[Translation]

Quarterly Report(The First Quarter of 150th Business Term)
From April 1, 2018 to June 30, 2018

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

Hitachi, Ltd.

[Cover][Document Filed]

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

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

Director, Kanto Local Finance Bureau[Filing Date]

August 7 , 2018

[Fiscal Year]

The First Quarter of 150th Business Term (from April 1, 2018 to June 30, 2018)[Company Name]

Kabushiki Kaisha Hitachi Seisakusho[Company Name in English]

Hitachi, Ltd.

[Title and Name of Representative]

Toshiaki Higashihara, President & CEO[Address of Head Office]6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo[Phone No.]

03-3258-1111[Contact Person]

Masachika Sawada, Manager, Legal Division[Contact Address]

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

03-3258-1111[Contact Person]

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

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

This is an English translation of the Quarterly Report filed with the Director of the Kanto Local Finance Bureau via Electronic
Disclosure for Investors’ NETwork (“EDINET”) pursuant to the Financial Instruments and Exchange Act of Japan.
The translation of the Confirmation Letter for the original Quarterly Report is included at the end of this document.
Unless the context indicates otherwise, the term “Company” refers to Hitachi, Ltd. and the term “Hitachi” refers to theCompany and its consolidated subsidiaries.
Unless otherwise stated, in this document, where we present information in millions or hundreds of millions of yen, we havetruncated amounts of less than one million or one hundred million, as the case may be. Accordingly, the total of figures presented incolumns or otherwise may not equal the total of the individual items. We have rounded all percentages to the nearest percent, onetenth of one percent or one-hundredth of one percent, as the case may be.
References in this document to the “Financial Instruments and Exchange Act” are to the Financial Instruments and Exchange Act
of Japan and other laws and regulations amending and/or supplementing the Financial Instruments and Exchange Act of Japan.

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

1

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

1
1

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

1
2

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

22

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

7
7

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

77(2) Information on the stock acquisition rights, etc. ………………………………………………………………………
(3) Information on moving strike convertible bonds, etc. …………………………………………………………………

89(4) Changes in the total number of issued shares and the amount of common stock and other …………………………
(5) Major shareholders ……………………………………………………………………………………………………

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

10
11

IV. Financial Information ……………………………………………………………………………………………………… 11
Part II Information on Guarantors, etc. for the Company ………………………………………………………………………… 11[Condensed Quarterly Consolidated Financial Statements] ……………………………………………………………………… F1[Confirmation Letter] ……………………………………………………………………………………………………………… A1

Part I Information on the Company
I. Overview of the Company
1. Key Financial Data
Consolidated financial data, etc.
(Millions of yen, unless otherwise stated)
Three months ended
June 30, 2017

Three months ended
June 30, 2018

2,088,669

2,165,899

9,368,614

Income from continuing operations, before
income taxes

141,553

180,462

638,646

Net income attributable to Hitachi, Ltd.
stockholders

75,068105,245362,988

80,331

113,121382,341

Total Hitachi, Ltd. stockholders’ equity

3,013,091

3,357,201

3,278,024

Total equity

4,165,236

4,539,373

4,511,671

Total assets

9,691,466

9,934,595

10,106,603

15.55

21.80

75.19

15.54

21.78

75.12

31.1

33.8

32.4

Net cash provided by operating activities

126,933

134,355

727,168

Net cash used in investing activities(104,625)(103,942)(474,328)

18,85587,779(321,454)

813,019814,399

697,964

Revenues

Comprehensive income attributable to Hitachi,Ltd. stockholders

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

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

Year ended
March 31, 2018

(Notes) 1. Hitachi's consolidated financial statements have been prepared in conformity with the International Financial ReportingStandards (“IFRS”) as issued by the International Accounting Standards Board.
2. Revenues do not include the consumption tax, etc.
2. Description of Business
There were no material changes in principal businesses of Hitachi during the three months ended June 30, 2018. The HitachiGroup is comprised of the Company, 851 consolidated subsidiaries, and 415 equity-method associates and joint-ventures.
Changes in principal affiliated companies during the three months ended June 30, 2018 were as follows.
・ Hitachi Information & Telecommunication Systems Global Holding Corporation in the Information & Telecommunication
Systems segment changed its company name to Hitachi Global Digital Holdings Corporation on April 1, 2018.
・ The Company transferred all shares of Hitachi Kokusai Electric Inc. stock owned by the Company on May 31, 2018, andthen Hitachi Kokusai Electric Inc. transferred its semiconductor manufacturing equipment business to HKE Holdings K.K.
Subsequently, the Company partially re-acquired shares of Hitachi Kokusai Electric Inc. stock on June 4, 2018. As a resultof these transactions, Hitachi Kokusai Electric Inc. in the Electronic Systems & Equipment segment turned into an equitymethod associate of the Company and belongs in the Social Infrastructure & Industrial Systems segment.

1II. Business Overview
1. Risk Factors
There were no new risk factors recognized during the three months ended June 30, 2018.
There were no material changes in the risk factors stated in the Annual Securities Report for the 149th business term
pursuant to the Financial Instruments and Exchange Act of Japan.
2. Management’s Discussion and Analysis of Consolidated Financial Condition, Results of Operation and Cash Flows(1) Analysis of Results of Operations
Results of Operations
The results of operations in the three months ended June 30, 2018 were as follows.
Revenues increased 4% to ¥2,165.8 billion, as compared with the three months ended June 30, 2017, despite the effect ofreorganization of Hitachi Kokusai Electric Inc. This increase was due mainly to the acquisition of the Sullair brand air
compressor business (Sullair business) in July 2017, increased revenues from the railway systems business for the U.K. in theSocial Infrastructure & Industrial Systems segment, higher revenues in the High Functional Materials & Components segmentowing to corporate acquisitions by Hitachi Chemical Company, Ltd. and Hitachi Metals, Ltd., and increased revenues, mainly
overseas, in the Construction Machinery segment.
Cost of sales increased 4% to ¥1,586.3 billion, as compared with the three months ended June 30, 2017, and the ratio of costof sales to revenues was 73%, which was the same level as for the three months ended June 30, 2017. Gross profit increased 4%
to ¥579.5 billion, as compared with the three months ended June 30, 2017.
Selling, general and administrative expenses (“SG&A”) increased 1% to ¥431.3 billion, as compared with the three months
ended June 30, 2017, and the ratio of SG&A to revenues was 20%, which was the same level as the three months ended June 30,
2017.
Adjusted operating income (presented as revenues less cost of sales as well as selling, general and administrative expenses)
increased ¥16.3 billion to ¥148.1 billion, as compared with the three months ended June 30, 2017, despite the lower profits in the
Automotive Systems segment and High Functional Materials & Components segment. This increase was due mainly to increased
revenues and higher profits because of improved profitability in the Construction Machinery segment, Social Infrastructure &Industrial Systems segment and Information & Telecommunication Systems segment.
Other income increased ¥38.9 billion to ¥39.5 billion, as compared with the three months ended June 30, 2017, due mainly
to gains on business reorganization and others by selling shares of Hitachi Kokusai Electric Inc. stock. Other expenses decreased¥0.5 billion to ¥10.3 billion, as compared with the three months ended June 30, 2017, due mainly to a decrease in expenses
related to competition law and others.
Financial income (excluding interest income) increased ¥9.7 billion to ¥14.4 billion and financial expenses (excludinginterest charges) decreased ¥0.2 billion to ¥0.2 billion, as compared with the three months ended June 30, 2017, respectively.
Share of loss of investments accounted for using the equity method was ¥11.1 billion, a decrease of ¥28.7 billion ascompared with the three months ended June 30, 2017.
EBIT (earnings before interest and taxes, which is presented as income from continuing operations, before income taxes lessinterest income plus interest charges) increased ¥37.1 billion to ¥180.4 billion, as compared with the three months ended June 30,
2017. This increase was due mainly to the increase in adjusted operating income and posting of gains from sales of shares ofHitachi Kokusai Electric Inc. stock.
Interest income increased ¥1.3 billion to ¥4.5 billion and interest charges decreased ¥0.3 billion to ¥4.5 billion, as comparedwith the three months ended June 30, 2017.
Income from continuing operations, before income taxes increased ¥38.9 billion to ¥180.4 billion, as compared with thethree months ended June 30, 2017.
Income taxes increased ¥13.7 billion to ¥48.9 billion, as compared with the three months ended June 30, 2017.
Income from discontinued operations was ¥5.8 billion, as compared with the loss of ¥70 million for the three months ended
June 30, 2017.
Net income increased ¥31.1 billion to ¥137.4 billion, as compared with the three months ended June 30, 2017.
Net income attributable to non-controlling interests increased ¥0.9 billion to ¥32.1 billion, as compared with the threemonths ended June 30, 2017.
As a result of the foregoing, net income attributable to Hitachi, Ltd. stockholders increased ¥30.1 billion to ¥105.2 billion, as
compared with the three months ended June 30, 2017.
Operations by Segment
The following is an overview of results of operations by segment. Revenues for each segment include intersegment
transactions.
(Information & Telecommunication Systems)
Revenues increased 1% to ¥440.5 billion, as compared with the three months ended June 30, 2017, due mainly to higher
revenues from system integration business for the Japanese market, despite the effect of transfer of a subsidiary operating
communication network equipment business.
Adjusted operating income increased ¥7.4 billion to ¥34.5 billion, as compared with the three months ended June 30, 2017,
due mainly to improved profitability in system integration business for the Japanese market and the IT platform & products
business.
2

EBIT increased ¥2.7 billion to ¥28.6 billion, as compared with the three months ended June 30, 2017, due mainly to theincreased adjusted operating income, despite posting of exchange loss.
(Social Infrastructure & Industrial Systems)
Revenues increased 8% to ¥518.3 billion, as compared with the three months ended June 30, 2017, due mainly torevenue increase in railway systems business for Europe and that in industrial products business owing to the acquisition of aircompressor business with Sullair brand (Sullair Business).
Adjusted operating income increased ¥7.5 billion to ¥20.9 billion, as compared with the three months ended June 30, 2017,
due mainly to improved profitability in power & energy business and business for industry & distribution field, despite a decline
in average sales price in elevators and escalators business in China.
EBIT decreased ¥6.4 billion to ¥10.1 billion, as compared with the three months ended June 30, 2017, due mainly to theimpact of foreign currency translation.
(Electronic Systems & Equipment)
Revenues decreased 2% to ¥239.9 billion, as compared with the three months ended June 30, 2017, despite increased
revenues at Hitachi High-Technologies Corporation owing to higher sales of clinical analyzers and in healthcare business owing
to higher sales of diagnostic imaging equipment. The decrease was due mainly to conversion of Hitachi Kokusai Electric Inc. into
an equity-method associate.
Adjusted operating income decreased ¥0.2 billion to ¥19.1 billion, as compared with the three months ended June 30, 2017,
due mainly to conversion of Hitachi Kokusai Electric Inc. into an equity-method associate, despite increased revenues at Hitachi
High-Technologies Corporation and in healthcare business.
EBIT decreased ¥0.3 billion to ¥18.6 billion, as compared with the three months ended June 30, 2017, due mainly to thedecreased adjusted operating income.
(Construction Machinery)
Revenues increased 14% to ¥240.2 billion, as compared with the three months ended June 30, 2017, due mainly to increased
sales of construction machinery in Asia-Pacific, North America and China.
Adjusted operating income increased ¥10.7 billion to ¥27.3 billion, as compared with the three months ended June 30, 2017,
due mainly to the increase in revenues.
EBIT increased ¥7.4 billion to ¥25.3 billion, as compared with three months ended June 30, 2017, due mainly to theincreased adjusted operating income, despite the effect of posting of exchange loss and structural reform expenses.
(High Functional Materials & Components)
Revenues increased 9% to ¥427.9 billion, as compared with the three months ended June 30, 2017, due mainly to the effectof corporate acquisition by Hitachi Chemical Company, Ltd. and Hitachi Metals, Ltd., and sales pricen rise linked to higher raw
material costs at Hitachi Metals, Ltd..
Adjusted operating income decreased ¥3.6 billion to ¥27.6 billion, as compared with the three months ended June 30, 2017,
due mainly to effects of changes in product mix at Hitachi Chemical Company, Ltd. and of changes in raw material costs at
Hitachi Metals, Ltd.
EBIT decreased ¥0.5 billion to ¥33.4 billion, as compared with three months ended June 30, 2017, due mainly to thedecreased adjusted operating income, despite gains on business reorganization and others recorded at Hitachi Metals, Ltd.
(Automotive Systems)
Revenues decreased 2% to ¥238.5 billion, as compared with the three months ended June 30, 2017, due mainly to sales
decrease in North America and Japan and lower sales of car information systems.
Adjusted operating income decreased ¥5.1 billion to ¥5.3 billion, as compared with the three months ended June 30, 2017,
due mainly to deteriorated profitability in North America and an increase in development expenditure as well as the decrease inrevenues.
EBIT decreased ¥5.3 billion to ¥4.4 billion, as compared with the three months ended June 30, 2017, due mainly to thedecreased adjusted operating income.
(Smart Life & Ecofriendly Systems)
Revenues decreased 13% to ¥114.3 billion, as compared with the three months ended June 30, 2017.
Adjusted operating income increased ¥0.5 billion to ¥2.6 billion, as compared with the three months ended June 30, 2017,
due mainly to the effect of structural reform.
EBIT increased ¥0.2 billion to ¥7.6 billion, as compared with the three months ended June 30, 2017, due mainly to theincreased adjusted operating income.
(Others)
Revenues decreased 6% to ¥124.4 billion, as compared with the three months ended June 30, 2017.
Adjusted operating income increased ¥0.8 billion to ¥4.9 billion and EBIT increased ¥3.7 billion to ¥6.5 billion, as
compared with the three months ended June 30, 2017, respectively.
3

Revenues by Market
Revenues in Japan increased 1% to ¥981.4 billion, as compared with the three months ended June 30, 2017, due mainly toincreased revenues in the Information & Telecommunication Systems segment and High Functional Materials & Components
segment.
Overseas revenues increased 6% to ¥1,184.4 billion, as compared with the three months ended June 30, 2017, due mainly toincreased revenues in Asia mainly in the Social Infrastructure & Industrial Systems segment and High Functional Materials &Components segments, and increased revenues in Europe and North America, particularly in the Social Infrastructure &Industrial Systems segment due mainly to the sales growth in the railway systems business and the effect of acquisition of the
Sullair Business.
As a result, the ratio of overseas revenues to total revenues increased 2% to 55%, as compared with the three months ended
June 30, 2017.
(2) Analysis of Financial Condition and Cash Flows
Liquidity and Capital Resources
During the three months ended June 30, 2018, there were no major changes in the Company’s policies of maintaining
liquidity and ensuring funds, efforts for improvement in fund management efficiency, and ideas regarding funding sources andfundraising.
Cash Flows(Cash Flows from Operating Activities)
Net income in the three months ended June 30, 2018 increased by ¥31.1 billion, as compared with the three months ended
June 30, 2017. Net cash inflow from a net change in trade receivables and contract assets* increased by ¥70.3 billion, as
compared with the three months ended June 30, 2017. Net cash outflow from a change in trade payables and inventories
increased by ¥5.3 billion and ¥42.4 billion, respectively, as compared with three months ended June 30, 2017.
As a result of the foregoing, net cash provided by operating activities was ¥134.3 billion in the three months ended June 30,
2018, an increase of ¥7.4 billion, compared with the three months ended June 30, 2017.
* Due to the implementation of IFRS 15, "change in trade receivables" is presented as "change in trade receivables and contract
assets" from the three months ended June 30, 2018.
(Cash Flows from Investing Activities)
Net amount of investments related to property, plant and equipment** was ¥116.0 billion in the three months ended June 30,
2018. This net sum increased by ¥19.1 billion compared with the three months ended June 30, 2017. Proceeds from sale ofinvestments in securities and other financial assets (including investments in subsidiaries and investments accounted for using theequity method) in the three months ended June 30, 2018 increased by ¥21.1 billion because of sale of the stock of Renesas
Electronics Corporation, as compared with the three months ended June 30, 2017. Purchase of investments in securities and otherfinancial assets (including investments in subsidiaries and investments accounted for using the equity method) in the threemonths ended June 30, 2018 decreased by ¥11.2 billion, as compared with the three months ended June 30, 2017.
As a result of the foregoing, net cash used in investing activities was ¥103.9 billion in the three months ended June 30, 2018,
a decrease of ¥0.6 billion compared with the three months ended June 30, 2017.
** The sum of the purchase of property, plant and equipment and the purchase of intangible assets, less the proceeds from sale ofproperty, plant and equipment, and intangible assets.
(Cash Flows from Financing Activities)
Net cash inflow from a change in short-term debt in the three months ended June 30, 2018 increased by ¥37.3 billion, as
compared with the three months ended June 30, 2017. Net cash outflow related to long-term debt*** in three months ended June30, 2018 decreased by ¥35.9 billion, as compared with three months ended June 30, 2017.
As a result of the foregoing, net cash flows provided in financing activities was ¥87.7 billion in the three months ended June30, 2018, an increase of ¥68.9 billion compared with three months ended June 30, 2017.
*** The proceeds from long-term debt, less the payments on long-term debt
As a result of the foregoing, cash and cash equivalents as of June 30, 2018 was ¥814.3 billion, an increase of ¥116.4 billion
from March 31, 2018. Free cash flows, the sum of cash flows from operating and investing activities, were an inflow of ¥30.4
billion in the three months ended June 30, 2018, an increase of ¥8.1 billion in the three months ended June 30, 2017.

4

Assets, Liabilities and Equity
The following is an overview of Hitachi’s assets, liabilities and equity as of June 30, 2018.
Total assets were ¥9,934.5 billion, a decrease of ¥172.0 billion from March 31, 2018. This was due mainly to the conversionof Hitachi Kokusai Electric Inc. to an equity-method associate and cash collection of trade payables.
Total interest-bearing debt, the sum of short-term debt and long-term debt, was ¥1,208.5 billion, an increase of ¥158.2
billion from March 31, 2018. This was due mainly to an increase in short-term debt.
Total Hitachi, Ltd. stockholders’ equity increased by ¥79.1 billion from March 31, 2018, to ¥3,357.2 billion, due mainly toposting net income attributable to Hitachi, Ltd. stockholders. The ratio of total Hitachi, Ltd. stockholders’ equity to total assets
increased 1.4% from March 31, 2018 to 33.8%.
Non-controlling interests were ¥1,182.1 billion, a decrease of ¥51.4 billion from March 31, 2018.
Total equity was ¥4,539.3 billion, an increase of ¥27.7 billion from March 31, 2018. The ratio of interest-bearing debt tototal equity was 0.27, as compared with 0.23 as of March 31, 2018.
(3) Management Policy
There were no material changes in Hitachi’s management policy during the three months ended June 30, 2018.
(4) Challenges Hitachi Group Faces
1) Business and Financial Challenges Hitachi Group Faces
There were no material changes in Hitachi’s business strategy during the three months ended June 30, 2018.
2) Fundamental Policy on the Conduct of Persons Influencing Decision on the Company’s Financial and Business Policies
The Group invests a great deal of business resources in fundamental research and in the development of market-leading
products and businesses that will bear fruit in the future, and realizing the benefits from these management policies requiresthat they be continued for a set period of time. For this purpose, the Company keeps its shareholders and investors wellinformed of not just the business results for each period but also of the Company’s business policies for creating value in the
future.
The Company does not deny the significance of the vitalization of business activities and performance that can be brought
about through a change in management control, but it recognizes the necessity of determining the impact on company value
and the interests of all shareholders of the buying activities and buyout proposals of parties attempting to acquire a large shareof stock of the Company or a Group company by duly examining the business description, future business plans, past
investment activities, and other necessary aspects of such a party.
There is no party that is currently attempting to acquire a large share of the Company’s stocks nor is there a specificthreat, neither does the Company intend to implement specified so-called anti-takeover measures in advance of the appearanceof such a party, but the Company does understand that it is one of the natural duties bestowed upon it by the shareholders andinvestors to continuously monitor the state of trading of the Company’s stock and then to immediately take what the Company
deems to be the best action in the event of the appearance of a party attempting to purchase a large share of the Company’s
stock. In particular, together with outside experts, the Company will evaluate the buyout proposal of the party and holdnegotiations with the buyer, and if the Company deems that said buyout will not maintain the Company’s value and is not in
the best interest of the shareholders, then the Company will quickly determine the necessity, content, etc., of specificcountermeasures and prepare to implement them. The same response will also be taken in the event a party attempts to acquirea large percentage of the shares of a Group company.

5(5) Research and Development
There were no material changes in the research and development of the Hitachi Group (the Company and consolidated
subsidiaries) stated in the Annual Securities Report for the 149th business term pursuant to the Financial Instruments andExchange Act of Japan. The Hitachi Group’s R&D expenditures in the three months ended June 30, 2018 were ¥75.4 billion,
3.5% of revenues. A breakdown of R&D expenditures by segment is shown below.
(Billions of yen)Segment

Three months ended
June 30, 2018

Information & Telecommunication Systems

11.3

Social Infrastructure & Industrial Systems

12.6

Electronic Systems & Equipment

9.9

Construction Machinery

5.5High Functional Materials & Components

12.4

Automotive Systems

16.5

Smart Life & Ecofriendly Systems

1.8

Others(0.2)

Corporate (Head Office and others)

5.3

Total

75.4

(6) Forward-Looking Statements
Certain statements found in “2. Management’s Discussion and Analyses of Consolidated Financial Conditions, Operating
Results and Cash Flows” and other descriptions in this report may constitute “forward-looking statements” as defined in the U.S.
Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views withrespect to certain future events and financial performance and include any statement that does not directly relate to any historicalor current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar
expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on
currently available information and are subject to various risks and uncertainties that could cause actual results to differ
materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forwardlooking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue relianceshould not be placed on “forward-looking statements,” as such statements speak only as of the date of this report.
Factors that could cause actual results to differ materially from those projected or implied in any “forward-looking
statement” and from historical trends include, but are not limited to:• economic conditions, including consumer spending and plant and equipment investment in Hitachi’s major markets,particularly Japan, Asia, the United States and Europe, as well as levels of demand in the major industrial sectors Hitachi
serves;• exchange rate fluctuations of the yen against other currencies in which Hitachi makes significant sales or in which Hitachi’s
assets and liabilities are denominated;• uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;• uncertainty as to general market price levels for equity securities, declines in which may require Hitachi to write down
equity securities that it holds;• fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel,aluminum, synthetic resins, rare metals and rare-earth minerals, or shortages of materials, parts and components;• the possibility of cost fluctuations during the lifetime of, or cancellation of, long-term contracts for which Hitachi uses thepercentage-of-completion method to recognize revenue from sales;• credit conditions of Hitachi’s customers and suppliers;• fluctuations in product demand and industry capacity;• uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in productdemand, exchange rates and/or price of raw materials or shortages of materials, parts and components;• uncertainty as to Hitachi’s ability to continue to develop and market products that incorporate new technologies on a timely
and cost-effective basis and to achieve market acceptance for such products;• uncertainty as to Hitachi’s ability to attract and retain skilled personnel;• increased commoditization of and intensifying price competition for products;6• uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation
Business;• uncertainty as to the success of acquisitions of other companies, joint ventures and strategic alliances and the possibility of
incurring related expenses;• uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting
underperforming businesses and to strengthen competitiveness;• the potential for significant losses on Hitachi’s investments in equity-method associates and joint ventures;• general socioeconomic and political conditions and the regulatory and trade environment of countries where Hitachi
conducts business, particularly Japan, Asia, the United States and Europe, including, without limitation, direct or indirect
restrictions by other nations on imports and differences in commercial and business customs including, without limitation,
contract terms and conditions and labor relations;• uncertainty as to the success of cost structure overhaul;• uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property;• uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its
subsidiaries or its equity-method associates and joint ventures have become or may become parties;• the possibility of incurring expenses resulting from any defects in products or services of Hitachi;• the possibility of disruption of Hitachi’s operations by natural disasters such as earthquakes and tsunamis, the spread of
infectious diseases, and geopolitical and social instability such as terrorism and conflict;• uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect
its confidential information or that of its customers; and• uncertainty as to the accuracy of key assumptions Hitachi uses to evaluate its employee benefit-related costs.
The factors listed above are not all-inclusive and are in addition to other factors contained elsewhere in this report and inother materials published by Hitachi.
3. Material Agreements, etc.
No material agreements were entered into during the three months ended June 30, 2018.
III. 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

10,000,000,000(Note) Since the item of share consolidation (to consolidate every five Hitachi shares into one share and to change the total sharesauthorized to be issued by the Company from 10 billion shares to 2 billion shares) was approved at the general meeting ofshareholders held on June 20, 2018, the toal shares authorized to be issued by the Company shall be 2,000,000,000 shares on
October 1, 2018.
2) Issued shares

Number of sharesissued as of the end of
first quarter (shares)(June 30, 2018)

Class

Number of sharesissued as of thefiling date (shares)(Note 1)
(August 7, 2018)

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 2)-

(Notes) 1. The "Number of shares issued as of the filing date" does not include shares issued upon exercise of stock acquisition rightsfrom August 1, 2018 to the filing date.
2. At the Board of Directors meeting held on April 27, 2018, the Company decided to change the number of shares per one
unit from 1,000 shares to 100 shares on October 1, 2018.
7

(2) Information on the stock acquisition rights, etc.
1) Details of stock option plans
The stock acquisition rights which the Company issued during the three months ended June 30, 2018 are as follows.

Name of stock acquisition rights

The Third Stock Acquisition Rights of Hitachi, Ltd.

Date of resolution

April 11, 2018

Category and number of person to whom stockacquisition rights are granted

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

Number of stock acquisition rights

17,399Class, detail and number of shares to be issued upon
exercise of stock acquisition rights
Amount to be paid in upon exercise of stockacquisition rights

Common stock
1,739,900 shares (Note 1)¥1 per share

Issue price for shares issued upon exercise of stockacquisition rights and amount of capitalization

From April 27, 2018
to April 26, 2048
Issue price:¥486.2 (Note 2)
Amount of capitalization:(Note 3)

Conditions for the exercise of stock acquisition rights(Note 4,5)

Matters regarding acquisition of stock acquisitionrights through transfer

Acquisition of stock acquisition rights throughtransfer shall be subject to the approval of the Boardof Directors.

Exercise period of stock acquisition rights

Matters regarding substitute payment－

Matters regarding grant of stock acquisition rights
upon organizational restructuring(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 the stock acquisition rights (¥1 per share) and the fair value of the stock acquisition right as calculated 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.
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
8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.
2) Details of other stock acquisition rights, etc.
Not applicable.
(3) Information on moving strike convertible bonds, etc.
Not applicable.
(4) Changes in the total number of issued shares and the amount of common stock and other

Date

From April 1, 2018
to June 30, 2018

Change in
the total
number ofissued shares(shares)－

Change in Balance of Change in Balance ofBalance of thecommon common capital
capitaltotal number of
stock
stock
reserve
reserveissued shares(Millions (Millions (Millions (Millions(shares)of yen)of yen)of yen)of yen)4,833,463,387(5) Major shareholders
Not applicable.

9－458,790－

176,757

(6) Information on voting rights
Information on voting rights as of March 31, 2018 is stated in this item because the Company does not identify the number ofvoting rights as of June 30, 2018 due to the lack of information on the number of the Company’s shares held by the entity which
the Company holds one quarter or more of total number of voting rights of such entity as of June 30, 2018.
1) Issued sharesClassification(As of March 31, 2018)
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

5,901,000

Shares with full voting right (others)

Common stock

4,806,928,000

Shares less than one unit

Common stock

20,634,387－－

Number of issued shares

4,833,463,387－－

Total number of voting rights－

4,806,928

4,806,928－－(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 not transferred titles) and 26 voting
rights for those shares.
2) Treasury stock, etc.

(As of March 31, 2018)

Name ofshareholder

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

Address

Number of
Ownership
Number ofshares held
percentage toshares held
under the Total shares
the total
under own name names of held (shares) number of(shares)othersissued shares(shares)(%)

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

10

5,735,000－

5,735,000

0.12

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

5,901,000－

5,901,000

0.12

2. Changes in Senior Management
There were no changes in senior managements from the filing date of the Annual Securities Report for the 149th businessterm pursuant to the Financial Instruments and Exchange of Act of Japan to June 30, 2018.
IV. Financial Information
Refer to the condensed quarterly consolidated financial statements incorporated in this Quarterly Report.

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

11

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

June 30, 2018

March 31, 2018814,399
2,142,788
1,445,750
379,921237,280

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

5,020,138

5,151,800

725,244664,894
2,129,497
1,058,500
336,322743,407
716,431
2,124,827
1,054,370
315,768

4,914,457

4,954,803

9,934,595

10,106,603

274,279
191,056
293,226
1,399,138
549,334
626,789374,801

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

3,708,623

3,795,394

743,172
553,825
389,602811,664
575,156
412,718

1,686,599

1,799,538

5,395,222

5,594,932

458,790576,742
2,194,532
130,904(3,767)458,790575,809
2,105,395
142,167(4,137)

3,357,201

3,278,024

1,182,172

1,233,647

Total equity

4,539,373

4,511,671

Total liabilities and equity

9,934,595

10,106,603

See accompanying notes to condensed quarterly consolidated financial statements.

F-1

Condensed Quarterly Consolidated Statement of Profit or Loss
Three months ended June 30, 2018 and 2017
Revenues (notes 3 and 9)
Cost of sales
Gross profit
Selling, general and administrative expenses
Other income (note 10)
Other expenses (note 10)
Financial income (note 11)
Financial expenses (note 11)
Share of profits (losses) of investments accounted for using the equity method
EBIT (Earnings before interest and taxes)
Interest income
Interest charges
Income from continuing operations, before income taxes
Income taxes
Income from continuing operations
Income (loss) from discontinued operations (note 12)
Net income
Net income attributable to:
Hitachi, Ltd. stockholders
Non-controlling interests
Earnings per share from continuing operations,
attributable to Hitachi, Ltd. stockholders (note 13)
Basic
DilutedEarnings per share attributable to Hitachi, Ltd. stockholders (note 13)
Basic
DilutedMillions of yen
2018
2,165,899(1,586,396)
579,503(431,355)
39,563(10,335)
14,437(203)(11,134)
180,476
4,570(4,584)
180,462(48,911)
131,551
5,876
137,4272017
2,088,669(1,529,896)
558,773(426,932)
604(10,903)
4,649
(474)
17,577143,294
3,190(4,931)
141,553(35,194)
106,359(70)
106,289

105,245
32,18275,06831,221

20.58
20.56

Yen
15.56
15.55

21.80
21.78

15.55
15.54

Condensed Quarterly Consolidated Statement of Comprehensive Income
Three months ended June 30, 2018 and 2017

Millions of yen
2018
137,427

2017
106,289

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

112
324
436

(15,378)576(14,802)

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

3,618
(282)
3,091
6,427

18,2442,654
7,401
28,2996,863
144,290

13,497
119,786

113,121
31,16980,33139,455

Net income

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

F-2

Condensed Quarterly Consolidated Statement of Changes in Equity
Three months ended June 30, 2018

Millions of yen
2018

Balance at beginning of period

Commonstock

CapitalsurplusRetainedearnings(note 8)458,790575,809

2,105,395

Cumulative effects of changes inaccounting policies (note 3)

Accumulated
othercomprehensive
income142,167

Treasurystock,
at cost(4,137)

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

Total equity

3,278,024

1,233,647

4,511,671

-

-

3,209

-

-

3,209

(1,406)

1,803

458,790575,809

2,108,604

142,167(4,137)

3,281,233

1,232,241

4,513,474

Reclassified into retained earnings--

19,304(19,304)

-

-

-

-

Net income--

105,245--

105,245

32,182

137,427

Other comprehensive income (loss)

-

-

-

7,876

-

7,876

(1,013)

6,863

Dividends to Hitachi, Ltd. stockholders--(38,621)--(38,621)-(38,621)

Restated balance
Changes in equity

Dividends to non-controlling interests

-

-

-

-

-

-

(20,152)(20,152)

Acquisition of treasury stock

-

-

-

-

(49)

(49)

-

(49)

Sales of treasury stock

-

(237)

-

-

419

182

-

182

Changes in non-controlling interests

-

1,170

-

165

-

1,335

(61,086)(59,751)

Total changes in equity-

933

85,928(11,263)370

75,968(50,069)

25,899Balance at end of period

458,790576,742

2,194,532

130,904(3,767)

3,357,201

1,182,172

4,539,373

Three months ended June 30, 2017

Millions of yen
2017
Accumulated
othercomprehensive
incomeNoncontrollinginterests

Total equity

Commonstock

Capitalsurplus458,790

577,573

1,793,570

141,068(3,916)

2,967,085

1,129,910

4,096,995

Reclassified into retained earnings

-

-

8,598

(8,598)

-

-

-

-

Net income--

75,068--75,06831,221

106,289

Other comprehensive income

-

-

-

5,263

-

5,263

8,234

13,497

Balance at beginning of period

Treasurystock,
at cost

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

Dividends to Hitachi, Ltd. stockholders--(33,796)--(33,796)-(33,796)

Dividends to non-controlling interests

-

-

-

-

-

-

(17,130)(17,130)

Acquisition of treasury stock

-

-

-

-

(45)

(45)

-

(45)

Sales of treasury stock

-

(25)

-

-

48

23

-

23

Changes in non-controlling interests

-

(507)

-

-

-

(507)

(90)

(597)

Total changes in equity

-

(532)

49,870(3,335)3

46,00622,23568,241

Balance at end of period

458,790577,041

1,843,440

137,733(3,913)

3,013,091

1,152,145

4,165,236

See accompanying notes to condensed quarterly consolidated financial statements.

F-3

Condensed Quarterly Consolidated Statement of Cash flows
Three months ended June 30, 2018 and 2017

Millions of yen
2018

2017

137,427

106,289

90,175
2,043
48,912
11,134(2,994)(37,472)(1,509)382,217(179,524)(29,565)(77,740)(8,179)(130,364)(1,808)87,211471
35,210(17,577)(2,429)8(60)
311,857(137,106)(2,577)(72,344)(6,208)(87,234)(4,350)202,753
3,772
5,726(5,712)(72,184)
134,355

211,161
3,174
6,712(5,596)(88,518)
126,933(102,827)(20,382)
7,138(80,077)(21,747)
4,856(21,059)(32,299)

51,003(17,815)

29,809(5,167)(103,942)(104,625)

152,748
9,281(19,748)
4,731(38,665)(19,519)(49)
182(1,177)(5)

115,435
21,118(67,504)257(33,838)(16,559)
(45)
28
(22)
(15)

87,77918,855

Effect of exchange rate changes on cash and cash equivalents
Change in cash and cash equivalents(1,757)
116,435

6,614
47,777

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

697,964
814,399765,242
813,019

Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
Impairment losses
Income taxes
Share of (profits) losses of investments accounted for using the equity method
Financial income and expenses
Net (gain) loss on business reorganization and others(Gain) loss on sale of property, plant and equipment
Change in trade receivables
Change in trade receivables and contract assets
Change in inventories
Change in other assets
Change in trade payables
Change in retirement and severance benefits
Change in other liabilities
Other
SubtotalInterest received
Dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment (note 2)
Purchase of intangible assets (note 2)
Proceeds from sale of property, plant and equipment, and intangible assets (note 2)
Purchase of investments in securities and other financial assets(including investments in subsidiaries and investments accounted for using the equity method)
Proceeds from sale of investments in securities and other financial assets(including investments in subsidiaries and investments accounted for using the equity method)Other
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Change in short-term debt, net
Proceeds from long-term debt
Payments on long-term debt
Proceeds from payments from non-controlling interests
Dividends paid to Hitachi, Ltd. stockholders
Dividends paid to non-controlling interests
Acquisition of common stock for treasury
Proceeds from sales of treasury stock
Purchase of shares of consolidated subsidiaries from non-controlling interests
Proceeds from partial sales of shares of consolidated subsidiaries to non-controlling interests
Other
Net cash provided by (used in) financing activities

See accompanying notes to condensed quarterly consolidated financial statements.

F-4

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
(1) Nature of Operations
Hitachi, Ltd. (the Company) is a corporation domiciled in Japan, whose shares are listed on the Tokyo Stock Exchange. The
condensed quarterly consolidated financial statements of the Company as of and for the three months ended June 30, 2018
comprise the Company, its subsidiaries and the Company’s interests in associates and joint ventures. The Company’s and its
subsidiaries’ businesses are global and diverse, and include manufacturing and services in eight segments consisting of informationand telecommunication systems, social infrastructure and industrial systems, electronic systems and equipment, construction
machinery, high functional materials and components, automotive systems, smart life and ecofriendly systems and others.
(2) Basis of Presentation
As the Company meets the requirements of a “Specified Company applying Designated International Financial ReportingStandards” pursuant to Article 1-2 of the Ordinance on Terminology, Forms and Preparation Methods of Quarterly Consolidated
Financial Statements (Cabinet Office Ordinance No.64 of 2007), the condensed quarterly consolidated financial statements of theCompany have been prepared in accordance with International Accounting Standards (IAS) 34 “Interim Financial Reporting,” aspermitted by the provision of Article 93 of the Ordinance. They do not include all the information and disclosures required for acomplete set of financial statements prepared in accordance with International Financial Reporting Standards (IFRS), and should
be read in conjunction with the financial statements and notes included in the Company’s annual consolidated financial statements
for the year ended March 31, 2018.
Management of the Company has made a number of judgments, estimates and assumptions relating to the application of
accounting policies, reporting of revenues and expenses and assets and liabilities in the preparation of these condensed quarterly
consolidated financial statements. Actual results could differ from those estimates.
Estimates and assumptions are continually evaluated. The effect of a change in accounting estimates, if any, is recognized in thereporting period in which the change was made and in future periods.
Judgments, estimates and assumptions that could have a material effect on these condensed quarterly consolidated financial
statements are basically the same as those disclosed in the Company’s annual consolidated financial statements for the year ended
March 31, 2018.
Regarding the condensed quarterly consolidated statement of cash flows, changes in presentation have been made effective thefiscal year beginning April 1, 2018 due to materiality of some account balances as a result of business reorganization and others.
“Purchase of leased assets,” which was separately presented, has been included in “Purchase of property, plant and equipment” or“Purchase of intangible assets.” “Proceeds from sale of leased assets,” which were separately presented, have been included in“Proceeds from sale of property, plant and equipment, and intangible assets.” The condensed quarterly consolidated statement ofcash flows for the three months ended June 30, 2017 has been reclassified in order to reflect these changes in presentation.
As a result, regarding the condensed quarterly consolidated statement of cash flows for the three months ended June 30, 2017,“Purchase of leased assets” of ¥1,168 million and ¥152 million has been reclassified as “Purchase of property, plant andequipment” and “Purchase of intangible assets” respectively. In addition, “Proceeds from sale of leased assets” of ¥1,253 million
have been reclassified as “Proceeds from sale of property, plant and equipment, and intangible assets.”

F-5

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(3) Significant Accounting Policies
Significant accounting policies adopted in preparation of the condensed quarterly consolidated financial statements are consistent
with those used in the preparation of the Company’s annual consolidated financial statements for the year ended March 31, 2018,
except for the following matters.
(a) Financial Instruments(i) Non-derivative Financial Assets
The Company initially recognizes trade and other receivables on the date such receivables arise. All other financial assets
are initially recognized at the transaction date, on which the Company becomes a party to the agreement.
The Company derecognizes financial assets when contractual rights to cash flows from the financial assets expire or when
the contractual rights to receive cash flows from the financial assets are transferred in transactions where the risks andeconomic rewards of owning the financial assets are substantially transferred. In transactions where the risks and economic
rewards of owning the financial assets are neither substantially transferred nor retained, the Company continues torecognize the financial assets to the extent of its continuing involvement and derecognizes such financial assets only if its
control is transferred.
The classification and measurement model of non-derivative financial assets is summarized as follows:
Financial Assets Measured at Amortized Cost
Financial assets are subsequently measured at amortized cost in case they meet the following requirements:
・The financial asset is held within a business model with the objective of collecting contractual cash flows.
・The contractual terms of the financial asset provide cash flows on specified dates that are solely payments of principal
and interest on the principal amount outstanding.
Financial assets measured at amortized cost are initially measured at fair value (including direct transaction costs). The
carrying amount of financial assets measured at amortized cost is subsequently measured using the effective interest
method. Interest accrued on financial assets measured at amortized cost is included in Interest income in the consolidated
statement of profit or loss.
FVTOCI Financial Assets
The Company holds certain equity instruments with the purpose of expanding its revenue base by maintaining andstrengthening business relations with the investees. These equity instruments are classified as FVTOCI financial assets bydesignation. They are initially and subsequently measured at fair value, and the changes in fair value are recognized in OCI.
The cumulative amount of OCI is recognized in equity as AOCI. Dividends on equity instruments designated as FVTOCI
are recognized in profit or loss, except where they are considered to be a return of the investment.
FVTPL Financial Assets
Equity instruments not designated as FVTOCI financial assets and debt instruments not classified as financial assets
measured at amortized cost are classified as FVTPL financial assets. These instruments are subsequently measured at fairvalue and the changes in fair value are recognized in profit or loss.
Impairment of Financial Assets
On a regular basis, but no less frequently than at the end of each quarterly reporting period, the Company evaluatesallowance for doubtful receivables based on expected credit losses on accounts receivable, contract assets, and otherreceivables depending on whether the credit risk has increased significantly since initial recognition.
If the credit risk has increased significantly since initial recognition, the allowance for doubtful receivables is measured at
the amount equal to the lifetime expected credit losses on the financial assets. If the credit risk has not increased
significantly since initial recognition, the allowance for doubtful receivables is measured at the amount equal to 12-month
expected credit losses. However, for accounts receivable, contract assets, and lease receivables, allowance for doubtfulreceivables is always measured at the amount equal to the lifetime expected credit losses.

F-6Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
Whether credit risk has increased significantly is determined based on changes in the risk of default. Default is defined as
the state in which a critical problem with debtor’s payment of contractual cash flows has been identified and there are no
reasonable expectations of recovering the financial assets in its entirety or a portion. To determine whether there have been
any changes in the risk of default, external credit ratings, past due information and other factors are mainly taken into
consideration.
Expected credit losses are measured by taking the probability weighted average of the discounted present values ofdifferences between the total amount of the contractual cash flows and the total amount of cash flows expected to bereceived in the future from the financial assets. If one or more events occur, such as overdue payments, extended payment
terms, negative evaluation by third party credit rating agencies, and/or a deterioration in financial position and operating
results, including capital deficit, the financial assets are individually assessed as credit-impaired financial assets andexpected credit losses are measured based mainly on historical credit loss experience, future collectible amounts and otherfactors. The expected credit losses on the financial assets that are not credit-impaired are measured through collective
assessment based mainly on provision rates depending on historical credit loss experience adjusted by the current and future
economic situation and other factors, if necessary.
For the expected credit losses on accounts receivable, contract assets, and other receivables, the allowances for doubtfulreceivables are recorded instead of directly reducing the carrying amounts. Changes in expected credit losses are recognizedin profit or loss as impairment losses and are included in Selling, general and administrative expenses in the consolidated
statement of profit or loss. For financial assets, after all means of collection have been exhausted and the potential forrecovery is considered remote, it is determined that there are no longer any reasonable expectations of recovering thefinancial assets in their entirety or a portion and the carrying amounts are generally written off.
(ii) Non-derivative Financial Liabilities
The Company initially recognizes debt instruments on the date of issuance. All other financial liabilities are initiallyrecognized at the transaction date, on which the Company becomes a party to the agreement.
The Company derecognizes financial liabilities if extinguished, or if the obligation in the contract is redeemed or theliability is discharged, cancelled or expires.
Non-derivative financial liabilities the Company holds include bonds, debts, trade payables and other financial liabilities.
They are initially measured at fair value (less direct transaction costs), and bonds and long-term debt are subsequently
measured at amortized cost using the effective interest method. Interest accrued on these financial liabilities is included inInterest charges in the consolidated statement of profit or loss.
(iii) Derivatives and Hedge Accounting
The Company uses derivative instruments including forward exchange contracts, cross currency swaps and interest rate
swaps in order to hedge foreign currency exchange risks and interest rate risks. All derivatives are measured at fair valueirrespective of the objective and intent of holding them.
The Company accounts for hedging derivatives as follows:・Fair value hedge: a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment. Thechanges in fair value of the recognized assets or liabilities or unrecognized firm commitments and the related derivatives
are both recorded in profit or loss if the hedge is considered effective.
・Cash flow hedge: a hedge of a forecast transaction or of the variability of cash flows to be received or paid related to arecognized asset or liability. The changes in fair value of the derivatives designated as cash flow hedges are recorded inother comprehensive income (OCI) if the hedge is considered effective. This treatment continues until profit or loss isaffected by the variability of cash flows or the unrecognized firm commitment of the designated hedged item, at which
point changes in fair value of the derivative are recognized in profit or loss. If a non-financial asset or a non-financial
liability is recognized due to a hedged forecast transaction, the changes in the fair value of the derivative recognized in
OCI are included directly in the acquisition cost or other carrying amount of the asset or liability at which point the asset
or liability is recognized.

F-7

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
The Company follows the documentation requirements as prescribed by IFRS 9 “Financial Instruments” (amended in July2014), which includes the risk management objective and strategy for undertaking various hedge transactions. In addition, aformal assessment is made at the hedge’s inception and subsequently on a periodic basis, as to whether the derivative usedin hedging activities is effective in offsetting changes in fair values or cash flows of the hedged items. Hedge accounting is
discontinued if a hedge becomes ineffective.
(iv) Offsetting Financial Assets and Liabilities
Financial assets and liabilities are offset and reported as net amounts in the consolidated statement of financial position,
only if the Company currently has a legally enforceable right to set off the recognized amounts and intends to settle on a net
basis or to realize the asset and settle the liability simultaneously.
(v) Changes in Accounting Policies
While the Company had historically adopted IFRS 9 (issued in November 2009, amended in October 2010), it has adopted
IFRS 9 (amended in July 2014) from the beginning of the fiscal year ending March 31, 2019. IFRS 9 (amended in July2014) amends guidance for hedge accounting and classification and measurement of financial instruments and introduces
impairment guidance based on expected credit losses on financial assets. As a transitional measure upon the adoption of
IFRS 9 (amended in July 2014), the Company applies this standard and recognizes the cumulative effect of the initial
application as an adjustment to the beginning balance of retained earnings for the current fiscal year. The effect of adopting
this standard on the Company’s financial position and operating results is not material.
(b) Revenue Recognitions
The Company recognizes revenue in accordance with the following five-step approach.
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the Company satisfies a performance obligation
The Company offers multiple solutions to meet its customers’ needs which may involve the delivery or performance ofmultiple elements, such as goods or services. When the Company enters into multiple contracts for providing the goods orservices, related contracts are combined based on interdependencies between each contract’s consideration and the time theCompany entered into such contracts, and the transaction price is allocated to each performance obligation on the basis of therelative stand-alone selling prices of each distinct good or service for the purpose of recognizing revenue.
In estimating the stand-alone selling price, the Company considers various factors such as market conditions, entity-specificfactors and information about the customer or class of customer.
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferringpromised goods or services to a customer. Variable consideration, such as discounts and rebates, is included in the transaction
price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will
not occur when the uncertainty associated with the variable consideration is subsequently resolved. The promised amount ofconsideration does not include a significant financing component.
For a performance obligation satisfied over time, the Company measures its progress towards complete satisfaction of that
performance obligation on the basis of output or input methods in consideration of the nature of the goods and services for the
purpose of recognizing revenue. When the Company cannot reasonably measure the progress, revenue is recognized only to theextent of the costs incurred.
The Company recognizes the incremental costs of obtaining a contract with a customer and the costs directly related tofulfilling a contract as an asset if those costs are expected to be recovered, and those assets are amortized based on the methods
used to recognize revenue of the goods or services to which the assets relate. The Company recognizes the incremental costs ofobtaining a contract as an expense when incurred if the amortization period of the assets is less than one year.
Changes in Accounting Policies
From the beginning of the fiscal year ending March 31, 2019, the Company has adopted IFRS 15 “Revenue from Contracts
with Customers.” IFRS 15 provides a comprehensive framework for recognizing revenue. In accordance with the five-step
approach, revenue is measured based on changes in assets and liabilities arising from contracts with customers and recognizedwhen control over goods or services is transferred to the customer.
As a transitional measure upon the adoption of IFRS 15, the Company applies this standard retrospectively and recognizes the
cumulative effect of the initial application as an adjustment to the beginning balance of retained earnings for the current fiscal
year.

F-8

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
Primarily in a transaction whereby the Company provides a customer with a combination of multiple elements such as goods,
services or right to use assets, the transaction price is allocated to each performance obligation based on the stand-alone selling
price then revenue is recognized in accordance with the five-step approach even if no fair value is available. However, theeffect of adopting this standard on the Company’s financial position as of June 30, 2018 and operating results for the threemonths then ended is not material, compared with the application of the previous accounting standard.
In addition, due to the application of IFRS 15, unbilled receivables, which were previously included in Trade receivables, havebeen reclassified as contract assets, and billed receivables have been classified as trade receivables and presented as Trade
receivables and contract assets. Advances received from customers, which were previously presented as Advances received, arepresented as Contract liabilities.
.(c) Income Taxes
Income taxes for the three months ended June 30, 2018 are computed using the estimated annual effective tax rate.

F-9

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(4) Segment Information
The operating segments of the Company are the components for which separate financial information is available and which isevaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance.
The Company discloses its business in eight reportable segments, corresponding to categories of activities classified primarily by
the similarities for the nature of markets, products and services, and economic characteristics. Several operating segments areaggregated into Social Infrastructure & Industrial Systems, Electronic Systems & Equipment and High Functional Materials &Components for financial reporting purposes so that users of the financial statements better understand the Company’s financial
position and business performance. The Company aggregates operating segments based on the similarities of economic
characteristics mainly using profit margin ratios of operating segments. The primary products and services included in eachsegment are as follows:
Information & Telecommunication Systems:
Systems integration, Consulting, Cloud services, Servers, Storage, Software, Telecommunication & network and ATMs
Social Infrastructure & Industrial Systems:
Industrial machinery and plants, Elevators, Escalators, Railway systems, Thermal, Nuclear and Renewable energy power
generation systems and Transmission & distribution systems
Electronic Systems & Equipment:
Semiconductor processing equipment, Test and measurement equipment, Advanced industrial products and Medical electronics
equipment
Construction Machinery:Hydraulic excavators, Wheel loaders and Mining machinery
High Functional Materials & Components:
Semiconductor and display related materials, Circuit boards and materials, Automotive parts, Energy storage devices, Specialty
steel products, Magnetic materials and applications, Functional components and equipment and Wires, cables and related products
Automotive Systems:
Engine powertrain systems, Electric powertrain systems, Integrated vehicle control systems and Car information systems
Smart Life & Ecofriendly Systems:
Air-conditioning equipment, Room air conditioners, Refrigerators and Washing machines
Others:
Optical disk drives, Property management and others

F-10Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
The following tables show business segment information for the three months ended June 30, 2018 and 2017.
Revenues from Outside Customers
Millions of yen
2018

2017

Information & Telecommunication Systems

414,420

408,856

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

472,611215,385

432,584
219,536

Construction Machinery
High Functional Materials & Components

240,130
414,575

211,416
380,598

Automotive Systems
Smart Life & Ecofriendly Systems

236,903
106,400

243,518
123,642

Others62,922

67,733

Subtotal

2,163,346

2,087,883

Corporate items
Total

2,553

786

2,165,899

2,088,669

Revenues from Intersegment Transactions
Millions of yen
2018

2017

Information & Telecommunication Systems
Social Infrastructure & Industrial Systems

26,15245,70925,92846,127

Electronic Systems & Equipment
Construction Machinery

24,614
81

25,572
83

High Functional Materials & Components
Automotive Systems

13,353
1,618

12,756670

Smart Life & Ecofriendly Systems
Others

7,929
61,545

7,525
65,157

Subtotal
Corporate items and Eliminations

181,001(181,001)

183,818(183,818)

-

-

Total

F-11

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
Total Revenues
Millions of yen
2018

2017

Information & Telecommunication Systems

440,572

434,784

Social Infrastructure & Industrial Systems
Electronic Systems & Equipment

518,320
239,999478,711245,108

Construction Machinery
High Functional Materials & Components

240,211427,928

211,499
393,354

Automotive Systems
Smart Life & Ecofriendly Systems

238,521
114,329

244,188
131,167

Others124,467

132,890

Subtotal

2,344,347

2,271,701

Corporate items and Eliminations(178,448)(183,032)

Total

2,165,899

2,088,669

Segment Profit (Loss)
Millions of yen
2018

2017

Information & Telecommunication Systems
Social Infrastructure & Industrial Systems

28,680
10,111

25,92016,528

Electronic Systems & Equipment
Construction Machinery

18,691
25,32618,99817,862High Functional Materials & Components
Automotive Systems

33,473
4,489

34,055
9,836

Smart Life & Ecofriendly Systems
Others

7,696
6,599

7,412
2,814

Subtotal
Corporate items and Eliminations

135,065
45,411

133,425
9,869

Total

180,476

143,294

Interest income
Interest charges

4,570(4,584)

3,190(4,931)

Income from continuing operations, before income taxes

180,462

141,553

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

F-12

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
(5) Business Acquisitions and Divestitures
The following are the main Business Acquisitions and Divestitures for the three months ended June 30, 2018, including the period
up to the approval date of the condensed quarterly 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 K.K. (HKE), which is indirectly held andoperated by a related investment fund whose equity interests are wholly owned by Kohlberg Kravis Roberts & Co. L.P. andwith HVJ Holdings Inc. (HVJ), in which is invested by funds which are managed, operated, provided with information and thelike by Japan Industrial Partners, Inc., regarding (i) a tender offer to be conducted by HKE for the common shares of Hitachi
Kokusai, which was a consolidated subsidiary of the Company in the Electronic Systems & Equipment segment and a shareconsolidation of the share of Hitachi Kokusai, and the acquisition of treasury shares by Hitachi Kokusai, through which Hitachi
Kokusai becomes a wholly-owned subsidiary of HKE, (ii) an absorption-type company split of the thin-film process solutions
business of Hitachi Kokusai, whereby HKE is the company succeeding in the absorption-type split, to be conducted by HKE
and Hitachi Kokusai after Hitachi Kokusai becomes a wholly-owned subsidiary of HKE, and (iii) the transfer by HKE of 20%of the share of Hitachi Kokusai to the Company and 20% of the share of Hitachi Kokusai to HVJ to take place after theabsorption-type company split, and other transactions that are incidental or related to those transactions. Furthermore, on
October 11, 2017, on November 24, 2017 and on March 30, 2018, the Company signed a memorandum of understanding toamend the basic agreement (the Amendment Memorandum) with HKE and HVJ.
HKE commenced the tender offer on October 12, 2017 pursuant to the Amendment Memorandum, and the tender offer wascompleted on December 8, 2017. Following the completion of the tender offer, the above related transactions, such as the shareconsolidation of Hitachi Kokusai shares, took place and the all related transactions were completed on June 4, 2018. As aresult, the Company's ownership ratio of shares of Hitachi Kokusai decreased from 51.7% to 20.0% and Hitachi Kokusai
turned into an equity-method associate of the Company. A gain on the sale of shares of Hitachi Kokusai in the amount of¥32,049 million was recognized in Other income in the condensed quarterly consolidated statement of profit or loss. Changes
in non-controlling interests in the condensed quarterly consolidated statement of changes in equity include derecognition of non-controlling interest in Hitachi Kokusai as a result of its deconsolidation.
On June 1, 2018, HKE changed its name to Kokusai Electric Corporation.

F-13

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(6) Trade Receivables, Trade Receivables and Contract Assets
The components of trade receivables, trade receivables and contract assets are as follows:
Millions of yen
June 30, 2018
Accounts receivable

March 31, 2018

1,505,021

2,322,554

Contract assets

441,107-

Others196,660

178,860-

2,501,414

2,142,788-

Total trade receivables
Total trade receivables and contract assets

Trade receivables, trade receivables and contract assets are stated as net of the allowance for doubtful receivables.
Others include notes receivable and electronically recorded monetary claims.
(7) Fair Value of Financial Instruments(a) Fair Value Measurements
The following methods and assumptions are used to measure the fair value of financial assets and liabilities.
Cash and cash equivalents, Trade receivables, Short-term loans receivable, Other receivables, Short-term debt, Other
payables and Trade payables
The carrying amount approximates the fair value because of the short maturity of these instruments.
Investments in securities and other financial assets
The fair value of lease receivables is based on the present value of lease payments receivable calculated for each group of years
to maturity using discount rates that reflect the time to maturity and credit risk.
Investment securities with quoted market prices are estimated using the quoted share prices. In the absence of an active market
for investment securities, quoted prices for similar investment securities, quoted prices associated with transactions that are notdistressed for identical or similar investment securities or other relevant information including market interest rate curves,referenced credit spreads or default rates, are used to determine fair value. If significant inputs of fair value measurement areunobservable, the Company uses price information provided by financial institutions to evaluate such investments. The
information provided is corroborated by the income approach using its own valuation model, or the market approach using
comparisons with prices of similar securities.
The fair value of long-term loans receivable is estimated based on the present value of future cash flows using the interest rateapplicable to an additional loan of the same type.
Derivative assets are measured at fair value based on quoted prices associated with transactions that are not distressed, prices ininactive markets, or based on models using interest rate curves and forward and spot prices for currencies and commodities. If
significant inputs are unobservable, the Company mainly uses the income approach or the market approach to corroborate
relevant information provided by financial institutions and other available information.
Long-term debt
The fair value of long-term debt is estimated based on quoted market prices or the present value of future cash flows using themarket interest rates applicable to the same contractual terms.
Other financial liabilities
Derivative liabilities are measured at fair value based on quoted prices associated with transactions that are not distressed, prices
in inactive markets, or based on models using interest rate curves and forward and spot prices for currencies and commodities. If
significant inputs are unobservable, the Company uses mainly the income approach or the market approach to corroborate
relevant information provided by financial institutions and other available information.

F-14

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(b) Financial Instruments Measured at Amortized Cost
The carrying amounts and estimated fair values of the financial instruments measured at amortized cost as of June 30 and March
31, 2018 are as follows.
The fair value estimated for financial assets and liabilities measured at amortized cost is classified in Level 2 of the fair value
hierarchy.
Millions of yen
June 30, 2018
Carrying amounts

March 31, 2018

Estimated
fair values

Carrying amounts

Estimated
fair values

AssetsInvestments in securities and otherfinancial assets
Lease receivables

89,691

90,662

92,19893,165

Debt securities

132,459

132,464

120,915

120,920

Long-term loans receivable

108,238

109,723

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

51,631

51,84949,47849,723

Bonds

150,963

154,513

149,837

153,614Long-term borrowings

731,634

737,069

729,540

734,912[1] Long-term debt is included in Current portion of long-term debt and Long-term debt in the condensed quarterly consolidated
statement of financial position.
(c) Financial Instruments Measured at Fair Value
Financial instruments measured at fair value on a recurring basis after the initial recognition are classified into three levels of thefair value hierarchy based on the measurement inputs’ observability as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets
Level 2: Valuations measured by direct or indirect observable inputs other than Level 1
Level 3: Valuations measured by significant unobservable inputs
When several inputs are used for a fair value measurement, the level is determined based on the input that is significant with thelowest level in the fair value measurement as a whole.
Transfers between levels are deemed at the beginning of each quarter period.

F-15

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
The following tables present the assets and liabilities that are measured at fair value on a recurring basis as of June 30 and March
31, 2018.
June 30, 2018
Class of financial instruments

Millions of yen
Level 1

Level 2

Level 3

Total

FVTPL financial assets:
Investments in securities and otherfinancial assets
Equity securities
Debt securities

-

-

1,517

1,517

11,011

4,909

10,803

26,723-31,4097,760

39,169258,142

52

109,881

368,075

269,153

36,370129,961

435,484-

34,979-34,979-34,979-34,979Derivatives
FVTOCI financial assets:
Investments in securities and otherfinancial assets
Equity securities
Total financial assets at fair value
FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value
March 31, 2018
Class of financial instruments

Millions of yen
Level 1

Level 2

Level 3

Total

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

-

-

1,114

1,114

10,749

6,535

9,590

26,874-

27,6697,760

35,429298,307669

113,620

412,596

309,056

34,873132,084

476,013-35,791-35,791-35,791-35,791FVTOCI financial assets:
Investments in securities and otherfinancial assets
Equity securities
Total financial assets at fair value
FVTPL financial liabilities:
Other financial liabilities
Derivatives
Total financial liabilities at fair value

F-16

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
The following tables present the changes in Level 3 instruments measured on a recurring basis for the three months ended June30, 2018 and 2017.
June 30, 2018
Level 3 financial assets
Balance at beginning of period

Millions of yen
Equitysecurities

Debt
securities

Derivatives

Total

114,734

9,590

7,760

132,084

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

71
2,553

105
-

-

176
2,553

Purchases
Sales and redemption

679(1,047)2,180(1,027)-2,859(2,074)

Acquisitions and divestitures
Transfer from Level 3 [3](5,227)
(378)

(55)
-

-

(5,282)
(378)

Other
Balance at end of period

13
111,398

10
10,8037,760

23129,961

71

104

-

175

Unrealized gain relating tofinancial assets held at end of period [4]June 30, 2017
Level 3 financial assets
Balance at beginning of period
Gain (loss) in profit or loss [1]Millions of yen
Equitysecurities

Debt
securities

Derivatives

Total

110,470
6

8,991
(47)

6,061
-

125,522(41)

Gain in OCI [2]Purchases

3,791
517

369

-

3,791
886

Sales and redemption
Acquisitions and divestitures

(544)
-

(521)
1

-

(1,065)
1

168
114,408

6
8,799

6,061

174
129,268

6

20

-

26

Other
Balance at end of period
Unrealized gain relating tofinancial assets held at end of period [4][1] Gain (loss) in profit or loss related to FVTPL financial assets is included in Financial income and Financial expenses in thecondensed quarterly consolidated statement of profit or loss.
[2] Gain in OCI related to FVTOCI financial assets is included in Net changes in financial assets measured at fair value throughOCI in the condensed quarterly consolidated statement of comprehensive income.
[3] Transfer from Level 3 is mainly the result of an investee being listed on the stock market.
[4] Unrealized gain relating to FVTPL financial assets held at the end of period is included in Financial income and Financial
expenses in the condensed quarterly consolidated statement of profit or loss.
Written put options on non-controlling interests of subsidiaries are not included in the above table. Such put options areclassified as Level 3 financial liabilities measured on a recurring basis, and changes in fair value are recognized in Capitalsurplus. The fair value of the put options above as of June 30 and March 31, 2018 were ¥16,500 million and ¥17,098 million,
respectively, included in Other financial liabilities in the condensed quarterly consolidated statement of financial position.
Fair values are measured by the finance departments in accordance with the Company’s policies and procedures. Valuation
models are determined so that they reflect each financial instrument’s nature, characteristics and risks most appropriately. The
finance departments continually examine changes in important inputs that could affect the fair value. In case the fair value of afinancial instrument was significantly impaired, administrators review and approve the impairment loss.

F-17

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(8) Dividends
Dividends paid on the Company’s common stock for the three months ended June 30, 2018 are as follows:

Decision
The Board of Directors
on May 10, 2018

Cash dividends(millions of yen)
38,621

Appropriation
from
Retained earnings

Cash dividends
per share (yen)8.0

Record date

Effective date

March 31, 2018

May 29, 2018

Dividends paid on the Company’s common stock for the three months ended June 30, 2017 are as follows:

Decision
The Board of Directors
on May 12, 2017

Cash dividends(millions of yen)
33,796

Appropriation
from
Retained earnings

F-18

Cash dividends
per share (yen)7.0

Record date

Effective date

March 31, 2017

May 29, 2017

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
(9) Revenues(a) Disaggregation of revenue
The Company’s revenue primarily arises from contracts with customers. The following table shows the disaggregation ofrevenue attributable to each reportable segment and geographic area.
(Millions of yen)
June 30, 2018

Overseas
Revenues
Subtotal

Total
Revenues

9,733

134,242

440,572

98,524

14,664

268,466

518,320

23,14730,316

7,214

151,871

239,999

66,99738,317

34,816

60,629200,759

240,211

172,335

126,951

90,884

31,467

6,291

255,593427,928

96,28545,42068,731

14,726

13,359142,236

238,52190,864

18,616

252

829

3,768

23,465

114,329

Others

96,05319,061

5,482

2,487

1,384

28,414

124,467

Subtotal

1,139,301

534,624

302,392

250,988

117,042

1,205,046

2,344,347

Corporate items andEliminations(157,899)(14,317)(2,781)(2,878)(573)(20,549)(178,448)

Total

981,402520,307299,611248,110

116,469

1,184,497

2,165,899

North
America

Japan

Asia

Information &Telecommunication Systems

306,330

39,912

46,77437,823Social Infrastructure &Industrial Systems

249,854

126,473

28,805

Electronic Systems &Equipment

88,12891,194

Construction Machinery

39,452High Functional Material &Components
Automotive Systems
Smarts Life & Ecofriendly
Systems

Europe

Other
Areas

The Information & Telecommunication Systems segment consists of Front Business and IT Platform & Products, for whichrevenue amounted to 313,047 million yen and 163,781 million yen, respectively (including intersegment transactions). Front
Business is operated mainly in Japan, and IT Platform & Products is operated mainly in Japan, North America and Europe.
(b) Information about satisfaction of performance obligations
The following is information about satisfaction of performance obligations related to major goods and services of eachreportable segment.
(Information & Telecommunication Systems)
Front Business primarily provides services such as system integration, consulting and cloud services. The business provides
goods and services according to customers’ specifications over a specified period of time, and revenue is recognized based on
the pattern of the cost accrual or the passage of time as performance obligations are satisfied over time.
Many of the contracts require payments based on milestones, and in some cases, payments are made before performanceobligations are satisfied.
IT Platform & Products primarily sells server, storage, telecommunication network equipment and related software. Revenue
is recognized upon the completion of the sale and delivery of goods to customers as performance obligations are satisfied atthat point in time. The Company’s general terms and conditions apply, and there are no significant transactions in which
payment terms include deferred payments, etc.

F-19

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
(Social Infrastructure & Industrial Systems)
This segment includes revenue from businesses such as building systems, railway systems, and power and energy. The
building system business is operated mainly in China, the railway system business is operated mainly in Europe, and thepower and energy business is operated mainly in Japan.
Contracts such as construction in this segment involve manufacturing and providing goods based on customers’
specifications over a long period of time. As performance obligations are satisfied over time, revenue is recognized based on
the pattern of the cost accrual. In addition, the segment provides certain services promised in the contracts such as
maintenance throughout the duration of the contract, and recognizes revenue over time based on the passage of time. Many of
the contracts require payments based on milestones, and, in some cases, payments are made before performance obligations
are satisfied.
Further, in the sale of industrial equipment, etc., revenue is recognized when control over the goods is transferred tocustomers as performance obligations are satisfied at the point in time upon the completion or upon delivery of the goods.
The Company’s general terms and conditions apply, and there are no significant transactions in which payment terms include
deferred payments, etc.
(Other)In the Electronic Systems & Equipment, Construction Machinery, High Functional Materials & Components, Automotive
Systems, and Smart Life & Ecofriendly Systems segments, performance obligations are generally satisfied at a point in timeupon completion of the sale and customers’ acceptance and inspection of the goods, and revenue is recognized when control
over goods is transferred to customers. The Company’s general terms and conditions apply, and there are no significant
transactions in which payment terms include deferred payments, etc.
These segments provide certain services promised in the contracts such as maintenance throughout the duration of thecontract, and they recognize revenue over time based on the passage of time. The Company’s general terms and conditions
apply, and there are no significant transactions in which payment terms include deferred payments, etc.
(10) Other Income and Expenses
The main components of other income and expenses for the three months ended June 30, 2018 and 2017 are as follows:
Millions of yen
2018

2017

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

1,308

44

Impairment losses(2,043)(471)

Net gain (loss) on business reorganization and others

37,472(8)

Special termination benefits(1,771)(2,578)

Expenses related to competition law and others(1,631)(3,920)

Impairment losses are mainly recognized on property, plant and equipment, investment properties and intangible assets. Net gain
(loss) on business reorganization and others include gains and losses related to obtaining and losing control of investees and gains
and losses related to obtaining and losing significant influence over investees.
Restructuring charges (structural reform expenses) included in other expenses for the three months ended June 30, 2018 and 2017
were ¥3,814 million and ¥3,049 million, respectively. Restructuring charges (structural reform expenses) mainly include
impairment losses and special termination benefits.
(11) Financial Income and Expenses
The main components of financial income and expenses for the three months ended June 30, 2018 and 2017 are as follows:
Millions of yen
2018

2017

Dividends received

3,041

3,232

Exchange gain (loss)

10,628401

Dividends received for the three months ended June 30, 2018 and 2017 are from FVTOCI financial assets.

F-20

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(12) Discontinued Operations
In the Social Infrastructure & Industrial Systems segment, the Company classified the part of thermal power generation systems
business which was not transferred to Mitsubishi Hitachi Power Systems, Ltd. for business integration in the thermal power
generation systems business with Mitsubishi Heavy Industries, Ltd. but was operated by the Company and certain subsidiaries as
discontinued operations in the condensed quarterly consolidated statement of profit or loss since the projects were completed in
the year ended March 31, 2015.
Profit or loss and cash flows from the discontinued operations for the three months ended June 30, 2018 and 2017 are as follows:
Millions of yen
2018

2017

Profit or loss from discontinued operations
Revenues

6,151

245

Cost of sales and expenses

(274)

(299)

5,877

(54)

(1)

(16)

5,876

(70)

Income (loss) from discontinued operations, before income taxes
Income taxes
Income (loss) from discontinued operations

Millions of yen
2018

2017

Cash flows from discontinued operations
Cash flows from operating activities

1,996

362

Cash flows from investing activities--

Cash flows from financing activities(1,741)

189

F-21

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(13) Earnings Per Share (EPS) Information
The computations of net income attributable to Hitachi, Ltd. stockholders used to derive basic and diluted EPS for the threemonths ended June 30, 2018 and 2017 are as follows:
Number of shares

Weighted average number of shares on which basic EPS is calculated

2018

2017

4,828,273,471

4,828,029,198

4,400,452

3,924,332

4,832,673,923

4,831,953,530

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

Millions of yen
2018

2017

Net income from continuing operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted99,36975,138--99,36975,138

5,876

(70)

-

-

5,876

(70)

105,245

75,068--105,245

75,068Net income(loss) from discontinued operations,
attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted
Net income attributable to Hitachi, Ltd. stockholders
Basic
Effect of dilutive securities
Diluted

Yen
2018

2017

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

20.58

15.56

Diluted

20.56

15.55

Basic

1.22

(0.01)

Diluted1.22(0.01)

Basic

21.80

15.55

Diluted

21.78

15.54

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

EPS attributable to Hitachi, Ltd. stockholders

F-22

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018(14) Contingencies(a) Litigation
In July 2011, a subsidiary in the U.S.A. received a grand jury subpoena from the Antitrust Division of the U.S. Department ofJustice, the Company and a subsidiary in Europe received requests for information from the European Commission, and a
subsidiary in Canada received requests for information from the Canadian Competition Bureau, all in respect of alleged
antitrust violations relating to automotive equipment. In November 2013, a subsidiary in Japan, which had been also primarily
responsible for responding to the investigation from the Antitrust Division of the U.S. Department of Justice, paid fines. In
January 2016, the Company and the subsidiary in Japan which had been also primarily responsible for responding to theinvestigation from the European Commission reached a settlement with the European Commission, and paid fines in April
2016.
In April 2014, a subsidiary in the U.S.A. received a grand jury subpoena in connection with the investigation conducted by
the Antitrust Division of the U.S. Department of Justice in respect of alleged antitrust violations relating to automotive
equipment. In August 2016, a subsidiary in Japan, which had been also primarily responsible for responding to theinvestigation, concluded an agreement in which the subsidiary will pay fines, and paid fines in March 2017.
In addition to the above, the Company, its subsidiaries and associates have cooperated with the competent authorities.
Depending upon the outcome of these matters, fines or surcharge payments, the amount of which is uncertain, may be
imposed on them. Also, in connection with pending and settled antitrust violations, civil disputes, including class action
lawsuits, involving the Company and some of these companies have arisen in a number of countries, including in the U.S.A.
and Canada. An amount, which was considered to be a reasonable estimate in respect of these claims, was accrued for the
potential losses in relation to certain of these civil disputes.
In August 2012, a subsidiary in Europe received a complaint filed by a customer in Europe seeking compensation forconsequential losses of EUR 1,058 million (¥135,404 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 complaints requesting compensation for consequential losses of EUR 239
million (¥30,633 million) and EUR 105 million (¥13,384 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 (¥81,500 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. In addition, a settlement regarding a part of unsettled matters was paid in July 2017.
In addition, in December 2015, these companies, jointly and severally received a request for arbitration from the customer
demanding EUR 161 million (¥20,635 million) in compensation primarily for performance related deficiencies of a power
plant. As of June 30, 2018, the amount of compensation claimed by the customer had been changed to EUR 101 million(¥13,033 million).
In relation to these arbitration cases, the Company, the subsidiary in Europe and the consortium consisting of the Company
and the subsidiary in Europe agreed on the terms of the settlement and settled the claims in July 2018.

F-23

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
In November 2017, a subsidiary in Japan received a complaint that was filed against three companies, namely a construction
company of a condominium complex, the subsidiary and a secondary subcontractor, by a contractee in Japan seeking
approximately ¥45.9 billion in compensation for expenses allegedly incurred arising from concerns over partial deficienciesof piling work during the construction phases of the condominium complex, which the subsidiary contracted as the primary
subcontractor. In July 2018, the compensation claim against three companies was amended to approximately ¥51.0 billion by
the contractee.
In relation to the aforementioned lawsuit, the subsidiary in Japan received a complaint that was filed against the subsidiaryand the secondary subcontractor, by the construction company of the condominium complex seeking approximately ¥49.6
billion in compensation for expenses allegedly incurred arising from the aforementioned lawsuit. Although the subsidiary inJapan will address these claims and explain its position, there can be no assurance that it will not be held liable for any
amounts claimed.
In December 2017, a subsidiary and an associate in Europe received a complaint filed by a customer in Europe seeking
compensation for consequential losses of EUR 263 million (¥33,646 million) and interest allegedly incurred by performance
defects of a power plant. In addition, in July 2018, the subsidiary and the associate in Europe received a complaint requesting
additional compensation for consequential losses of EUR 6 million (¥887 million). Although the subsidiary and the associate
in Europe will vigorously defend themselves against this lawsuit, there can be no assurance that they will not be held liable
for any amounts claimed.
The Company and its subsidiaries execute a number of business reorganizations, including mergers, acquisitions anddivestitures. Contracts for these reorganizations include clauses for transaction price adjustments subsequent to thereorganizations. There is a possibility products or services provided by the Company and its subsidiaries contain defects. As
the result of price adjustments, or in compensation for defects in products or services etc. there is a possibility that theCompany pays for any amounts.
Depending upon the outcome of the above legal proceedings, there may be an adverse effect on the consolidated financial
position or results of operations. Currently, the Company is unable to estimate the adverse effect, if any, of many of theseproceedings. The actual amount of fines, surcharge payments or any other payments resulting from these legal proceedings
may be different from the accrued amounts.
In addition to the above, the Company and its subsidiaries are subject to legal proceedings and claims which have arisen in
the ordinary course of business and have not been finally adjudicated. These actions when ultimately concluded anddetermined will not, in the opinion of management, have a material adverse effect on the consolidated financial statements of
the Company and subsidiaries.
(b) Other
On February 1, 2014 (hereinafter the “effective date of company split”), the Company and Mitsubishi Heavy Industries, Ltd.
(hereinafter “MHI”) integrated their thermal power generation systems businesses into MHI’s consolidated subsidiary,
MITSUBISHI HITACHI POWER SYSTEMS, LTD. (hereinafter “MHPS”), through a spin-off in the form of an absorptiontype company-split. As part of this business integration, assets and liabilities associated with boiler construction projects forMedupi and Kusile Power Stations for which the Company’s consolidated subsidiaries in the Republic of South Africa,
Hitachi Power Africa Proprietary Limited (hereinafter “HPA”) and other companies received orders in 2007, as well as theircontractual status in relation to customers, and rights and obligations thereof were transferred from HPA to MHI’s
consolidated subsidiary, Mitsubishi Hitachi Power Systems Africa Proprietary Limited (hereinafter “MHPS Africa”)(hereinafter, the “Transfer of South African Business”).
Under the agreement executed between the Company and MHI regarding the Transfer of South African Business, theCompany and HPA shall be liable for contingent liabilities resulting from events that occurred before the effective date ofcompany split as well as claims that had already been made as of the said date, while MHPS and MHPS Africa shall be held
responsible for the execution of business on and after the effective date of company split. Given these conditions, it has been
agreed upon to determine the final transfer price upon agreement on future construction schedule as of the effective date ofcompany split and confirmation of estimated project cash flows based on such schedule between the parties, and settle thedifference with the provisional price.

F-24

Notes to Condensed Quarterly Consolidated Financial Statements
June 30, 2018
On March 31, 2016, MHI requested the Company to pay ZAR 48,200 million (approximately ¥379.0 billion when ZAR 1 =¥7.87) to MHPS Africa as a portion of transfer price adjustment, etc. The Company replied to MHI on April 6, 2016 that thedetails of the demand letter lacked legal grounds under any agreement and thus the Company cannot accept it.
On January 31, 2017, MHI extended the amount above and requested the Company to pay ZAR 89,700 million(approximately ¥763.4 billion when ZAR 1 = ¥8.51). The Company again replied to MHI that the Company cannot accept therequest since it lacks legal grounds under any agreement as does the request of March 2016. On August 21, 2017, theCompany received a notice from the Japan Commercial Arbitration Association (hereinafter, the “JCAA”) stating that MHI
had filed a request for arbitration with the JCAA on July 31, 2017 in order to claim for payment of ZAR 90,779 million(approximately ¥774.3 billion when ZAR 1 = ¥8.53) as the said transfer price adjustment, etc. against the Company. The
Company will address this claim and explain its position in the arbitration proceedings.
The Company has recorded provisions based on reasonable estimates for the aforementioned agreement related to the South
African Business. The amount of the said transfer price adjustment, etc. to be determined under the agreement may bedifferent from the accrued amount.

In June 2018, Hitachi Chemical Company, Ltd. (hereinafter “Hitachi Chemical”), a consolidated subsidiary of the Company,
found that, for certain products of the industrial-use lead-acid batteries business, pre-shipment testing to measure battery
capacity was performed in a different manner from that which had been originally agreed upon with customers, andinspection reports containing different data from measurement results were provided to customers. Hitachi Chemical set up a
special investigation committee and the committee has been investigating related facts and causes. Hitachi Chemical has also
been notifying customers, etc. The outcome of the investigation by the committee or discussions with customers may
adversely affect the consolidated financial position or results of operations in the future. As it is not possible to reasonably
estimate the impact on the consolidated financial statements at this time, no amount has been reflected in the condensed
quarterly consolidated financial statements.
(15) Approval of Condensed Quarterly Consolidated Financial Statements
The condensed quarterly consolidated financial statements were approved on August 7, 2018 by Toshiaki Higashihara, President
and CEO of the Company.

F-25

[Cover][Document Filed][Applicable Law]

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

Director, Kanto Local Finance Bureau
August 7 , 2018

[Company Name][Company Name in English]

Kabushiki Kaisha Hitachi Seisakusho
Hitachi, Ltd.

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

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

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

1. Matters Related to Adequacy of Statements Contained in the Quarterly Report
Mr. Toshiaki Higashihara, President & CEO, and Mr. Mitsuaki Nishiyama, Senior Vice President and Executive Officer,
confirmed that statements contained in the Quarterly Report for the first quarter of the 150th fiscal year (from April 1, 2018 to June30, 2018) were adequate under the Financial Instruments and Exchange Act.
2. Special Notes
None.

A-2