi, Ltd.
4/1982 Joined Hitachi, Ltd.
4/2015 Chief Operating Officer ofSystems & Services Business,
Information &Telecommunication Systems(Note 2)Company, Information &Telecommunication Systems
Group
4/2016 Vice President and Executive
Officer
4/1986 Joined Hitachi, Ltd.
3/2015 President, Hitachi Power
Solutions Co., Ltd. (Retired in(Note 2)
March 2017)
4/2017 Vice President and Executive
Officer, Hitachi, Ltd.

-62-

56,0000

9,000

10,00012,000Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Vice President
and Executive
Officer

Services &platforms business

RyuichiOtsukiMar. 15,
1958

Vice President
and Executive
Officer

Power business

AtsushiOda

Feb. 19,
1958

Vice President
and Executive
Officer

Investment strategies
and strategies for
Yoshihikonext generation
Kawamura
business

Aug.20,1956

Vice President
and Executive
Officer

Regional strategies(China)Kenichi
KokuboNov. 25,
1955

Vice President
and Executive
Officer

Urban solutions
business

Keizo
KobayashiJan. 23,
1960

Share
Term ofownership
office(shares)

4/1981 Joined Hitachi, Ltd.
4/2014 Chief Strategy Officer andGeneral Manager of Group
Business Development Division,
Information &Telecommunication Systems(Note 2)Company, Information &Telecommunication Systems
Group
4/2015 Vice President and Executive
Officer
4/1980 Joined Hitachi, Ltd.
4/2015 General Manager ofTransmission & Distribution
Systems Division, Energy
Solutions Company and Chief(Note 2)
Operating Officer of Power
Systems Company, Power &Infrastructure Systems Group
4/2016 Vice President and Executive
Officer
4/1979 Joined Mitsubishi Corporation
4/2010 Senior Vice President, Division
COO, IT Service Division,
Mitsubishi Corporation (Retired
in March 2015)
4/2015 Joined Hitachi, Ltd.
Executive Strategist, Information& Telecommunication Systems (Note 2)Group
4/2016 Deputy General Manager of IoTBusiness Promotion Division andGeneral Manager of Incubation
Division, Hitachi, Ltd.
4/2017 Vice President and Executive
Officer, Hitachi, Ltd.
4/1979 Joined Hitachi, Ltd.
4/2011 President, Hitachi (China) Ltd.
(Note 2)4/2014 Vice President and Executive
Officer
4/1983 Joined Hitachi, Ltd.
5/2015 Chief Operating Officer ofIndustrial Products Company,
Power & Infrastructure Systems (Note 2)Group
4/2016 Vice President and Executive
Officer-63-

27,00026,0008,000

18,0009,000

Position

Responsibility

NameDate ofbirth

Business experience, including
experience in Hitachi, and functions

Vice President
and Executive
Officer

Systems & services
business

SetsuoShibahara

Feb. 3,
1958

Vice President
and Executive
Officer

Governments &external relations

Akira
Shimizu

Nov. 3,
1954

Vice President
and Executive
Officer

Research &development

Norihiro
SuzukiDec. 5,
1961

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

Katsuya
NaganoAug. 30,
1958

Vice President
and Executive
Officer

Human capital

Hidenobu
Nakahata

Jan. 24,
1961

Vice President
and Executive
OfficerMarketing & sales(business forfinancial institutions,
government, public
Tadashicorporation andNamurasocial infrastructure
systems, healthcare
business and defense
systems business)

Feb. 27,
1957

Share
Term ofownership
office(shares)

4/1982 Joined Hitachi, Ltd.
4/2014 Chief Operating Officer ofSystems & Solutions Business,
and General Manager of Service
Division Group, Information &Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2015 Chief Strategy Officer ofInformation &(Note 2)
Telecommunication Systems
Company, and Chief Operating
Officer of Systems & Services
Business, Information &Telecommunication Systems
Company, Information &Telecommunication Systems
Group
4/2016 Vice President and Executive
Officer
4/1979 Joined Hitachi, Ltd.
10/2012 General Manager, International
Strategy Division(Note 2)4/2013 Vice President and Executive
Officer
4/1986 Joined Hitachi, Ltd.
10/2014 General manager of Central
Research Laboratory
4/2015 General Manager of Global
Center for Social Innovation,(Note 2)
Research & Development Group,
and General Manager of Central
Research Laboratory Group
4/2016 Vice President and Executive
Officer
4/1983 Joined Hitachi, Ltd.
4/2016 General Manager of Social
Infrastructure Information
Systems Division, Information &(Note 2)
Communication Technology
Business Division
4/2017 Vice President and Executive
Officer
4/1983 Joined Hitachi, Ltd.
10/2013 Deputy General Manager,
Human Capital Group(Note 2)4/2014 Vice President and Executive
Officer
4/1980 Joined Hitachi, Ltd.
4/2015 Deputy General Manager ofCorporate Sales & MarketingGroup
4/2016 Deputy General Manager ofCorporate Sales & Marketing(Note 2)
Group and General Manager ofSocial Innovation Business
Division
4/2017 Vice President and Executive
Officer-64-

28,00010,0004,000

15,00024,00027,000Position

Vice President
and Executive
Officer

Responsibility

NameMarketing & sales(nuclear energy
Isaobusiness, power
Narukawa
business and energy
solutions business)

Date ofbirth

Business experience, including
experience in Hitachi, and functions
4/1978 Joined Hitachi, Ltd.
4/2013 General Manager, Chubu Area
Operation
4/2015 Vice President and Executive
Officer

Sep. 8,
1955

Vice President
and Executive
Officer

Energy solutions
business

MasaakiNomotoSep. 17,
1958

Vice President
and Executive
Officer

Railway systems
business

KentaroMasai

May. 22,
1959

Vice President
and Executive
OfficerMarketing & sales(business forindustry &distribution sectors,
water business,building systems
business, railway
systems businessand urban solutions
business)

YasushiManabeDec. 15,1956

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

Vice President
and Executive
OfficerBusiness for
Tsugiofinancial institutions Yamamoto

Aug. 27,
1959

Vice President
and Executive
Officer

Healthcare business

MasayaWatanabeJan. 31,1958

Representative
Executive
Officer

GeneralHiroakiNakanishi

See “(1)
See “(1)Directors”
Directors”

Apr. 12,
1959(Note 2)

4/1984 Joined Hitachi, Ltd.
4/2015 President & CEO of Energy
Solutions Company(Note 2)4/2016 Vice President and Executive
Officer
4/1982 Joined Hitachi, Ltd.
4/2014 President & CEO of Rail
Systems Company, Infrastructure(Note 2)
Systems Group
4/2016 Vice President and Executive
Officer
4/1979 Joined Hitachi, Ltd.
4/2016 Deputy General Manager ofCorporate Sales & MarketingGroup and Chief Marketing
Officer of Industry &(Note 2)Distribution, Water and Urban
businesses
4/2017 Vice President and Executive
Officer

Vice President
and Executive
Officer

MamoruMoritaShare
Term ofownership
office(shares)

Total

30,00017,00018,00025,000(Note 2)40,000(Note 2)6,000

(Note 2)49,000(Note 2)140,000
1,217,600(Notes) 1. The “Responsibility” column describes matters delegated to each of the Executive Officers by the
Board of Directors.
2. The term of office of the Executive Officers expires on March 31, 2018.

-65-

6. Corporate Governance, etc.
(1) Corporate governance1) Outline of corporate organizations
The Company is a company with Nominating Committee, etc. under the Companies Act, aiming
to establish a framework for quick business operation and to realize highly transparent management byseparating responsibilities for management oversight and those for execution of business operations.
Board of Directors
The Board of Directors approves basic management policy for the Hitachi Group and supervises
the execution of the duties of executive officers and directors in order to sustainably enhance corporate
value and the shareholders’ common interests. The basic management policy includes medium-term
management plan and annual budget compilation. The Board of Directors focuses on strategic issues
related to the basic management policy as well as other items to be resolved that are provided in laws,
regulations, the Articles of Incorporation and Board of Directors Regulations. As of June 21, 2017, theBoard of Directors was made up of 13 Directors, and nine of whom are outside Directors and two
concurrently serve as Executive Officers. Within the Board of Directors, there are three statutory
committees of the Nominating Committee, the Audit Committee and the Compensation Committeewith outside Directors accounting for the majority of members of each committee. The Board of
Directors meetings were held 8 days during the fiscal year ended March 31, 2017, and the attendance
rate of Directors at those meetings was 99%. The Nominating Committee meetings were held 10 days,
the Audit Committee meetings were held 16 days, and the Compensation Committee meetings were
held 4 days during the fiscal year ended March 31, 2017.
The Nominating Committee has the authority to determine particular proposals submitted to thegeneral meeting of shareholders for the election and dismissal of Directors, and consists of four
Directors, three of whom are outside Directors.
The Audit Committee has the authority to audit the execution of duties of Directors and Executive
Officers and to determine on proposals submitted to the general meeting of shareholders for theelection and dismissal of accounting auditors, and consists of five Directors, including three outside
Directors and one standing Audit Committee member. Mr. Hiroaki Yoshihara, the Chair of the Audit
Committee, has considerable knowledge of finance and accounting based on his long experience at
KPMG Group with businesses related to accounting, etc. Mr. Toyoaki Nakamura, the member of the
Audit Committee, has considerable knowledge of finance and accounting due to his long experience as
the General Manager of accounting and finance of the Company as well as Executive Officer
responsible for accounting and finance for many years.
The Compensation Committee has the authority to determine remuneration policies for Directors
and Executive Officers and remuneration for individuals based on them. The Compensation
Committee consists of four Directors, three of whom are outside Directors.
With regard to the number of Directors and their election, the Company stipulates in its Articles
of Incorporation that the Company shall have not more than 20 Directors. With regard to the adoptionof resolution for the election of Directors, the Company stipulates in its Articles of Incorporationthat the presence of shareholders representing one-third or more of the voting, that resolutions for theelection of Directors shall be approved by attending shareholders possessing one- third or more of all
voting rights of the shareholders who are entitled to exercise their votes, and that the resolution shallnot be made by cumulative voting.
The Company maintains a limited liability agreement (hereinafter referred to as “Agreement”)
stipulated in Article 427, Paragraph 1 of the Companies Act with each director (excluding Executive
Director, etc.) The general intent of the Agreement is to limit the liability of Directors to the aggregate
amount stipulated in each item under Article 425, Paragraph 1 of the Companies Act.

-66-

Executive Officers
Executive Officers decide on matters delegated to them by the Board of Directors and execute theCompany’s business affairs within the scope of assignments determined by the Board of Directors. As
of June 21, 2017, the Company has 36 Executive Officers.
The Company stipulates in its Articles of Incorporation that the Company shall have not morethan 40 Executive Officers.
Senior Executive Committee
The Senior Executive Committee is a council to ensure that President deliberately decides onimportant managerial matters, which may affect the Company or the Hitachi Group business, throughdiscussing from diverse viewpoints. It consists of 10 members as of June 21, 2017; President & CEO,six Executive Vice President and Executive Officers and three Senior Vice President and Executive
Officers.
2) Matters determined by resolution of the Board of Directors without resolution at the general meetingof shareholders pursuant to the provisions of the Articles of Incorporation
The Company stipulates in the Articles of Incorporation that it may, unless otherwise provided in
the applicable laws, determine on matters specified in each item of Article 459, Paragraph 1 of theCompanies Act by the resolution of the Board of Directors, without resolution at the general meetingof shareholders.
For the repurchase of the company’s own its shares (Article 459, Paragraph 1, Item 1 of theCompanies Act), the Board of Directors shall determine on the matter in order to enable timely
implementation of capital strategies.
Regarding reduction of capital reserve or earned surplus reserve (Article 459, Paragraph 1, Item 2of the Companies Act), appropriation of surplus (excluding dividends of surplus and disposal of theproperty of the Company) (Article 459, Paragraph 1, Item 3 of the Companies Act) and dividends ofsurplus (Article 459, Paragraph 1, Item 4 of the Companies Act), since the Company was a company
with committees as of the date of enforcement of the Companies Act, it was deemed that its Articles ofIncorporation had stipulations that the Board of Directors was able to decide the above matters without
resolution at the general meeting of shareholders and that it should not stipulate that such matters shallbe resolved at the resolution of the general meeting of shareholders, in accordance with Article 57 of
the Act on Arrangement of Relevant Acts Incidental to Enforcement of the Companies Act (July 26,
2005, Act No. 87). Even after the enforcement of the Companies Act, the Company has made it a rule
to timely decide on these important business judgments by the Board of Directors to enhance theshareholders’ common interests.
The Company has stipulated in its Articles of Incorporation that it may, by resolution of theBoard of Directors, exempt any Director (including former Director) and Executive Officer (including
former Executive Officer) from liabilities as provided Article 423, Paragraph 1 of the Companies Act
to the extent as provided in laws or regulations.
3) Requirement for special resolution of the general meeting of shareholders
To enable to securely meet the quorum of the general meeting of shareholders under Article 309,
Paragraph 2 of the Companies Act, the Company stipulates in its Articles of Incorporation that any
resolution as provided in Article 309, Paragraph 2 of the Companies Act shall be adopted at a general
meeting of shareholders where shareholders representing one-third or more of the voting rights of all
the shareholders shall be present, by a majority of two-thirds or more of the voting rights of theshareholders who are present in such meeting and are entitled to vote.

-67-4) Internal control system and risk management system
Outlines of the internal control system and the risk management system of the Company are as
follows. In addition, these systems were resolved by the Board of Directors as the basic policy forinternal control system under the Companies Act.
i) The following measures shall be taken to ensure the effectiveness of audits by the Audit Committee.
(a) When necessary, the Board of Directors may appoint one or more director(s), who does notserve concurrently as an executive officer, as a director responsible for assisting with the dutiesof the Audit Committee. In addition, the Board of Directors’ Office (the “Office”) shall beestablished specifically to assist with the duties of each Committee and the Board of Directors.
(b) In order to ensure the independence of the Office personnel from Executive Officers and theeffect of instructions by the Audit Committee, the Office is staffed with personnel who work
only for the Office and are not subject to orders and instructions of Executive Officers, and the
Audit Committee shall be informed in advance of planned transfers of the Office personnel.
(c) Executive Officers and employees shall report without delay to the members of the Audit
Committee significant matters affecting the Company and its subsidiaries, results of internal
audits, and the implementation status of reporting under the internal reporting system. It shallbe provided for in the company regulation that reporters using the internal reporting system,
which applies to the employees of the Company and its subsidiaries, shall not receive
disadvantageous treatment for reason of having made a report, and the secretariat of the systemshall thoroughly administer this provision.
(d) The Office shall be in charge of payment for the expenses incurred in connection with theexecution of the duties of the Audit Committee members and other administrative duties, andshall promptly process the payment for the expense or debt except in the case where theexpense or debt of the claim is clearly found to be unnecessary to the execution of the duties ofthem.
(e) Standing Committee member(s) shall be appointed to the Audit Committee, and activity plansof the Audit Committee shall be prepared in coordination with the audit plans of Internal
Auditing Office.
ii) The following measures shall be effective to ensure the adequacy of business operations within the
Company and the Hitachi Group.
(a) Such fundamental policies as the emphasis of the social responsibilities of businessenterprises shall be shared with the subsidiaries of the Company.
(b) Each subsidiary of the Company shall develop systems to ensure the appropriateness ofoperations corresponding to its size and other characteristics, basic framework of which issimilar to ones employed in the Company. In order to ensure development of such systems ineach subsidiary, directors and auditors shall be sent from the Company to its subsidiary, andregular audits shall be conducted for the subsidiary.
(c) A reporting system to Directors shall be established to ensure that the execution of duties by
Executive Officers of the Company is in compliance with laws, regulations, and the Articles ofIncorporation.
(d) Information pertaining to the execution of duties by Executive Officers of the Company shall be
prepared and maintained in accordance with internal rules.
(e) A structure shall be established in which each relevant department shall establish regulations
and guidelines, conduct training, prepare and distribute manuals, and carry out other suchmeasures with respect to various risks. Efforts shall be made to identify possible new risks
through such things as progress reports on business operations and, should it become necessary
to respond to a new risk, an Executive Officer responsible for responding thereto shall be
appointed promptly.

-68-

(f) Efficient performance of duties of the Executive Officers of the Company, and Directors andExecutive Officers of the subsidiaries shall be ensured through the following business
management systems.
- The Senior Executive Committee shall be established in order to deliberate on and facilitate
the formulation of decisions based on due consideration of diverse factors regarding
important issues that affect the Company and/or the Hitachi Group.
- Based on the management policy, medium-term business plans and annual budgets, on which
performance management is based, shall be prepared in order to operate business in aplanned and efficient manner.
- Internal audits of the Company and its subsidiaries shall be conducted to monitor and identify
the status of their business operations and to facilitate improvements.
- The Audit Committee shall receive the audit plans of the accounting auditors in advance, andthe prior approval of the Audit Committee shall be required with respect to the fees to be
paid to the accounting auditors.
- Documented business processes for matters to be reflected in financial reports shall be
executed at the Company and its subsidiaries, and internal and external auditors shall
examine said processes in order to ensure the reliability of financial reports.
- A structure for the adequate and efficient conduct of business operations common to the
Hitachi Group companies shall be established.
(g) Continuous maintenance of a legal and regulatory compliance structure shall be ensured throughthe following business management systems.
- Internal audits shall be conducted, and various committees shall be established for legal andregulatory compliance activities. Furthermore, an internal reporting system for employees of
the Company and its subsidiaries shall be established and education on legal and regulatorycompliance shall be provided.
- Various policies and rules on compliance with laws shall be established, aiming to ensurethat the employees are aware of the internal control systems overall and that the systems are
effective.
(h) A system shall be established, in which the subsidiaries report on important issues and theprogress in measures for operations to the Company through the Company’s Senior Executive
Committee, medium-term business plans and the budget system.
(i) The policy on transactions within the Hitachi Group is to trade fairly based on market prices.
5) Internal audit and audit by the Audit Committee(a) Internal audit
The Internal Auditing Office is in charge of internal audit within Hitachi Group and audits
business units, corporate divisions of headquarters and subsidiaries and affiliates. The number of staffof the Internal Auditing Office is 36 as of March 31, 2017.
The Internal Auditing Office monitors and assesses whether overall business operations,
including marketing, personnel management, labor management, compliance, procurementtransactions, production, environment, disaster prevention, export regulations, information system,
accounting and financing activities, and property management of Hitachi Group are properly carriedout pursuant to audit standards established by the Company, and points out items required to be
improved based on the results of auditing and follows up their improvements. The Internal Auditing
Office reports in advance its internal audit plan to the Audit Committee, and reports results of auditing
to the President & CEO and the Audit Committee. Furthermore, relating to the internal control overfinancial reporting, the internal control division in the Internal Audit Office promotes to establish andmaintain the internal control systems pursuant to the Company’s guideline, assesses its effectiveness,and reports the results to the President & CEO and the Audit Committee.

-69-

(b) Audit by the Audit Committee
The Audit Committee conducts audits for whether corporate administration by Directors andExecutive Officers are properly carried out under appropriate internal control systems.
The Audit Committee develops the audit policy and the audit plan, and periodically receives
reports or conducts hearing for execution of duties from Directors and Executive Officers. In addition,
the members of the Audit Committee, who are in charge of internal investigation, investigate business
units of the Company and receive reports from subsidiaries in order to check whether business
transaction and property management are properly carried out, and then report the results to the Audit
Committee. Furthermore, such members of the Audit Committee attend the important meetings
including the budget meeting, the Senior Executive Committee and the Disclosure Committee, inspect
audit reports from internal audit divisions, and provide internal audit divisions with instructions about
divisions to be subject to auditing and items to be focused, if necessary.
The Audit Committee receives reports and explanations about the audit plan and results of theaudit from the accounting auditor, and based on the reports, verifies results of financial audits andinternal control audits. In addition, the Audit Committee receives reports and explanations of quality
control systems of the accounting auditor. Furthermore, the Company makes it a rule to obtain theprior approval of the Audit Committee for remuneration to the accounting auditor.
6) Outside Directors(a) Qualification for the outside Directors and criteria for the independency
For electing an outside Director, the Nominating Committee of the Company considers, inaddition to the following criteria for the independency, whether the outside Director has the highest
personal and professional ethics, integrity and insight, and distinguished records of leadership orexperience at policy making levels in business, law, administration, accounting or education, etc.
For the independency of an outside Director, the Company considers the outside director to be
independent unless:- his or her immediate family member* is, or has been within the last three years, a director or an
executive officer, of the Company or any of its subsidiaries;- he or she is currently an executive director, an executive officer or an employee of a company
that has made payments to, or received payments from, the Company for property or services
in an amount which, in any of the last three fiscal years, exceeds 2% of any of the companies’
consolidated gross revenues;- he or she has received during any of the last three fiscal years more than ¥10 million in directcompensation for his or her service as a specialist in law, accounting or tax, or as a consultant
from the Company, other than director compensations; or- he or she serves as an executive officer or director of a not-for-profit organization, and theCompany’s discretionary charitable contributions to the organization in any of the last threefiscal years are more than ¥10 million and 2% of that organization’s annual gross revenues.
* An “immediate family member” includes a person’s spouse, parents, children, siblings, grandparents, grand-children, mothers and fathers-in-law, sons and daughters-in-law, spouses ofsiblings, grand-children-in-law, and brothers and sisters-in-law.
(b) Function of the outside Directors
Following the policy stated in “(a) Qualification for outside Directors and criteria for the
independency,” the Company has elected nine persons; Messrs. Baba Kalyani, Sadayuki Sakakibara,
George Buckley, Harufumi Mochizuki, Takatoshi Yamamoto, Philip Yeo and Hiroaki Yoshihara andMses. Cynthia Carroll and Louise Pentland, as outside Directors under Article 2, Item 15 of theCompanies Act. Each outside Director is expected to enhance functions of the Company’s Board of
Directors through supervising execution of duties of Executive Officers and others from an
independent perspective, based on rich experiences and insights as top executive of major global
companies in the cases of Ms. Cynthia Carroll and Messrs. Baba Kalyani, Sadayuki Sakakibara andGeorge Buckley, based on deep insight into corporate legal matters and corporate governance gained
through her rich experience as the chief legal officer of major global companies in the case of Ms.
Louise Pentland, based on diverse experiences and insights in such areas as public administration in
the cases of Messrs. Harufumi Mochizuki and Philip Yeo, based on a broad range of insight inbusiness and management gained through his experience in the area of corporate analysis and global-70-

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

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

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

-71-

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

Category

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

Directors(excluding outside
75
69
6
4
Directors)
Outside Directors
308
290
17
10
Executive Officers
2,569
1,386
982
200
33
Total
2,953
1,747
1,005
200
47
(Notes) 1. The number of Directors indicated excludes two Directors who concurrently serve as
Executive Officers.
2. The amount of compensation to Directors (excluding outside Directors) includes the basic
remuneration for two Directors, who retired due to expiration of their term of office at theclose of the 147th Annual General Meeting of Shareholders held on June 22, 2016.
3. The amount of compensation to Outside Directors includes the basic remuneration for one
outside director, who retired due to expiration of his term of office at the close of the147th Annual General Meeting of Shareholders held on June 22, 2016.

-72-

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

Name

Company

ToshiakiHigashihara

Hitachi, Ltd.
(The Company)

Ryuichi
Kitayama

YutakaSaito

Koji
TanakaToshikazu
NishinoAlistairDormer(Note 5)

Hitachi, Ltd.
(The Company)
Hitachi HighTechnologies
Corporation(Consolidated
subsidiary)
Hitachi Capital
Corporation(Consolidated
subsidiary)(Note 4)
Hitachi, Ltd.
(The Company)
Hitachi Kokusai
Electric Inc.
(Consolidated
subsidiary)
HitachiConstruction
Machinery Co.,Ltd.
(Consolidated
subsidiary)
Hitachi, Ltd.
(The Company)
Hitachi
ChemicalCompany, Ltd.
(Consolidated
subsidiary)
Hitachi, Ltd.
(The Company)
Hitachi RailEurope Ltd.
(Consolidated
subsidiary)(Note 6)

Total amountof compensaIncentives
Categorytion, etc.
Basic
Medium and Year-end(MillionsShort-term
remuneration
Long-term allowanceof yen)(Note 1)
(Note 2)
Executive
Officer
102
70
37
209
(Note 3)
Executive
57
40
10
Officer
Director

1

-

-

110

Director

1

-

-

-

Executive
Officer

49

39

10

-

Director

7

-

-

1
113

Director

5

-

-

1

Executive
Officer

57

40

10

-

Director

3

-

-

0

Executive
Officer

61

41

10

-

113

Executive
Chairmanand CEO

67

40

38

-

146

112

Executive
Officer
97
67
24
189
(Note 3)(Notes) 1. Compensations from the Company and consolidated subsidiaries paid depending on finacial results andindividual performances in the short term are collectively called.
2. Medium and long-term incentive compensation for Executive Officers of the Company is stock options
as stock-based compensation.
3. Although concurrently serving as Director for the fiscal year ended March 31, 2017, Messrs. Toshiaki
Higashihara and Hiroaki Nakanishi did not receive compensation as Director.
4. The amount of compensation from Hitachi Capital Corporation is only for the period for which thecompany was a consolidated subsidiary of the Company in the fiscal year ended March 31, 2017.
5. Although concurrently served as Executive Officer of the Company for the fiscal year ended March 31,
2017, Mr. Alistair Dormer did not receive compensation as Executive Officer of the Company.
6. The basic remuneration paid in Sterling pounds is converted into yen using average exchange rate foreach quarter of the fiscal year ended March 31, 2017. The incentives paid in Sterling pounds areconverted into yen using average exchange rate for the fiscal year ended March 31, 2017.
HiroakiNakanishi

Hitachi, Ltd.
(The Company)-73-9) Information on shareholdings(a) Equity securities held for purposes other than pure investment
Number of stock names:
309 stock names
Total amount recorded in the balance sheet:¥324,323 million(b) Stock name, number of shares, amount recorded in the balance sheet, and purpose of holding
regarding equity securities held for purposes other than pure investment(Fiscal year ended March 31, 2016)
Specified investment securities
Stock nameRenesas Electronics
Corporation

Number ofshares(shares)

Balance sheet
amount(Millions of yen)

127,725,748

92,4736,250,000

33,268Central Japan Railway
Company

900,000

17,914

East Japan Railway Company

812,400

7,890

Yungtay Engineering Co., Ltd.

31,817,168

5,105

Electric Power Development
Co., Ltd.

980,780

3,447

ShinMaywa Industries, Ltd.

4,000,337

3,192

Seibu Holdings Inc.

1,286,900

3,064

Shin-Etsu Chemical Co., Ltd.

521,000

3,034

Ono Pharmaceutical Co., Ltd.

120,000

2,859

The Chugoku Electric Power
Co., Inc.

1,412,622

2,147

The Chiba Bank, Ltd.

3,269,000

1,833

The Japan Steel Works, LTD.

5,050,000

1,792

Sapporo Holdings Limited

2,988,000

1,673

Oclaro, Inc.

2,650,000

1,612West Japan Railway Company

215,000

1,494

Chubu Electric Power Co., Inc.

900,254

1,414

The Dai-ichi Life Insurance
Company, Limited

1,000,000

1,362

Kintetsu Corporation

2,842,913

1,296

Western Digital Corporation-74-

Purpose of holding
Received in relation to the reorganization,etc. of Renesas Technology Corp. which
was an affiliate of the Company
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
relationship
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Received as consideration for the
reorganization of Oclaro, Inc. andOpnext, Inc. which was an affiliate of theCompany
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions
Maintaining and enhancing business
transactions

Stock name

Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Purpose of holding

Maintaining and enhancing business
transactions
Maintaining and enhancing businessToho Gas Co., LTD.
1,524,471
1,218transactions
Maintaining and enhancing business
Sotetsu Holdings, Inc.
1,570,518
1,083
transactions
Maintaining and enhancing businessJapan Tobacco Inc.
225,000
1,055
transactions
Maintaining and enhancing business
Keio Corporation
1,032,873
1,020
transactions
Maintaining and enhancing business
Benefit One Inc.
400,000
1,015
transactions
Maintaining and enhancing business
TOYO DENKI SEIZO K.K.
2,100,000
829
relationship
Hokuriku Electric Power
Maintaining and enhancing business
518,400
825
Companytransactions
Maintaining and enhancing business
NOF Corporation
1,000,000
798
transactions
DAIICHI SANKYO
Maintaining and enhancing business
300,000
750
COMPANY, LIMITED
transactions
Maintaining and enhancing business
TOKYU CORPORATION
788,032
743
transactions(Note) Since the number of stock of which balance sheet amount exceeds 1% of the amount of the Company’scommon stock on the balance sheet is less than 30, the top 30 stocks in balance sheet amount are listed.
NGK INSULATORS, LTD.

607,000

1,261(Fiscal year ended March 31, 2017)
Specified investment securities
Stock name

Number ofshares(shares)

Balance sheet
amount(Millions of yen)Renesas Electronics
Corporation

127,725,748

149,055

6,250,000

57,869Central Japan Railway
Company

900,000

16,326

Hitachi Maxell, Ltd.

7,797,100

15,835

East Japan Railway Company

812,400

7,875

Yungtay Engineering Co., Ltd.

31,817,168

6,160

Shin-Etsu Chemical Co., Ltd.

521,000

5,024

Electric Power Development
Co., Ltd.

980,780

2,554

Seibu Holdings Inc.

1,286,900

2,364

The Chiba Bank, Ltd.

3,269,000

2,337

597,600

1,798

Western Digital Corporation

Sapporo Holdings Limited-75-

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

Stock name

Number ofshares(shares)

Balance sheet
amount(Millions of yen)

Purpose of holding

Maintaining and enhancing business
transactions
Maintaining and enhancing business
NGK INSULATORS, LTD.
607,000
1,529
transactions
Maintaining and enhancing business
Ono Pharmaceutical Co., Ltd.
600,000
1,382
transactions
Maintaining and enhancing business
Benefit One Inc.
400,000
1,366
transactions
Maintaining and enhancing businessToho Gas Co., LTD.
1,524,471
1,199
transactions
Maintaining and enhancing businesserex Co., Ltd.
750,000
984
relationship
Maintaining and enhancing business
Keio Corporation
1,032,873
910
transactions
Maintaining and enhancing business
The Japan Steel Works, LTD.
505,000905
transactions
Maintaining and enhancing business
Kintetsu Corporation
2,242,913
899
transactions
Maintaining and enhancing businessChubu Electric Power Co., Inc.
600,254894
transactions
Maintaining and enhancing businessJapan Tobacco Inc.
225,000
814
transactions
Maintaining and enhancing business
Sotetsu Holdings, Inc.
1,570,518
811
transactions
Maintaining and enhancing businessShowa Denko K.K.
400,000
794
transactions
Maintaining and enhancing business
Seiko Electric Co., Ltd.
1,180,320
790
transactions
Tohoku Electric Power Co.,
Maintaining and enhancing business
505,000
761
Inc.
transactions
DAIICHI SANKYO
Maintaining and enhancing business
300,000
752
COMPANY, LIMITED
transactions
Kyushu Electric Power
Maintaining and enhancing business
592,500
702
Company Inc.
transactions
Maintaining and enhancing businessTosoh Corporation
657,000
642
transactions
Maintaining and enhancing business
TOKYU CORPORATION
788,032620
transactions(Note) Since the number of stock of which balance sheet amount exceeds 1% of the amount of the Company’scommon stock on the balance sheet is less than 30, the top 30 stocks in balance sheet amount are listed.
West Japan Railway Company

215,000

1,556(c) Equity securities held for pure investment
None.

-76-

(2) Audit Fees
1) Fees to Certified Public Accountants
Fiscal year ended March 31, 2016

Fiscal year ended March 31, 2017

Category

Fees for audit
services(Millions of yen)

Fees for non-audit
services(Millions of yen)

Fees for audit
services(Millions of yen)

Fees for non-audit
services(Millions of yen)

The Company

439

92

485

34

Consolidated
subsidiaries

1,219

187

1,009

118

Total

1,658

279

1,494

152

2) Other fees
Audit fees paid by the Company and its consolidated subsidiaries to the Company’s accounting
auditor, Ernst & Young ShinNihon LLC Group (including Ernst & Young and its group firms which
belong to the same network as Ernst & Young ShinNihon LLC), were ¥3,628 million for the fiscal year
ended March 31, 2016, and ¥2,993 million for the fiscal year ended March 31, 2017, respectively.
These fees are mainly paid for audit services to its overseas consolidated subsidiaries.
3) Descriptions of non-audit services to the Company
Non-audit services to the Company in the fiscal year ended March 31, 2016 and the fiscal year
ended March 31, 2017 were various consulting services.
4) Policy on determination of audit fees
For determining the amount of audit fees, the Company conducts hearing of the audit plan andverify efficiency of audit services, including the number of days, hours for auditing, the number ofsubjects to be audited and the scope of audit, etc., and appropriateness of the estimate. The Company
also discusses with the accounting auditor taking into consideration the formation of auditors and audit
fees for the preceding fiscal year. In addition, the Audit Committee receives the audit plans of theaccounting auditors and the results of discussion between the auditors and Executive Officers of theCompany and approves the amount of the fees in advance of the Company’s decision.
V. Financial Information
Refer to the consolidated financial statements incorporated in this Annual Securities Report.

-77-VI. Stock-Related Administration for the Company
Fiscal year

From April 1 to March 31

Annual General Meetingof Shareholders

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

Record date

End of every fiscal year

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

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

Forward office-

Purchasing and selling fee

Free of charge

Method of public notice

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

Special benefit for
None
Shareholders(Notes) 1. Under the Articles of Incorporation, distribution of surplus through dividend payment, if any, will bemade to shareholders of record as of March 31 and September 30 of each year. In addition, theCompany may make further distributions of surplus to shareholders of record as of another record date.
2. The Articles of Incorporation provide that a holder of shares representing less than one unit does nothave any other rights of a shareholder in respect of those shares, other than those specified in the
Articles of Incorporation. This includes:(1) Rights under each item of Article 189, Paragraph 2 of the Companies Act;
(2) Rights to be allotted rights to subscribe for free for new shares and stock acquisition rights whensuch rights are granted to shareholders; or(3) Rights stipulated in the Articles of Incorporation-78-VII. Reference Information on the Company
1. Information on a Parent Company, etc. of the Company
The Company has no parent company.
2. Other Reference Information
The Company filed the following documents during the period from the commencing date of the fiscal
year ended March 31, 2017 to the filing date of the Annual Securities Report.
(1)

Annual Securities Report and documents attached, and Confirmation Filed with the Director of theLetterKanto Local Finance Bureau(The 147th business term (from April 1, 2015 to March 31, 2016))
on June 22, 2016

(2)

Internal Control Report

Filed with the Director of the
Kanto Local Finance Bureau
on June 22, 2016

(3)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 9-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on June 23, 2016

(4)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 2-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on June 29, 2016

(5)

Amended Extraordinary Report(Amendment to Extraordinary Report (4) above)

Filed with the Director of the
Kanto Local Finance Bureau
on July 15, 2016

(6)

Quarterly Report and Confirmation Letter(The First Quarter of the 148th business term (from April 1, 2016 toJune 30, 2016))

Filed with the Director of the
Kanto Local Finance Bureau
on August 8, 2016(7)

Amended Annual Securities Report and Confirmation Letter(Amendment to Annual Securities Report (1) above)

Filed with the Director of the
Kanto Local Finance Bureau
on August 26, 2016(8)

Quarterly Report and Confirmation Letter
Filed with the Director of the(The Second Quarter of the 148th business term (from July 1, 2016 to Kanto Local Finance Bureau
September 30, 2016))
on November 14, 2016

(9)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 9 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)(10)

Quarterly Report and Confirmation Letter
Filed with the Director of the(The Third Quarter of the 148th business term (from October 1, 2016 Kanto Local Finance Bureau
to December 31, 2016))
on February 8, 2017(11)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 2-2 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on April 6, 2017

(12)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 3 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on April 25, 2017(13)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 12 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on April 27, 2017(14)

Amended Extraordinary Report(Amendment to Extraordinary Report (11) above)

Filed with the Director of the
Kanto Local Finance Bureau
on April 27, 2017(15)

Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 3 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on May 12, 2017

-79-

Filed with the Director of the
Kanto Local Finance Bureau
on February 1, 2017

(16)Extraordinary Report(pursuant to Article 19, Paragraph 2, Item 12 of the Cabinet Office
Ordinance Concerning Disclosure of Corporate Affairs, etc.)

Filed with the Director of the
Kanto Local Finance Bureau
on May 12, 2017(17)

Amended Shelf Registration Statement(Amended Shelf Registration Statement concerning the Shelf
Registration Statement filed on June 26, 2015)

Filed with the Director of the
Kanto Local Finance Bureau
on May 13, 2016
June 23, 2016
June 29, 2016
July 15, 2016
July 22, 2016
August 26, 2016
February 1, 2017
April 6, 2017
April 25, 2017
April 27, 2017 andMay 12, 2017

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

-80-

Consolidated Financial Statements
Page
NumberConsolidated Financial Statements of Hitachi, Ltd. and Subsidiaries:
Consolidated Statement of Financial Position as ofMarch 31, 2017 and 2016

F-2

Consolidated Statement of Profit or Loss andConsolidated Statement of Comprehensive Income for the years ended
March 31, 2017 and 2016

F-3

Consolidated Statement of Changes in Equity for the years ended
March 31, 2017 and 2016

F-4

Consolidated Statement of Cash Flows for the years ended
March 31, 2017 and 2016

F-5

Notes to Consolidated Financial Statements

F-6

Reports of Independent Registered Public Accounting Firm

F-1

F-77

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

As of March 31, 2017

As of March 31, 2016

765,2422,433,149
42,3651,225,907
535,943699,315
2,992,770
338,758
1,299,855
541,857

5,002,606

5,872,555

691,251
719,704
38,646
1,998,411
919,201
294,098

676,960
1,329,974
727,485
2,500,226
1,070,403
373,402

Total non-current assets

4,661,311

6,678,450

Total assets

9,663,917

12,551,005

Liabilities
Current liabilities
Short-term debt (note 26)
Current portion of long-term debt (notes 8 and 26)
Other financial liabilities (note 26)
Trade payables (note 14)
Accrued expenses
Advances received (note 7)
Other current liabilities (notes 15 and 30)

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

871,417651,518
280,048
1,451,918
727,402480,457
531,456

Total current liabilities

3,720,859

4,994,216

Non-current liabilities
Long-term debt (notes 8 and 26)
Other financial liabilities (note 26)
Retirement and severance benefits (note 16)
Other non-current liabilities (notes 13 and 15)

790,01353,422635,684
366,944

2,081,520
115,155
783,670
450,874

Total non-current liabilities

1,846,063

3,431,219

Total liabilities

5,566,922

8,425,435

EquityHitachi, Ltd. stockholders’ equity
Common stock (note 17)
Capital surplus (notes 17 and 20)
Retained earnings (notes 17 and 19)
Accumulated other comprehensive income (note 18)
Treasury stock, at cost (note 17)458,790
577,573
1,793,570
141,068(3,916)

458,790586,790
1,609,761
83,543(3,806)

2,967,085

2,735,078

1,129,910

1,390,492

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

4,096,995

4,125,570

Total liabilities and equity

9,663,917

12,551,005

See accompanying notes to consolidated financial statements.

F-2

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

Millions of yen

Revenues
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income (note 21)
Other expenses (note 21)
Financial income (note 22)
Financial expenses (note 22)
Share of profit (loss) of investments accounted for using the equity method (note10)
EBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income from continuing operations, before income taxes
Income taxes (note 13)
Income from continuing operations
Loss from discontinued operations (notes 15 and 23)
Net income
Net income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
Earnings per share from continuing operations,
attributable to Hitachi, Ltd. stockholders (note 24)
Basic
DilutedEarnings per share attributable to Hitachi, Ltd. stockholders (note 24)
Basic
Diluted2017
9,162,264(6,782,677)
2,379,587(1,792,278)
100,742(146,568)
7,091(26,206)2016
10,034,305(7,459,073)
2,575,232(1,940,363)
57,539(141,881)
10,615(30,295)(47,186)

156

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

531,003
12,028(25,991)
517,040(165,206)
351,834(57,081)294,753

231,261
106,768

172,155
122,598

49.13
49.12

Yen
47.48
47.44

47.90
47.88

35.65
35.62

Consolidated Statement of Comprehensive Income
Years ended March 31, 2017 and 2016

Millions of yen

Net income

2017
338,0292016
294,753

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

59,93446,086(1,887)104,133(50,323)(140,844)(4,275)(195,442)

Items that can be reclassified into net income
Foreign currency translation adjustments
Net changes in cash flow hedges
Share of OCI of investments accounted for using the equity method
Total items that can be reclassified into net income(64,761)
21,303
1,166(42,292)(190,099)
32,785(26,239)(183,553)

61,841
399,870(378,995)(84,242)

299,397
100,473(127,557)
43,315

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

Consolidated Statement of Changes in Equity

Year ended March 31, 2017

Millions of yen
2017
Accumulated
other
Total
comprehensive
Treasury
Hitachi, Ltd.
incomestock, at cost stockholders’(note 18)
(note 17)
equityCommonstock(note 17)

Capitalsurplus(note 17)

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

1,609,761

83,543(3,806)

Reclassified into retained earnings--

10,486(10,486)

Net income--

231,261

Other comprehensive income(loss)

-

-

-

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

Balance at beginning of year

Noncontrollinginterests(note 5)

Total equity

2,735,078

1,390,492

4,125,570

-

-

-

-

-

-

231,261

106,768

338,029

68,136-

68,136(6,295)61,841-(57,938)-(57,938)

Changes in equity

Dividends to non-controlling interests

-

-

-

-

-

-

(38,283)(38,283)

Acquisition of treasury stock

-

-

-

-

(153)

(153)

-

(153)

Sales of treasury stock

-

(15)

-

-

43

28

-

28
(332,099)-(9,202)

-

(125)

-

(9,327)(322,772)

Total changes in equity-(9,217)

183,80957,525(110)

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

Balance at end of year

458,790

577,573

1,793,570

141,068(3,916)

2,967,085

1,129,910

4,096,995

Changes in non-controlling interests

Year ended March 31, 2016

Millions of yen
2016

Balance at beginning of year

Accumulated
Total
other
Hitachi, Ltd.
comprehensive
Treasury
incomestock, at cost stockholders’equity(note 18)
(note 17)

Commonstock(note 17)

Capitalsurplus(note 17)

Retainedearnings(notes 17
and 19)458,790

608,416

1,477,517

401,100(3,542)

2,942,281

Noncontrollinginterests

Total equity

1,354,061

4,296,342

Changes in equity
Reclassified into retained earnings--

18,030(18,030)

-

-

-

-

Net income--

172,155--

172,155

122,598

294,753(378,995)

Other comprehensive loss

-

-

-

(299,712)-(299,712)(79,283)

Dividends to Hitachi, Ltd. stockholders--(57,941)--(57,941)-(57,941)

Dividends to non-controlling interests

-

-

-

-

-

-

(39,502)(39,502)

Acquisition of treasury stock

-

-

-

-

(295)

(295)

-

(295)

Sales of treasury stock

-

(4)

-

-

31

27

-

27

Changes in non-controlling interests-(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)

Balance at end of year

458,790586,790

1,609,761

83,543(3,806)

2,735,078

1,390,492

4,125,570

See accompanying notes to consolidated financial statements.

F-4

Consolidated Statement of Cash Flows
Years ended March 31, 2017 and 2016

Millions of yen
2017

2016

338,029294,753

415,183
68,587124,039
47,186324(81,369)(15,103)(196,824)(22,731)
13,299111,589(56,539)
16,408
1,050

507,790
44,781
164,812604
4,172(55,235)
4,475(53,092)
44,342(9,665)(1,602)(67,175)
59,852
13,529763,128
13,307
14,113(20,664)(140,302)

952,341
12,23432,385(27,356)(157,378)

629,582

812,226(316,116)(101,034)(292,943)
52,208
14,539180,726(369,494)(116,438)(539,420)
22,632
23,834326,497(177,303)(196,608)

248,956
53,012

137,852(19,654)(337,955)(730,799)(233,818)
512,898(397,394)
7,638(57,935)(36,508)(153)
28(4,305)60(47)(69,801)
717,810(537,188)
1,034(57,907)(41,671)(295)
27(38,361)(115)(209,536)(26,467)

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

Change in cash and cash equivalents

65,927(2,388)Cash and cash equivalents at beginning of year

699,315

701,703

Cash and cash equivalents at end of year

765,242699,315

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

See accompanying notes to consolidated financial statements.

F-5

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

F-6

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

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

F-8

Notes to Consolidated Financial Statements

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

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

2 to 17 years

Tools, furniture and fixtures

2 to 20 years

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

2 to 10 years

Other

2 to 20 years

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

F-10

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

F-11

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

F-12

Notes to Consolidated Financial Statements(o) Earnings per Share
Basic earnings per share (EPS) for net income attributable to Hitachi, Ltd. stockholders is calculated based on the weighted
average number of ordinary shares outstanding during the period. Diluted EPS for net income attributable to Hitachi, Ltd.
stockholders is calculated based on the sum of weighted average number of ordinary shares outstanding during the period andthe conversion of securities with dilutive effects or the number of authorized shares.
(p) Business Combinations
Business combinations are accounted for using the acquisition method. Consideration is measured as the sum of the fair value ofthe consideration transferred at acquisition date and the non-controlling interests in the acquiree. The Company determines, on atransaction by transaction basis, whether to measure non-controlling interests at fair value or by the appropriate share in the fairvalue of identifiable net assets of the acquiree. Acquisition related costs are expensed in the period in which the costs are
incurred.
(q) New Accounting Standards not yet Adopted by the Company
The following table lists the principal new accounting standards and interpretations issued or amended prior to the approval dateof the consolidated financial statements that are not yet adopted by the Company as of the reporting date. The Company iscurrently evaluating the potential impact of adopting these new standards and amendments on its financial position and businessperformance.
IFRSs
Title
Mandatory effective
To be adopted by
Description of new standards anddate
the Company
amendments(Fiscal year beginning (Fiscal year beginningon or after)on)
IFRS 9Financial Instruments
January 1, 2018
April 1, 2018
Amendments for hedge accounting(amended in November 2013)
Amendments for the classification andmeasurement of financial instruments,
and adoption of expected credit loss
impairment model for financial assets(amended in July 2014)
IFRS 15

Revenue fromJanuary 1, 2018

April 1, 2018

Contracts with

Revised accounting standard forrevenue recognition and disclosure

Customers
IFRS 16

LeasesJanuary 1, 2019

April 1, 2019

Revised lease definition and mainly
lessee accounting

F-13

Notes to Consolidated Financial Statements(4) Segment Information
Business Segments
The operating segments of the Company are the components for which separate financial information is available and which isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company discloses its business in nine reportable segments, corresponding to categories of activities classified primarily by
the similarities for the nature of markets, products and services, and economic characteristics. Several operating segments areaggregated into Social Infrastructure & Industrial Systems, Electronic Systems & Equipment and High Functional Materials &Components for financial reporting purposes so that financial statement users better understand the Company’s financial position
and business performance. The Company aggregates operating segments based on the similarities of economic characteristics
mainly using profit margin ratios of operating segments. The primary products and services included in each segment are as
follows:
Information & Telecommunication Systems:
Systems integration, Consulting, Cloud services, Servers, Storage, Software, Telecommunication & network and ATMs
Social Infrastructure & Industrial Systems:
Industrial machinery and plants, Elevators, Escalators, Railway systems, Thermal, Nuclear and Renewable energy power
generation systems and Transmission & distribution systems
Electronic Systems & Equipment:
Semiconductor processing equipment, Test and measurement equipment, Advanced industrial products, Medical electronics
equipment and Power tools
Construction Machinery:Hydraulic excavators, Wheel loaders and Mining machinery
High Functional Materials & Components:
Semiconductor and display related materials, Circuit boards and materials, Automotive parts (molded plastics, etc.), Energy
storage devices, Specialty steels, Magnetic materials and components, High grade casting components and materials and Wires andcablesAutomotive Systems:
Engine management systems, Electric powertrain systems, Drive control systems and Car information systems
Smart Life & Ecofriendly Systems:
Air-conditioning equipment, Room air conditioners, Refrigerators and Washing machines
Others:
Optical disk drives, Property management and others
Financial Services:
Leasing and Loan guarantees
Effective from April 1, 2016, the Company changed the name of Others (Logistics and Other services) to Others.
In October 2016, the Company sold a certain number of shares of Hitachi Capital Corporation (Hitachi Capital). As a result,
Hitachi Capital and its subsidiaries, which were included in the Financial Services segment, became equity-method associates of
the Company. Accordingly, total assets and investments accounted for using the equity method of the Financial Services segment
as of March 31, 2017 are left blank "-". From the beginning of the third quarter of the year ended March 31, 2017, the Company
includes its share of profit (loss) of investments accounted for using the equity method of Hitachi Capital and its subsidiaries in
Corporate items and Eliminations.

F-14

Notes to Consolidated Financial Statements
The following tables show business segment information for the years ended March 31, 2017 and 2016.
Revenues from Outside Customers
Millions of yen
2017

2016

Information & Telecommunication Systems

1,815,085

1,858,364

Social Infrastructure & Industrial Systems

2,053,607

2,051,214Electronic Systems & Equipment

1,067,237

1,016,350

Construction Machinery

747,122742,306

1,408,622

1,499,180

Automotive Systems

988,928

996,074

Smart Life & Ecofriendly Systems

528,633

646,847

Others375,903878,663High Functional Materials & Components

Financial Services
Subtotal

170,583

342,801

9,155,720

10,031,799

Corporate items
Total

6,544

2,506

9,162,264

10,034,305

Revenues from Intersegment Transactions
Millions of yen
2017

2016

Information & Telecommunication Systems

167,736

250,957

Social Infrastructure & Industrial Systems

278,324

281,930

Electronic Systems & Equipment

103,138

111,258

Construction Machinery

6,825

16,025High Functional Materials & Components

56,06564,872

Automotive Systems

3,356

5,118

Smart Life & Ecofriendly Systems

28,682

34,171Others277,891

374,099

Financial Services

8,629

22,552

Subtotal

930,646

1,160,982

Corporate items and Eliminations(930,646)(1,160,982)

-

-

Total
Total Revenues

Millions of yen
2017

2016

Information & Telecommunication Systems

1,982,821

2,109,321

Social Infrastructure & Industrial Systems

2,331,931

2,333,144

Electronic Systems & Equipment

1,170,375

1,127,608

753,947

758,331

Construction Machinery
High Functional Materials & Components

1,464,687

1,564,052

Automotive Systems

992,284

1,001,192

Smart Life & Ecofriendly Systems

557,315

681,018

Others653,794

1,252,762

Financial Services

179,212365,353

10,086,366

11,192,781

Subtotal
Corporate items and Eliminations(924,102)(1,158,476)

Total

9,162,264

10,034,305

F-15

Notes to Consolidated Financial Statements
Segment Profit (Loss)
Millions of yen
2017

2016

Information & Telecommunication Systems

76,458109,141

Social Infrastructure & Industrial Systems(19,993)

29,108

Electronic Systems & Equipment

66,77264,370Construction Machinery

22,73525,847

High Functional Materials & Components

123,342

153,553

Automotive Systems

65,83053,947

Smart Life & Ecofriendly Systems

31,84041,967

Others

20,63040,609Financial Services

22,841

46,665

Subtotal

410,455

565,207

Corporate items and Eliminations

64,727(34,204)

Total

475,182

531,003

Interest income

12,923

12,028Interest charges(19,014)(25,991)

Income from continuing operations, before income taxes

469,091

517,040

Segment profit (loss) is measured by EBIT.
Intersegment transactions are generally recorded at the same prices used in arm’s length transactions. Corporate items include
corporate expenses not allocated to individual business segments, such as expenditures for leading-edge R&D, a part of net gain on
business reorganization and share of profit (loss) of investments accounted for using the equity method, and others.
Total Assets
Millions of yen
March 31, 2017

March 31, 2016

Information & Telecommunication Systems

1,672,386

1,654,008

Social Infrastructure & Industrial Systems

3,205,656

3,217,211

967,731

1,082,782

Construction Machinery

Electronic Systems & Equipment

1,036,800

996,117High Functional Materials & Components

1,666,879

1,596,464

Automotive Systems

743,095

728,451

Smart Life & Ecofriendly Systems

326,373

322,466

1,552,003

1,983,923-

3,091,487

Subtotal

11,170,923

14,672,909

Corporate assets and Eliminations(1,507,006)(2,121,904)

Total

9,663,917

12,551,005

OthersFinancial Services

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

F-16

Notes to Consolidated Financial Statements
Investments Accounted for Using the Equity Method
Millions of yen
March 31, 2017

March 31, 2016

Information & Telecommunication Systems

14,52312,758Social Infrastructure & Industrial Systems

390,653482,507385

325

Construction Machinery

22,815

18,415High Functional Materials & Components

36,50145,879

Electronic Systems & Equipment

Automotive Systems

5,213

6,899

Smart Life & Ecofriendly Systems

50,71545,930

Others

6,607

6,722

-

20,329Subtotal

527,412639,764

Corporate items and Eliminations

163,839

37,196

Total

691,251

676,960

Financial Services

Depreciation and Amortization
Millions of yen
2017
Information & Telecommunication Systems

2016
95,921

113,161

Social Infrastructure & Industrial Systems

44,64643,277

Electronic Systems & Equipment

24,32522,477

Construction Machinery

35,84341,285High Functional Materials & Components

71,54973,078Automotive Systems

51,65648,310Smart Life & Ecofriendly Systems

11,791

17,116

Others

26,07849,070Financial Services

49,55996,573

Subtotal

411,368

504,347

3,815

3,443

415,183

507,790

Corporate items and Eliminations
Total

Depreciation consists of that of property, plant and equipment and investment properties.
Impairment Losses
Millions of yen
2017

2016

Information & Telecommunication Systems

37,57918,120Social Infrastructure & Industrial Systems

10,08312,092

Electronic Systems & Equipment

8,272

3,113

Construction Machinery

3,883

2,987

High Functional Materials & Components

2,732

2,599

691

64

4,862

1,267

854

4,442

Automotive Systems
Smart Life & Ecofriendly Systems
OthersFinancial Services
Subtotal
Corporate items and Eliminations
Total

-

97

68,95644,781(369)-

68,58744,781

Impairment losses mainly consist of those recognized on property, plant and equipment, investment properties and intangible
assets.
F-17

Notes to Consolidated Financial Statements
Share of Profit (Loss) of Investments Accounted for Using the Equity Method
Millions of yen
2017

2016

Information & Telecommunication Systems

1,657

1,313

Social Infrastructure & Industrial Systems(73,986)(20,425)

142

51

Electronic Systems & Equipment
Construction Machinery

(311)

234

High Functional Materials & Components

4,703

3,651

Automotive Systems

562

759

8,253

6,054

Others292

400

Financial Services

995

1,776

Subtotal(57,693)(6,187)

Corporate items and Eliminations

10,507

6,343

Total

(47,186)

156

Smart Life & Ecofriendly Systems

Share of profit (loss) of investments accounted for using the equity method include impairment losses on investments accounted
for using the equity method.
Capital Expenditures
Millions of yen
2017

2016

Information & Telecommunication Systems

80,56897,757

Social Infrastructure & Industrial Systems

85,436

84,215

Electronic Systems & Equipment

29,60628,324

Construction Machinery

17,312

27,903High Functional Materials & Components

104,417

93,118Automotive Systems

59,41884,296

Smart Life & Ecofriendly Systems

7,186

18,767

Others

22,21865,358Financial Services

76,645

156,889

Subtotal

482,806

656,627

3,883

9,161

486,689

665,788

Corporate items and Eliminations
Total

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

F-18

Notes to Consolidated Financial Statements
Geographic Information
The following table shows revenues attributed to geographic areas based on the location of the customers for the years ended
March 31, 2017 and 2016.
Millions of yen
2017

2016

Japan

4,757,685

5,231,530

Asia

1,860,716

2,112,334

North America

1,144,029

1,280,326

972,661

951,105

EuropeOther Areas

427,173

459,010

Overseas Revenues Subtotal

4,404,579

4,802,775

Total Revenues

9,162,264

10,034,305

Revenues in China for the years ended March 31, 2017 and 2016 were ¥928,983 million and ¥1,055,576 million, respectively.
Revenues in the U.S.A. for the years ended March 31, 2017 and 2016 were ¥1,051,535 million and ¥1,168,164 million,
respectively. Revenues from outside customers attributable to any individual country and region other than Japan, China and the
U.S.A. were not material for the years ended March 31, 2017 and 2016.
The following table shows the balances of property, plant and equipment, investment properties and intangible assets for eachgeographic area as of March 31, 2017 and 2016.
Millions of yen
March 31, 2017
Japan

March 31, 2016

1,627,391

2,099,182

Asia

365,774

435,969

North America

445,119474,536

Europe360,991

501,180

Other Areas

127,551

80,2772,926,826

3,591,144

34,79133,875

2,961,617

3,625,019

Subtotal
Corporate items and Eliminations
Total

The balances of property, plant and equipment, investment properties and intangible assets in the U.S.A. as of March 31, 2017 and2016 were ¥431,364 million and ¥459,502 million, respectively. The balances of property, plant and equipment, investment
properties and intangible assets in any individual country and region other than Japan and the U.S.A. were not material as of March
31, 2017 and 2016.
Significant Customer Information
There was no concentration of revenues from a specific customer for the years ended March 31, 2017 and 2016.

F-19

Notes to Consolidated Financial Statements(5) Business Acquisitions and Divestitures
The following are the main business acquisitions and divestitures for the year ended March 31, 2017, including the period up to theapproval date of the consolidated financial statements.
(a) Sale of shares and business reorganization of Hitachi Kokusai Electric Inc. (Hitachi Kokusai)
On April 26, 2017, the Company signed a basic agreement with HKE Holdings G.K. (HKE), which is indirectly held andoperated by a related investment fund whose equity interests are wholly owned by Kohlberg Kravis Roberts & Co. L.P. andwith HVJ Holdings Inc. (HVJ), in which is invested by funds which are managed, operated, provided with information and thelike by Japan Industrial Partners, Inc., regarding (i) a tender offer scheduled to be conducted by HKE for the common shares ofHitachi Kokusai, which is a consolidated subsidiary of the Company in the Electronic Systems & Equipment segment and ashare consolidation of the share of Hitachi Kokusai, and the acquisition of treasury shares by Hitachi Kokusai, through which
Hitachi Kokusai becomes a wholly-owned subsidiary of HKE, (ii) an absorption-type company split of the thin-film processsolutions business of Hitachi Kokusai, whereby HKE will be the company succeeding in the absorption-type split, to be
conducted by HKE and Hitachi Kokusai after Hitachi Kokusai becomes a wholly-owned subsidiary of HKE, and (iii) thetransfer by HKE of 20% of the share of Hitachi Kokusai to the Company and 20% of the share of Hitachi Kokusai to HVJ thatis scheduled to take place after the absorption-type company split, and other transactions that are incidental or related to thosetransactions.
It is expected that upon the completion of the transaction, the Company's ownership ratio of shares of Hitachi Kokusai will
decrease from 51.7% to 20.0% and Hitachi Kokusai will turn into an equity-method associate of the Company. The effects ofthis transaction on the Company’s consolidated financial statements are currently being evaluated.
(b) Acquisition of “Sullair” business
On April 25, 2017, the Company signed an agreement with Accudyne Industries Borrower, S.C.A. (Accudyne) to acquire
Accudyne’s subsidiaries and certain related assets that manufacture and sell air compressors under the “Sullair” brand mainly
in North America, in order to expand global business of industrial equipment business. The total consideration will be USD
1,245 million (¥139,676 million). The effects of this transaction on the Company’s consolidated financial statements are
currently being evaluated.
(c) Sale of all shares of Hitachi Koki Co., Ltd. (Hitachi Koki)
On January 13, 2017, the Company and Hitachi Urban Investment, Ltd., a subsidiary of the Company, signed an agreementwith HK Holdings Co., Ltd., all of whose issued shares are owned by investment funds controlled by Kohlberg Kravis Roberts& Co. L.P., regarding a tender offer made by HK Holdings Co., Ltd. The objective of the tender offer was to acquire common
stock of Hitachi Koki, a subsidiary of the Company in the Electronic Systems & Equipment segment, and stock acquisitionrights issued based on a resolution at the Hitachi Koki’s board of directors’ meeting held on July 28, 2015. The agreement
provided that the Company and Hitachi Urban Investment, Ltd. would subscribe all shares of common stock of Hitachi Koki
owned by the Company and Hitachi Urban Investment, Ltd. to the tender offer and in accordance with this agreement, thetransfer of shares was completed on March 29, 2017.
As a result of this transfer of shares, the Company’s ownership ratio of shares of Hitachi Koki decreased from 51.2% to zero,and Hitachi Koki was deconsolidated. A gain on the sale of shares of Hitachi Koki in the amount of ¥28,097 million wasrecognized in Other income in the consolidated statement of profit or loss. Changes in non-controlling interests in the
consolidated statement of changes in equity include derecognition of non-controlling interest in Hitachi Koki as a result of its
deconsolidation.

F-20

Notes to Consolidated Financial Statements(d) Acquisition of Bradken Limited (Bradken)
On October 3, 2016, Hitachi Construction Machinery Co., Ltd. (HCM), a subsidiary of the Company in the Construction
Machinery segment, signed a bid implementation agreement with Bradken to implement a tender offer for all issued shares ofcommon stock of Bradken, which conducts metal casting and operates manufacture and distribution services for metal castingproducts, in order to complement and bolster the parts service business in the mining business of HCM. The tender offer was
executed from November 1, 2016 to April 7, 2017, and HCM had acquired the majority of the ownership ratio of voting rights
in Bradken and Bradken became a consolidated subsidiary of HCM on March 20, 2017.
As a result of the tender offer, HCM acquired over 90% of the total number of issued shares of Bradken. Since HCM proceededwith a squeeze-out procedure to acquire the remaining shares of Bradken held by its minority shareholders aiming to makeBradken a wholly owned subsidiary, HCM accounted for the acquisition as if it had substantially acquired 100% of the sharesof Bradken.
The following table summarizes the fair value of the consideration paid for Bradken and the provisional amounts of the assets
acquired and liabilities assumed recognized as of the acquisition date.
Millions of yen
Cash and cash equivalents
3,572
Trade receivables
7,950
Inventories
15,136
Other current assets
3,895
Property, plant and equipment
30,488Intangible assets
Goodwill (not deductible for tax purposes)
34,722Other intangible assets
4,900
5,562
Other non-current assets
106,225
Total
Current liabilities
Non-current liabilities
Total

42,2405,371
47,611

Consideration for acquisition

58,614

The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
The consideration, paid in cash, for the 68.62% ownership interest by March 31, 2017 was ¥40,336 million. Unpaid
consideration of ¥18,278 million as of March 31, 2017 is recognized in Other current liabilities in the consolidated statement offinancial position.
The Company is currently evaluating the fair values to be assigned to assets and liabilities of Bradken at the acquisition date,
and therefore the above amounts are subject to change.
The results of operations of Bradken for the period from the acquisition date to March 31, 2017 were not material.
On a pro forma basis, revenues and net income attributable to Hitachi, Ltd. stockholders using an assumed acquisition date for
Bradken of April 1, 2016 would not differ materially from the amounts reported in the consolidated financial statements for theyear ended March 31, 2017.

F-21

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

F-22

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

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

F-23

Notes to Consolidated Financial Statements
The following are the main Business Acquisitions and Divestitures for the year ended March 31, 2016.
(a) Acquisition of divisions of signaling and railvehicle of Finmeccanica S.p.A. (FNM)
Hitachi Rail Italy S.p.A. (HRI) and Hitachi Rail Italy Investments S.r.L. (HRII), subsidiaries of the Company in the Social
Infrastructure & Industrial Systems segment, signed binding agreements with FNM to acquire;1) the current business of AnsaldoBreda S.p.A. (Breda), a manufacturer of rail vehicles for mass transit, with the exclusion ofsome revamping activities and certain residual contracts,
2) the entire interest owned by FNM in Ansaldo STS S.p.A. (STS), a company engaged in the design and implementation andmanagement of systems for signaling and supervision of railways, equal to approximately 40% of the share capital,
in order to strengthen our manufacturing footprint and expand our customer base in the global railway business. On November
2, 2015 (the acquisition date), HRI and HRII closed the deal and acquired the business of Breda and the entire interest owned
by FNM in STS in accordance with the binding agreements. The Company obtained control of STS, due to factors such as theacquisition of the share capital and the fact that the Company’s recommended directors represent the majority of the board of
directors elected at the shareholders’ meeting held on the acquisition date, and therefore STS became a consolidated subsidiaryof the Company effective on the same date.
The total consideration, paid in cash, for the business of Breda was EUR 30 million (¥4,041 million) and the total
consideration, paid in cash, for the shares of STS was EUR 761 million (¥101,184 million). HRII acquired a part of the rest of
STS shares, as a result, the ownership ratio of voting rights reached to 50.77% as of March 31, 2016.
The following table summarizes the fair value of the consideration paid for STS and the business of Breda, and the amounts of
the assets acquired and liabilities assumed recognized as of the acquisition date.
Millions of yen
STS the businessof Breda
30,115
2,706
131,343
61,31537,42433,49634,494
17,444

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

55,82023,238
312,434

241
115,202

Current liabilities
Non-current liabilities
Total

124,044
20,606
144,650

107,401
3,760
111,161

Cash paid for acquisitionNon-controlling interests
Total

101,184
66,600167,784

4,041
4,041

The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
Non-controlling interests are measured by the appropriate share in the fair value of identifiable net assets of the STS.
HRI repaid EUR 111 million (¥14,754 million) of loans from FNM which were included in the business of Breda, in addition
to the acquisition.
The results of operations of STS and the business of Breda for the period from the acquisition date to March 31, 2016 were notmaterial.
On a pro forma basis, revenues and net income attributable to Hitachi, Ltd. stockholders using an assumed acquisition date for
STS and the business of Breda of April 1, 2015 would not differ materially from the amounts reported in the consolidated
financial statements for the year ended March 31, 2016.

F-24

Notes to Consolidated Financial Statements(b) Acquisition of Pentaho Corporation (Pentaho)
On February 7, 2015, Hitachi Data Systems Corporation (HDS), a subsidiary of the Company in the Information &Telecommunications Systems segment, signed a definitive agreement with the shareholders of Pentaho to acquire all the sharesof Pentaho, for enhancing big-data technologies and solutions. Pentaho integrates data, develops technologies for big-data
analysis and visualization, and delivers solutions and supports. On May 29, 2015, HDS acquired all the shares of Pentaho inaccordance with the definitive agreement, and HDS obtained control of Pentaho, and it became a wholly owned subsidiary.
The following table summarizes the fair value of the consideration paid for Pentaho, the assets acquired and liabilities assumed
recognized as of the acquisition date.
Millions of yen
988
807
182
82

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

55,901
10,275
68,235Current liabilities
Non-current liabilities
Total

3,449
9
3,458

Cash paid for acquisition

64,777

The goodwill mainly comprises excess earning power and expected synergies arising from the acquisition.
The results of operations of Pentaho for the period from the acquisition date to March 31, 2016 were not material.
On a pro forma basis, revenues and net income attributable to Hitachi, Ltd. stockholders using an assumed acquisition date forPentaho of April 1, 2015 would not differ materially from the amounts reported in the consolidated financial statements for theyear ended March 31, 2016.
(6) Trade Receivables
The components of trade receivables are as follows:
Millions of yen
March 31, 2017

March 31, 2016

2,295,199

2,836,953

Others137,950

155,817

Total

2,433,149

2,992,770

Accounts receivable

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

F-25

Notes to Consolidated Financial Statements(7) Construction Contracts
Total costs incurred and profits recognized, advances received and retentions for construction contracts in progress as of March 31,2017 and 2016 are as follows:
Millions of yen
Total costs incurred and profits recognized

March 31, 2017

March 31, 2016

2,589,474

2,373,255

Advances received

195,847

178,191

Retentions

14,93810,802Gross amount due from and due to customers for contract work as of March 31, 2017 and 2016 are as follows:
Millions of yen
Gross amount due from customers forcontract work
Gross amount due to customers forcontract work

March 31, 2017

March 31, 2016

506,086

459,386

276,270

244,004

Revenues recognized from construction contracts for the years ended March 31, 2017 and 2016 were ¥1,096,376 million and¥920,474 million, respectively.

F-26

Notes to Consolidated Financial Statements(8) Leases(a) Lessee
The Company and certain subsidiaries use leased facilities and equipment, including buildings, machinery and equipment andvehicles under finance leases or operating leases.
The following table shows the undiscounted amounts and present value of minimum lease payments under finance leases as ofMarch 31, 2017 and 2016.
Millions of yen
March 31, 2017
Minimum
Present value
leaseof minimum
payments
lease
payments

March 31, 2016
Minimum
Present value
leaseof minimum
payments
lease
payments

Within 1 year

16,447

15,198

12,792

12,011After 1 year but not more than 5 years

34,241

31,49631,03929,516More than 5 years

4,007

3,009

3,552

3,073

Total

54,69549,70347,38344,600Finance charges(4,992)(2,783)49,70344,600Present value of minimum lease payments,
total

The following table shows the future minimum lease payments under non-cancelable operating leases as of March 31, 2017and 2016.
Millions of yen
March 31, 2017

March 31, 2016

Within 1 year

21,39140,056After 1 year but not more than 5 years

59,307

99,787More than 5 years

21,51650,372

Total

102,214

190,215

Total operating lease expenses for the years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017
Operating lease expenses

2016
121,135

F-27

150,243

Notes to Consolidated Financial Statements(b) Lessor
The Company and certain subsidiaries lease certain assets such as manufacturing machinery and equipment under finance andoperating lease arrangements.
The following table shows the undiscounted amounts and present value of minimum lease payments receivable under financeleases as of March 31, 2017 and 2016.
Millions of yen
March 31, 2017
Gross
Present value
investmentof minimumin leaselease
payments
receivable

March 31, 2016
Gross
Present value
investmentof minimumin leaselease
payments
receivable

Within 1 year

45,62042,788363,815334,311After 1 year but not more than 5 years

41,57939,327

677,698

621,855219

210

96,843

83,16087,41882,325

1,138,356

1,039,326

More than 5 years
Total
Unearned income(4,130)(63,415)

Net investment in the lease

83,2881,074,941

Unguaranteed residual value(963)(35,615)

82,325

1,039,326

Present value of minimum lease payments
receivable, total

The amounts of the allowance for uncollectable minimum lease payments receivable as of March 31, 2017 and 2016 were¥2,277 million and ¥8,698 million, respectively.
The following table shows the future minimum lease payments receivable under non-cancelable operating leases as of March 31,2017 and 2016.

Within 1 year

3,034

Millions of yen
March 31, 2016
58,883After 1 year but not more than 5 years

3,782

67,650

15

2,043

6,831

128,576

March 31, 2017

More than 5 years
Total

F-28

Notes to Consolidated Financial Statements(9) Inventories
The components of inventories are as follows:
Millions of yen
March 31, 2017

March 31, 2016

Finished goods

512,539

587,431

Semi-finished goods and work in process

492,284

483,712Raw materials

221,084

228,7121,225,907

1,299,855

Total

For the years ended March 31, 2017 and 2016, the amounts of inventories expensed and included as cost of sales were ¥5,598,611
million and ¥5,775,548 million, respectively, and the write-downs of inventories were ¥27,444 million and ¥41,824 million,
respectively.
(10) Investments Accounted for Using the Equity Method
The aggregated carrying amounts of investments accounted for using the equity method as of March 31, 2017 and 2016, and theCompany and certain subsidiaries’ share of total comprehensive income (loss) of equity-method associates and joint ventures forthe years ended March 31, 2017 and 2016 are as follows:
Millions of yen
Associates
March 31, 2017
Carrying amount of investments

Joint ventures

March 31, 2016

664,857

March 31, 2017

641,246

March 31, 2016

26,39435,714
Millions of yen

Associates
2017

Joint ventures
2016

2017

2016

Net income (loss) fromcontinuing operations(8,193)(3,377)

5,849

3,533

Other comprehensive income (loss)(7,116)(16,751)

6,395(13,763)

Total comprehensive income (loss)(15,309)(20,128)

12,244(10,230)

As of March 31, 2017 and 2016, the Company and certain subsidiaries’ interests in certain joint ventures operating at a loss havethe cumulative loss exceeding the Company and certain subsidiaries’ investments, and thus the negative amounts of ¥104,176
million and ¥112,260 million, respectively, were recognized in other non-current liabilities.
In addition to the share of Net income (loss) from continuing operations of equity method associates and joint ventures,
impairment losses on investments accounted for using the equity method were recognized in Share of profit (loss) of investments
accounted for using the equity method. The amount of impairment losses recognized in the consolidated statement of profit orloss for the year ended March 31, 2017 was ¥44,842 million.
Share of profit (loss) of investments accounted for using the equity method in the year ended March 31, 2017 includes ¥66,477
million of losses related to the exit from the commercial development of a laser-based uranium enrichment technology by anassociate in the U.S.A. in the Social Infrastructure & Industrial Systems segment. The losses include ¥39,659 million of
impairment loss on the investment accounted for using the equity method. The recoverable amount was determined based onvalue in use, which was measured at ¥9,536 million as of March 31, 2017. In assessing value in use, future cash flows werediscounted using a discount rate of 11.1% (before tax).

F-29

Notes to Consolidated Financial Statements

Of the associates and joint ventures accounted for using the equity method, Hitachi Capital is the only associate that is material to
the Company’s financial statements. Hitachi Capital provides a diverse range of leasing and financial services to the Company
and other customers. Hitachi Capital’s summarized financial information is as follows, and it includes fair value adjustments on
assets and liabilities of Hitachi Capital.
Millions of yen
March 31, 2017
Total assets

3,177,606

Total liabilities

2,879,127

EquityEquity attributable to owners of the parent

285,142

Non-controlling interests

13,337

Year ended March 31, 2017
Revenues

371,110

Income from continuing operations

42,549Other comprehensive loss

(8,546)Comprehensive income

34,003

Hitachi Capital became an equity-method associate of the Company during the year ended March 31, 2017, and the Company hasreceived no dividends from Hitachi Capital as an equity-method associate.
Reconciliation of Equity attributable to owners of the parent in the above summarized financial information to the carrying
amount of the investment in Hitachi Capital is as follows.
Millions of yen
March 31, 2017
Equity attributable to owners of the parent

285,142
33.4

Share (%)
Carrying amount of the Company's investment
in Hitachi Capital

95,209The fair value of the Company’s investment in Hitachi Capital based on the market price of its shares as of March 31, 2017 was¥105,074 million.

F-30

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

Buildings
andstructures

MachineryandvehiclesTools,
furnitureandfixtures433,584

757,652

584,443

189,407383,473

123,938

2,472,497

124

12,131

49,11030,919153,202279,120524,606

Transfers between accounts

4,422

68,489112,453

49,5903,133(238,087)-

Sales and disposals(535)(12,427)(7,489)(5,244)(21,145)(438)(47,278)

Other

Constructionin progress

Total

Net carrying amountMarch 31, 2015
Additions

Depreciation-(62,049)(124,235)(74,000)(103,857)-(364,141)(1,972)(11,615)(7,445)(1,931)(253)(1,646)(24,862)

Acquisitions and divestitures

644

7,615

(22,675)(1,620)

1,806

3,906

(10,324)

Currency translation effect(8,651)(17,442)(23,217)(7,475)(12,123)(13,566)(82,474)

Impairment losses

Other(1,047)

6,302

(154)

13,79422,445(9,138)32,202

March 31, 2016

426,569

748,656

560,791

193,440

426,681

144,089

2,500,226

Additions

601

5,793

25,54424,45572,839245,446

374,678

Transfers between accounts

955

64,398109,796

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

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

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

(10)

(185)

(24,844)

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

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

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

6,223

16,475(5,059)15,972

March 31, 2017

360,330

687,242

533,522

171,673

93,028

152,616

1,998,411

Depreciation

The amount of depreciation recognized is included in Cost of sales and Selling, general and administrative expenses in the
consolidated statement of profit or loss. Impairment losses are included in Other expenses in the consolidated statement of profit
or loss.
Finance lease assets are included in Other in the table above, and their carrying amounts as of March 31, 2017 and 2016 were
¥ 28,032 million and ¥84,489 million, respectively.

F-31

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

Buildings
andstructures

Machinery
Tools,
andfurniturevehicles and fixtures

March 31, 2015

456,319

1,905,337

2,448,847

993,613

1,571,316

131,800

7,507,232

March 31, 2016

446,536

1,900,807

2,362,660

975,628

1,498,628

146,260

7,330,519

March 31, 2017377,817

1,723,950

2,391,448

937,139

216,120

153,0075,799,481

OtherConstructionin progress

Total

Gross carrying amount

Accumulated depreciation andimpairment losses
March 31, 2015

(22,735) (1,147,685) (1,864,404)(804,206) (1,187,843)(7,862) (5,034,735)

March 31, 2016

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

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

Impairment Losses Recognized for the Year Ended March 31, 2017:
The Social Infrastructure & Industrial Systems segment recognized impairment losses of ¥8,097 million, of which ¥6,129 million
was attributable to the lower than expected future revenue projected for its compressor business, mainly due to the downturn inthe oil and gas market. The recoverable amount of the CGU was largely determined on the basis of fair value less costs ofdisposal, which was measured at ¥3,427 million as of March 31, 2017. A market approach was used in measuring the fair value ofthe relevant assets. These fair value measurements were based on real estate appraisal value, and thus classified as Level 3 of fairvalue hierarchy.
The Information & Telecommunications Systems segment recognized impairment losses of ¥5,685 million, mainly due to thelower than expected future revenue from the Telecommunications & Network Systems business as a result of changes in market
trends.
The Smart Life & Ecofriendly Systems segment recognized impairment losses of ¥4,846 million, mainly due to the lower than
expected future revenue because of severe competition in the home appliances market.
Impairment Losses Recognized for the Year Ended March 31, 2016:
The Social Infrastructure & Industrial Systems segment recognized impairment losses of ¥11,697 million, of which ¥7,485
million was attributable to the lower than expected future revenue projected for its power semiconductor business, due to change
in market trends. The recoverable amount of the CGU was recorded at nominal value because the previously forecast future cash
flows in the business plan are no longer expected.
The Information & Telecommunication Systems segment recognized impairment losses of ¥3,275 million, due to idle assets ofbuildings and structures and machinery.
The Construction Machinery segment recognized impairment losses of ¥2,854 million, due to the lower than expected future
revenue projected in its construction machinery market because of severe competition in the construction market.

F-32

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

Goodwill

Intangible
lease assets

Other

Total

Net carrying amountMarch 31, 2015

438,131

136,534

50,322

44,824

263,771933,582

Internal developments

-

3,186

2,924

-

75,58081,690Purchases-

12,261

252

20,70622,32855,547

Transfers between accounts-

44,37138,757-(83,128)-

Amortization-(53,052)(38,787)(17,244)(32,160)(141,243)(14,525)(2,223)(424)-(2,743)(19,915)-(3,183)(192)(1,343)(1,212)(5,930)Acquisitions and divestitures

137,274

(611)

184

-

52,130188,977

Currency translation effect(32,315)

(985)

195

-

(8,522)(41,627)

Impairment losses
Disposals

Other
March 31, 2016

-

140

3,982

1,509

13,691

19,322

528,565

136,438

57,21348,452299,735

1,070,403

Internal developments

-

1,541

2,123

-

64,176

67,840Purchases-

10,026849

8,045

21,72740,647

Transfers between accounts-

30,91433,564-(64,478)-

Amortization-(49,616)(28,005)(9,097)(25,708)(112,426)(3,062)(1,285)(19,182)-(12,115)(35,644)-(2,934)

(432)

(539)

(3,091)(6,996)

Acquisitions and divestitures

14,473(9,622)(2,150)(45,974)(40,774)(84,047)

Currency translation effect(12,729)

(218)

(370)

(1)

(8,227)(21,545)

-

(376)

1,595

487

(737)

969

527,247

114,868

45,205

1,373

230,508919,201

Impairment losses
Disposals

Other
March 31, 2017

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

Software for Software forinternal use
saleIntangible
lease assets

Other

Total

Gross carrying amountMarch 31, 2015

441,266

627,149

502,194

264,399471,580

2,306,588

March 31, 2016

534,533

648,278

540,503

253,706

528,1392,505,159

March 31, 2017536,277

593,412552,868

2,807

485,123

2,170,487

March 31, 2015

(3,135)(490,615)(451,872)(219,575)(207,809)(1,373,006)

March 31, 2016

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

March 31, 2017

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

Accumulated amortization andimpairment losses

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

F-33

Notes to Consolidated Financial Statements

Impairment Losses Recognized for the Year Ended March 31, 2017:
The Information & Telecommunication Systems segment recognized impairment losses of ¥29,068 million, mainly due to thelower than expected future revenue on software for sale and other intangible assets as a result of changes in market trends.
The Electronic Systems & Equipment segment recognized impairment losses of ¥6,098 million, mainly due to the lower than
expected future revenue on software for sale because of severe competition in the Medical Information Systems business.
Impairment Losses Recognized for the Year Ended March 31, 2016:
The Information & Telecommunication Systems segment recognized impairment losses of ¥14,845 million, of which ¥13,235
million was attributable to a partial withdrawal from the consulting business in North America and Europe. The amount of
goodwill and other intangible assets related to the business withdrawn was fully written down.
The carrying amounts of intangible assets with indefinite useful lives as of March 31, 2017 and 2016 amounted to ¥9,932 millionand ¥10,849 million, respectively. The main components of such assets are acquired brands and trademarks. They are assessed tohave indefinite useful lives because there is no foreseeable limit to the period over which such assets are expected to generate net
cash inflows for the entity.
Expenditures on research activities aimed at obtaining new scientific or technical knowledge or understanding are expensed whenincurred. Expenditures on development activities for a new or major improvement of production plan or design prior to thebeginning of commercial production or use are capitalized as an internally generated intangible asset only when such
expenditures attributable to the intangible asset can be reliably measured, it is feasible for the Company to complete thedevelopment, and it is highly probable that the Company will obtain the future economic benefit. Otherwise, the expenditures arerecognized as an expense when incurred.
The carrying amounts of internally generated intangible assets (at cost less accumulated amortization and impairment losses) as ofMarch 31, 2017 and 2016 amounted to ¥174,840 million and ¥196,791 million, respectively. These assets are mainly included insoftware for internal use or software for sale.
Research and development expenditures recognized as an expense for the years ended March 31, 2017 and 2016 were ¥323,963
million and ¥333,730 million, respectively, and they are included in Cost of sales and Selling, general and administrative
expenses in the consolidated statement of profit or loss.
The Company tests goodwill acquired through business combinations for impairment by comparing the carrying amount and therecoverable amount per CGU (or group of CGUs).
The group of CGUs with a significant proportion of goodwill allocated as of March 31, 2017 was the Information &Communication Technology Business Division, and as of March 31, 2016 was the Information & Telecommunication Systems
segment. Effective from April 1, 2016, the Company changed its business structure in order to strengthen front-line functions.
Due to this transition, the Company reclassified the group of CGUs of the Information & Telecommunication Systems segment,
and the group of CGUs with a significant proportion of goodwill allocated as of March 31, 2017 was changed to the Information& Communication Technology Business Division, which belongs to the Information & Telecommunication Systems segment.
The carrying amounts of goodwill allocated to the Information & Communication Technology Business Division as of March 31,2017 and to the Information & Telecommunication Systems segment as of March 31, 2016 were ¥191,251 million and ¥207,293
million, respectively.
The recoverable amount used for the impairment test of goodwill of the Information & Communication Technology Business
Division for the year ended March 31, 2017 was calculated based on the value in use. The value in use was calculated by theestimated future cash flows based on the business plans approved by the management, discounted at the discount rate which wasderived from the weighted average cost of capital. The business plan reflected past experience based on external information. For
the year ended March 31, 2017, cash flows were projected over three years, the discount rates used was 7.61% (before tax), andthe growth rate used was 1.0%.

F-34Notes to Consolidated Financial Statements
The recoverable amount used for the impairment test of goodwill of the Information & Telecommunication Systems segment for
the year ended March 31, 2016 was the fair value less cost of disposal. The fair value was estimated by a combination of prices ofsimilar businesses, present value calculations and other inputs. Judgments and assumptions required for future plans of relevantbusinesses were based on certain assumptions deemed reasonable at the time of estimate. For the year ended March 31, 2016,
cash flows were projected over five years, the discount rate used was 5.72%, and the growth rate used was 1.0%. The fair value
measurement was classified as Level 3 of the fair value hierarchy based on the inputs used.
The Company considers it unlikely for the carrying amount of each CGU (or group of CGUs), together with allocated goodwill,
would exceed the respective recoverable amounts of the CGU (or group of CGUs) even if the primary assumptions used for the
impairment test changed within a reasonable range.

F-35

Notes to Consolidated Financial Statements(13) Deferred Taxes and Income Taxes
The components of income taxes recognized in the consolidated statement of profit or loss and deferred taxes recognized in the
consolidated statement of comprehensive income are as follows:
Millions of yen
2017

2016

Income taxes
Current tax expense

178,405

156,177

Temporary differences originated and reversed(19,401)

78,149Changes in realizability of deferred tax assets(34,343)(80,005)

Deferred tax expense

Adjustments to deferred tax assets and liabilities for enactedchanges in tax laws and tax rates in Japan

451

10,885125,112165,206

30,685(25,602)

Remeasurements of defined benefit plans

1,960(15,771)

Net changes in cash flow hedges

6,553(4,168)Foreign currency translation adjustments

(364)

433

38,834(45,108)

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

Total

The Company and its domestic Japanese subsidiaries were subject to a national corporate tax, an inhabitant tax and business tax,
for the years ended March 31, 2017 and 2016, which in the aggregate resulted in combined statutory income tax rates ofapproximately 30.8% and 33.0%, respectively.
The Company and certain subsidiaries file consolidated income tax returns in certain jurisdictions.
On November 18, 2016, amendments to corporation tax law were enacted in Japan, resulting in reclassifying the combined
statutory income tax rate without changing the total tax rate. The effect of those changes on the Company’s deferred tax balances
amounted to ¥451 million of additional expenses and is included in Income taxes.
On March 29, 2016, amendments to corporation tax law were enacted in Japan, resulting in lower corporate tax rates. Thosechanges became effective on April 1, 2016. As a result, the aggregate statutory income tax rate for domestic companies will beapproximately 30.8% for the years beginning on or after April 1, 2016 and 30.5% for the years beginning on or after April 1,
2018. The effect of those changes on the Company’s deferred tax balances amounted to ¥10,885 million of additional expenses
and is included in Income taxes.

F-36

Notes to Consolidated Financial Statements
Reconciliations between the combined statutory income tax rate and the effective income tax rate are as follows:
2017

2016

Combined statutory income tax rate

30.8%

33.0%

3.1

0.0

(9.5)

9.8

10.3

2.2

Expenses not deductible for tax purposes

1.2

2.3

Enacted changes in tax laws and rates

0.1

2.1

Share of profits of investments accounted for using the equity method
Change in excess amounts over the tax basis of investments in
subsidiaries and investments accounted for using the equity method
Gain or loss on sale of investments in subsidiaries and investments
accounted for using the equity method

Impairment of goodwill

0.2

0.9

Change in realizability of deferred tax assets(7.3)(15.5)

Difference in statutory tax rates of foreign subsidiaries

(2.3)

(3.2)

Other, net

0.1

0.4

26.7%

32.0%

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

Millions of yen
March 31, 2017
Deferred tax assets, net at beginning of year

March 31, 2016

112,446

85,208

Recognized in profit or loss

53,293(9,029)

Recognized in OCI(38,834)

45,108Acquisitions, divestitures and others(13,280)(9,241)

1,186

400

114,811

112,446

Discontinued operations
Deferred tax assets, net at end of year

Significant components of the deferred tax assets and liabilities are as follows:
Millions of yen
Consolidated statement offinancial position
March 31,2017

March 31,2016

Consolidated statement of
profit or loss
2017

2016

Deferred tax assets
Retirement and severance benefits

67,719108,322(7,545)

13,349Accrued expenses

105,384

71,19034,323(14,067)

12,60524,982

2,472(1,685)

12,26022,747(9,925)45

27,24530,913(145)(1,988)26,82825,589

1,168

1,270

Other

57,886

138,346(32,994)

14,748

Total deferred tax assets

309,927

422,089(12,646)

11,672

Deferred profit on sale of properties(4,457)(14,071)(1,618)(2,982)

Investments in securities(83,680)(89,142)

31,425(36,780)

Depreciation of property, plant andequipment
Net operating loss carryforwards
Net intercompany profits oninventories, P.P.E. and others
Deferred revenues

Deferred tax liabilities

Tax purpose reserves regulated by(30,367)(51,355)

13,680341

Intangible assets

Japanese tax laws

(42,028)(61,226)

8,871

7,907

Other

(34,584)(93,849)

13,581

10,813

Total deferred tax liabilities(195,116)(309,643)

65,939(20,701)

Net deferred tax assets

114,811

112,446

53,293(9,029)F-37

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

March 31, 2017
171,612

Millions of yen
March 31, 2016
222,369

Other non-current liabilities(56,801)(109,923)

Total

114,811

112,446

Other non-current assets

Deferred tax liabilities are not recognized for excess amounts over the tax basis of investments in subsidiaries and investments
accounted for using the equity method that are considered to be reinvested indefinitely, for such differences will unlikely reversein the foreseeable future. The temporary differences related to undistributed earnings of subsidiaries for which deferred tax
liabilities are not recognized were ¥638,458 million and ¥710,921 million, respectively, as of March 31, 2017 and 2016.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or
all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generationof future taxable income in specific tax jurisdictions during the periods in which these deductible differences become deductible.
Although realization is not assured, the Company carries out an assessment of the scheduled reversals of deferred tax liabilities
and projected future taxable income, including the execution of certain available tax strategies if needed. Based on these factors,
the Company believes it is more likely than not it will realize the benefits of these deductible differences as of March 31, 2017.
Deductible temporary differences and net operating loss carryforwards for unrecognized deferred tax assets are as follows:
Millions of yen
March 31, 2017

March 31, 2016

Deductible temporary differences

1,294,211

1,301,576

Net operating loss carryforwards

522,881592,352

1,817,092

1,893,928

Total

Net operating loss carryforwards for unrecognized deferred tax assets will expire as follows:
Millions of yen
March 31, 2017

March 31, 2016

Within 5 years

283,452

286,736

After 5 years but not more than 10 years

90,726

146,712More than 10 years

148,703

158,904

Total

522,881592,352

F-38

Notes to Consolidated Financial Statements(14) Trade Payables
The components of trade payables are as follows:
Millions of yen
March 31, 2017

March 31, 2016

1,220,236

1,365,736

Others181,997

86,182

Total

1,402,233

1,451,918

Accounts payable

Others include electronically recorded monetary claims and notes payable.
(15) Provisions
Changes in the balance and components of provisions for the year ended March 31, 2017 are as follows:
Millions of yen
Asset retirement
obligations

Provisions related torestructuring(structural reform)

Product warranty
provisions

Other
provisions

March 31, 2016

25,085

1,431

36,094

210,154

Additions

3,583

24,66518,307

13,258

Utilized(2,308)(17,301)(18,581)(57,699)

Acquisitions and divestitures(8,418)

974

1,924

589

and others

112

90

(1,164)

6,305

March 31, 201718,0549,859

36,580172,607

228

4,072

24,252

166,561

17,826

5,787

12,328

6,046

Currency translation effects,

Current
Non-current

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

F-39

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

F-40

Notes to Consolidated Financial Statements
Changes in the present value of defined benefit obligations and the fair value of plan assets for the years ended March 31,2017 and 2016 are as follows:
Millions of yen
March 31, 2017

March 31, 2016

Defined benefit obligations
At beginning of year

2,416,920

2,384,173

Service cost

81,431

84,206

Interest cost

12,46821,993

Plan amendments

153

(163)

Actuarial losses

5,781

117,413

Benefits paid

(117,606)(131,296)

Acquisitions and divestitures(113,180)(14,518)

Transfer to defined contribution pension plan

(1,268)(25,703)

Settlements/curtailments(19,913)(1,244)Currency translation effect(16,862)(17,941)

2,247,924

2,416,920

1,662,642

1,703,201

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

9,607

18,280Return on plan assets (excluding interest income)

52,991(38,290)

Employers’ contributions

103,289

110,287

Employees’ contributions

249

227

Benefits paid

(88,338)(96,523)

Acquisitions and divestitures(70,695)(17,589)-(4,431)

Transfer to defined contribution pension plan
Settlements/curtailments(18,852)(1,272)Currency translation effect(7,255)(11,248)

1,643,638

1,662,642

5,815

6,651

610,101

760,929

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

Millions of yen
March 31, 2017
Arising from changes in financial assumptions

10,253

March 31, 2016
(107,660)

Arising from changes in demographic assumptions(8,752)

792

Other

(7,282)(10,545)

The Company and certain subsidiaries remeasure the defined benefit obligations and plan assets at the end of the fiscal year.
The discount rates used in actuarial calculation of defined benefit obligations are as follows:
Percentage
March 31, 2017
Discount rate

0.6

F-41

March 31, 20160.6

Notes to Consolidated Financial Statements
If, at March 31, 2017, the discount rate rose by 0.5%, the defined benefit obligations would decrease by ¥136,366 million,
and if the discount rate decreased by 0.5%, the defined benefit obligations would increase by ¥148,154 million.
The sensitivity analysis is based on an assumption that all other variables other than the one analyzed are held constant; inreality, changes in other assumptions may impact the outcome of the analysis.
The Fund’s plan asset management is based on the safe and efficient management of the contributions, diversified
investments and determination of the investment ratio that should be sustained over the long term. The Fund seeks to maintaincurrent value of assets sufficient for future obligations. A target rate of return is established to ensure a stable long term rateof return on assets. A diversified investment strategy is carried out while a target asset allocation is established to achieve thetarget rate of return. The target asset allocation is based on the expected rate of return by each class of asset, the standard
deviation of the rate of return and the correlation coefficient among the assets. It is currently approximately 20% in equity,
50% in public and corporate bonds, and 30% in hedge funds, securitization products, life insurance general accounts andother assets. If market values fluctuate exceeding certain levels, the investment ratio is adjusted to the target allocation ratio inorder to control risks.
In selecting trustees or asset management companies, the Fund takes into account appropriate quantitative and qualitativeevaluations. The Fund also presents its management policies to the trustees or asset management companies, and periodicallyreceives asset management reports.
The fair values of plan assets invested as of March 31, 2017 and 2016 are as follows:
Millions of yen
March 31, 2017
With quoted market
price in an active
marketEquityGovernment bonds and municipal
debt securities
Corporate bonds and other debt securities
Hedge funds
Securitization products
Cash and cash equivalents
Life insurance general accounts
Commingled funds
Other
Total

With no quoted market
price in an active
marketTotal

26,892730

27,622

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

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

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

March 31, 2016
With quoted market
price in an active
marketEquityGovernment bonds and municipal
debt securities
Corporate bonds and other debt securities
Hedge funds
Securitization products
Cash and cash equivalents
Life insurance general accounts
Commingled funds
Other
Total

With no quoted market
price in an active
marketTotal

29,155

187

29,342

157,718
46,012
7,435
240,320

32,176
71,24541,31358,076
156
151,793
1,041,190
26,186
1,422,322

189,894
71,24541,31358,076
46,168
151,793
1,041,190
33,621
1,662,642

F-42

Notes to Consolidated Financial Statements
As of March 31, 2017 and 2016, investments in equity were allocated to approximately 30% in stocks listed in Japan and 70%
in stocks listed in foreign markets.
As of March 31, 2017, Japanese government bonds made up approximately 70% of the government bonds and municipal debt
securities, the majority of which were Japanese national bonds. As of March 31, 2016, Japanese government bonds made up
approximately 60% of the government bonds and municipal debt securities, the majority of which were Japanese nationalbonds. Foreign public bonds, as of March 31, 2017, took approximately 30%, the majority of which were foreign nationalbonds, and as of March 31, 2016, foreign public bonds took approximately 40%, the majority of which were foreign nationalbonds.
As of March 31, 2017, investments in corporate bonds and other debt securities were allocated to approximately 5% inJapanese corporate bonds and debt instruments, and 95% in foreign corporate bonds and debt instruments. As of March 31,
2016, investments in corporate bonds and other debt securities were allocated to nearly 100% in foreign corporate bonds anddebt instruments.
Hedge funds primarily consist of investments in relative value strategy funds, event driven funds, equity long or short funds,
and macroeconomic and Commodity Trading Advisor (CTA) funds.
Securitization products primarily consist of investments in equity of Japanese real estate funds, and debt and equity ofcollateralized loan obligations (CLO).
Commingled funds represent pooled institutional investments. As of March 31, 2017, commingled funds were allocated to
30% in listed stocks, 45% in government bonds, 5% in corporate bonds and other debt securities, 10% in cash and cash
equivalents and 10% in other assets. As of March 31, 2016, they were allocated to 30% in listed stocks, 50% in government
bonds, 5% in corporate bonds and other debt securities, 10% in cash and cash equivalents and 5% in other assets.
Funding by the Fund is conducted by taking into account various factors such as funded status, the limit of tax deductions,and actuarial calculations. For the purpose of maintaining balanced finance into the future, the bylaws of the Fund require
recalculation of the contribution amounts at the end of fiscal year every five years. Basic assumptions (expected interest rates,
mortality rates, withdrawal rate, etc.) are reviewed to recalculate the appropriate level of contribution.
The amount of contributions expected to be paid by the Company and its subsidiaries to the plan assets for the year ending
March 31, 2018 is ¥92,920 million.
The weighted average durations (expected average maturity) of defined benefit obligations as of March 31, 2017 and 2016
were 12.7 years and 13.1 years, respectively.
Contributions made to defined contribution plans and expensed in profit or loss in the years ended March 31, 2017 and 2016
were ¥29,033 million and ¥29,243 million, respectively.
(b) Employee Benefit Expenses
The aggregated amounts of employee benefit expenses including salary recognized in the consolidated statement of profit orloss for the years ended March 31, 2017 and 2016 were ¥2,363,880 million and ¥2,604,950 million, respectively.

F-43

Notes to Consolidated Financial Statements(17) Equity(a) Common Stock
Number of shares
March 31, 2017
Total number of authorized shares

March 31, 2016

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

10,000,000,000
Capital amount(Millions of yen)March 31, 2015

4,833,463,387

458,790

March 31, 2016

4,833,463,387

458,790

March 31, 2017

4,833,463,387

458,790

Shares issued by the Company are non-par value common stock. The issued shares above include treasury stock. The changes
in treasury stock for the years ended March 31, 2017 and 2016 are as follows:
Treasury stock(Number of shares)
March 31, 2015

(Millions of yen)

4,886,838

3,542

Acquisition of treasury stock

402,996295

Sales of treasury stock(41,905)(31)

5,247,929

3,806

271,523

153

March 31, 2016
Acquisition of treasury stock
Sales of treasury stock
March 31, 2017

(58,880)(43)

5,460,572

3,916

The number of shares of the Company held by the Company’s associates as of March 31, 2017 and 2016 were 167,000
shares, respectively.
(b) Surplus(i) Capital Surplus
The Companies Act of Japan mandates that at least half of paid-in capital be appropriated as common stock and the rest be
appropriated as legal reserve within capital surplus.
The changes in capital surplus include the effect of changes in the Company’s ownership interest in its consolidated
subsidiaries. For the year ended March 31, 2017, the changes in capital surplus were due mainly to the granting of a written
put option on FIAMM Energy Technology S.p.A. (FET) stock to the owner of the non-controlling interests of FET in
acquiring FET by Hitachi Chemical Company, Ltd. and for the year ended March 31, 2016, the changes in capital surplus
were due mainly to an additional purchase of Ansaldo STS S.p.A. by Hitachi Rail Italy Investments S.r.L.
(ii) Retained Earnings
The Companies Act of Japan requires that ten percent of retained earnings appropriated for dividends be retained until the
total amount of earned reserves included in capital reserve and retained earnings reaches a quarter of the nominal value ofcommon stock. Earned reserves may be available for dividends by resolution at the shareholders’ meeting.

F-44

Notes to Consolidated Financial Statements(18) Accumulated Other Comprehensive Income (AOCI) and Other Comprehensive Income (OCI)
Components of AOCI, net of related tax effects, presented in the consolidated statement of changes in equity, and changes in eachcomponent for the years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017

2016

Foreign currency translation adjustments
Balance at beginning of year

118,635

253,474

OCI, net of reclassification(39,526)(135,099)

(122)

260

78,987

118,635

Balance at beginning of year

(42,337)

86,136

OCI

36,815(127,743)

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

Net transfer of non-controlling interests

-

(56)

Reclassified into retained earnings

4,675

(674)

Balance at end of year(847)

(42,337)

Balance at beginning of year

147,852

213,415

OCI

59,422(48,205)(3)(2)

Reclassified into retained earnings(15,161)(17,356)

Balance at end of year

192,110

147,852

Balance at beginning of year

(140,607)(151,925)

OCI, net of reclassification

11,425

11,335

Net changes in financial assets measured at FVTOCI

Net transfer of non-controlling interests

Net changes in cash flow hedges

Net transfer of non-controlling interests

-

(17)

(129,182)(140,607)

Balance at beginning of year

83,543401,100

OCI, net of reclassification

68,136(299,712)

(125)

185

Reclassified into retained earnings(10,486)(18,030)

Balance at end of year

141,068

83,543

Balance at end of year
Total AOCI

Net transfer of non-controlling interests

F-45

Notes to Consolidated Financial Statements
The following shows a reconciliation of OCI, including non-controlling interests, to profit or loss items and deferred income tax
effect per components of OCI during the years ended March 31, 2017 and 2016.
Millions of yen
2017
Before tax

Tax effect

After tax

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

340(78,558)

Remeasurements of defined benefit plans

48,046(1,960)46,086

Net changes in financial assets measured at FVTOCI

90,619(30,685)

59,934

Net changes in cash flow hedges

1,700

488

2,188

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

Total

58,632(31,416)

27,216

Foreign currency translation adjustments

13,77324

13,797

Net changes in cash flow hedges

26,156(7,041)

19,115

Share of OCI of investments accounted for using the equity method

1,713

-

1,713

Total

41,642(7,017)

34,625

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

Remeasurements of defined benefit plans

48,046(1,960)46,086

Net changes in financial assets measured at FVTOCI

90,619(30,685)

59,934

Net changes in cash flow hedges

27,856(6,553)

21,303

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

401

(721)

Total

100,274(38,433)

61,841

Reconciliation of OCI to profit or loss:

OCI, net of reclassification adjustments:

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

Remeasurements of defined benefit plans

7,100

Net changes in financial assets measured at FVTOCI796

Net changes in cash flow hedges

759

Total

(6,295)

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

Remeasurements of defined benefit plans

38,986

Net changes in financial assets measured at FVTOCI

59,138Net changes in cash flow hedges

20,544

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

(721)
68,136F-46

Notes to Consolidated Financial Statements

Millions of yen
2016
Before tax

Tax effect

After tax

OCI arising during the year:
Foreign currency translation adjustments(183,133)(433)(183,566)

Remeasurements of defined benefit plans(156,615)

15,771(140,844)

Net changes in financial assets measured at FVTOCI(75,925)

25,602(50,323)

Net changes in cash flow hedges

36,5352,543

39,078

Share of OCI of investments accounted for using the equity method(30,369)

5,999(24,370)

Total(409,507)

49,482(360,025)

Foreign currency translation adjustments(6,533)-(6,533)

Net changes in cash flow hedges(7,918)

1,625(6,293)

Share of OCI of investments accounted for using the equity method(6,144)-(6,144)

Total(20,595)

1,625(18,970)

Foreign currency translation adjustments(189,666)(433)(190,099)

Remeasurements of defined benefit plans(156,615)

15,771(140,844)

Net changes in financial assets measured at FVTOCI(75,925)

25,602(50,323)

Net changes in cash flow hedges

28,617

4,168

32,785

Share of OCI of investments accounted for using the equity method(36,513)

5,999(30,514)

Total(430,102)

51,107(378,995)

Reconciliation of OCI to profit or loss:

OCI, net of reclassification adjustments:

OCI, net of reclassification adjustments, attributable tonon-controlling interests:
Foreign currency translation adjustments(60,388)

Remeasurements of defined benefit plans(16,259)

Net changes in financial assets measured at FVTOCI(3,235)

Net changes in cash flow hedges

599

Total

(79,283)

OCI, net of reclassification adjustments, attributable to
Hitachi, Ltd. stockholders:Foreign currency translation adjustments(129,711)

Remeasurements of defined benefit plans(124,585)

Net changes in financial assets measured at FVTOCI(47,088)

Net changes in cash flow hedges

32,186

Share of OCI of investments accounted for using the equity method(30,514)

Total(299,712)

F-47

Notes to Consolidated Financial Statements(19) Dividends
Dividends paid on common stock for the years ended March 31, 2017 and 2016 are as follows:
Cash dividends(millions of yen)

Appropriation from

Cash dividends
per share (yen)The Board of Directors
on October 28, 2016

28,968Retained earnings

The Board of Directors
on May 13, 2016

28,969The Board of Directors
on October 28, 2015
The Board of Directors
on May 14, 2015

Decision

Record date

Effective date

6.0

September 30, 2016

November 28, 2016

Retained earnings

6.0

March 31, 2016

May 30, 2016

28,970Retained earnings

6.0

September 30, 2015

November 26, 2015

28,971Retained earnings

6.0

March 31, 2015

June 1, 2015

The dividend on common stock whose record date falls in the year ended March 31, 2017 and the effective date falls in the next
fiscal year is as follows:

Decision
The Board of Directors
on May 12, 2017

Cash dividends(millions of yen)

Appropriation from

Cash dividends
per share (yen)33,796

Retained earnings

7.0

F-48

Record date

Effective date

March 31, 2017

May 29, 2017

Notes to Consolidated Financial Statements(20) Stock-based Compensation
The Company introduced a stock option plan as stock-based compensation. Under the Company’s stock option plan, Executive
Officers and Corporate Officers are granted the right to purchase shares of common stock of the Company (stock acquisitionrights).
Details of the Company’s stock option plan for the year ended March 31, 2017 are as follows.

Fiscal Year of Issueance and Name

Grant Date

Exercise period

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

From July 15, 2016

June 29, 2016

to July 14, 2046

Conditions for the exercise of stock acquisition rights(1) During the above exercise period, a holder of stock acquisition rights may exercise all the stock acquisition rights
determined in accordance with the provisions of paragraph (2) or (3) below in a lump sum only within 10 days (in case thelast day is not a business day, the following business day) from the day immediately following the date on which he/sheceases to be an Executive Officer, a Director or a Corporate Officer of the Company.
(2) The number of stock acquisition rights that a holder of stock acquisition rights may exercise, shall be determined based on
the ratio of (i) the total shareholder return (TSR) for shares of the Company for three years from the beginning of the fiscal
year in which the date of allotment of the stock acquisition rights falls (Waiting Period) to (ii) the growth rate of TOPIX(Tokyo Stock Price Index) for the same period (TSR/TOPIX Growth Rate Ratio).
(3) The number of stock acquisition rights, that a holder of stock acquisition rights who has left his/her position in the
Company before the end of the Waiting Period (Resignee) may exercise, shall be determined by reducing the number ofstock acquisition rights allotted to him/her in proportion to the term of office of the Resignee in the Waiting Period, andapplying the TSR/TOPIX Growth Rate Ratio for the period from the beginning of the fiscal year in which the date ofallotment of the stock acquisition rights falls to the time of resignation in accordance with the provision of paragraph (2)above.
The amount of stock-based compensation expenses recognized for the year ended March 31, 2017 was ¥401 million.
Summary of stock option activity for the year ended March 31, 2017 is as follows. The number of stock options is translated into
their equivalent number of shares (100 shares per stock option).

Outstanding at beginning of year

2017
Weighted average
Number of shares
exercise price（shares）(yen)-

Granted

2,421,9001

Forfeited--

Exercised--

Expired--Outstanding at end of year

2,421,900

1

Exercisable at end of year--

The range of exercise prices and the weighted average remaining contractual life of stock options outstanding as of March 31,2017 were ¥1 and 29.3 years, respectively.
The weighted average fair value (per share) at the measurement date of stock options issued under the Company’s stock option
plan for the year ended March 31, 2017 was ¥268.0.

F-49Notes to Consolidated Financial Statements
Fair value of stock options is estimated using Monte Carlo simulation based on the following assumptions.
March 31, 2017
Exercise price

1 yen

Expected life (a)3.3 years

Stock price at the measurement date (b)449.3 yen

Expected volatility (c)33.444%

Expected dividends (d)12 yenRisk-free rate (e)(0.355%)

Average value of the normal distribution of

105.6%

TSR/TOPIX Growth Rate Ratio (f)Standard deviation of the normal distribution of

38.1%

TSR/TOPIX Growth Rate Ratio (f)(a) Based on the expected term of office of each grantee.
(b) Based on the closing prices of the Company's stocks on the Tokyo Stock Exchange at the measurement date.
(c) Based on historical volatility of weekly stock price fluctuations during a directly preceding period that is equal to the expected
life of the stock options.
(d) Based on actual annual dividends in the fiscal year preceding that of the measurement date.
(e) Calculated based on the yield of a Japanese government bond with a term to maturity that is equal to the expected life of thestock options.
(f) Calculated based on historical data in fiscal years preceding that of the measurement date.

F-50

Notes to Consolidated Financial Statements(21) Other Income and Expenses
The main components of other income and expenses for the years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017

2016

Net gain (loss) on sales and disposals of fixed assets

15,094(4,475)

Impairment losses(68,587)(44,781)

Net gain on business reorganization and others

81,36955,235Special termination benefits(24,665)(45,531)

Expenses related to competition law and others(6,730)(22,327)

Impairment losses are mainly recognized on property, plant and equipment, investment properties and intangible assets. Net gain
on business reorganization and others include gains and losses related to obtaining and losing control of investees and gains andlosses related to obtaining and losing significant influence over investees.
Restructuring charges (structural reform expenses) included in other expenses for the years ended March 31, 2017 and 2016 were
¥96,289 million and ¥90,312 million, respectively. Restructuring charges (structural reform expenses) mainly include impairment
losses and special termination benefits.

(22) Financial Income and Expenses
The main components of financial income and expenses for the years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017
Dividends received
Exchange loss

2016
6,919

7,386

(25,238)(26,579)

Dividends received for the years ended March 31, 2017 and 2016 are from FVTOCI financial assets.

F-51

Notes to Consolidated Financial Statements(23) Discontinued Operations
In the Social Infrastructure & Industrial Systems, the Company classified the part of thermal power generation systems business
which was not transferred to Mitsubishi Hitachi Power Systems, Ltd. for business integration in the thermal power generation
systems business with Mitsubishi Heavy Industries, Ltd. but was operated by the Company and certain subsidiaries as
discontinued operations in the consolidated statement of profit or loss since the projects were completed in the year ended March
31, 2015.
Profit or loss and cash flows from the discontinued operations for the years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017

2016

Profit or loss from discontinued operations
Revenues

1,358

9,002

Cost of sales and expenses(8,381)(66,477)(7,023)(57,475)

Loss from discontinued operations, before income taxes
Income taxes
Loss from discontinued operations

1,073

394

(5,950)(57,081)Millions of yen

2017

2016

Cash flows from discontinued operations
Cash flows from operating activities(9,097)(9,221)

Cash flows from investing activities-

16

Cash flows from financing activities

8,294

9,611

F-52

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

Weighted average number of shares on which basic EPS is calculated

2017

2016

4,828,127,659

4,828,366,279

1,530,325-

4,829,657,984

4,828,366,279

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

Millions of yen
2017

2016

Net income from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic237,211229,236

Effect of dilutive securities
Other

(0)

(185)

Diluted237,211229,051(5,950)(57,081)

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

-

-

Diluted(5,950)(57,081)

231,261

172,155

Other

(0)

(185)

Diluted231,261

171,970

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

Yen
2017

2016

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

49.13

47.48

Diluted

49.12

47.44

Basic

(1.23)(11.82)

Diluted(1.23)(11.82)

Basic

47.90

35.65

Diluted

47.88

35.62

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

EPS attributable to Hitachi, Ltd. stockholders

F-53

Notes to Consolidated Financial Statements(25) Supplementary Cash Flow Information
Non-cash investing and financing activities for the years ended March 31, 2017 and 2016 are as follows:
Millions of yen
2017
Finance lease assets acquired and obligations incurred

2016
4,464

5,890

(26) Financial Instruments and Related Disclosures(a) Capital Management
The Company manages its capital under the policy of maintaining appropriate level of assets, liabilities and capital for current
and future business operations, as well as optimizing the efficiency of capital utilization throughout the business operations.
The Company uses the total Hitachi, Ltd. stockholders’ equity ratio as an important indicator in capital management. The
target is set in the mid-term management plan and is regularly monitored. The total Hitachi, Ltd. stockholders’ equity ratio asof March 31, 2017 and 2016 were 30.7% and 21.8%, respectively.
The Company is not subject to any capital requirements except for the general rules such as the Japanese Company Law.
(b) Financial Risks
The Company is engaged in business activities world-wide, and constantly exposed to various risks such as market risks(mainly currency exchange risk and interest rate risk), credit risk and liquidity risk. The Company implements risk
management policies to avoid or mitigate these financial risks.
(i) Currency Exchange Risk
The Company and its subsidiaries hold assets and liabilities exposed to currency exchange risk. In order to hedge this risk,
the management uses forward exchange contracts or cross currency swaps.
For trade receivables and payables denominated in foreign currencies, the Company and its subsidiaries measure the net
future cash flows per currency on a monthly basis, and enter into forward exchange contracts using a constant ratio withthe purpose of fixing the future cash flows arising from receivables and payables and forecasted transactions denominatedin foreign currencies. The terms of forward exchange contracts are largely within one year. If necessary, the Company andits subsidiaries establish a risk control policy and a risk management approach specific to each transaction by reviewing
the business characteristics, the structure of income and expenditure, and conditions of the contract. The Company and its
subsidiaries hedge the risk exposure arising from specific transactions based on the risk control policy and the risk
management approach.
To fix cash flows from long-term debt denominated in foreign currencies, the Company and its subsidiaries enter intocross currency swap agreements with the same maturities as the underlying debt. The hedging relationship between theforward exchange contracts or cross currency swaps and the underling hedged items is highly effective in offsetting theimpact from changes in foreign currency exchange rates.
The sensitivity analysis for currency exchange rates shown below indicates the impact on income from continuing
operations, before income taxes, in the Company’s consolidated statement of profit or loss, if the Japanese yen depreciatedby 1% on the foreign-currency denominated financial instruments held by the Company and its subsidiaries as of March
31, 2017 and 2016, while all other variables are held constant.
Millions of yen
Currency

2017

2016

Impact on income from continuing

US Dollar

515

544

operations, before income taxes

Euro

194

426

F-54

Notes to Consolidated Financial Statements(ii) Interest Rate Risk
The Company and its subsidiaries are exposed to interest rate risk related principally to long-term debt obligations. In
order to minimize this risk, the Company and its subsidiaries enter into interest rate swap agreements to control fluctuation
risk of cash flows. The interest rate swaps entered into are receive-variable, pay-fixed interest rate swaps. Under theinterest rate swaps, the Company and its subsidiaries receive variable interest rate payments on long-term debt associatedwith medium-term notes (MTN) and make fixed interest rate payments, thereby creating fixed interest rate long-term debt.
Certain financing subsidiaries raise funds by issuing long-term debt with a fixed interest rate and lending it at variableinterest rates, creating interest rate risk. In order to minimize this risk, interest rate swaps are used to convert, in effect, thefixed rate to a variable rate to manage fluctuations in fair value resulting from interest rate risk. Under the interest rate
swaps, certain financing subsidiaries receive fixed interest rate payments associated with long-term debt, including MTN,
and make variable interest rate payments, thereby creating variable-rate long-term debt. The hedging relationship between
the interest rate swaps and the underlying hedged items is highly effective in offsetting the impact from changes in cash
flows and fair value resulting from interest rate risk.
The sensitivity analysis for interest rate shown below indicates the impact on income from continuing operations, before
income taxes, in the consolidated statement of profit or loss, if interest rates increased by 1% on the financial instruments(floating-interest financial assets and liabilities measured at amortized cost, FVTPL financial assets and liabilities andderivatives) held by the Company and its subsidiaries as of March 31, 2017 and 2016, while all other variables are held
constant.
Millions of yen
2017
Impact on income from continuing operations,2016(1,082)

before income taxes(8,322)(iii) Credit Risk
Trade receivables, lease receivables and other receivables resulting from operating activities of the Company and its
subsidiaries are exposed to credit risk of the customers. Investments in debt securities held for managing cash surplus andequity instruments held for strategic purposes are exposed to credit risk of the issuers. Derivative transactions entered into
in order to lower market risks are exposed to credit risk of the counter-party financial institutions.
For credit risk of customers, the Company conducts periodic credit checks as appropriate for the products sold and thecustomers’ financial conditions and credit ratings. A credit limit is set according to the credit risk. For cash surplus,
investment is restricted to low risk debt securities, and derivative transactions are entered into with financial institutions
with high credit rating only.
No significant concentration of credit risk is present in a particular region or a customer, as the Company and its
subsidiaries are engaged in diverse industries worldwide.
The maximum exposure to the credit risk equals the financial assets’ carrying amount after impairment in the consolidated
statement of financial position, if collateral held is not included. The maximum exposure to the credit risk from guarantee
obligations is disclosed in note 30.
The Company considers that trade receivables, lease receivables and other receivables neither past due nor impaired as ofthe end of each fiscal year are all collectible.

F-55

Notes to Consolidated Financial Statements
The following table presents the aging of trade receivables, lease receivables and other receivables past due but not
impaired as of March 31, 2017 and 2016.
Millions of yen
March 31, 2017

March 31, 2016

Past due within 30 days

39,85663,001

Past due between 31 and 90 days

33,61642,946

Past due between 91 days and 1 year

29,85936,738

Past due over 1 year

33,05731,092

Total

136,388

173,777

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

March 31, 2015

Trade receivables

Lease receivables

Other financial
assets measured atamortized cost

35,213

13,140

2,256

Total
50,609Impairment loss
provision or reversals

12,746690(293)

13,143

Amounts written off(7,503)(5,124)(74)(12,701)

513

(8)

(307)

198

40,969

8,698

1,582

51,249

401

(110)

(321)

(30)

Other
March 31, 2016
Impairment loss
provision or reversals
Amounts written off(2,629)

(938)

(23)

(3,590)Other(9,518)(5,373)(49)(14,940)

March 31, 2017

29,223

2,277

1,189

32,689Other includes the impact from business acquisitions and divestitures and currency translation effect. Decreases of ¥8,843
million out of ¥9,518 million in trade receivables and ¥5,373 million in lease receivables during the fiscal year ended
March 31, 2017 were attributable to changes in the scope of consolidation including Hitachi Capital Corporation.
As of March 31, 2017 and 2016, the total balances of trade receivables, lease receivables and other receivables
individually determined to be impaired were ¥75,210 million and ¥95,932 million, respectively, and the allowance for
doubtful receivables corresponding to such receivables was recorded in the amounts of ¥23,697 million and ¥33,565
million, respectively.

F-56

Notes to Consolidated Financial Statements(iv) Liquidity Risk
Trade payables and financial liabilities, such as long-term debts, held by the Company and its subsidiaries are exposed toliquidity risk. With respect to this risk, the Company and its subsidiaries try to optimize capital efficiency through efficientmanagement of working capital, and maintain cash control through a centralized cash management system. They are alsoable to raise funds, as necessary, from capital markets through the issuance of debt and equity securities, and fromcommercial banks through borrowings and commitment lines. The total unused commitment lines as of March 31, 2017
are disclosed in note 30.
The following tables present the maturities of non-derivative financial liabilities. Trade payables are not included in thetables since the carrying amounts agree with the contractual cash flows and they all mature in less than one year.
Millions of yen
Carrying
amountShort-term debt

Contractual
cash flows

March 31, 2017
Within 1 year

After 1 year
but not morethan 5 years

More than 5
years

196,357

197,828

197,828--

Lease payables

49,70354,695

16,44734,241

4,007

Bonds

159,820

166,474

41,15872,91052,406Long-term debt

770,723

792,830

146,060

424,487

222,283

Long-term debt

Millions of yen
Carrying
amountShort-term debt

Contractual
cash flows

March 31, 2016
Within 1 year

After 1 year
but not morethan 5 years

More than 5
years

871,417873,553

873,553--

44,60047,383

12,792

31,0393,552

742,941765,680

148,726

425,914

191,040

1,945,497

1,988,640

519,810

1,216,069

252,761Long-term debt
Lease payables
Bonds
Long-term debt

The weighted average interest rate for short-term debt is 1.5%, and the weighted average interest rate for long-term debt is
1.0% with maturities ranging from 2017 to 2031.

F-57

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

IssuerName of bond

The

UnsecuredCompanydebenture #15

The

UnsecuredCompanydebenture #16

The

UnsecuredCompanydebenture #17

Subsidiaries

March 31,2016

Security

IssuedMarch 31,
2017

2013

10,00010,000 Unsecured

0.3

2018

2013

30,00030,000 Unsecured

0.8

2023

2013

20,00020,000 Unsecured

1.4

2028

0.3

2017

2007

Unsecured-debentures

Millions of yen
Interest
Mature
rates
in
(%)

99,820682,941 Unsecured

2014

Total

159,820

-

-

2.0

2022

742,941

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

Forward exchange contracts
Cross currency swaps
Interest rate swaps
Option contracts

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

Total

In

13,02018,137-31,157

Out

25,70324,070-49,773

In

296

318

8,300

8,914

Out

797

3,994

269

5,060

In

18

501

-

519

Out

60

2,159

637

2,856

In

122

6,061

-

6,183

Out

-

-

-

Millions of yen

Within 1 year

Forward exchange contracts
Cross currency swaps
Interest rate swaps
Option contracts

March 31, 2016
After 1 year
More than 5
but not more
years
than 5 years

Total

In

10,7038,490-

19,193Out

7,630

53,068-60,698

In

9,123

8,889

63

18,075

Out

4,820

8,014

-

12,834

In

6

37

-

43

Out

425

4,471

4,034

8,930

In

169

6,061

-

6,230

Out

47

-

-

47

F-58

Notes to Consolidated Financial Statements(c) Fair Value of Financial Instruments(i) Fair Value Measurements
The following methods and assumptions are used to measure the fair value of financial assets and liabilities.
Cash and cash equivalents, Short-term loans receivable, Short-term debt, Other payables and Trade payables
The carrying amount approximates the fair value because of the short maturity of these instruments.
Trade receivables
The fair value of trade receivables is measured by the present value of future cash flows discounted by risk-free rates after
considering early settlements, cancellation and the balance of doubtful accounts, for each type of receivable, class ofreceivable based on collection records and term of collection.
Lease receivables
The fair value of lease receivables is based on the present value of lease payments receivable based on years to maturity,using discount rates that reflect the time to maturity and credit risk.
Investments in securities and other financial assets
Investment securities with quoted market prices are estimated using the quoted share prices. In the absence of an active
market for investment securities, quoted prices for similar investment securities, quoted prices associated with transactions
that are not distressed for identical or similar investment securities or other relevant information including market interest
rate curves, referenced credit spreads or default rates, are used to determine fair value. If significant inputs of fair value
measurement are unobservable, the Company uses price information provided by financial institutions to evaluate suchinvestments. The information provided is corroborated by the income approach using its own valuation model, or themarket approach using comparisons with prices of similar securities.
The fair value of long-term loans receivable is estimated based on the present value of future cash flows using the interest
rate applicable to an additional loan of the same type.
Derivative assets are measured at fair value based on quoted prices associated with transactions that are not distressed,
prices in inactive markets, or based on models using interest rate curves and forward and spot prices for currencies andcommodities. If significant inputs are unobservable, the Company mainly uses the income approach or the market
approach to corroborate relevant information provided by financial institutions and other available information.
Fair values of subordinated interests and beneficiary interests in trust that are retained in transactions of transferring
financial assets are estimated by discounting future cash flows based on economic assumptions including expected rate ofcredit loss and discount rate since significant inputs for estimation of the fair value are unobservable.
Long-term debt
The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using
the market interest rates applicable to the same contractual terms.
Other financial liabilities
Derivative liabilities are measured at fair value based on quoted prices associated with transactions that are not distressed,
prices in inactive markets, or based on models using interest rate curves and forward and spot prices for currencies andcommodities. If significant inputs are unobservable, the Company uses mainly the income approach or the market
approach to corroborate relevant information provided by financial institutions and other available information.
Contract guarantee deposits are financial liabilities received from some customers and other parties as a credit
enhancement to trade and lease receivables, and normally returned after the underlying assets are fully collected. The fairvalue of contract guarantee deposits is measured by discounting the sum of the principals over the time to the contractual
return dates, using the risk-free discount rate.

F-59

Notes to Consolidated Financial Statements(ii) Financial Instruments Measured at Amortized Cost
The carrying amounts and estimated fair values of the financial instruments measured at amortized cost as of March 31,2017 and 2016 are as follows.
The fair value estimated for financial assets and liabilities measured at amortized cost is classified in Level 2 of the fairvalue hierarchy.
Millions of yen
March 31, 2017
Carrying amounts

March 31, 2016

Estimated
fair values

Carrying amounts

Estimated
fair values

AssetsTrade receivables [1]2,471,967

2,472,031

3,676,298

3,691,667

81,01182,007

1,066,243

1,104,607

Debt securities

155,745

155,751

75,32675,319Long-term loans receivable

102,384

103,257

90,944

91,773

Lease obligations

49,70350,02744,60044,696

Bonds

159,820

164,037

742,941755,325

Long-term debt

770,723

777,341

1,945,497

1,970,687--

31,987

31,528

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

F-60

Notes to Consolidated Financial Statements
The following tables present the assets and liabilities that are measured at fair value on a recurring basis as of March 31,2017 and 2016.
March 31, 2017Class of financial instruments

Millions of yen
Level 1

Level 2

Level 3

Total

FVTPL financial assets:
Investments in securities and otherfinancial assets[1]Equity securities
Debt securities

-

-

704

704

11,593

6,814

8,991

27,398-40,724

6,061

46,785355,310

104

109,766

465,180

366,903

47,642

125,522

540,067-

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

Derivatives
FVTOCI financial assets:
Investments in securities and otherfinancial assets[1]Equity securities
Total financial assets at fair value
FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value
March 31, 2016
Class of financial instruments

Millions of yen
Level 1

Level 2

Level 3

Total

FVTPL financial assets:
Investments in securities and otherfinancial assets[1]Equity securities
Debt securities
Derivatives

16

-

1,781

1,797

12,051

7,427

38,02557,503-37,4896,061

43,550FVTOCI financial assets:
Investments in securities and otherfinancial assets[1]Equity securities
Total financial assets at fair value

280,978220

115,536

396,734

293,045

45,136

161,403499,584-

82,617-

82,617-

82,617-

82,617

FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value[1] Investments in securities and other financial assets are included in Other current assets and Investments in securities
and other financial assets in the consolidated statement of financial position.

F-61

Notes to Consolidated Financial Statements
The following tables present the changes in Level 3 instruments measured on a recurring basis for the years ended March
31, 2017 and 2016.
2017

Millions of yen
Level 3 financial assets

Balance at beginning of year

Equitysecurities

Debt
securities

Derivatives

Total

117,317

38,025

6,061

161,403

16

(192)

-

(176)

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

Purchases

2,471

2,535

-

5,006

Sales and redemption(3,949)(11,365)-(15,314)Acquisitions and divestitures(4,532)(19,548)-(24,080)

Transfer from Level 3 [3]

(168)

-

-

(168)

Other
Balance at end of year

701

(464)

-

237

110,470

8,991

6,061

125,522

40

(197)

-

(157)

Unrealized gain (loss) relating to financial
assets held at end of year [4]2016

Millions of yen
Level 3 financial assets

Balance at beginning of year

Equitysecurities

Debt
securities

Derivatives

Total

112,632

57,299-169,931

Loss in profit or loss [1]

(310)

(442)

-

(752)

Gain in OCI [2]

3,196

-

-

3,196

Purchases

2,499

2,721

6,061

11,281

Sales and redemption(2,692)(21,769)-(24,461)

Acquisitions and divestitures

7,306

364

-

7,670

Transfer from Level 3 [3](4,874)--(4,874)

(440)

(148)

-

(588)

117,317

38,025

6,061

161,403

(311)

(410)

-

(721)

Other
Balance at end of year
Unrealized loss relating to financial assets
held at end of year [4][1] Gain (loss) in profit or loss related to FVTPL financial assets is included in Financial income and Financial expenses
in the consolidated statement of profit or loss.
[2] Gain (loss) in OCI related to FVTOCI financial assets is included in Net changes in financial assets measured at fairvalue through OCI in the consolidated statement of comprehensive income.
[3] Transfer from Level 3 is mainly the result of an investee being listed on the stock market.
[4] Unrealized gain (loss) relating to FVTPL financial assets held at the end of year is included in Financial income andFinancial expenses in the consolidated statement of profit or loss.
Written put options on non-controlling interests of subsidiaries are not included in the above table. Such put options areclassified as Level 3 financial liabilities measured on a recurring basis, and changes in fair value are recognized in Capitalsurplus. The fair value of the put options above was ¥14,495 million as of March 31, 2017 included in Other financial
liabilities in the consolidated statement of financial position.

F-62

Notes to Consolidated Financial Statements
Valuation techniques and unobservable inputs used for measuring financial instruments categorized as Level 3 on arecurring basis as of March 31, 2016 are as follows:
March 31, 2016

Millions of yen

Level 3 financial instruments

Fair value

Valuationtechnique25,389DCF

Discount rate

Subordinated interests and beneficiary interests intrusts that are retained relating to securitization of

Unobservable inputs

financial assets

Expected rate of credit loss of theentire transferred financial assets

Range
0.05-1.25%
0.15-0.36%

There are no material valuation techniques and unobservable inputs used for measuring financial instruments categorized
as Level 3 on a recurring basis as of March 31, 2017.
The impact on the fair value is not material if unobservable inputs are changed to reasonably possible alternative
assumptions in estimating the fair value of subordinated interests and beneficiary interests in trusts that are retained
relating to securitization of financial assets.
Fair values are measured by the finance departments in accordance with the Company’s policies and procedures.
Valuation models are determined so that they reflect each financial instrument’s nature, characteristics and risks mostappropriately. The finance departments continually examine changes in important inputs that could affect the fair value. Incase the fair value of a financial instrument was significantly impaired, administrators review and approve the impairment
loss.
Equity instruments held with the objective of maintaining and strengthening business relations with the issuers areclassified as FVTOCI financial assets. The following is a list of principal equity instruments designated as FVTOCI andtheir fair values.
March 31, 2017

Millions of yen

Principal FVTOCI financial assets

Fair value

Renesas Electronics Corporation

149,055

Western Digital Corporation

57,869JECC Corporation

19,298Central Japan Railway Company

16,326

Hitachi Maxell, Ltd.

15,835

Yungtay Engineering Co., Ltd.

9,252

World Trade Center Building, Inc.

9,214

Nippon Steel Kowa Real Estate Co., Ltd.

8,693

East Japan Railway Company

7,875

Honda Motor Co., Ltd.

6,830

F-63

Notes to Consolidated Financial Statements

March 31, 2016

Millions of yen

Principal FVTOCI financial assets

Fair value

Renesas Electronics Corporation

92,473

Western Digital Corporation

33,268JECC Corporation

19,011

Central Japan Railway Company

17,914

World Trade Center Building, Inc.

13,014

East Japan Railway Company

7,911

Yungtay Engineering Co., Ltd.

7,663

Nippon Steel Kowa Real Estate Co., Ltd.

7,511

Honda Motor Co., Ltd.

6,272

Nitto Denko Corporation

6,257

See note 22 for dividends received from investment securities classified as FVTOCI financial assets.
Accumulated gains and losses on valuation of FVTOCI financial assets are reclassified into retained earnings when
derecognized during the fiscal year. The net gains reclassified, net of taxes, for the years ended March 31, 2017 and 2016
were ¥15,161 million and ¥17,356 million, respectively. These financial assets were derecognized upon disposal of shares
after reviewing particular business relations, or acquisitions and divestitures.
The information on FVTOCI financial assets that were derecognized for the years ended March 31, 2017 and 2016 is asfollows:
Millions of yen
2017

2016

Fair value at the time of derecognition

42,48245,579

Accumulated gains at the time of derecognition

21,802

27,621(d) Derivatives and Hedging Activities(i) Fair Value Hedge
Changes in the fair value of recognized assets and liabilities, and of derivatives designated as a fair value hedge of these assets
and liabilities are recognized in profit or loss for the period in which the changes occur. Derivatives designated as a fair value
hedge include forward exchange contracts associated with operating transactions, cross currency swaps agreements and interest
rate swaps associated with financing transactions.
(ii) Cash Flow Hedge
Foreign Currency Risk
Changes in the fair value of forward exchange contracts designated as an effective cash flow hedge of forecasted transactions
are recognized in OCI. AOCI is subsequently reclassified into profit or loss when the hedged items affect profit for the period.
Interest Rate Risk
Changes in the fair value of interest rate swaps designated as a hedge of the variability of cash flows associated with long-term
debt are recognized in OCI. AOCI is subsequently reclassified to interest charges over the period in which the interest on thedebt affects profit or loss.
As of March 31, 2017, the period in which the cash flows from the hedged items are expected to occur and in which they are
expected to affect profit or loss is between April 2017 and December 2026.

F-64

Notes to Consolidated Financial Statements
The fair values of the main types of derivatives designated as hedging instruments are as follows:
Millions of yen
March 31, 2017
Asset

March 31, 2016

Liability

Asset

Liability

Fair value hedge
Forward exchange contracts

1,450

3,527

6,407

1,462

Cross currency swaps

8,774

4,339

3,031

5,251

Interest rate swaps

352

69

-

861

10,576

7,935

9,438

7,574

28,651

27,666

11,82546,423-721

14,869

7,049

Total
Cash flow hedge
Forward exchange contracts
Cross currency swaps
Interest rate swaps
Total

167

2,787

43

8,068

28,81831,174

26,73761,540The fair values of derivative assets and liabilities for which hedge accounting was not applied as of March 31, 2017 and 2016
were ¥7,383 million and ¥7,366 million for derivative assets, and ¥18,626 million and ¥13,406 million for derivative liabilities,
respectively.
The contract amounts and notional amounts of the main types of derivatives are as follows:
Millions of yen
March 31, 2017

March 31, 2016

Forward exchange contracts
To sell foreign currencies

717,979

752,975

To buy foreign currencies

168,406

304,571

To sell foreign currencies

13,187

16,709To buy foreign currencies

129,875

345,396

Interest rate swaps

324,772

696,854

Cross currency swaps

F-65

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

Millions of yen Hedged items
Recognized in
profit or loss

Derivatives

AmountrecognizedMillions of yen

Recognized instatement of financial
position

Recognized in
profit or loss

Amountrecognized

Trade receivables,

Forwardexchange contracts
Cross
currency swaps

Financial expenses

18,495other current assets

Financial expenses(19,246)

Financial expenses(13,242)and trade payables
Financial expenses

Total

12,973Long-term debt

31,468

Total(32,488)

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

Millions of yen

Forward exchange contracts

34,558Cross currency swaps

24,354

Interest rate swaps

7,754

Total

66,666

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

Recognized in profit or loss
Cost of sales and Financial
expensesMillions of yen
1,512

Cross currency swaps

Financial expenses(11,353)

Interest rate swaps

Cost of sales and Interest charges(2,364)

Total(12,205)

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

Recognized in profit or loss
Financial expenses

Millions of yen(6,569)

Total(6,569)F-66

Notes to Consolidated Financial Statements
The following table, “Effective portion of derivatives designated as hedging instruments and related hedged items” shows theeffects of derivative instruments for fair value hedges in the consolidated statement of profit or loss for the year ended March
31, 2016.
Effective Portion of Derivatives Designated as Hedging Instruments and Related Hedged Items
Hedging instruments

Millions of yen Hedged items
Recognized in
profit or loss

Derivatives
Forwardexchange contracts
Cross
currency swaps

Amountrecognized

Financial expenses

4,887

Financial expenses

454

Total

5,341

Millions of yen

Recognized instatement of financial
position
Trade receivables andtrade payables
Long-term debt

Recognized in
profit or loss

Amountrecognized

Financial expenses(5,505)

Financial expenses

(447)

Total

(5,952)

The amounts recognized in the consolidated statement of profit or loss and consolidated statement of comprehensive income forthe year ended March 31, 2016, related to cash flow hedges are detailed in the following tables:“Gain (loss) recognized in OCI, Effective portion of derivatives designated as hedging instruments,”“Gain (loss) reclassified from OCI into profit or loss, Effective portion of derivatives designated as hedging instruments,” and“Gain (loss) on derivatives designated as cash flow hedging instruments, ineffective portion.”
Gain (Loss) Recognized in OCI, Effective Portion of Derivatives Designated as Hedging Instruments
Derivatives

Millions of yen

Forward exchange contracts

19,764

Cross currency swaps

16,200Interest rate swaps(868)

Option contracts

193

Total

35,289Gain (Loss) Reclassified from OCI into Profit or Loss, Effective Portion of Derivatives Designated as Hedging
Instruments
Derivatives
Forward exchange contracts

Recognized in profit or loss
Cost of sales and Financial
expensesMillions of yen
2,609

Cross currency swaps

Financial expenses

8,373Interest rate swaps

Cost of sales and Interest charges(2,855)

Option contracts

Financial expenses

(193)

Total

7,934

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

Recognized in profit or loss

Forward exchange contracts

Financial expenses

Interest rate swaps

Cost of sales and Interest charges

Millions of yen(4,460)Total

18(4,442)

F-67

Notes to Consolidated Financial Statements(e) Securitization of Financial Assets
For the purpose of providing diversified and stable financing, the Company and certain subsidiaries securitize certain financial
assets, such as lease and trade receivables, through structured entities formed by third parties. These structured entities procure
funds by issuing commercial paper and other borrowings. These securitization transactions are similar to those used by manyfinancial institutions.
Basically, investors in these structured entities only have recourse to the assets owned by the entity, and not to other assets held by
the Company and its subsidiaries. The Company and certain subsidiaries do not provide non-contractual support to structured
entities and do not have implicit support arrangements with any of them. The majority of their involvement with these structured
entities related to securitization activities are financing of an entity, providing limited credit enhancements, servicing the assets andreceiving fees for services provided.
(i) Consolidated Structured Entities for Securitization Purposes
The assets and liabilities held by the consolidated structured entities for securitization purposes as of March 31, 2017 and 2016
are as follows:
Millions of yen
March 31, 2017

March 31, 2016

Cash and cash equivalents-

16,448Trade receivables-

16,453

Lease receivables-

56,118-89,019Total current assets
Trade receivables-

93,522

Lease receivables-

109,110-

202,632-

71,674

Total non-current assets
Current portion of long-term debt
Total current liabilities
Long-term debt
Total non-current liabilities-

71,674-

165,350-

165,350

Substantially, all of the assets held by the consolidated structured entities for securitization purposes can only be used to settle
obligations of these entities.
(ii) Risks Associated with the Company’s Interests in Unconsolidated Structured Entities for Securitization Purposes
The Company and certain subsidiaries use structured entities sponsored by financial institutions to securitize certain financial
assets, such as lease and trade receivables. These financial institutions operate those structured entities as a part of theirordinary business. The amount of assets transferred by the Company and certain subsidiaries is considerably small compared tothe total assets of the structured entities sponsored by these financial institutions that purchase a large amount of assets fromentities other than the Company and certain subsidiaries. The Company and certain subsidiaries have little relevance to theevaluation of exposures to the risks these structured entities hold.
With respect to securitization of certain assets, certain subsidiaries structure trusts upon investors’ requests and sell interests inthe trusts to the investors and hold limited interests of these trusts.
In some cases, the Company and certain subsidiaries retain subordinated interests in the financial assets transferred to structured
entities, mainly to secure liquidity and provide limited credit enhancement, and/or investors have recourse with a scope that is
considerably limited. As of March 31, 2016, the amount of the maximum exposures to losses associated with the Company’s
interests in these unconsolidated structured entities for securitization was ¥67,757 million, and this amount was included in thebalances of the subordinated interests and the obligations to purchase assets or the carrying amounts of the transferred assetsthat are not derecognized in their entirety.

F-68Notes to Consolidated Financial Statements(iii) Transfers of Financial Assets by Securitization
・ Transfers of Financial Assets Derecognized in their Entirety
The Company and certain subsidiaries transfer lease and trade receivables to unconsolidated structured entities and otherentities.
The Company and certain subsidiaries retain servicing responsibilities for financial assets derecognized in their entirety, but
do not record a servicing asset or liability because the amounts of the cost to service the receivables and the servicing income
are not material.
As of March 31, 2016, the maximum exposures to losses from continuing involvement with the financial assets derecognizedin their entirety, which is the sum of subordinated interests and the obligations to purchase assets under limited conditions,
are included in the maximum exposures to losses described in “Risks associated with the Company’s interests inunconsolidated structured entities for securitization purposes.”・ Transfers of Financial Assets not Derecognized in their Entirety
The Company and certain subsidiaries do not derecognize financial assets when they retain substantially all credit risks andeconomic value related to the transferred financial assets through holding subordinated interests.
As of March 31, 2017 and 2016, the carrying amounts of the financial assets that continue to be recognized in their entirety
and the related liabilities are as follows:
Millions of yen
March 31, 2017
Trade receivables

March 31, 2016

13,742

69,776

Lease receivables-

22,335

Total current assets

13,742

92,111

Lease receivables-

35,106

Total non-current assets-

35,106

13,742

127,217

13,804

40,522-

29,73313,80470,255-33,992-33,99213,804104,247

Carrying amount of transferred financial assets
Short-term debt
Current portion of long-term debt
Total current liabilities
Long-term debt
Total non-current liabilities
Carrying amount of related liabilities

As of March 31, 2017 and 2016, the fair values of the financial assets whose transferee has a recourse right only to thetransferred financial assets and the fair values of the related liabilities and their net positions are summarized as follows:
Millions of yen
March 31, 2017
Fair value of financial assets
Cash and cash equivalents related to collection oftransferred financial assets
Fair value of related liabilities
Net position

March 31, 2016

12,903

127,523-

4,086

12,903

102,522-29,087

Substantially, all of the financial assets transferred to investors can only be used to settle the obligations of the investor.

F-69

Notes to Consolidated Financial Statements(27) Pledged Assets
As a general contractual term for long-term and short-term debt, banks may demand collateral and guarantees for present andfuture obligations, and retain rights to offset the liabilities with bank deposits when repayment is overdue or any breach ofcontract occurs.
Per trustee agreements of secured bonds and particular secured or unsecured loan agreements, trustees or lenders generally havethe right to pre-approve profit distributions including dividend payments and new stock issues, as well as the right to demand
additional collateral or mortgage.
The Company and its subsidiaries pledged a portion of their assets as collateral primarily for bank loans as follows:
Millions of yen
March 31, 2017

March 31, 2016

Trade receivables

6,013

4,870

Inventories

13,528

5,137

575

7

Other current assets
Investments in securities and other financial assets

882

846

Land

639

1,970

Buildings and structures

8,802

7,178

Machinery and other property, plant and equipment

38,44325,724

Total

68,88245,732F-70

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

Reporting segment

Name of subsidiary

Information &Hitachi Information & Telecommunication

Telecommunication Systems

Engineering, Ltd.

Information &Business location

Ownership
percentage
of votingrights (%)

Yokohama, Kanagawa

100.0

Hitachi-Omron Terminal Solutions, Corp.

Shinagawa-ku, Tokyo

55.0

Hitachi Solutions, Ltd.

Shinagawa-ku, Tokyo

100.0

Hitachi Systems, Ltd.

Shinagawa-ku, Tokyo

100.0

Hitachi Computer Products (America), Inc.

Oklahoma,

100.0

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

Telecommunication Systems
Information &Texas,U.S.A.

Hitachi Data Systems Corporation

Telecommunication Systems

California,

100.0

U.S.A.

Information &Hitachi Financial Equipment System (Shen Zhen)

Shenzhen,Telecommunication Systems

Co., Ltd.

China

Information &Hitachi Payment Services Private Limited

Chennai,

Telecommunication Systems
Social Infrastructure &

100.0

100.0
100.0

India
Hitachi Building Systems Co., Ltd.

Chiyoda-ku, Tokyo

100.0

Hitachi-GE Nuclear Energy, Ltd.

Hitachi, Ibaraki

80.0

Hitachi Industrial Equipment Systems Co., Ltd.

Chiyoda-ku, Tokyo

100.0

Hitachi Industry & Control Solutions, Ltd.

Hitachi, Ibaraki

100.0

Hitachi Plant Construction, Ltd.

Toshima-ku, Tokyo

100.0

Hitachi Plant Services Co., Ltd.

Toshima-ku, Tokyo

100.0

Hitachi Power Solutions Co., Ltd.

Hitachi, Ibaraki

100.0

Hitachi Elevator (China) Co., Ltd.

Guangzhou,

70.0

Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &Industrial Systems
Social Infrastructure &China
Hitachi Rail Europe Ltd.

London,Industrial Systems
Social Infrastructure &Horizon Nuclear Power Limited

Industrial Systems
Electronic Systems &

100.0

U.K.
Gloucester,

100.0

U.K.
Hitachi High-Technologies Corporation

Minato-ku, Tokyo

51.8

Hitachi Kokusai Electric Inc.

Minato-ku, Tokyo

51.8

Hitachi Construction Machinery Co., Ltd.

Taito-ku, Tokyo

51.5

Equipment
Electronic Systems &Equipment
Construction Machinery

F-71

Notes to Consolidated Financial Statements

Reporting segment
High Functional Materials &Name of subsidiaryBusiness location

Ownership
percentage
of votingrights (%)

Hitachi Chemical Company, Ltd.

Chiyoda-ku, Tokyo

51.4

Hitachi Metals, Ltd.

Minato-ku, Tokyo

53.5

Automotive Systems

Clarion, Co., Ltd.

Saitama, Saitama

64.0

Automotive Systems

Hitachi Automotive Systems, Ltd.

Hitachinaka, Ibaraki

100.0

Automotive Systems

Hitachi Automotive Systems Americas, Inc.

Kentucky,

100.0

Components
High Functional Materials &Components

U.S.A.
Smart Life & Ecofriendly

Hitachi Appliances, Inc.

Minato-ku, Tokyo

100.0

Hitachi Consumer Marketing, Inc.

Minato-ku, Tokyo

100.0

Hitachi Consumer Products (Thailand), Ltd.

Prachinburi,

80.1

Systems
Smart Life & Ecofriendly
Systems
Smart Life & Ecofriendly
Systems

Thailand

OthersHitachi-LG Data Storage, Inc.

Minato-ku, Tokyo

51.0

OthersHitachi Life, Ltd.

Hitachi, Ibaraki

100.0

OthersHitachi Urban Investment, Ltd.

Chiyoda-ku, Tokyo

100.0

OthersHitachi America, Ltd.

New York,

100.0

U.S.A.
OthersHitachi Asia Ltd.

Singapore

100.0

OthersHitachi (China), Ltd.

Beijing,

100.0

China
OthersHitachi Europe Ltd.

Maidenhead,

100.0

U.K.
OthersHitachi India Pvt. Ltd.

New Delhi,

100.0

India
Others-Hitachi Information & Telecommunication

California,

Systems Global Holding Corporation

U.S.A.

Other 825 companies

F-72

100.0
-

-

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

March 31, 2017

Trade receivables

March 31, 2016

115,583

67,952

Short-term loans receivable [1]6,983

15,962Other receivables [1]9,540

12,835Long-term loans receivable [2]83,502

66,453

Trade payables

118,666

52,043

Other payables [3]18,3696,622

Lease obligations [4]18,230Millions of yen

With joint ventures

March 31, 2017

March 31, 2016

Trade receivables

184,491

116,586

Other receivables [1]1,058

12,353Long-term loans receivable [2]16,036-[1] Included in Other current assets in the consolidated statement of financial position.
[2] Included in Investments in securities and other financial assets in the consolidated statement of financial position.
[3] Included in Other financial liabilities in the consolidated statement of financial position.
[4] Included in Current portion of long-term debt and Long-term debt in the consolidated statement of financial position.
Revenue and purchase transactions of the Company and its subsidiaries with associates and joint ventures are as follows:
Millions of yen
With associates

2017

2016

Revenues

298,387

211,957

Purchases

191,408

86,219Millions of yen

With joint ventures

2017

2016

Revenues

137,077

143,706

Purchases

28,98931,130(b) Compensation for Directors and Executive Officers of the Company
Millions of yen
2017

2016

Basic remuneration, year-end allowance andperformance-linked compensation

2,437

2,323

300

-

2,737

2,323

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

F-73

Notes to Consolidated Financial Statements(30) Commitments and Contingencies(a) Loan Commitments(i) Loan Commitments to Associates and Others
The Company provides loan commitments to associates and others. The outstanding balance of loan commitments as ofMarch 31, 2017 is as follows:
Millions of yen
March 31, 2017
Total commitments available

70,230Less amount utilized

70,000

Balance available

230

Since some loan commitments require credit approval before execution, the amount of total commitments available may
not be necessarily utilized in full.
(ii) Commitments with Financial Institutions
The Company and certain subsidiaries have line of credit arrangements with banks in order to secure efficient financing forbusiness operations. The total unused line of credit as of March 31, 2017 amounted to ¥599,067 million, primarily
belonging to the Company. The Company has commitment line agreements with a number of banks and pays commitment
fees as consideration. These commitment agreements generally provide a one year term with renewal at the end of theterm. The unused line of credit under these arrangements as of March 31, 2017 amounted to ¥200,000 million. The
Company also maintains other commitment line agreements with several financial institutions, with terms of 3 years
ending in July 2019. The unused line of credit under these arrangements as of March 31, 2017 amounted to ¥200,000
million.
(b) Commitments for Acquisition of Assets
As of March 31, 2017, outstanding commitments made to purchase property, plant and equipment were ¥75,234 million.
(c) Guarantee Obligations
The Company and certain subsidiaries provide debt guarantees to their associates, joint ventures and third parties. As of
March 31, 2017, the balance of the guarantee obligations was ¥55,654 million. It consisted of guarantees to associates of¥6,597 million, to joint ventures of ¥27,745 million and to third parties of ¥21,312 million.
(d) Litigation
In June 2009, a subsidiary in Japan received a grand jury subpoena in connection with the investigation conducted by the
Antitrust Division of the U.S. Department of Justice and received requests for information from the European Commission in
respect of alleged antitrust violations relating to optical disk drives. In November 2011, the subsidiary in Japan paid a fine in
relation to the investigation from the Antitrust Division of the U.S. Department of Justice. In July 2012, the subsidiary inJapan received a statement of objections from the European Commission in respect of alleged antitrust violations. In October
2015, the European Commission announced the amount of the fine for the subsidiary in Japan in respect of alleged antitrust
violations, and in June 2016, two subsidiaries in Japan and Korea paid the fines.
In July 2011, a subsidiary in the U.S.A. received a grand jury subpoena from the Antitrust Division of the U.S. Department ofJustice, the Company and a subsidiary in Europe received requests for information from the European Commission, and a
subsidiary in Canada received requests for information from the Canadian Competition Bureau, all in respect of alleged
antitrust violations relating to automotive equipment. In November 2013, a subsidiary in Japan, which had been also primarily
responsible for responding to the investigation from the Antitrust Division of the U.S. Department of Justice, paid fines. In
January 2016, the Company and the subsidiary in Japan which had been also primarily responsible for responding to theinvestigation from European Commission reached a settlement with the European Commission, and paid fines in April 2016.
In April 2014, a subsidiary in the U.S.A. received a grand jury subpoena in connection with the investigation conducted by
the Antitrust Division of the U.S. Department of Justice in respect of alleged antitrust violations relating to automotive
equipment. In August 2016, a subsidiary in Japan, which had been also primarily responsible for responding to theinvestigation, concluded an agreement in which the subsidiary will pay fines, and paid fines in March 2017.
F-74

Notes to Consolidated Financial Statements

In June 2014, a subsidiary in Japan was investigated by the Japan Fair Trade Commission in respect of alleged antitrust
violations relating to capacitors. In March 2016, the subsidiary received a notice that the investigation was over from theJapan Fair Trade Commission. The subsidiary in Japan and subsidiaries in Europe, the U.S.A., and others are being
investigated by competition authorities in each country or region, all in respect of alleged antitrust violations relating tocapacitors. In April 2016, the subsidiary in Japan concluded an agreement in which the subsidiary will pay fines, and in June
2016, the subsidiary in Japan paid the fines. In November 2015, the subsidiaries in Japan received a statement of objections
from the European Commission in respect of alleged antitrust violations.
In addition to the above, the Company, its subsidiaries and associates have cooperated with the competent authorities.
Depending upon the outcome of these matters, fines or surcharge payments, the amount of which is uncertain, may be
imposed on them. Also, in connection with pending and settled antitrust violations, civil disputes, including class action
lawsuits, involving the Company and some of these companies have arisen in a number of countries, including in the U.S.A.
and Canada. An amount, which was considered to be a reasonable estimate in respect of these claims, was accrued for the
potential losses in relation to certain of these civil disputes.
In August 2012, a subsidiary in Europe received a complaint filed by a customer in Europe seeking compensation forconsequential losses of EUR 1,058 million (¥126,808 million), additional costs and interest allegedly incurred by the delay inthe construction process of a power plant against, jointly and severally, the Company, the subsidiary in Europe, a consortium
including the Company and the subsidiary in Europe, and two other companies. In addition, in October 2013 and February
2016, the subsidiary in Europe received additional complains requesting compensation for consequential losses of EUR 239
million (¥28,688 million) and EUR 105 million (¥12,534 million), respectively. In June 2016, the Company was informedthat the customer added an associate in Europe as one of the defendants. Although the Company, the subsidiary and theassociate in Europe and the consortium will vigorously defend themselves against this lawsuit, there can be no assurance thatthey will not be held liable for any amounts claimed.
In December 2013, the Company, a subsidiary in Europe and a consortium consisting of the Company and the subsidiary inEurope, jointly and severally received a request from a customer in Europe to refer a dispute to arbitration demanding EUR
637 million (¥76,327 million) in compensation for consequential losses allegedly incurred by the delay in the construction
process of a power plant. In November 2016, an arbitral award was issued by an arbitral tribunal and the award was paid in
February 2017. The customer, the Company, the subsidiary in Europe and the consortium consisting of the Company and thesubsidiary in Europe continue their negotiations to achieve a final settlement regarding certain unsettled matters.
In addition, in December 2015, these companies, jointly and severally received a request for arbitration from the customer
demanding EUR 161 million (¥19,325 million) in compensation primarily for performance related deficiencies of a power
plant. As of March 31, 2017, the amount of compensation claimed by the customer was changed to EUR 163 million(¥19,620 million). Although, the Company, the subsidiary in Europe and the consortium consisting of the Company and thesubsidiary in Europe will vigorously defend themselves against this lawsuit, there can be no assurance that they will not beheld liable for any amounts claimed.
In January 2016, a subsidiary in Europe notified its customer in Europe that the subsidiary had commenced arbitration
proceedings to resolve a disagreement about construction of a power plant, and then the arbitration was started. While thesubsidiary is seeking payments of the unpaid amounts based on the contract, a counterclaim was filed by the customer. Thus,
there can be no assurance that the subsidiary will not be held liable for any amounts.
The Company and its subsidiaries execute a number of business reorganizations, including mergers, acquisitions anddivestitures. Contracts for these reorganizations include clauses for transaction price adjustments subsequent to thereorganizations. There is a possibility products or services provided by the Company and its subsidiaries contain defects. As
the result of price adjustments, or in compensation for defects in products or services etc. there is a possibility that theCompany pays for any amounts.
Depending upon the outcome of the above legal proceedings, there may be an adverse effect on the consolidated financial
position or results of operations. Currently, the Company is unable to estimate the adverse effect, if any, of many of theseproceedings. Accordingly, except as otherwise stated, no accrual for potential loss has been made. The actual amount of fines,
surcharge payments or any other payments resulting from these legal proceedings may be different from the accrued amounts.
F-75

Notes to Consolidated Financial Statements

In addition to the above, the Company and its subsidiaries are subject to legal proceedings and claims which have arisen in
the ordinary course of business and have not been finally adjudicated. These actions when ultimately concluded anddetermined will not, in the opinion of management, have a material adverse effect on the consolidated financial position or
results of operations of the Company and subsidiaries.
(e) Other
On February 1, 2014 (hereinafter the “effective date of company split”), the Company and Mitsubishi Heavy Industries, Ltd.
(hereinafter “MHI”) integrated their thermal power generation systems businesses into MHI’s consolidated subsidiary,
MITSUBISHI HITACHI POWER SYSTEMS, LTD. (hereinafter “MHPS”), through a spin-off in the form of an absorptiontype company-split. As part of this business integration, assets and liabilities associated with boiler construction projects forMedupi and Kusile Power Stations for which the Company’s consolidated subsidiaries in the Republic of South Africa,
Hitachi Power Africa Proprietary Limited (hereinafter “HPA”) and other companies received orders in 2007, as well as theircontractual status in relation to customers, and rights and obligations thereof were transferred from HPA to MHI’s
consolidated subsidiary, Mitsubishi Hitachi Power Systems Africa Proprietary Limited (hereinafter “MHPS Africa”)(hereinafter, the “Transfer of South African Business”).
Under the agreement executed between the Company and MHI regarding the Transfer of South African Business, theCompany and HPA shall be liable for contingent liabilities resulting from events that occurred before the effective date ofcompany split as well as claims that had already been made as of the said date, while MHPS and MHPS Africa shall be held
responsible for the execution of business on and after the effective date of company split. Given these conditions, it has been
agreed upon to determine the final transfer price upon agreement on future construction schedule as of the effective date ofcompany split and confirmation of estimated project cash flows based on such schedule between the parties, and settle thedifference with the provisional price.
The said transfer price adjustment for the Transfer of South African Business is still under discussion between the Company
and MHI and not yet agreed upon at the moment. On March 31, 2016, MHI requested the Company to pay ZAR 48,200
million (approximately ¥379.0 billion when ZAR 1 = ¥7.87) to MHPS Africa as a portion of transfer price adjustment, etc.
The Company replied to MHI on April 6, 2016 that the details of the demand letter lacked legal grounds under any agreement
and thus the Company cannot accept it.
On January 31, 2017, MHI extended the amount above and requested the Company to pay ZAR 89,700 million(approximately ¥763.4 billion when ZAR 1 = ¥8.51). While the Company cannot accept the request since it lacks legal
grounds under any agreement as well as the request of March 2016 does, the Company intends to continue further discussion
with MHI upon the agreement executed between the Company and MHI regarding the Transfer of South African Businessand past discussion between the Company and MHI.
The Company has recorded provisions based on reasonable estimates for the aforementioned agreement related to the South
African Business. The actual amount of payment resulting from the transfer price adjustment may be different from theaccrued amount.

(31) Approval of Consolidated Financial Statements
The consolidated financial statements were approved on June 21, 2017 by Toshiaki Higashihara, President and CEO of theCompany.

F-76

Independent Auditor’s Report
To the Stockholders and Board of Directors ofHitachi, Ltd.
We have audited the accompanying consolidated financial statements of Hitachi, Ltd. and its consolidated
subsidiaries, which comprise the consolidated statement of financial position as at March 31, 2017, and theconsolidated statements of profit or loss, comprehensive income, changes in equity, and cash flows for the year
then ended and notes to the consolidated financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with International Financial Reporting Standards, and for designing and operating such internal control
as management determines is necessary to enable the preparation and fair presentation of the consolidated financial
statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
OpinionIn our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of Hitachi, Ltd. and its consolidated subsidiaries as at March 31, 2017, and theirconsolidated financial performance and cash flows for the year then ended in conformity with International
Financial Reporting Standards.
/s/ Ernst & Young ShinNihon LLC
June 21, 2017
Tokyo, Japan

F-77

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

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

Director, Kanto Local Finance Bureau[Filing Date]

June 21, 2017

[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Name and title of CFO]

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

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

1. Matters Related to Basic Framework of Internal Control over Financial Reporting
Mr. Toshiaki Higashihara, President & CEO, and Mr. Mitsuaki Nishiyama, Senior Vice President andExecutive Officer, are responsible for establishing and maintaining internal control over financial reporting of
Hitachi, Ltd. (the “Company”) and have established and maintained internal control over financial reporting inaccordance with the basic framework for internal control set forth in the “On the Revision of the Standards andPractice Standards for Management Assessment and Audit concerning Internal Control Over Financial
Reporting (Council Opinions)” published by the Business Accounting Council.
The internal control over financial reporting is designed to achieve its objectives to the extent reasonablethrough the effective function and combination of its basic elements. Therefore, there is a possibility that internal
control over financial reporting may not completely prevent or detect misstatements.
2. Matters Related to Scope of Assessment, Record Date, and Assessment Procedure
We assessed the effectiveness of our internal control over financial reporting on the record date as of March
31, 2017. We made this assessment in accordance with assessment standards for internal control over financial
reporting generally accepted in Japan.
In making this assessment, we evaluated internal control which may have a material effect on the entire
financial reporting on a consolidated basis (“company-level controls”) and based on the result of this assessment,
we appropriately selected business processes to be evaluated, analyzed these selected business processes,
identified key controls that may have a material impact on the reliability of our financial reporting, and assessed
the design and operation of these key controls. These procedures have allowed us to evaluate the effectiveness of
our internal controls.
We determined the required scope of assessment of internal control over financial reporting for theCompany, as well as its consolidated subsidiaries, equity-method associates and joint ventures, from theperspective of the materiality that may affect the reliability of our financial reporting. The materiality that may
affect the reliability of our financial reporting is determined taking into account the materiality of quantitativeand qualitative impacts. We confirmed that we had reasonably determined the scope of assessment of internal
controls over business processes in light of the results of assessment of company- level controls conducted for
the Company, its consolidated subsidiaries, equity-method associates and joint ventures. We did not include apart of consolidated subsidiaries, equity-method associates and joint ventures which do not have any
quantitatively or qualitatively material impact on the consolidated financial statements in the scope ofassessment of company-level controls.
Regarding the scope of assessment of internal control over business processes, we accumulated business
units in descending order of total revenues (after elimination of intercompany transactions) for the previous
fiscal year, and those business units whose combined amount of revenues reaches approximately 80% of total
revenues on a consolidated basis were selected as “significant business units.” In addition, some of our equitymethod associates and joint ventures which have a significant effect to our consolidated financial statements
were selected as “significant business units.” At the selected significant business units, we included, in the scopeof assessment, those business processes leading to revenues, accounts receivables and inventories and thosebusiness processes relating to greater likelihood of material misstatements and significant account involving
estimates or forecasts as significant accounts that may have a material impact on our business objectives.
Further, not only at selected significant business units, but also at other business units, we added to the scope ofassessment, as business processes having greater materiality considering their impact on the financial reporting,those business processes relating to businesses or operations dealing with high-risk transactions.
3. Matters Related to Results of Assessment
As a result of the assessment above, we concluded that our internal control over financial reporting was
effective as of March 31, 2017.
4. Supplementary Matters
None.
5. Special Notes
None.

A-2

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

Independent Auditors’ Report(filed under the Financial Instruments and Exchange Act of Japan)
June 21, 2017
Mr. Toshiaki Higashihara, President & CEO
Hitachi, Ltd.

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

Takashi Ouchida

Designated and Engagement Partner,
Certified Public Accountant:

Takahiro Saga

Designated and Engagement Partner,
Certified Public Accountant:

Takuya Tanaka[Audit of Financial Statements]
Pursuant to the Article 193-2, paragraph 1 of the Financial Instruments and Exchange Act, we have audited theconsolidated financial statements included in the Financial Section, namely, the consolidated statement of financial
position as at March 31, 2017 of Hitachi, Ltd. (the “Company”) and its consolidated subsidiaries, and the related
consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the year thenended, including notes to the consolidated financial statements.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements inaccordance with International Financial Reporting Standards pursuant to the provision of Article 93 of theRegulation for Terminology, Forms and Preparation of Consolidated Financial Statements, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial statements thatare free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in Japan. Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement.
A-3

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditors’ judgment, including theassessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. The purpose of an audit of the consolidated financial statements is not to express an opinion on theeffectiveness of the entity’s internal control, but in making these risk assessments, the auditor considers internal
controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order todesign audit procedures that are appropriate in the circumstances. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient an appropriate to provide a basis for our audit
opinion.
Audit Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of the Company and its consolidated subsidiaries as at March 31, 2017, and theresults of their operations and their cash flows for the year then ended in conformity with International Financial
Reporting Standards.
[Audit of Internal Control]
Pursuant to the Article 193-2, Paragraph 2 of the Financial Instruments and Exchange Act, we have audited
management’s report on internal control over financial reporting of the Company and its consolidated subsidiaries
as of March 31, 2017.
Management’s Responsibility for the Report on Internal Control
The Company’s management is responsible for designing and operating effective internal control over financial
reporting and for the preparation and fair presentation of its report on internal control in conformity withassessment standards for internal control over financial reporting generally accepted in Japan. There is a possibility
that misstatements may not be completely prevented or detected by internal control over financial reporting.
Auditors’ Responsibility
Our responsibility is to express an opinion on management’s report on internal control based on our internal
control audit as independent position. We conducted our internal control audit in accordance with auditing
standards for internal control over financial reporting generally accepted in Japan. Those standards require that weplan and perform the audit to obtain reasonable assurance about whether management’s report on internal control isfree from material misstatement.
An internal control audit involves performing procedures to obtain audit evidence about the results of theassessment of internal control over financial reporting in management’s report on internal control. The procedures
selected depend on the auditors’ judgment, including the significance of effects on reliability of financial reporting.
An internal control audit includes examining representations on the scope, procedures and results of the assessmentof internal control over financial reporting made by management, as well as evaluating the overall presentation ofmanagement’s report on internal control.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.

A-4

Audit Opinion
In our opinion, management’s report on internal control referred to above, which represents that the internal control
over financial reporting of the consolidated financial statements of the Company and its consolidated subsidiaries
as of March 31, 2017 is effectively maintained, presents fairly, in all material respects, the results of the assessmentof internal control over financial reporting in conformity with assessment standards for internal control overfinancial reporting generally accepted in Japan.
Interest
Our firm and the engagement partners do not have any interest in the Company for which disclosure is required
under the provisions of the Certified Public Accountants Act.
(The above represents a translation, for convenience only, of the original report issued in the Japanese language.)A-5

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

Confirmation Letter[Applicable Law]

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

Director, Kanto Local Finance Bureau[Filing Date]

June 21, 2017

[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name ofToshiaki Higashihara, President & CEO

Representative][Name and title of CFO]

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

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

1. Matters Related to Adequacy of Statements Contained in the Annual Securities Report
Mr. Toshiaki Higashihara, President & CEO, and Mr. Mitsuaki Nishiyama, Senior Vice President andExecutive Officer, confirmed that statements contained in the Annual Securities Report for the 148th fiscal year
(from April 1, 2016 to March 31, 2017) were adequate under the Financial Instruments and Exchange Act.
2. Special Notes
None.

A-7