<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 20-F

(Mark One)

  (   )         REGISTRATION STATEMENT PURSUANT TO SECTION 12(b)
                 OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

                                       OR

  ( X )           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 2003
                                              --------------

                                       OR

  (   )         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

            For the transition period from ___________ to ___________

                          Commission file number 1-8320
                                                 ------

                       KABUSHIKI KAISHA HITACHI SEISAKUSHO
                       -----------------------------------
             (Exact name of Registrant as specified in its charter)

                                  Hitachi, Ltd.
                                  -------------
                 (Translation of Registrant's name into English)

                                      Japan
                                      -----
                 (Jurisdiction of incorporation or organization)

          6, Kanda-Surugadai 4-chome, Chiyoda-ku, Tokyo 101-8010, Japan
          -------------------------------------------------------------
                    (Address of principal executive offices)

 Securities registered or to be registered pursuant to Section 12(b) of the Act.

       Title of each class            Name of each exchange on which registered
       -------------------            -----------------------------------------
   American Depositary Shares                  New York Stock Exchange
-------------------------------     --------------------------------------------
          Common Stock                         New York Stock Exchange
-------------------------------     --------------------------------------------

 Securities registered or to be registered pursuant to Section 12(g) of the Act.

                                      None
--------------------------------------------------------------------------------
                                (Title of Class)

<PAGE>

 Securities for which there is a reporting obligation pursuant to Section 15(d)
                                   of the Act.

                                      None
--------------------------------------------------------------------------------
                                (Title of Class)


Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report.

Common Stock        3,368,124,286 shares

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes  X     No ___
    ---

Indicate by check mark which financial statement item the registrant has elected
to follow.

Item 17  X   Item 18 ___
        ---

Fiscal years 2002, 2001 and 2000 of this report indicate Hitachi, Ltd.'s fiscal
years ended March 31, 2003, 2002 and 2001.

Unless the context indicates otherwise, the term "Company" refers to Hitachi,
Ltd. and the term "Hitachi" refers to Hitachi, Ltd. and its consolidated
subsidiaries.


Cautionary Statement

Certain statements contained in this annual report may constitute
forward-looking statements which reflect management's current views with respect
to certain future events and financial performance based on certain assumptions
and include any statement that does not directly relate to any historical or
current fact. Words such as "anticipate," "believe," "expect," "estimate,"
"intend," "plan," "project" and similar expressions which indicate future events
and trends may identify forward-looking statements. Actual results may differ
materially from those projected or implied in the forward-looking statements and
from historical trends. Further, certain forward-looking statements are based
upon assumptions of future events which may not prove to be accurate.

Factors that could cause actual results to differ materially from those
projected or implied in any forward-looking statements and from historical
trends include, but are not limited to:

  -  rapid technological change, particularly in the Information &
     Telecommunication Systems segment and Electronic Devices segment;

  -  uncertainty as to Hitachi's ability to continue to develop and market
     products that incorporate new technology on a timely and cost-effective
     basis and to achieve market acceptance for such products;

  -  fluctuations in product demand and industry capacity, particularly in the
     Information & Telecommunication Systems segment, Electronic Devices segment
     and Digital Media & Consumer Products segment;

  -  increasing commoditization of information technology products, and
     intensifying price competition in the market for such products;

                                       2

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  -   fluctuations in rates of exchange for the yen and other currencies in
      which Hitachi makes significant sales or in which Hitachi's assets and
      liabilities are denominated, particularly between the yen and the U.S.
      dollar;

  -   uncertainty as to Hitachi's ability to access, or access on favorable
      terms, liquidity or long-term financing, particularly in the context of
      limited credit availability currently prevailing in Japan;

  -   uncertainty as to Hitachi's ability to implement measures to reduce the
      potential negative impact of fluctuations in product demand and/or
      exchange rates;

  -   general economic conditions and the regulatory and trade environment of
      Hitachi's major markets, particularly, the United States, Japan and
      elsewhere in Asia, including, without limitation, continued stagnation or
      deterioration of the Japanese economy, or direct or indirect restriction
      by other nations of imports;

  -   uncertainty as to Hitachi's access to, or protection for, certain
      intellectual property rights, particularly those related to electronics
      and data processing technologies;

  -   uncertainty as to the success of alliances upon which Hitachi depends,
      some of which Hitachi may not control, with other corporations in the
      design and development of certain key products; and

  -   uncertainty as to general market price levels for equity securities in
      Japan, declines in which may require Hitachi to write-down equity
      securities it holds.

These factors listed above are not exclusive and are in addition to other
factors that are stated or indicated elsewhere in this report, or in other
materials published by the Company.

                                       3

<PAGE>

                                     PART I

Item 1.  Identity of Directors, Senior Management and Advisers

Not applicable.


Item 2.  Offer Statistics and Expected Timetable

Not applicable.


Item 3.  Key Information

A. Selected Financial Data

<TABLE>
<CAPTION>
                                                                          Year ended March 31
                                             -------------------------------------------------------------------------------
                                                    1999           2000            2001           2002            2003
                                             -------------------------------------------------------------------------------
                                                   (Millions of yen, except per share amounts and number of shares issued)
<S>                                               <C>            <C>             <C>            <C>             <C>
Total revenues                                    7,977,374      8,001,203       8,416,982      7,993,784       8,191,752
Income (loss) before income taxes and
  minority interests                               (221,174)        79,235         323,655       (586,072)         96,828
Net income (loss)                                  (327,611)        16,922         104,380       (483,837)         27,867
Per common share:
  Net income (loss)
    Basic                                            (98.15)          5.07           31.27        (144.95)           8.31
    Diluted                                          (98.15)          4.99           30.32        (144.95)           8.19
  Cash dividends declared                              5.50           6.00           11.00           3.00            6.00
                                                    ($0.045)       ($0.058)        ($0.094)       ($0.024)        ($0.049)

Cash and cash equivalents                         1,237,527      1,357,432       1,381,603      1,029,374         828,171
Short-term investments                              605,679        632,434         433,650        178,933         186,972
Total assets                                      9,847,742      9,983,361      11,246,608      9,915,654      10,179,389
Short-term debt and current
  installments of long-term debt                  1,159,811      1,305,670       1,611,855      1,199,921       1,328,446
Long-term debt                                    1,478,168      1,482,810       1,881,270      1,798,303       1,512,152
Minority interests                                  776,462        791,925         825,158        798,744         751,578
Stockholders' equity                              3,006,015      2,987,687       2,861,502      2,304,224       1,853,212
Common stock                                        281,735        281,738         281,754        282,032         282,032
Number of shares issued
(thousand shares)                                 3,337,895      3,337,900       3,337,932      3,338,481       3,368,124
</TABLE>

Note:  On April 1, 2000, Hitachi adopted the provisions of Statement of
       Financial Accounting Standards No. 115, "Accounting for Certain
       Investments in Debt and Equity Securities." Accordingly, figures for all
       prior periods have been restated.

                                       4

<PAGE>

The following table provides the noon buying rates for Japanese yen in New York
City for cable transfers as certified for customs purposes by the Federal
Reserve Bank of New York. Translation of dividend amounts into U.S. dollars is
based on such rates at each respective payment date. The average rate means the
average of the exchange rates on the last day of each month during a fiscal
year.

     Yen exchange rates per U.S. dollar:
      Year ended March 31                   Average        High          Low
      -------------------                   -------        ----          ---
        1999                                 128.10
        2000                                 110.02
        2001                                 111.65
        2002                                 125.64
        2003                                 121.10

        March 2003                                        121.42       116.47
        April 2003                                        120.55       118.25
        May 2003                                          119.50       115.94
        June 2003                                         119.87       117.46
        July 2003                                         120.55       117.24
        August 2003                                       120.47       116.71

     On September 10, 2003, the yen exchange rate per U.S. dollar was 117.13 yen
per $1.


B. Capitalization and Indebtedness

Not applicable.


C. Reasons for the Offer and Use of Proceeds.

Not applicable.


D. Risk Factors

Hitachi operates in a broad range of business fields, conducts business on a
global scale, and utilizes sophisticated specialized technologies to carry on
its operations. It is therefore exposed to risks attributable to the economic
environment, risks inherent in individual industrial sectors and business lines,
and risks related to management.

Although certain risks that may affect Hitachi's businesses are listed in this
section, the list is not exhaustive. Hitachi's businesses may in the future also
be affected by other risks that are currently unknown or that are not currently
considered significant. The items set forth in this section contain information
relating to the forward-looking statements subject to "Cautionary Statement"
beginning on page 2 of this report.

Certain of the risk factors that may affect Hitachi are set out below.

Risks related to economic environment

..  Economic trends
   The continuing adverse economic environment in Hitachi's main markets may
   have a negative effect on Hitachi's business results. Decreases in
   consumption owing to economic downturns in Japan, North America, Asia and
   other major markets where Hitachi does business may negatively impact
   Hitachi's business results by reduced demand and increased price competition
   for the products and services Hitachi offers. In addition, the

                                       5

<PAGE>

   adverse economic environment may result in increased risks of excess
   inventories and overcapacities, and further restructuring measures by
   Hitachi, which could pose associated expenses.

..  Currency exchange rate fluctuations
   Since Hitachi conducts business in many foreign countries, a certain portion
   of its assets, liabilities, revenues and expenses are denominated in various
   currencies, principally the U.S. dollar. Fluctuations in currency exchange
   rates may affect Hitachi's financial results, which are reported in Japanese
   yen. A strong yen, for example, reduces the price competitiveness of products
   exported to foreign markets and diminishes profit by decreasing revenues.

Risks related to industrial sectors and business lines

..  Rapid technological innovation
   New technologies are rapidly emerging in the segments in which Hitachi does
   business, with the pace of technological innovation being especially notable
   in the field of information systems and electronics. The development of such
   advanced technologies and their continuous, timely and cost-effective
   incorporation in products and services is indispensable to stay competitive.
   While introducing such products and services requires a significant
   commitment to research and development, there can be no assurance that
   Hitachi's research and development will result in success. Should Hitachi
   fail in its endeavors to so develop and incorporate such advanced
   technologies, the results of operations of related Hitachi businesses may be
   negatively impacted.

..  Intense competition
   The industrial sectors and business lines in which Hitachi is engaged are
   experiencing increasingly intense competition. Hitachi competes with diverse
   competitors ranging from huge global corporations to specialized companies.
   Competitors are increasingly manufacturing products, including sophisticated
   electronic products, in low-cost jurisdictions. Globalization of markets and
   commoditization of such products are making price competition in the business
   sectors in which Hitachi is engaged increasingly intense. To succeed in this
   competitive environment, Hitachi believes its products and services must be
   competitive in terms of price, engineering expertise, quality and brand
   value. Hitachi cannot be certain that each or any of the products or services
   that it offers will be competitive, and should each or any such products or
   services fail to be competitive, Hitachi's business results may be negatively
   affected.

..  Supply and demand balance
   Supply in excess of demand leads to a decline in selling prices and thus,
   such oversupply in the markets in which Hitachi is involved may adversely
   affect Hitachi's performance. In addition, Hitachi may be forced to dispose
   overcapacity and obsolete equipment to adjust supply and demand, which can
   cause Hitachi losses. Semiconductor industry and liquid crystal display
   industry, in particular, are highly cyclical and cyclical downturns are
   characterized by a sharp fall in prices and overcapacity. Hitachi's
   semiconductor business and liquid crystal display business have recently been
   and may be in the future negatively impacted by a periodic oversupply in the
   global markets.

..  Dependence on the ability of third parties to deliver materials and
   components
   Hitachi's manufacturing operations rely on third parties for supplies of
   parts, components and services of adequate quality and quantity and in a
   timely manner. External suppliers may have other customers and may not have
   sufficient capacity to meet all of the needs of such customers during periods
   of excess demand. Although in general, Hitachi maintains multiple sources of
   supply and works closely with its suppliers to avoid supply-related problems,
   such problems including shortages and delays may occur, which could
   materially harm Hitachi's business. In addition, reliance on outside sources
   increases the risk that Hitachi will not be able to control or avoid the
   introduction under the Hitachi name of products incorporating defective or
   inferior components, which could impose expenses for product recalls and
   lawsuits on Hitachi and adversely affect Hitachi's business results or its
   reputation for quality products.

                                       6

<PAGE>

Risks related to management

..  Dependence on specially skilled personnel
   Hitachi believes it can continue to remain competitive only if it can
   maintain and secure additional people who are highly skilled in the fields of
   management and technology. However, the number of skilled personnel is
   limited and the competition for attracting and maintaining such personnel is
   intense, particularly in the information technology industry. Hitachi cannot
   assure that it will be able to successfully maintain and secure additional
   skilled personnel.

..  Acquisitions, joint ventures and strategic alliances
   In every operating sector, Hitachi conducts business through acquisitions of
   other companies, joint ventures and strategic alliances with outside partners
   to develop new technologies and products, and to strengthen competitiveness.
   Such transactions are inherently risky, including because of the difficulties
   in integrating operations, technologies, products and personnel. Integration
   issues are complex, time-consuming and expensive and, without proper planning
   and implementation, could adversely affect Hitachi's business. The success of
   alliances may also be adversely affected by decisions or performance of
   alliance partners other than Hitachi or by adverse business trends. Hitachi
   may incur significant acquisition, administrative and other costs in
   connection with these transactions, including costs related to integration or
   restructuring of acquired businesses. There can be no assurance that Hitachi
   will be able to successfully integrate acquired businesses or achieve all or
   any of the initial aims through such transactions.

..  Restructuring of business
   Hitachi is continuing to restructure its business to improve management
   efficiency and strengthen competitiveness by closing unprofitable operations,
   divesting its subsidiaries and affiliated companies, reorganizing production
   bases and sales network and reducing its workforce. In connection with these
   actions, there may occur costs that adversely affect Hitachi's financial
   results and condition. Restructuring measures may be constrained or intended
   plans cannot be implemented in a timely manner due to governmental
   regulations, employment issues and underdevelopment of Japanese M&A market.
   Moreover, Hitachi may not achieve all of the goals that it aims for through
   these actions.

..  Measures taken under the medium-term management plan
   In January 2003, Hitachi announced a new medium-term management plan through
   the fiscal year ending March 31, 2006. Hitachi plans to realign its business
   portfolio by exiting certain businesses and increasing focus on targeted
   businesses under the management plan. A variety of exit strategies may be
   employed to exit the selected businesses, including divestiture and closure.
   Significant costs may arise in connection with these actions, including costs
   related to the restructuring of businesses and losses related to the sale of
   securities. While increasing focus on targeted businesses may require a
   significant commitment to investment and research and development, there can
   be no assurance that Hitachi's investment and research and development
   efforts will be successful. In addition, there can be no assurance that the
   strategic realignment of businesses under the plan will be beneficial to
   Hitachi's business or financial condition. Even assuming the strategic
   realignment would be beneficial, Hitachi may fail to properly implement the
   measures under the plan, which might adversely affect Hitachi's financial
   condition and results of operations.

..  Intellectual property
   Hitachi depends in part on intellectual property rights covering its
   products, product design and manufacturing processes. Hitachi owns or
   licenses a large number of intellectual property rights and, when Hitachi
   believes it is necessary or desirable, obtains additional licenses for the
   use of other parties' intellectual property rights. If Hitachi fails to
   protect, maintain or obtain such rights, its performance and ability to
   compete may be adversely affected. In addition, since intellectual property
   litigation is costly and unpredictable, Hitachi's efforts to protect its
   intellectual property rights or to defend itself against claims relating to
   intellectual property rights made by others could impose considerable
   expenses on Hitachi.

                                       7

<PAGE>

..  Product quality and liability
   Hitachi increasingly provides products and services utilizing sophisticated
   and complicated technologies. Reliance on external suppliers reduces
   Hitachi's control over quality assurance. There is a risk that defects may
   occur in Hitachi's products and services. The occurrence of such defects
   could make Hitachi liable for damages caused by the defects and could
   negatively impact Hitachi's reputation for quality products and thereby
   adversely affect Hitachi's business results.

..  Risks of natural disasters and similar events
   Portions of Hitachi's facilities, including its research and development
   facilities, manufacturing facilities and the Company's headquarters, are
   located in Japan, where seismic activity is frequent. Large earthquakes or
   other significant natural disasters could have a negative impact on Hitachi's
   operating activities, results of operations and financial condition. In
   addition, with the increased importance of information systems in Hitachi's
   operating activities, disruptions in such information systems due to computer
   viruses and other factors could have a negative impact on Hitachi's operating
   activities, results of operations and financial condition.

..  Governmental regulations
   Hitachi's business activities are subject to various governmental regulations
   in countries where it operates, which include investment approvals, export
   regulations, tariffs, antitrust, intellectual property, consumer and business
   taxation, exchange controls, and environmental and recycling requirements.
   Significant changes in such regulations may limit Hitachi's business
   activities or increase operating costs.

..  Financial risks
   Hitachi owns marketable securities that are exposed to stock market risks.
   Declines in stock market prices may have an adverse effect on Hitachi's
   financial condition and results of operations. Hitachi is dependent on the
   capital market for long-term financing secured through the issue of
   debentures and long-term borrowing from financial institutions, which exposes
   Hitachi to interest rate and credit risks.

..  Retirement benefits
   Hitachi has significant employee retirement benefit costs which are derived
   from actuarial valuations based on a number of assumptions. Assumptions may
   differ from actual results and may adversely and materially affect Hitachi's
   financial condition and results of operations. For example, difference
   between expected return assumptions and actual return on plan assets could
   result in a material understatement of Hitachi's funding obligations which
   may adversely affect Hitachi's financial condition and results of operations.
   In addition, changes in valuation assumptions, such as the discount rate or
   the expected return on plan assets, may have a material effect on Hitachi's
   financial condition and results of operations.

                                       8

<PAGE>

Item 4.  Information on the Company

A. History and Development of the Company

The Company was founded in 1910 as a small electric repair shop and was
incorporated as Hitachi, Ltd. (KABUSHIKI KAISHA HITACHI SEISAKUSHO) in 1920
under the laws of Japan. Its registered office is located at 6, Kanda-Surugadai
4-chome, Chiyoda-ku, Tokyo 101-8010, Japan. The telephone number of the
Company's principal executive office is +81-3-3258-1111.

Over the years, Hitachi has broadened the horizon of its research as well as its
business activities to develop a highly diversified product mix ranging from
electricity generation systems to consumer products and electronic devices.
Hitachi has grown into Japan's largest diversified manufacturer of electronic
and electrical products. With its diverse product lines, Hitachi maintains a
significant presence in each of the major markets it serves, which together make
Hitachi one of the world's largest manufacturers of electronic products. With
its emphasis on research and development and its ability to combine a wide range
of technologies, Hitachi continues to strive to provide the world with products
that meet the changing needs of its customers.

In January 2003, Hitachi launched a new medium-term management plan defining the
direction and goals of its businesses through the fiscal year ending March 31,
2006. The plan includes, among other things, a realignment of Hitachi's business
portfolio which may be implemented by exiting certain businesses, increasing
focus on targeted businesses and creating new businesses in an effort to achieve
increased profitability and alteration of its corporate governance structure in
an effort to improve the efficiency and transparency of management. In addition,
under the plan, Hitachi expects to pursue further growth in the global markets
by identifying competitive businesses and channeling management resources into
those businesses. The businesses on which Hitachi plans to increase focus
include its storage solutions business, hard disk drive business and automotive
equipment business. Hitachi also expects under the plan to continue to improve
cash-flow management by increasing the efficiency of working capital use while
making selective investments, and further to reduce procurement costs. See "Item
5. Operating and Financial Review and Prospects - A. Operating Results" and
"Item 6. Directors, Senior Management and Employees."

In recent years, Hitachi has accelerated business reorganization, including to
facilitate Hitachi's goal of maximizing growth by combining and utilizing the
diverse management resources within Hitachi in the most effective and efficient
ways.

On October 1, 2000, Hitachi Credit Corporation, a 53.4% owned subsidiary, merged
with Hitachi Leasing, Ltd., a 50.0% owned affiliate of the Company, for the
purpose of strengthening management and promoting business development in the
area of financial services. The merged company changed its name to Hitachi
Capital Corporation.

On October 1, 2000, Kokusai Electric Co., Ltd., a 26.7% owned affiliate of the
Company, merged with Hitachi Denshi, Ltd., a 63.7% owned subsidiary, and Yagi
Antenna Co., Ltd., a 40.9% owned affiliate of the Company, for the purpose of
integrating and strengthening their wireless communication businesses. The
merged company became an affiliate of the Company and changed its name to
Hitachi Kokusai Electric Inc.

On October 1, 2001, Nissei Sangyo Co., Ltd., a subsidiary of the Company, was
integrated with the Company's instrument and semiconductor manufacturing
equipment operations and sales operations relating to clinical testing systems
of Hitachi Medical Corporation, a subsidiary of the Company, to form Hitachi
High-Technologies Corporation. The aim of the reorganization is to speedily
respond to market changes in nanotechnology areas such as semiconductor
manufacturing equipment and biotechnology-related products.

On April 1, 2002, the consumer products operation of the Company was separated
and integrated with related subsidiaries of the Company to form Hitachi Home &
Life Solutions, Inc. for the purpose of enabling the consumer products business
to be managed with more speed and flexibility.

                                       9

<PAGE>

On October 1, 2002, the Company made UNISIA JECS CORPORATION a wholly-owned
subsidiary through a share exchange. The purpose of the transaction was to
strengthen Hitachi's competitiveness in the automotive products business. UNISIA
JECS CORPORATION changed its name to Hitachi Unisia Automotive, Ltd. on the same
date.

In June 2002, the Company and International Business Machines Corporation
("IBM") entered into an agreement under which their respective hard disk drive
operations would be transferred to a new standalone company and the Company
would then purchase a majority ownership in the new company. The purpose of the
transaction was to strengthen hard disk drive operations in a highly competitive
market. The deal closed on December 31, 2002 and the new company, Hitachi Global
Storage Technologies, Inc., commenced operations on January 1, 2003.

On April 1, 2003, the Company transferred its semiconductor operations centered
in system LSIs to a new company incorporated jointly by the Company and
Mitsubishi Electric Corporation ("Mitsubishi"). Hitachi expects the new company,
Renesas Technology Corp. ("Renesas"), to improve semiconductor competitiveness
by permitting more flexible management and realizing synergies between the
advanced technologies of the Company and Mitsubishi. Renesas is expected to be
accounted for under the equity method by Hitachi.

Hitachi's capital expenditures for fixed assets on a completion basis were JPY
787,496 million, JPY 856,279 million and JPY 971,095 million in fiscal 2002,
2001 and 2000. While Hitachi has maintained a selective attitude toward
investment decisions, it has placed an emphasis on capital expenditures for
strategically important products. Excluding the purchase of assets to be leased,
a significant portion of capital expenditures have been directed toward
information-related products and electronic devices, including large capital
investments in manufacturing facilities to maintain or enhance competitiveness
in those product sectors. The decrease in capital expenditures during fiscal
2001 reflected curbs on expenditures in the semiconductor sector. The decrease
in capital expenditures during fiscal 2002 reflected Hitachi's increasingly
selective attitude toward investment decisions. In April 2003, Hitachi projected
that, for the fiscal year ending March 31, 2004, its capital expenditures would
amount to approximately JPY 810,000 million, primarily invested in Japan.
Hitachi expects this investment to be funded primarily through internal sources
of financing.


B. Business Overview

Main Categories of Products and Services

Hitachi's business is highly diversified. Starting from the fiscal year ended
March 31, 2002, Hitachi has reclassified its operations into seven industry
segments: (1) Information & Telecommunication Systems, (2) Electronic Devices,
(3) Power & Industrial Systems, (4) Digital Media & Consumer Products, (5) High
Functional Materials & Components, (6) Logistics, Services & Others and (7)
Financial Services. Hitachi's major categories of products and services offered
in each segment as of March 31, 2003 are shown below. This classification of
segments is required pursuant to a ministerial ordinance under the Securities
and Exchange Law of Japan.

(1) Information & Telecommunication Systems
     Systems Integration, Software, Disk Array Subsystems, Hard Disk Drives,
     Servers, Mainframes, Personal Computers, Computer Peripherals,
     Telecommunications Equipment

                                       10

<PAGE>

(2) Electronic Devices
     System LSIs, Memories, Multi-Purpose Semiconductors, Liquid Crystal
     Displays, Semiconductor Manufacturing Equipment, Test and Measurement
     Equipment, Medical Electronics Equipment

(3) Power & Industrial Systems
     Nuclear Power Plants, Thermal Power Plants, Hydroelectric Power Plants,
     Plant Engineering and Construction, Industrial Machinery and Plants,
     Air-Conditioning Equipment, Construction Machinery, Railway Vehicles,
     Elevators, Escalators, Automotive Equipment, Environmental Control Systems

(4) Digital Media & Consumer Products
     Optical Disk Drives, Television Sets, Mobile Phones, LCD Projectors, Room
     Air Conditioners, Refrigerators, Washing Machines, Batteries, Information
     Storage Media

(5) High Functional Materials & Components
     Wires and Cables, Copper Products, Malleable Cast-Iron Products, Forged and
     Cast-Steel Products, Specialty Steels, Magnetic Materials, Chemical
     Products, Electrical Insulating Materials, Synthetic Resin Materials and
     Products, Carbon Products, Printed Circuit Boards, Ceramic Materials

(6) Logistics, Services & Others
     General Trading, Transportation, Property Management

(7) Financial Services
     Loan Guarantees, Leasing, Insurance Services

Sales and Distribution

Hitachi distributes its products in Japan primarily through its own sales
network. Hitachi also distributes some of its products through independent
dealers. In most field sales offices, Hitachi's sales personnel specialize in
the marketing of particular types of products.

International marketing is conducted through overseas sales subsidiaries,
joint-venture companies and unaffiliated distributors. Also, certain types of
equipment are sold to industrial companies in foreign markets on an original
equipment manufacturing (OEM) basis and marketed under the brand names of such
industrial companies.

Overseas sales amounted to JPY 2,645,209 million in fiscal 2002, accounting for
32% of total revenues. Foreign currency exchange rate fluctuations influence
Hitachi's operating environment. A strong yen reduces the price competitiveness
of products exported to foreign markets and diminishes profit by decreasing
revenue when foreign currency income from overseas product sales is converted to
yen. See "Item 5. Operating and Financial Review and Prospects - A. Operating
Results."

Hitachi's widespread customer base in domestic and overseas markets encompasses
leading industrial companies, financial institutions, utilities, governments and
individual customers. No material part of its business is dependent upon one or
a few customers.

                                       11

<PAGE>

Segment Information

Hitachi has not presented segment information in accordance with the
requirements of Statement of Financial Accounting Standards (SFAS) No.131,
"Disclosures about Segments of an Enterprise and Related Information," since
foreign issuers are presently exempted from these disclosure requirements for
the purpose of Securities Exchange Act filings with the SEC. However, Hitachi is
required to disclose the segment information presented below in accordance with
a ministerial ordinance under the Securities and Exchange Law of Japan. Hitachi
believes that this presentation may be useful in understanding Hitachi's results
of operations.

(1) Industry Segment

<TABLE>
<CAPTION>
                                                                 Year ended March 31
                                                                 -------------------
                                                    2001                 2002                  2003
                                             ------------------   ------------------    ------------------
                                                                   (Millions of yen)
<S>                                            <C>          <C>     <C>          <C>      <C>          <C>
Revenues
  Information & Telecommunication Systems      1,796,084    17%     1,829,661    18%      1,899,651    19%
  Electronic Devices                           2,011,717    19      1,487,200    15       1,570,069    15
  Power & Industrial Systems                   2,321,104    21      2,266,895    23       2,297,068    22
  Digital Media & Consumer Products            1,053,199    10      1,170,744    12       1,205,551    12
  High Functional Materials & Components       1,467,345    13      1,250,248    12       1,248,550    12
  Logistics, Services & Others                 1,599,369    15      1,430,825    14       1,449,594    14
  Financial Services                             592,774     5        567,138     6         579,267     6
    Subtotal                                  10,841,592   100%    10,002,711   100%     10,249,750   100%
                                                          ====                 ====                  ====
  Eliminations and Corporate Items            (2,424,610)          (2,008,927)           (2,057,998)
                                             -----------          -----------           -----------
    Total                                      8,416,982            7,993,784             8,191,752
                                             ===========          ===========           ===========

Operating Income (Loss)

  Information & Telecommunication Systems         48,921    13%        35,757     -%        110,523     -%
  Electronic Devices                             118,128    31       (163,633)    -         (23,242)    -
  Power & Industrial Systems                      77,269    20         55,004     -          53,253     -
  Digital Media & Consumer Products                1,541     0        (14,675)    -           6,204     -
  High Functional Materials & Components          83,415    22        (22,024)    -          18,301     -
  Logistics, Services & Others                     8,437     2          3,257     -          10,352     -
  Financial Services                              44,146    12         37,403     -          12,067     -
    Subtotal                                     381,857   100%       (68,911)    -%        187,458     -%
                                                          ====                 ====                  ====
  Eliminations and Corporate Items               (39,545)             (48,504)              (34,491)
                                             -----------          -----------           -----------
    Total                                        342,312             (117,415)              152,967
                                             ===========          ===========           ===========
</TABLE>

                                       12

<PAGE>

<TABLE>
<CAPTION>
                                                                   Year ended March 31
                                                                   -------------------
                                                      2001                2002                2003
                                               ------------------  ------------------  ------------------
                                                                    (Millions of yen)
<S>                                              <C>          <C>    <C>          <C>    <C>          <C>
 Segment Assets
   Information & Telecommunication Systems       1,342,252    12%    1,307,248    13%    1,702,104    16%
   Electronic Devices                            1,582,447    15     1,246,285    13     1,345,835    13
   Power & Industrial Systems                    2,230,193    20     2,060,169    21     2,194,445    21
   Digital Media & Consumer Products               820,212     8       743,515     7       782,420     8
   High Functional Materials & Components        1,520,718    14     1,349,133    14     1,298,973    13
   Logistics, Services & Others                  1,191,298    11     1,051,712    11     1,016,599    10
   Financial Services                            2,193,057    20     2,114,367    21     1,932,459    19
     Subtotal                                   10,880,177   100%    9,872,429   100%   10,272,835   100%
                                                             ===                 ===                 ===
   Eliminations and Corporate Items                366,431              43,225             (93,446)
                                               -----------         -----------         -----------
     Total                                      11,246,608           9,915,654          10,179,389
                                               ===========         ===========         ===========

 Depreciation & Amortization
   Information & Telecommunication Systems         106,256    19%      105,716    18%      106,958    19%
   Electronic Devices                              153,789    27       168,706    28       120,911    22
   Power & Industrial Systems                       68,733    12        70,236    12        77,697    14
   Digital Media & Consumer Products                46,155     8        46,419     8        43,083     8
   High Functional Materials & Components           84,317    15        83,573    14        75,833    13
   Logistics, Services & Others                     38,383     7        40,058     7        32,700     6
   Financial Services                               64,728    12        79,124    13       102,468    18
     Subtotal                                      562,361   100%      593,832   100%      559,650   100%
                                                             ===                 ===                 ===
   Eliminations and Corporate Items                  4,315               4,796               6,719
                                               -----------         -----------         -----------
     Total                                         566,676             598,628             566,369
                                               ===========         ===========         ===========

 Tangible & Intangible Asset Increase
   Information & Telecommunication Systems         135,636    12%      137,802    13%      203,380    18%
   Electronic Devices                              230,684    20       125,373    12       107,373     9
   Power & Industrial Systems                       83,012     7        85,936     8        94,920     8
   Digital Media & Consumer Products                48,135     4        40,871     4        37,074     3
   High Functional Materials & Components          111,292     9        85,112     8        64,511     6
   Logistics, Services & Others                     36,519     3        44,823     4        35,498     3
   Financial Services                              527,429    45       551,017    51       608,434    53
     Subtotal                                    1,172,707   100%    1,070,934   100%    1,151,190   100%
                                                             ===                 ===                 ===
   Eliminations and Corporate Items                (69,824)            (57,436)            (65,483)
                                               -----------         -----------         -----------
     Total                                       1,102,883           1,013,498           1,085,707
                                               ===========         ===========         ===========
</TABLE>

                                       13

<PAGE>

(2) Geographic Segment

<TABLE>
<CAPTION>
                                                              Year ended March 31
                                                              -------------------
                                                2001                 2002                 2003
                                         ------------------   ------------------   ------------------
                                                               (Millions of yen)
<S>                                        <C>          <C>     <C>          <C>     <C>          <C>
  Revenues
    Japan
      Outside customer sales               6,557,736    65%     6,134,554    66%     6,290,654    65%
      Intersegment transactions            1,148,587    12        892,562    10      1,026,916    11
                                         -----------  ----    -----------  ----    -----------  ----
        Total                              7,706,323    77      7,027,116    76      7,317,570    76
    Asia
      Outside customer sales                 550,303     6        607,041     6        651,228     7
      Intersegment transactions              415,946     4        349,337     4        351,006     3
                                         -----------  ----    -----------  ----    -----------  ----
        Total                                966,249    10        956,378    10      1,002,234    10
    North America
      Outside customer sales                 863,349     9        830,959     9        802,582     8
      Intersegment transactions               48,141     0         45,382     0         38,753     1
                                         -----------  ----    -----------  ----    -----------  ----
        Total                                911,490     9        876,341     9        841,335     9
    Europe
      Outside customer sales                 395,809     4        364,840     4        379,615     4
      Intersegment transactions               27,513     0         32,268     0         28,382     0
                                         -----------  ----    -----------  ----    -----------  ----
        Total                                423,322     4        397,108     4        407,997     4
    Other Areas
      Outside customer sales                  49,785     0         56,390     1         67,673     1
      Intersegment transactions                4,254     0          2,359     0          2,645     0
                                         -----------  ----    -----------  ----    -----------  ----
        Total                                 54,039     0         58,749     1         70,318     1
          Subtotal                        10,061,423   100%     9,315,692   100%     9,639,454   100%
                                                      ====                 ====                 ====
    Eliminations and Corporate Items      (1,644,441)          (1,321,908)          (1,447,702)
                                         -----------          -----------          -----------
          Total                            8,416,982            7,993,784            8,191,752
                                         ===========          ===========          ===========

  Operating Income (Loss)
    Japan                                    303,359    82%       (70,420)    -%       155,684    82%
    Asia                                      45,032    12         (5,090)    -         18,357    10
    North America                              7,037     2        (21,053)    -          6,336     3
    Europe                                    13,109     4          4,007     -          6,720     4
    Other Areas                                1,246     0          1,842     -          2,097     1
      Subtotal                               369,783   100%       (90,714)    -%       189,194   100%
                                                      ====                 ====                 ====
    Eliminations and Corporate Items         (27,471)             (26,701)             (36,227)
                                         -----------          -----------          -----------
      Total                                  342,312             (117,415)             152,967
                                         ===========          ===========          ===========

  Segment Assets
    Japan                                  8,492,338    82%     7,685,632    82%     7,935,395    81%
    Asia                                     659,153     6        624,864     7        731,108     7
    North America                            662,439     7        603,980     6        592,530     6
    Europe                                   471,040     5        434,239     5        502,446     5
    Other Areas                               37,428     0         39,492     0         55,824     1
      Subtotal                            10,322,398   100%     9,388,207   100%     9,817,303   100%
                                                      ====                 ====                 ====
    Eliminations and Corporate Items         924,210              527,447              362,086
                                         -----------          -----------          -----------
      Total                               11,246,608            9,915,654           10,179,389
                                         ===========          ===========          ===========
</TABLE>

                                       14

<PAGE>

(3) Revenues by Market

                                         Year ended March 31
                                         -------------------
                             2001                2002              2003
                      -----------------   ----------------   ---------------
                                          (Millions of yen)

  Domestic sales       5,791,300    69%    5,444,662   68%   5,546,543   68%
  Overseas sales
    Asia                 966,870    11       896,050   11    1,017,439   12
    North America        903,800    11       930,629   12      890,684   11
    Europe               550,968     7       513,310    6      537,029    7
    Other Areas          204,044     2       209,133    3      200,057    2
      Subtotal         2,625,682    31     2,549,122   32    2,645,209   32
                      ----------  ----    ---------- ----   ---------- ----
        Total          8,416,982   100%    7,993,784  100%   8,191,752  100%
                      ==========  ====    ========== ====   ========== ====

    Notes: 1.   Revenues by segment include intersegment transactions.
           2.   Geographic Segment is based on the locations of Hitachi's
                facilities where products or services are produced.
           3.   Figures for Revenues by Market are based on the locations of
                the customer to whom Hitachi's products or services are sold.
           4.   In order to be consistent with financial reporting principles
                and practices generally accepted in Japan, operating income
                (loss) is presented as total revenues less cost of sales and
                selling, general and administrative expenses. Under accounting
                principles generally accepted in the United States of America,
                restructuring charges, net gain or loss on sale and disposal of
                rental assets and other property, impairment losses, special
                termination benefits and the losses resulting from the adoption
                of EITF issue No. 03-2 "Accounting for the Transfer to the
                Japanese Government of the Substitutional Portion of Employee
                Pension Fund Liabilities" are included as part of operating
                income (loss). See notes (16), (17) and (18) to the consolidated
                financial statements.
           5.   Hitachi has changed industry segment classifications starting
                from the fiscal year ended March 31, 2002. Accordingly, figures
                for the fiscal year ended March 31, 2001 have been restated.

Hitachi conducts a broad and diverse range of businesses. Hitachi divides its
operations into seven segments that are determined mainly on the basis of
management units, and the similarity of products and services in type, use,
production method and marketing method. The seven segments are Information &
Telecommunication Systems, Electronic Devices, Power & Industrial Systems,
Digital Media & Consumer Products, High Functional Materials & Components,
Logistics, Services & Others and Financial Services. Each segment includes the
Company's subsidiaries and affiliates engaged in related production, marketing
and service activities.

Information & Telecommunication Systems

Products and services provided by Hitachi in this segment include systems
integration, computer hardware, software and telecommunications equipment and
components. This segment groups products with many common technological aspects,
facilitating operations management.

Hitachi's computer business consists of hardware products, software and
solutions business. Customers are business entities in various industries,
national and local governments, and, to a lesser extent, individuals. Among the
hardware products Hitachi offers, disk array subsystems, hard disk drives,
servers and mainframes are more significant than other products. In order to
meet market requirements, these products need to be built to achieve high
performance while meeting cost parameters of customers. Hitachi also develops
and offers various software packages designed to enhance the productivity of
customers. Systems integration, consulting and outsourcing form the core of the
solutions business in which customized solutions are developed and offered to
customers with Hitachi's hardware and software products, as well as other
venders' products, to deliver systems that help customers achieve their business
objectives. This segment also provides telecommunications equipment

                                       15

<PAGE>

and components such as switches and fiber optic components, which are delivered
to customers in data and telecommunication industries.

The computer industry is extremely competitive. The speed of technology
development in both hardware and software is very fast, and failure or delay to
introduce the products or services that incorporate the latest technology would
materially diminish Hitachi's market presence. Customers are highly sensitive to
the cost effectiveness of their investments in information technology, which
leads to intense price competition particularly in hardware products.

Over the medium term, in accordance with changing market requirements, Hitachi
intends to expand its solutions business in growing areas, such as network
business and outsourcing business. In overseas markets, especially in North
America, Hitachi focuses on storage solutions business integrating its
large-capacity disk array subsystems, software and related services and drives
expansion in its IT solutions business. In accordance with this strategy,
Experio Solutions Corporation (currently Hitachi Consulting Corporation), a
subsidiary of the Company, acquired the e-Business Consulting Group of Grant
Thornton LLP, an accounting and management-consulting firm, in October 2000 and
two IT consulting companies in fiscal 2001 and expanded its business, including
by hiring consultants from Arthur Andersen LLP in fiscal 2002.

In June 2002, the Company and IBM entered into an agreement under which their
respective hard disk drive operations would be transferred to a new standalone
company and the Company would then purchase a majority ownership in the new
company. The purpose of the transaction was to strengthen hard disk drive
operations in a highly competitive market. The deal closed on December 31, 2002
and the new company, Hitachi Global Storage Technologies, Inc., commenced
operations on January 1, 2003. Hitachi believes the new company will be able to
realize increased competitiveness in the hard disk drive industry, including as
a result of access to the combined R&D capabilities of Hitachi and IBM, an
expanded product line-up, increased production capacity and an enhanced global
sales and support network.

Hitachi believes strategic alliances are important to improve time to market
requirements. The Company entered into an alliance with IBM in the field of
servers and joined Microsoft Corporation in establishing a joint-venture company
in the system solutions business for enterprises in fiscal 2000. The Company and
one of its subsidiaries entered into an agreement with Sun Microsystems, Inc. in
the area of storage systems including cross-license, distribution and
development of storage software in fiscal 2001.

In fiscal 2002, the segment accounted for 19% of total revenues before
eliminations and posted operating income of JPY 110,523 million.

Electronic Devices

The Electronic Devices segment provides semiconductors, liquid crystal displays,
semiconductor manufacturing equipment, test and measurement equipment and
medical electronics equipment. Semiconductors and liquid crystal displays form
the nucleus of this segment.

Semiconductors are used extensively in many industries, including computers,
digital consumer products and automobiles. Hitachi's product line for
semiconductors consists of system LSIs, semiconductor memories and other
multi-purpose semiconductors. Hitachi develops and manufactures advanced memory
chips. Recently, Hitachi has been giving more emphasis on system LSIs which
combine memories, microprocessors and other components on a single chip and are
capable of performing complex tasks.

Two notable features of the semiconductor market are rapid technological changes
and significant price fluctuations with changes in the supply-demand balance.
Technology becomes obsolete in a very short period of time, and new industry
standards for any product line may be established very quickly. Prices for DRAMs
in particular are under pressure due to increasing commoditization and intense
competition among companies with large production capacity that specialize in
this market. The industry is responding to these circumstances by

                                       16

<PAGE>

seeking ways to spread investment risks by outsourcing manufacture to foundries,
setting up joint ventures and forming alliances.

In accordance with changing market requirements, Hitachi has consolidated its
semiconductor manufacturing bases and sold non-strategic business such as
semiconductor silicon crystal operations in an effort to redefine the scope of
its operation. In December 1999, Hitachi, together with NEC Corporation,
established a joint-venture company called Elpida Memory, Inc. which is engaged
in the DRAM business. The new company has integrated DRAM business including
development, marketing and manufacturing.

In the face of the sluggish demand and sharp declines in prices, during fiscal
2001, Hitachi implemented reforms to restore profitability. The reforms include
right-sizing of production by integrating product lines and cutting the
workforce.

In addition, on April 1, 2003, the Company transferred its semiconductor
operations centered in system LSIs to a new company incorporated jointly by the
Company and Mitsubishi. Hitachi expects the new company, Renesas, to improve
semiconductor competitiveness by permitting more flexible management and
realizing synergies between the advanced technologies of the Company and
Mitsubishi. Renesas is expected to be accounted for under the equity method by
Hitachi which will likely result in assets and liabilities of Renesas'
operations being excluded from Hitachi's consolidated balance sheet.

The display business is highly competitive and characterized by significant
price fluctuations with changes in the supply-demand balance. In light of the
difficult business conditions, during fiscal 2001, Hitachi decided to withdraw
from cathode ray tubes for PC monitors, as well as cathode ray tubes for direct
view color televisions in North America, to concentrate its resources on the
flat panel display operations.

In fiscal 2002, the segment accounted for 15% of total revenues before
eliminations and posted an operating loss of JPY 23,242 million.

Power & Industrial Systems

In this segment, Hitachi offers power plants, industrial machinery, construction
machinery, automotive equipment, transportation equipment and other products and
related services for power utilities and industry.

Power companies are the main customers of the power sector. In this sector,
Hitachi must respond to customer demand for low-priced products with high added
value. In addition, in recent years Hitachi has given high priority to
environmental protection in its product design. The entry of independent power
producers into the domestic electric power industry brought about by
deregulation has put pressure on power companies to lower electricity prices.
This causes more intense price competition among vendors to match lower
electricity prices. Since the orders the sector receives are generally for large
items with long delivery periods, a portion of the purchase price from those
orders is generally paid in advance to finance the production of the items.

The industrial systems sector covers products used in numerous industries and is
strongly influenced by trends in public works spending and private-sector plant
and equipment investment. Market demands focus primarily on low price, high
added value and the capability of products to be integrated into systems. The
number of product types is vast and production is frequently done in small lots
or on order. The industry includes many small-to-medium-sized specialty
manufacturers and competition for orders is fierce.

Hitachi optimizes its response to the needs and priorities of segment customers
by strategically combining technologies from Hitachi's diverse fields of
operation, especially from the technologies of information systems and
electronics field.

On October 1, 2002, the Company made UNISIA JECS CORPORATION a wholly-owned
subsidiary through a share exchange. The purpose of the transaction was to
strengthen Hitachi's competitiveness in the automotive

                                       17

<PAGE>

products business. UNISIA JECS CORPORATION changed its name to Hitachi Unisia
Automotive, Ltd. on the same date.

In fiscal 2002, the segment accounted for 22% of total revenues before
eliminations and posted operating income of JPY 53,253 million.

Digital Media & Consumer Products

In this segment, Hitachi manufactures and sells products in two main categories:
digital media products and consumer products. The former includes optical disk
drives, TVs, mobile phones and LCD projectors, while the latter comprises room
air conditioners, refrigerators, washing machines and other appliances. All
products have a broad range of customers dominated by general consumers.

Home electrical equipment manufacturers are responding to customer demand for
low price and high added value by cutting costs and developing differentiated
product lines. Success in this segment will also depend considerably on the
development of products geared to advances in new multimedia-related markets.

In order to achieve low-cost production and have access to growing markets,
Hitachi has expanded overseas production, especially in Southeast Asia. Hitachi
also has introduced supply chain management to shorten lead times and hold
minimum inventory. Hitachi is a well-recognized brand associated with high
reliability and quality.

On April 1, 2002, the consumer products operation of the Company was separated
and integrated with related subsidiaries of the Company to form Hitachi Home &
Life Solutions, Inc. for the purpose of enabling the consumer products business
to be managed with more speed and flexibility.

In fiscal 2002, the segment accounted for 12% of total revenues before
eliminations and posted operating income of JPY 6,204 million.

High Functional Materials & Components

This segment includes fabricated chemical and metal products supplied as parts
or materials to downstream manufacturers of mainly electric and electronic
products. For example, Hitachi Chemical Co., Ltd. manufactures products based on
its resin technology and serves industrial markets such as semiconductors,
liquid crystal displays and automobiles. Hitachi Metals, Ltd. manufactures and
sells magnetic and electronic materials and parts. They include specialty steels
such as materials for mobile phones and automobile engine parts. Hitachi Cable,
Ltd. manufactures and sells electronic materials and components for
semiconductors and mobile phones as well as cable and wire products used for
transmission of power and telephone signals.

As more products in this segment become more closely dependent upon and driven
by capabilities in electronics technology, Hitachi's strength in electronics
technology is expected to provide Hitachi with an advantage in introducing new
products with such technology. Since the portion of materials and components
used for semiconductors, liquid crystal displays, mobile phones and other
IT-related products has increased in recent years, the business results have
been significantly affected by the business climate of IT industry.

In fiscal 2002, the segment accounted for 12% of total revenues before
eliminations and posted operating income of JPY 18,301 million.

                                       18

<PAGE>

Logistics, Services & Others

This segment includes various businesses not covered by other segments,
primarily consisting of sales from general trading, transportation and property
management services conducted by consolidated subsidiaries of the Company.
Hitachi has set up sales subsidiaries by region and by product. Hitachi also has
many subsidiaries that were established to offer various services related to
Hitachi's business operations internally, such as printing and food services.

In fiscal 2002, the segment accounted for 14% of total revenues before
eliminations and posted operating income of JPY 10,352 million.

Financial Services

Financial services originated to extend credit to purchasers of Hitachi
products. This segment currently provides leases, loan guarantees and insurance
services and conducts business in the area of securitization and outsourcing
services.

On October 1, 2000, Hitachi Credit Corporation, a subsidiary of the Company,
merged with Hitachi Leasing, Ltd., an affiliate of the Company, for the purpose
of strengthening management and promoting business development in the area of
financial services. The merged company changed its name to Hitachi Capital
Corporation.

In fiscal 2002, the segment accounted for 6% of total revenues before
eliminations and posted operating income of JPY 12,067 million.

Competition

Hitachi is subject to intense competition in each of its businesses. Among its
major competitors are some of the top-ranking industrial companies in Japan,
U.S., Europe and Asia. Depending on the nature of the business, the competition
is marked by rapid progress in technology or the need to reduce costs to meet
customer requirements. In addition, Hitachi is facing more competition against
companies that focus exclusively on specific market segments. See "Segment
Information" in this Item for details of competition in each segment.

Seasonality

Hitachi's revenues in fourth quarters ended March 31 tend to be higher than
those in other quarters due in part to the purchase customs of governmental
agencies in Japan.

Sources of Supply

Hitachi purchases a wide variety of raw materials, parts and components from
many suppliers in Japan and abroad. In general, Hitachi is not dependent on any
single source of supply for its raw materials, parts and components. In light of
the fact that Japan produces very few of the raw materials Hitachi uses in its
manufacturing processes, Hitachi monitors the availability of raw materials on a
regular basis. There are currently no particular shortages of energy, raw
material, parts or components that are likely to materially affect Hitachi's
business. Although prices of certain raw materials, parts and components that
Hitachi purchases are volatile, such as petroleum products, copper, aluminum and
semiconductor memories, Hitachi does not think, at the present time, the price
volatility for any specific raw materials, parts and components may materially
affect Hitachi's results of operations in the near future.

Intellectual Property and Licenses

Hitachi holds numerous patents, trademark rights and copyrights. While Hitachi
considers them to be valuable assets and important for its operations, it
believes that its business is not dependent to any material extent upon any
single patent, trademark right, copyright or any related group of such rights it
holds.

                                       19

<PAGE>

Hitachi also has many licenses and technical assistance agreements covering a
wide variety of products. Such licenses and technical assistance agreements
grant Hitachi the rights to use certain Japanese and foreign patents or the
rights to receive certain technical information. Hitachi is not materially
dependent on any single such agreement.

Hitachi has granted licenses and technical assistance to various companies
located in Japan and overseas. In certain instances, Hitachi has entered into
cross-licensing agreements with other major international electronics and
electrical equipment manufacturers.

Government Regulations

Hitachi's business activities are subject to various governmental regulations in
countries where it operates, which include investment approvals, export
regulations, tariffs, antitrust, intellectual property, consumer and business
taxation, exchange controls, and environmental and recycling requirements. At
present, Hitachi manages to operate its business without any significant
difficulty in coping with such regulations.


C. Organizational Structure

The table below shows major subsidiaries of Hitachi, Ltd. as of March 31, 2003.

<TABLE>
<CAPTION>
                                                                    Country of      Ownership ratio of
                      Name of company                             incorporation        voting rights
                      ---------------                             -------------        -------------
<S>                                                               <C>                <C>
(1) Information & Telecommunication Systems
        Hitachi Communication Technologies, Ltd.                       Japan               100.0%
        Hitachi Electronics Services Co., Ltd.                         Japan               100.0
        Hitachi Information Systems, Ltd.                              Japan                51.4
        Hitachi Software Engineering Co., Ltd.                         Japan                51.8
        Hitachi Systems & Services, Ltd.                               Japan               100.0
        Hitachi Computer Products (America), Inc.                      U.S.A.              100.0
        Hitachi Computer Products (Asia) Corp.                         Philippines         100.0
        Hitachi Computer Products (Europe) S.A.S.                      France              100.0
        Hitachi Data Systems Holding Corp.                             U.S.A.              100.0
        Hitachi Global Storage Technologies Netherlands B.V.           Netherlands         100.0

(2) Electronic Devices
        Eastern Japan Semiconductor Technologies, Inc.                 Japan               100.0%
        Hitachi Displays, Ltd.                                         Japan               100.0
        Hitachi Electronics Engineering Co., Ltd.                      Japan               100.0
        Hitachi High-Technologies Corporation                          Japan                67.6
        Hitachi Medical Corporation                                    Japan                63.4
        Hitachi Semiconductor and Devices Sales Co., Ltd.              Japan               100.0
        Northern Japan Semiconductor Technologies, Inc.                Japan               100.0
        Trecenti Technologies, Inc.                                    Japan               100.0
        Hitachi Electronic Devices (USA), Inc.                         U.S.A.              100.0
        Hitachi Nippon Steel Semiconductor Singapore Pte. Ltd.         Singapore            92.0
        Hitachi Semiconductor (America) Inc.                           U.S.A.              100.0
        Hitachi Semiconductor (Europe) GmbH                            Germany             100.0
        Hitachi Semiconductor (Malaysia) Sdn. Bhd.                     Malaysia             90.0
</TABLE>

                                       20

<PAGE>

<TABLE>
<CAPTION>
                                                               Country of      Ownership ratio of
                      Name of company                         incorporation       voting rights
                      ---------------                         -------------       -------------
<S>                                                          <C>               <C>
(3) Power & Industrial Systems
        Babcock-Hitachi Kabushiki Kaisha                          Japan                100.0%
        Hitachi Air Conditioning Systems Co., Ltd.                Japan                100.0
        Hitachi Building Systems Co., Ltd.                        Japan                100.0
        Hitachi Construction Machinery Co., Ltd.                  Japan                 56.4
        Hitachi Engineering Co., Ltd.                             Japan                100.0
        Hitachi Engineering & Services Co., Ltd.                  Japan                100.0
        Hitachi Industrial Equipment Systems Co., Ltd.            Japan                100.0
        Hitachi Industries Co., Ltd.                              Japan                100.0
        Hitachi Kiden Kogyo, Ltd.                                 Japan                 54.9
        Hitachi Plant Engineering & Construction Co., Ltd.        Japan                 56.3
        Hitachi Unisia Automotive, Ltd.                           Japan                100.0
        Hitachi Via Mechanics, Ltd.                               Japan                100.0
        Japan Servo Co., Ltd.                                     Japan                 57.8
        Hitachi Automotive Products (USA), Inc.                   U.S.A.               100.0
        Taiwan Hitachi Co., Ltd.                                  Taiwan                61.5

(4) Digital Media & Consumer Products
        Hitachi Home & Life Solutions, Inc.                       Japan                100.0%
        Hitachi Maxell, Ltd.                                      Japan                 52.1
        Hitachi Media Electronics Co., Ltd.                       Japan                100.0
        Hitachi Home Electronics (America), Inc.                  U.S.A.               100.0
        Shanghai Hitachi Household Appliances Co., Ltd.           China                 60.0

(5) High Functional Materials & Components
        Hitachi Cable, Ltd.                                       Japan                 53.3%
        Hitachi Chemical Co., Ltd.                                Japan                 51.7
        Hitachi Metals, Ltd.                                      Japan                 55.0

(6) Logistics, Services & Others
        Chuo Shoji, Ltd.                                          Japan                100.0%
        Hitachi Life Corporation                                  Japan                100.0
        Hitachi Mobile Co., Ltd.                                  Japan                 64.8
        Hitachi Transport System, Ltd.                            Japan                 59.9
        Nikkyo Create, Ltd.                                       Japan                100.0
        Hitachi America, Ltd.                                     U.S.A.               100.0
        Hitachi Asia Ltd.                                         Singapore            100.0
        Hitachi (China), Ltd.                                     China                100.0
        Hitachi Europe Ltd.                                       U.K.                 100.0

(7) Financial Services
        Hitachi Capital Corporation                               Japan                 55.3%
        Hitachi Insurance Services, Ltd.                          Japan                100.0
</TABLE>

                                       21

<PAGE>

D. Property, Plants and Equipment

Most of Hitachi's plants, offices and other fixed assets are located in Japan.
Hitachi considers its properties to be well maintained and believes its plant
capacity is adequate for its current needs. Certain of Hitachi's properties such
as land and buildings are subject to mortgages in respect of bonds and loans.
The total outstanding balance of the secured loans and bonds as of March 31,
2003 was JPY 31,920 million.

The following table shows relevant property data in relation to major lines of
business as of March 31, 2003.

<TABLE>
<CAPTION>
                Name                    Location            Area             Principal products
                ----                    --------            ----             ------------------
                                                       (thousands of
                                                       square meters)
<S>                                     <C>            <C>                   <C>
 In Japan

 Hitachi, Ltd.:
    Semiconductor & Integrated          Tokyo, etc.          601         Semiconductors
      Circuits
    Thermal & Hydroelectric             Ibaraki            3,636         Power generating equipment, Turbines
      Systems Division, etc.
    Sales Offices                       Osaka, etc.          226                        -
    Research & Development Group        Tokyo, etc.          930                        -
    Head Office                         Tokyo                905                        -
    Enterprise Server Division          Kanagawa             203         Mainframes
    Device Development Center           Tokyo                 67         Semiconductors
    Automotive Products                 Ibaraki              609         Automotive products
    Internet Systems Platform           Kanagawa             234         PCs
      Division
    Data Storage Systems Division       Kanagawa              67         Hard disk drives

 Subsidiaries:
    Hitaka Works                        Ibaraki, etc.      1,049         Electronic materials and components
    (Hitachi Cable, Ltd.)
    Hitachi Displays, Ltd.              Chiba                517         Liquid crystal displays
    Yasugi Works                        Shimane            1,111         Special steels
    (Hitachi Metals, Ltd.)
    Head Office                         Tokyo                 16                        -
    (Hitachi Software Engineering
    Co., Ltd.)
    Kyoto Works                         Kyoto                313         Magnetic recording media
    (Hitachi Maxell, Ltd.)
    Head Office                         Tokyo                206                        -
    (Hitachi Building Systems
    Co., Ltd.)
    Tsuchiura Plant                     Ibaraki, etc.      5,471         Hydraulic excavators
    (Hitachi Construction Machinery
    Co., Ltd.)
    Tsuchiura Works                     Ibaraki              562         Electronic materials and components
    (Hitachi Cable, Ltd.)
    Densen Works                        Ibaraki              123         Electronic materials and components
    (Hitachi Cable, Ltd.)
    Tochigi Works                       Tochigi            1,095         Refrigerators, Air conditioners
    (Hitachi Home & Life Solutions,
    Inc.)
</TABLE>

                                       22

<PAGE>

<TABLE>
<CAPTION>
                  Name                Location          Area             Principal products
                  ----                --------          ----             ------------------
                                                      (thousands of
                                                     square meters)
<S>                                   <C>            <C>                 <C>
 Overseas Subsidiaries:
      Hitachi Global Storage          California         1,572         Hard disk drives
      Technologies Netherlands B.V.   U.S.A., etc.
      Hitachi Metals America, Ltd.    New York,          2,903         Automotive components
                                      U.S.A., etc.
      Hitachi Computer Products       Binan,                83         Hard disk drives
        (Asia) Corp.                  Philippines
      Hitachi Semiconductor           Landshut,             63         Semiconductors
        (Europe) GmbH                 Germany
</TABLE>


For information on Hitachi's plan for capital investment for the fiscal year
ending March 31, 2004, see "A. History and Development of the Company" in this
Item.

                                       23

<PAGE>

Item 5. Operating and Financial Review and Prospects

A. Operating Results

Overview

Hitachi provides highly diversified products and services and conducts business
throughout the world. Hitachi's results of operations therefore are affected by
various aspects of the economic environment, particularly capital investment in
the private sector and consumer spending in Hitachi's main market sectors.

In fiscal 2002, the Japanese economy was buoyed by firm consumer confidence but
failed to make a full-fledged recovery because of continued stagnant
private-sector plant and equipment investment and declines in public-sector
spending. Japan's GDP grew 3.2% in fiscal 2000, declined by 1.2% in fiscal 2001
and grew 1.6% in fiscal 2002.

Outside Japan, in fiscal 2002, the economic environment was marked by the slow
pace of the economic recovery in the United States and a deepening slump in
Europe, but generally vigorous economic activity in Asia.

Overseas sales, a significant part of which are denominated in U.S. dollars,
were 31% of total revenues in fiscal 2000 and 32% of total revenues in fiscal
2001 and 2002. Fluctuations in foreign currency exchange rates may affect
Hitachi's financial results, which are reported in Japanese yen, through the
translation of foreign currencies to Japanese yen. The Japanese yen on average
did not change substantially against the U.S. dollar during fiscal 2000,
weakened against the U.S. dollar during fiscal 2001 and strengthened against the
U.S. dollar during fiscal 2002, each as compared with the preceding fiscal year.
Hitachi employs forward exchange contracts and cross currency swap agreements to
reduce the impact of foreign currency exchange fluctuations. In addition, to
alleviate the adverse effects of foreign currency exchange fluctuations, when
Hitachi believes it is appropriate, it seeks to manufacture outside Japan and
procure materials and parts locally. Hitachi expects to finance foreign currency
investments by such foreign currency it has on hand. When the amount on hand is
insufficient, Hitachi may enter into forward exchange contracts to reduce the
impact of foreign currency exchange fluctuations. For additional information
regarding foreign currency fluctuations, see "Item 4. Information on the Company
- B. Business Overview - Sales and Distribution."

The business circumstances surrounding Hitachi have been increasingly
challenging. Some of its businesses are in stagnant industries. In addition,
globalization of markets and commoditization of electronic products is
continuing to intensify price competition in the business sectors in which
Hitachi is engaged. However, Hitachi's ability to close or sell unprofitable
businesses is limited, including due to the underdeveloped M&A market in Japan
and the importance of preserving customer goodwill. A large portion of Hitachi's
manufacturing is done domestically, which means that a strengthening of the yen
reduces Hitachi's cost competitiveness. Hitachi is responding to these
circumstances by closing or downsizing unprofitable operations where feasible,
seeking joint ventures with competitors, reallocating employees from overstaffed
businesses to growth businesses, and reorganizing the geographic allocation of
its manufacturing facilities.

In the face of the increasingly difficult business environment due primarily to
global economic slowdowns and worldwide decline in demand for IT-related
products, during fiscal 2001, Hitachi implemented management measures to raise
management efficiency and strengthen competitiveness. The measures include the
withdrawal from unprofitable businesses such as cathode ray tubes for PC
monitors, the reorganization and streamlining of production bases and facilities
for semiconductors and digital media products operations, and the introduction
of an early retirement benefits program. In addition, Hitachi has accelerated
the pace of certain corporate projects, including a project aimed at reducing
materials purchasing costs and a project aimed at improving turnover of assets.
For a description of the charges associated with the restructuring measures, see
"Restructuring."

                                       24

<PAGE>

Following its medium-term business plan launched in November 1999 and ending
March 2003, in January 2003, Hitachi launched a new medium-term management plan
defining the direction and goals of its businesses through the fiscal year
ending March 31, 2006. The plan includes, among other things, a realignment of
Hitachi's business portfolio which may be implemented by exiting certain
businesses, increasing focus on targeted businesses and creating new businesses
in an effort to achieve increased profitability and alteration of its corporate
governance structure in an effort to improve the efficiency and transparency of
management. In addition, under the plan, Hitachi expects to pursue further
growth in the global markets by identifying competitive businesses and
channeling management resources into those businesses. Hitachi also expects
under the plan to continue to improve cash-flow management by increasing the
efficiency of working capital use while making selective investments, and
further to reduce procurement costs. See "Item 4. Information on the Company -
A. History and Development of the Company" and "Item 6. Directors, Senior
Management and Employees."

Hitachi is currently aware of no governmental economic, fiscal, monetary or
political policies or factors that have materially affected, or could materially
affect, directly or indirectly, Hitachi's operations or investment by U.S.
shareholders.

Hitachi's total revenues rose 5% in fiscal 2000, decreased 5% in fiscal 2001 and
rose 2% in fiscal 2002 on a year-on-year basis, respectively. Hitachi posted net
income of JPY 104,380 million in fiscal 2000, a net loss of JPY 483,837 million
in fiscal 2001 and net income of JPY 27,867 million in fiscal 2002.

The analysis of revenues by industry and geographic segment and description of
restructuring measures by industry segment mentioned below are based on the
information presented in "Item 4. Information on the Company - B. Business
Overview - Segment Information." Hitachi believes that this presentation may be
useful in understanding Hitachi's results of operations. Revenues by segment
include intersegment transactions which Hitachi adjusts for in calculating total
revenues. Hitachi has changed industry segment classifications starting from the
fiscal year ended March 31, 2002. Accordingly, results of operations by industry
segment for the preceding fiscal year have been restated on the basis of the new
classification.

Restructuring

For fiscal 2000, Hitachi recorded a restructuring charge of JPY 8,814 million,
primarily associated with the reorganization and streamlining of its domestic
and overseas operations in the areas of consumer products and power and
industrial systems. The restructuring charge included special termination
benefits of JPY 5,275 million for 772 employees. The special termination
benefits accrual of JPY 2,371 million as of March 31, 2001, which was related to
the voluntary termination of 336 employees, was paid in fiscal 2001.

In the face of an increasingly difficult business environment due primarily to
global economic slowdowns and worldwide decline in demand for IT-related
products, during fiscal 2001, Hitachi implemented restructuring measures to
reduce cost structure and focus on strategic businesses, primarily by reducing
its work force and withdrawing from unprofitable businesses.

For fiscal 2001, Hitachi recorded restructuring charges of JPY 288,096 million
in connection with the restructuring measures. The restructuring charges
included a cost of JPY 185,105 million primarily for special termination
benefits for 22,422 employees under the early retirement benefits program
introduced by the Company and certain of its subsidiaries. Payments of JPY
73,252 million were made in fiscal 2001 and special termination benefits accrual
of JPY 114,266 million as of March 31, 2002, which was related to the voluntary
termination of 10,077 employees, was paid in fiscal 2002. In addition, the
restructuring charges included a loss on fixed assets in the amount of JPY
51,316 million, a loss on disposal of inventories in the amount of JPY 19,451
million, and lease termination and business partner compensation of JPY 11,487
million. The details of the restructuring measures were as follows.

Information & Telecommunication Systems incurred restructuring charges of JPY
63,790 million, including a cost of JPY 45,294 million primarily for special
termination benefits. In March 2002, Hitachi decided to exit its
telecommunications equipment business in North America, except for the related
after-services, by March 2002, due to the significant downturn in the market and
the bankruptcy of a major customer. In this connection, the Company and certain
subsidiaries disposed of inventories and fixed assets. The charges in connection
with such restructuring amounted to JPY 23,369 million, including accrual of JPY
9,342 million mainly for special termination benefits. The liabilities
recognized were paid by March 2003. Sales in this business line were
approximately JPY 30 billion and operating income was negative. Restructuring
measures related to the telecommunications equipment business were expected to
decrease personnel, depreciation and other costs by approximately JPY 7 billion.
Hitachi believes that it realized substantially such effect in fiscal 2002.

                                       25

<PAGE>

Electronic Devices recorded restructuring charges of JPY 82,718 million,
including a cost of JPY 46,301 million primarily for special termination
benefits. Restructuring measures in this segment included withdrawal from the
cathode ray tubes business and realignment of the semiconductor business. In
July 2001, due to intense competition and general overcapacity in the market,
Hitachi decided to shut down several plants and production lines of PC monitors
in Japan, Singapore and Malaysia, and the direct view color TV product line in
the U.S. Consequently, the Company and certain subsidiaries disposed of
inventories and fixed assets. The charges in connection with such restructuring
amounted to JPY 30,412 million, and the amount of JPY 13,921 million for special
termination benefits and JPY 4,851 million mainly for cancellation penalties
were accrued. The liabilities for special termination benefits were paid by
March 2003 and the remaining liabilities were substantially paid by March 2002.
Sales in this business line were approximately JPY 80 billion and operating
income was negative. Restructuring measures related to the cathode ray tubes
business were expected to decrease costs by approximately JPY 21 billion.
Hitachi believes that it realized substantially such effect in fiscal 2002.

In October 2002, Hitachi also decided to realign its semiconductor business by
reorganizing its semiconductor product lines and facilities primarily in Japan.
This realignment was in response to a sharp decline in prices of semiconductor
products and general overcapacity in the market, which was primarily due to a
decline in demand for semiconductor products used in PCs and mobile
communications equipment. With respect to front-end manufacturing processing,
production of semiconductor products on older lines with low utilization rates
was transferred to new lines in order to optimize utilization of certain lines.
As a result, the number of active lines was reduced from 19 to 15 by March 2002,
and from 15 to 13 by December 2002. Also, reorganization and consolidation of
back-end production bases reduced the number of bases from 13 to 11 by March
2002, and from 11 to 9 by March 2003. The associated restructuring charges
amounted to JPY 45,510 million, including accrual of JPY 37,156 million. The
liabilities for special termination benefits in the amount of JPY 28,479 million
were paid out by March 2003, and the liabilities in the amount of JPY 8,677
million incurred mainly for removal costs were substantially paid by March 2002.
These restructuring measures were expected to decrease costs by approximately
JPY 23 billion. Hitachi believes that it realized substantially all of such
effect in fiscal 2002.

Power & Industrial Systems recorded restructuring charges of JPY 53,833 million,
including a cost of JPY 49,723 million primarily for special termination
benefits for employees of the Company and its domestic subsidiaries. The
restructuring measures were implemented in an effort to increase profitability
by reducing fixed costs.

Digital Media & Consumer Products recorded restructuring charges of JPY 39,245
million, including a cost of JPY 21,510 million primarily for special
termination benefits. Affected by the slowdown of the global economy, prices of
color TVs declined due to increased competition. And against this backdrop,
Hitachi sought to strengthen competitiveness of its TV operations on a global
scale by consolidating its manufacturing operations and streamlining sales
channels. As part of its restructuring of digital media and consumer products
operations in the Asian region, Hitachi decided to transfer its product
management, R&D capabilities, manufacturing of color TVs and production of
vacuum cleaners in Singapore to certain subsidiaries in China, Indonesia and
Thailand. In addition, Hitachi decided to liquidate a sales and manufacturing
subsidiary in the U.K. and reorganized sales channels in Europe in February
2002. Hitachi disposed of inventories and fixed assets in the process of
implementing its restructuring measures. The charges in connection with such
restructuring amounted to JPY 9,581 million. The liabilities for special
termination benefits in the amount of JPY 3,634 million were paid by March 2002
and the liabilities for lease termination and others amounted to JPY 2,719
million, which were substantially paid by March 2002. Sales in this business
line were approximately JPY 57 billion and operating income was almost breakeven
in fiscal 2001. These restructuring measures were expected to decrease costs for
personnel and depreciation by approximately JPY 50 billion for the following
fiscal year. Hitachi believes it realized substantially such effect for fiscal
2002.

High Functional Materials & Components recorded restructuring charges of JPY
25,693 million, including a cost of JPY 11,613 million primarily for special
termination benefits. Other restructuring charges were primarily related to the
disposal of fixed assets due to weak demand for IT-related products,
particularly for mobile phone related parts. Restructuring measures in this
segment involved streamlining the product lines mainly in Japan, and shutting
down manufacturing plants in Malaysia and Japan. The charges in connection with
such restructuring amounted to JPY 23,474 million, and liabilities in the amount
of JPY 11,940 million were accrued mainly for special termination benefits. The
liabilities were paid by March 2003. These measures were expected to decrease
costs by approximately JPY 16 billion for the following fiscal year, and Hitachi
believes that it realized substantially such effect in fiscal 2002.

Other segments incurred restructuring charges of JPY 22,817 million, including a
cost of JPY 10,664 million primarily for special termination benefits.

In addition to the restructuring charges above, JPY 46,115 million of impairment
losses for long-lived assets, of which JPY 37,442 million were related to the
semiconductor and display operations, were recognized.

For fiscal 2002, Hitachi did not record any restructuring charges.

                                       26

<PAGE>

Fiscal 2001 Compared with Fiscal 2000

Hitachi's total revenues in fiscal 2001 were JPY 7,993,784 million, a decrease
of 5% from the preceding fiscal year. Overseas sales declined 3% over the same
period, to JPY 2,549,122 million.

Revenues in Information & Telecommunication Systems rose 2%, to JPY 1,829,661
million, from the preceding fiscal year primarily as a result of increased sales
of software, systems integration and other services as well as an increase in
sales of large-capacity storage systems, partially offset by a decrease in sales
of telecommunications equipment due to weak demand by telecommunications
carriers. Revenues in Electronic Devices dropped 26%, to JPY 1,487,200 million,
from the preceding fiscal year primarily due to a sharp decline in sales of
semiconductors resulting from a sluggish demand for personal computers and
mobile communications equipment as well as falling semiconductor prices and, to
a lesser degree, due to a decline in sales of liquid crystal displays owing
primarily to falling prices. Revenues in Power & Industrial Systems declined 2%,
to JPY 2,266,895 million, from the preceding fiscal year primarily due to a
decrease in sales of construction machinery and industrial equipment, partially
offset by an increase in sales of nuclear power systems owing to the delivery of
large orders. Revenues in Digital Media & Consumer Products rose 11%, to JPY
1,170,744 million, from the preceding fiscal year primarily due to an increase
in sales of optical storage drives resulting from the establishment of a
consolidated subsidiary jointly with LG Electronics Inc. of the Republic of
Korea. Sales of air conditioners remained largely unchanged from the preceding
fiscal year, while sales of refrigerators and washing machines dropped due to a
decrease in volumes of and prices for such products. Revenues in High Functional
Materials & Components declined 15%, to JPY 1,250,248 million, from the
preceding fiscal year primarily due to a decrease in sales of materials and
components for semiconductors, liquid crystal displays and mobile communications
equipment owing primarily to weak demand for such products. Revenues in
Logistics, Services & Others declined 11%, to JPY 1,430,825 million, from the
preceding fiscal year primarily due to a decrease in sales by consolidated
subsidiaries of semiconductors and liquid crystal displays as well as a decrease
in sales of logistics services. Revenues in Financial Services declined 4%, to
JPY 567,138 million, from the preceding fiscal year primarily due to the slow
pace of the semiconductor manufacturing equipment leasing business and stagnant
demand for personal financial services.

An analysis by geographic segment shows that revenues of the Company and its
consolidated subsidiaries located in Japan dropped 9%, to JPY 7,027,116 million,
from the preceding fiscal year primarily due to decreased demand in the
semiconductor and liquid crystal display markets. Revenues of consolidated
subsidiaries of the Company located in Asia (other than Japan) declined 1%, to
JPY 956,378 million, from the preceding fiscal year primarily owing to flagging
demand for semiconductors and liquid crystal displays. Revenues of consolidated
subsidiaries of the Company located in North America declined 4%, to JPY 876,341
million, from the preceding fiscal year primarily due to a decrease in sales of
semiconductors and IT products, partially offset by an increase in sales of
thermal power station equipment. Revenues of consolidated subsidiaries of the
Company located in Europe dropped 6%, to JPY 397,108 million, from the preceding
fiscal year primarily due to a decrease in sales of semiconductors and liquid
crystal displays. Revenues of consolidated subsidiaries of the Company located
in Other Areas increased 9%, to JPY 58,749 million, from the preceding fiscal
year.

Hitachi's cost of sales during fiscal 2001 amounted to JPY 6,184,396 million,
approximately the same as the preceding fiscal year. The ratio of cost of sales
to total revenues increased 4% from the preceding fiscal year, to 77%, due to a
drop in total revenues. Selling, general and administrative expenses amounted to
JPY 1,926,803 million, approximately the same as the preceding fiscal year, and
was 24% of total revenues.

Hitachi recorded impairment losses for long-lived assets in the amount of JPY
46,115 million due primarily to the significant decline in demand for and prices
of semiconductor products. Restructuring charges increased significantly, to JPY
288,096 million, from JPY 8,814 million in the preceding fiscal year. For a
description of the restructuring charges, see "Restructuring."

Interest income declined 31% from the preceding fiscal year, to JPY 22,481
million, due in part to a decline in interest rates. Dividends received
decreased 36% from the preceding fiscal year, to JPY 6,134 million, mainly due
to lower dividend payments by companies in which Hitachi invests because of the
weak business performance of certain of those companies. Other income amounted
to JPY 7,424 million, consisting of foreign exchange gain, compared to JPY
27,544 million in the preceding fiscal year, which included net gain on
securities in the amount of JPY 9,334 million, JPY 15,651 million of gross
realized gains on contributions of available-for-sale securities to pension fund
trusts and JPY 2,559 million of equity in earnings of affiliated companies.

Interest charges declined 22% from the preceding fiscal year, to JPY 45,830
million, due in part to a decline in borrowings. Other deductions increased
significantly, to JPY 124,655 million, from JPY 20,697 million in the preceding
fiscal year primarily due to a net loss on securities in the amount of JPY
80,938 million. Equity in earnings of affiliated companies included in other
deductions posted a net loss of JPY 35,756 million primarily due to the poor
results by affiliated companies engaged in the semiconductor business.

A loss before income taxes and minority interests in fiscal 2001 amounted to JPY
586,072 million compared to income before income taxes and minority interests of
JPY 323,655 million in the preceding fiscal year. Net loss was JPY 483,837
million in fiscal 2001, compared to net income of JPY 104,380 million in the
preceding fiscal year.

                                       27

<PAGE>

Fiscal 2002 Compared with Fiscal 2001

Hitachi's total revenues in fiscal 2002 were JPY 8,191,752 million, an increase
of 2% from the preceding fiscal year. Overseas sales increased 4% over the same
period, to JPY 2,645,209 million.

Revenues in Information & Telecommunication Systems rose 4%, to JPY 1,899,651
million, from the preceding fiscal year, due primarily to two factors. First,
sales of hard disk drives and disk array systems increased, reflecting steady
demand from business enterprises. Second, sales of systems integration and other
services increased. Increased sales of these products and services, however,
were partially offset by a decrease in sales of telecommunications equipment due
to weak demand by telecommunications carriers. Revenues in Electronic Devices
rose 6%, to JPY 1,570,069 million, from the preceding fiscal year primarily due
to two factors. First, sales of system LSIs increased, most notably
microcontrollers for automotive applications and liquid crystal display drivers
for mobile phones. In addition, sales of small and medium-size liquid crystal
displays increased due to expansion in demand for mobile phones with color
liquid crystal display panels. Increased sales of these products, however, were
partially offset by a decline in sales of cathode ray tubes for PC monitors due
to Hitachi's withdrawal from such business. Revenues in Power & Industrial
Systems increased 1%, to JPY 2,297,068 million, from the preceding fiscal year
primarily as a result of an increase in sales of construction machinery, driven
by vigorous demand in overseas markets, particularly in China, and automotive
products, as a result of the consolidation of UNISIA JECS CORPORATION through an
exchange of shares. Increased sales of these products, however, were partially
offset by a decrease in sales of industrial equipment due to sluggish
private-sector plant and equipment investment in Japan and maintenance services
for power plants. Revenues in Digital Media & Consumer Products rose 3%, to JPY
1,205,551 million, from the preceding fiscal year primarily due to an increase
in sales of optical storage products, plasma display TVs and batteries for
mobile phones because of growth in demand for such products. Increased sales of
these products, however, were partially offset by a decrease in sales of air
conditioners and refrigerators because of a fall in prices for such products.
Revenues in High Functional Materials & Components amounted to JPY 1,248,550
million, approximately the same as the preceding fiscal year. An increase in
sales of materials and components for semiconductors and liquid crystal displays
due primarily to steady demand for such products was partially offset by a
decline in sales of submarine fiber-optic cables and other cables and wires.
Revenues in Logistics, Services & Others increased 1%, to JPY 1,449,594 million,
from the preceding fiscal year primarily due to an increase in sales of
information-related products by overseas trading companies as well as increased
sales of logistics services. Increased sales of these products and services,
however, were partially offset by the absence of sales from a subsidiary engaged
in monorail passenger service operations, since this subsidiary was sold during
fiscal 2001. Revenues in Financial Services increased 2%, to JPY 579,267
million, from the preceding fiscal year due to inclusion of sales of a leasing
company acquired during fiscal 2001 as well as the inclusion of large orders for
leased software. These sales were partially offset by the slow pace of the
leasing business for corporate clients and stagnant demand for personal
financial services.

An analysis by geographic segment shows that revenues of the Company and its
consolidated subsidiaries located in Japan rose 4%, to JPY 7,317,570 million,
from the preceding fiscal year primarily due to the firm growth in information
systems business, notably systems integration, as well as the rebound of
semiconductors. Revenues of consolidated subsidiaries of the Company located in
Asia (other than Japan) rose 5%, to JPY 1,002,234 million, from the preceding
fiscal year primarily due to an increase in sales of information-related
products, notably hard disk drives. Revenues of consolidated subsidiaries of the
Company located in North America declined 4%, to JPY 841,335 million, from the
preceding fiscal year primarily due to a decrease in sales of power generation
equipment, partially offset by an increase in sales of storage-related
businesses. Revenues of consolidated subsidiaries of the Company located in
Europe increased 3%, to JPY 407,997 million, from the preceding fiscal year
primarily due to an increase in sales of hard disk drives partially offset by a
decrease in sales of semiconductors and liquid crystal displays. Revenues of
consolidated subsidiaries of the Company located in Other Areas increased 20%,
to JPY 70,318 million, from the preceding fiscal year.

                                       28

<PAGE>

Hitachi's cost of sales during fiscal 2002 amounted to JPY 6,240,493 million, an
increase of 1% from the preceding fiscal year. The ratio of cost of sales to
total revenues decreased 1% from the preceding fiscal year, to 76%, due in part
to Hitachi's efforts to reduce materials purchasing costs. Selling, general and
administrative expenses declined 7%, to JPY 1,798,292 million, from the
preceding fiscal year due in part to the restructuring measures Hitachi took
during the preceding fiscal year to reduce fixed costs. The ratio of selling,
general and administrative expenses to total revenues also decreased 2% from the
preceding fiscal year, to 22%.

In fiscal 2002, Hitachi recorded impairment losses for long-lived assets in the
amount of JPY 8,474 million, the majority of which were recorded with respect to
the Company's equipment which provides semiconductor product development and
design services.

Interest income declined 37% from the preceding fiscal year, to JPY 14,158
million, primarily due to a decrease in financial assets held by the Company and
a decline in U.S. interest rates. Dividends received increased 45% from the
preceding fiscal year, to JPY 8,921 million, mainly because of increased
dividend payments by companies in which Hitachi invests, due, in turn, to
recovery in business performance of certain of those companies. Other income
amounted to JPY 23,658 million, consisting of net gain on sale and disposal of
rental assets and other property, compared to JPY 7,424 million consisting of
foreign exchange gain in the preceding fiscal year.

Interest charges declined 25% from the preceding fiscal year, to JPY 34,338
million, primarily due to a decrease in borrowings and a decline in U.S.
interest rates. Other deductions declined significantly, to JPY 60,064 million,
from JPY 124,655 million in the preceding fiscal year primarily due to a
decrease in a net loss on securities from the preceding fiscal year. Hitachi
recorded a net periodic benefit cost of JPY 24,857 million as other deductions
for fiscal 2002 due to its adoption of Emerging Issues Task Force (EITF) Issue
No.03-2, "Accounting for the Transfer to the Japanese Government of the
Substitutional Portion of Employee Pension Fund Liabilities," which provides
guidance with respect to accounting for transfer of the substitutional portion
of the Employee Pension Fund to the Japanese government. This cost arose from
the remeasurement of the substitutional portion of the benefit obligation by the
Company and certain subsidiaries in accordance with the EITF. For additional
information on the accounting treatment of the transfer of the substitutional
portion of the Employee Pension Fund to the Japanese government, see note (10)
to the consolidated financial statements. Equity in earnings of affiliated
companies included in other deductions reflected a net loss of JPY 15,803
million, compared to a net loss of JPY 35,756 million in the preceding fiscal
year, primarily due to the poor results of affiliated companies engaged in the
semiconductor memories business. A net loss on securities included in other
deductions amounted to JPY 660 million, compared to a net loss of JPY 80,938
million in the preceding fiscal year. In addition, other deductions include a
foreign exchange loss of JPY 18,262 million, primarily due to the appreciation
of the Japanese yen during fiscal 2002.

Income before income taxes and minority interests in fiscal 2002 amounted to JPY
96,828 million, compared to a loss before income taxes and minority interests of
JPY 586,072 million in the preceding fiscal year.

Income taxes in fiscal 2002 amounted to an expense of JPY 52,662 million,
compared to a benefit of JPY 71,114 million in the preceding fiscal year.
Minority interests in fiscal 2002 amounted to income of JPY 16,299 million,
which decreased net income by the same amount, compared to a loss of JPY 31,121
million in the preceding fiscal year.

Net income in fiscal 2002 was JPY 27,867 million, compared to a net loss of JPY
483,837 million in the preceding fiscal year.

                                       29

<PAGE>

B. Liquidity and Capital Resources

The analysis made in this Item covers the three-year period from fiscal 2000 to
fiscal 2002. Management considers maintaining an appropriate level of liquidity
and securing adequate funds for current and future business operations to be
important financial objectives. Through efficient management of working capital
and selective investment in new plant and equipment, Hitachi is working to
optimize the efficiency of capital utilization throughout its business
operations. Hitachi endeavors to improve its cash management by centralizing
such management within its group. Hitachi's internal sources of funds include
cash flows generated by operating activities and cash on hand. Management also
considers short-term investments as an immediately available source of funds. In
addition, Hitachi raises funds both directly from the capital markets and
indirectly from Japanese and international commercial banks.

Net cash provided by operating activities was JPY 646,518 million, JPY 482,866
million and JPY 535,433 million in fiscal 2002, 2001 and 2000, respectively. The
increase in fiscal 2002 was caused primarily by posting net income compared to a
large net loss in the preceding fiscal year. This increase was partially offset
by a decrease in accrued expenses and retirement and severance benefits due to
special severance payments arising during fiscal 2002 under the early retirement
program implemented in the preceding fiscal year. The decrease in fiscal 2001
was caused primarily by posting a large net loss, partially offset by a
reduction in receivables and inventories under a project aimed at improving
turnover of assets.

Net cash used in investing activities was JPY 619,285 million, JPY 272,871
million and JPY 370,717 million in fiscal 2002, 2001 and 2000, respectively. The
increase in fiscal 2002 was due in part to an increase in purchase of
investments and subsidiaries' common stock arising from Hitachi's purchase of
hard disk drive operations from IBM and new shares of Elpida Memory, Inc. Cash
flows for capital expenditures and purchase of assets to be leased during fiscal
2002, 2001 and 2000 were JPY 782,861 million, JPY 874,766 million and JPY
995,727 million, respectively. The decrease in capital expenditures in fiscal
2002 reflects Hitachi's more stringent selection of capital investment and the
decrease in fiscal 2001 reflects Hitachi's curbing of expenditures in the
semiconductor field. Management's policy is to finance capital expenditures
primarily by internally generated funds and to a lesser extent by funds raised
by the issuance of debt and equity securities in domestic and foreign capital
markets. Management has made more selective capital expenditures for recent
years in order to conserve capital while maintaining the ability to grow in
competitive markets. As of March 31, 2003, Hitachi's capital commitments for the
purchase of property, plant and equipment amounted to JPY 30,214 million.

Net cash used in financing activities was JPY 207,170 million, JPY 578,112
million and JPY 159,507 million in fiscal 2002, 2001 and 2000, respectively.
These outflows in financing activities were chiefly due to Hitachi's efforts to
reduce interest-bearing debt by improving cash management within the Company and
its subsidiaries. In fiscal 2002, proceeds from long-term debt amounted to JPY
375,802 million, a decrease of JPY 197,571 million from fiscal 2001, while
payments on long-term debt amounted to JPY 547,759 million compared to JPY
743,385 million in fiscal 2001. In fiscal 2002, proceeds from sale of common
stock by subsidiaries were JPY 1,872 million, compared to JPY 42,466 million in
fiscal 2001, which consisted primarily of proceeds from the issuance of common
stock by OpNext, Inc. As part of its business strategy, the Company may take one
of its wholly-owned subsidiaries public through an issuance of the stock of such
subsidiary.

Hitachi relies for its liquidity principally on cash and other working capital
as well as bond issuances, bank loans and other uncommitted sources of
financing. While Hitachi has maintained committed facilities for issuing
commercial paper in the U.S. market, the aggregate amount of such facilities is
limited. In fiscal 2002, the Company concluded commitment line agreements with a
number of banks under which the Company may borrow any amount it requires up to
a total of JPY 120,000 million in order to ensure efficient access to operating
funds. The commitment line agreements generally provide for a one-year term,
renewable upon mutual agreement between the Company and each of the lending
banks. Certain of its subsidiaries also hold lines of credit arrangements. The
unused lines for the Company and its subsidiaries totaled to JPY 147,042 million
as of March 31, 2003.

At the end of fiscal 2002, the total of Hitachi's short-term debt and long-term
debt amounted to JPY 2,840,598 million, a decrease of JPY 157,626 million from
at the end of fiscal 2001. The decrease was chiefly due to Hitachi's efforts to
reduce interest-bearing debt. Short-term debt totaled JPY 825,860 million,
consisting of borrowings mainly from banks and commercial paper. Long-term debt
was JPY 1,512,152 million, mainly

                                       30

<PAGE>

consisting of debentures, convertible debentures and loans principally from
banks and insurance companies. Current installments of long-term debt came to
JPY 502,586 million. Hitachi's debt is not significantly affected by seasonal
factors. In general, there are no material restrictions on Hitachi's use of
borrowings. For further details including the maturity and interest rates, see
note (9) to the consolidated financial statements.

The Company's current debt ratings (long-term/short-term) are: A2/P-1 by
Moody's; A-/A-1 by S & P; and AA-/a-1+ by R&I. With its current ratings, the
Company believes that its access to the global capital markets will remain
sufficient for its financing needs. However, the downgrade of its debt ratings
is likely to increase the cost of debt finance by the Company. Hitachi seeks to
maintain a stable credit rating in order to ensure financial flexibility for
liquidity and capital management, and to continue to maintain access to
sufficient funding resources through capital markets.

In fiscal 2002, the above activities and the effect of foreign exchange rate
fluctuations decreased cash and cash equivalents by JPY 201,203 million from
fiscal 2001. Cash and cash equivalents at the end of fiscal 2002 amounted to JPY
828,171 million, primarily held in Japanese yen and a substantial part in U.S.
dollars. Short-term investments, the change of which is classified as investing
activities, are considered as an immediately available source of funds.
Short-term investments at the end of fiscal 2002 amounted to JPY 186,972
million, an increase of JPY 8,039 million from at the end of fiscal 2001. As a
result of the foregoing, the total of cash and cash equivalents and short-term
investments at the end of fiscal 2002 was JPY 1,015,143 million, a decrease of
JPY 193,164 million from at the end of fiscal 2001.

The transfer of funds from a subsidiary to a parent company in the form of cash
dividends is restricted pursuant to the Commercial Code of Japan or regulatory
requirements of foreign countries where such subsidiary is located. Although the
Company's subsidiaries are subject to such restrictions, Hitachi does not expect
such restrictions to have a significant impact on the ability of Hitachi to meet
its cash obligations.

Management believes that Hitachi's current financial position including working
capital as indicated by these figures is adequate for its present requirements
and business operations, and is seeking to ensure that the level of liquidity
and the access to capital resources be maintained in order to successfully
conduct its future operations in highly competitive markets.

The Company and its subsidiaries assess foreign currency exchange rate risk and
interest rate risk by continually monitoring changes in these exposures and by
evaluating hedging opportunities. Hitachi uses certain derivative financial
instruments in order to reduce such risks, and does not enter into derivative
financial instruments for any purpose other than hedging. For additional
information on financial instruments and derivative financial instruments, see
notes (22) and (24) to the consolidated financial statements.

Pursuant to the provisions of Article 210 of the Commercial Code of Japan, the
Company, at the Tokyo Stock Exchange, purchased 66,338,000 shares of its own
common stock for the aggregate amount of JPY 29,934 million during May 2003.

In May 2003, the Company issued unsecured debentures in the amount of JPY 80,000
million. The debentures mature in ten years and the coupon rate is 0.72%. The
procured funds are used primarily for redemption of convertible debentures.

In June 2003, the Company announced that it reached an agreement with its labor
union on a basic framework for pension plan reform centered on the introduction
of the cash balance plan. Under the cash balance plan, the pension benefit
obligation is adjusted automatically in correlation to market interest trends.
The Company expects that the cash balance plan will enable stable administration
of its pension system and reduce the impact of interest rate and stock market
volatility on Hitachi's financial results.

In July and August 2003, Hitachi sold most of its shares of NITTO DENKO
CORPORATION, which was accounted for under the equity method by Hitachi, for the
aggregate amount of approximately JPY 140 billion.

                                       31

<PAGE>

The proceeds of such sales are expected to be used to secure funding for
Hitachi's implementation of its business portfolio realignment and to increase
Hitachi's focus on targeted businesses.

The following tables show Hitachi's contractual obligations and other commercial
commitments as of March 31, 2003.

<TABLE>
<CAPTION>
                                            Payments due by period
                           --------------------------------------------------------------------------
 Contractual                                  Less than                                      After
  obligations                       Total       1 year           1-3 years   4-5 years      5 years
-----------------------------------------------------------------------------------------------------
                                              (Millions of yen)
<S>                              <C>          <C>                <C>         <C>           <C>
Long-term debt                   1,994,671      497,450            915,047     289,420       292,754
Capital lease obligations           20,067        5,136              6,935       3,763         4,233
Operating leases                    44,292       13,174             17,450       5,090         8,578
-----------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                     March 31
Other commercial              ----------------------
 commitments                           2003
-----------------------------------------------------
                                 (Millions of yen)
<S>                           <C>
Lines of credit                       662,737
Purchase of property, plant
 and equipment                         30,214
Trade notes discounted
 and endorsed                          28,563
Guarantees                            628,627
-----------------------------------------------------
</TABLE>

See note (15) to the consolidated financial statements.

Off-balance Sheet Arrangements

Hitachi uses off-balance sheet Special Purpose Entities (SPE) to securitize and
sell certain trade and lease receivables. The purpose of such securitization
transactions is to enable Hitachi to access the capital markets for liquidity.

In these securitizations, trade and lease receivables are sold to the SPE which
are in turn packaged mainly into asset-backed commercial papers by the SPE for
sale to third party investors. In certain securitizations, the SPE require
Hitachi to retain subordinated residual interests to the investors. These
retained subordinated residual interests are not material. The SPE and the
investors have no recourse to Hitachi when there are failures by the debtors of
trade and lease receivables to pay when due. Accordingly, Hitachi's contingent
liability exposure is limited to the retained subordinated residual interests.

No officers, directors or employees of Hitachi have any investments in the SPE.
The SPE meet the accounting criteria for off-balance sheet treatment and are not
consolidated under generally accepted accounting principles in the United States
of America.

                                       32

<PAGE>

The amount of off-balance sheet arrangements as of March 31, 2003 is as follows:

<TABLE>
<CAPTION>
                                         March 31
                                   --------------------
                                            2003
----------------------------------------------------------
                                      (Millions of yen)
<S>                                <C>
Securitized lease receivables             382,861
Securitized trade receivables             291,223
----------------------------------------------------------
Total                                     674,084
----------------------------------------------------------
</TABLE>

See note (1) (f) to the consolidated financial statements.

C. Research and Development

Viewing research and development (R&D) activity as a key investment for the
future, Hitachi conducts its R&D in a number of areas from materials to
production technology. Hitachi focuses on basic R&D with a long-term vision but
also strives to achieve more immediate benefits by introducing new products.

Hitachi's R&D expenditures amounted to JPY 435,579 million in fiscal 2000, JPY
415,448 million in fiscal 2001 and JPY 377,154 million in fiscal 2002. The ratio
of R&D expenditures to total revenues remained at approximately 5% over these
three years. The decreases in fiscal 2001 and fiscal 2002 reflect Hitachi's more
stringent selection of R&D activities.

Hitachi recognizes the importance of the Information & Telecommunication Systems
segment and the Electronic Devices segment as sources of new technologies that
can be applied to other segments. Therefore, Hitachi places emphasis on these
segments in allocating R&D resources. In fiscal 2002, expenditures in the
Information & Telecommunication Systems segment and the Electronic Devices
segment accounted for 32% and 28% of total R&D expenditures, respectively.

To achieve higher efficiency, Hitachi has reinforced the link between R&D
activities and marketing activities under the control of each business operation
while maintaining its focus on long-term research at independent corporate
laboratories. Hitachi's global R&D activities include cooperation with
universities and companies in the U.S. and Europe.

D. Trend Information

In fiscal 2001, Hitachi's business results significantly deteriorated due
primarily to global economic slowdowns and worldwide decline in demand for
IT-related products. In the face of the difficult business environment, during
fiscal 2001, Hitachi implemented management measures to raise management
efficiency and strengthen competitiveness. The measures include the withdrawal
from unprofitable businesses, the reorganization and streamlining of production
bases and facilities and the introduction of an early retirement benefits
program.

In January 2003, Hitachi launched a new medium-term management plan defining the
direction and goals of its businesses through the fiscal year ending March 31,
2006. The plan includes, among other things, a realignment of Hitachi's business
portfolio which may be implemented by exiting certain businesses, increasing
focus on targeted businesses and creating new businesses in an effort to achieve
increased profitability and alteration of its corporate governance structure in
an effort to improve the efficiency and transparency of management. In addition,
under the plan, Hitachi expects to pursue further growth in the global markets
by identifying competitive businesses and channeling management resources into
those businesses. Hitachi also expects under the plan to

                                       33

<PAGE>

continue to improve cash-flow management by increasing the efficiency of working
capital use while making selective investments, and further to reduce
procurement costs. See "Item 4. Information on the Company - A. History and
Development of the Company" and "Item 6. Directors, Senior Management and
Employees."

In December 2002, the Company purchased a majority ownership in a
newly-established company to which IBM's hard disk drive operations were
transferred. The new company, a majority-owned subsidiary of the Company,
commenced operations on January 1, 2003. The sales of the new company are
expected to be included in Hitachi's consolidated statement of income for the
fiscal year ending March 31, 2004. In April 2003, the Company transferred its
semiconductor operations centered in system LSIs to a new company, Renesas,
incorporated jointly by the Company and Mitsubishi. The new company is expected
to be accounted for under the equity method by the Company which will likely
result in the sales of such operations, included in Hitachi's consolidated
statement of income for the fiscal year ended March 31, 2003, to be excluded in
the fiscal year ending March 31, 2004.

Management believes that the Japanese economy is unlikely to stage any
significant recovery for some time and that an upturn in the U.S. economy is
uncertain. Under continuing difficult business circumstances, Hitachi expects
total revenues for the fiscal year ending March 31, 2004 to decrease, due in
part to the transfer of its semiconductor operations to Renesas, as described in
the preceding paragraph. In addition, Hitachi expects net income for the fiscal
year ending March 31, 2004 to decrease, due in part to poor results from its
hard disk drive operations.

Factors that could cause actual results to differ materially from those expected
or implied in any forward-looking statements in this section include, but are
not limited to, rapid and significant declines in product prices and uncertainty
as to Hitachi's ability to implement restructuring measures. In addition, see
"Cautionary Statement" beginning on page 2 and "Item 3. Key Information - D.
Risk Factors" for other examples of factors that could cause actual results to
differ materially from those anticipated.

E. Critical Accounting Policies

The preparation of the consolidated financial statements of Hitachi in
conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Certain accounting estimates
are particularly sensitive because of their significance to the financial
statements and because of the possibility that future events affecting the
estimate may differ significantly from management's current judgments.
Management considers the accounting estimates discussed in this section to be
critical accounting estimates for two reasons. First, the estimates require
Hitachi to make assumptions about matters that are highly uncertain at the time
the accounting estimate is made. Second, different estimates that Hitachi
reasonably could have used for the accounting estimate in the current period, or
changes in the accounting estimate that are reasonably likely to occur from
period to period, could have a material impact on the presentation of Hitachi's
financial condition, changes in financial condition or results of operations.
Management believes the following represents Hitachi's critical accounting
policies.

Impairment of long-lived assets
Hitachi reviews the carrying value of its long-lived assets held and used, and
intangible assets that do not have indefinite useful lives, whenever events or
changes in circumstances indicate that the carrying value of the assets may not
be recoverable. Hitachi performs the initial impairment review using estimates
of undiscounted future cash flows. If the carrying value of the asset is
considered impaired based upon the review, an impairment charge is recorded for
the amount by which the carrying value of the asset exceeds its estimated fair
value. Although management believes that the estimates of future cash flows and
fair value are reasonable, changes in estimates resulting in lower future cash
flows and fair value due to unforeseen changes in business assumptions

                                       34

<PAGE>

could negatively affect the valuations of the long-lived assets.

Goodwill and other intangible assets
All goodwill and other intangible assets with indefinite useful lives are not
amortized but are tested for impairment in accordance with SFAS No.142,
"Goodwill and Other Intangible Assets," on an annual basis or between annual
tests if an event occurs or circumstances change in a manner that would more
likely than not reduce the fair value of these assets below their carrying
value. Fair value for these assets is determined using a discounted cash flow
analysis, which is based on various assumptions, including forecasted
operational results set forth in Hitachi's authorized business plan. Although
management believes that the estimates of future cash flows and fair value are
reasonable, changes in estimates resulting in lower future cash flows and fair
value due to unforeseen changes in the business environment could negatively
affect the valuations and the amount of the impairment charge. Goodwill and
other intangible assets with indefinite useful lives acquired after June 30,
2001 but prior to the adoption of SFAS No.142 on April 1, 2002 are not amortized
but are reviewed for impairment in accordance with Accounting Principles Board
Opinion (APB) No. 17 and SFAS No.121.

Deferred tax assets
In assessing the realizability of the deferred tax assets, the management
considers whether it is more likely than not that a portion or all of the
deferred tax assets will not be realized. The ultimate realization of Hitachi's
deferred tax assets is dependent on whether Hitachi is able to generate future
taxable income in specific tax jurisdictions during the periods in which
temporary differences become deductible. Management has scheduled the expected
future reversals of the temporary differences and projected future taxable
income in making this assessment. Based on these factors, management believes
that it is more likely than not that Hitachi will realize the benefits of these
temporary differences, net of the existing valuation allowance as of March 31,
2003. However, the amount of deferred tax assets may be different if Hitachi
does not realize estimated future taxable income during the carry forward
periods as originally expected.

Retirement benefits
Hitachi has a significant amount of employee retirement benefit costs which are
developed from actuarial valuations. Inherent in these valuations are key
assumptions in estimating pension costs including mortality, withdrawal,
disablement and retirement, changes in compensation, discount rate and expected
return on plan assets. Hitachi is required to estimate the key assumptions by
taking into account various factors including personnel demographics, current
market conditions and expected trends in interest rates. Hitachi determines the
discount rate by looking to available information about rates implicit in return
on high-quality fixed-income governmental and corporate bonds. Accordingly, the
discount rate is likely to change from period to period based on these ratings.
A decrease in the discount rate results in an increase in actuarial pension
benefit obligations. Increases and decreases in the pension benefit obligation
affect the amount of the actuarial gain or loss which is amortized into income
over the service lives of employees. A decrease in the expected return on plan
assets would increase the pension benefit obligation. Changes in the key
assumptions may have a material effect on Hitachi's financial position and
results of operations. Management believes that estimation of the key
assumptions is reasonable under the various underlying factors.

Allowance for doubtful accounts
Hitachi is required to estimate the collectibility of its notes and accounts
receivable. A considerable amount of judgment is required in assessing the
ultimate realization of these receivables, including the current
creditworthiness of each customer. Such assessment includes an examination of
factors such as business conditions, turnover of receivables and financial
positions for significant customers. Significant changes in required reserves
have been recorded in recent periods and may occur in the future due to the
current market environment. Any deterioration in customer credit rating may
adversely affect net income.

Investments in securities
Hitachi holds various investments in securities and equity method investments. A
decline in fair value of securities and equity method investments below carrying
value that is deemed other than temporary results in a write-down of the
carrying value to the fair value as a new cost basis. The amount of the
write-down is included

                                       35

<PAGE>

in earnings. Management regularly reviews each investment in security and equity
method investment for possible impairment based on criteria such as the extent
to which the carrying value exceeds market value, the duration of that market
decline and the financial condition of and specific prospects of the issuer.

F. New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, "Accounting for Asset Retirement Obligations," which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the related asset retirement costs. The standard
applies to legal obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) normal use
of the asset. SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. Hitachi is required and
plans to adopt the provisions of SFAS No. 143 for the fiscal year beginning
April 1, 2003. SFAS No. 143 will have no material impact on Hitachi's
consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities and
nullifies the FASB's Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS
No. 146 applies to costs associated with an exit activity that does not involve
an entity newly acquired in a business combination covered by EITF Issue No.
95-3, "Recognition of Liabilities in Connection with a Purchase Business
Combination," or with a disposal activity covered by SFAS No. 144. This
statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred and measured at
fair value. The provisions of the statement are effective for exit or disposal
activities that are initiated after December 31, 2002. The adoption of this
statement did not have a material effect on Hitachi's financial position or
results of operations.

In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities, an interpretation of ARB No. 51." This interpretation
addresses the consolidation by business enterprises of variable interest
entities as defined in the interpretation. The interpretation applies
immediately to variable interests in variable interest entities created and
acquired after January 31, 2003. For variable interest in a variable interest
entity created before February 1, 2003, the interpretation is applicable no
later than the beginning of the first interim or annual reporting period
beginning after June 15, 2003. The application of this interpretation did not
have a material effect on Hitachi's consolidated financial statements for the
year ended March 31, 2003 and is not expected to have a material effect for the
year ending March 31, 2004.

                                       36

<PAGE>

Item 6.  Directors, Senior Management and Employees

A. Directors and Senior Management

The Company, by special resolution of the general meeting of shareholders held
on June 25, 2003, adopted a new corporate governance structure (the "Committee
System") recently permitted as a form of corporate organization pursuant to the
amended Commercial Code and the amended Law for Special Exceptions to the
Commercial Code Concerning Audit, etc. of Kabushiki-Kaisha of Japan (together,
hereinafter referred to as the "Commercial Code"). Each company adopting the
Committee System, such as the Company, is required to establish within its board
of directors a nominating, audit and compensation committee, a majority of the
members of each of which must be outside directors who are not executive
officers of the company, and to have executive officers responsible for
executing the business of the company. The Commercial Code defines an outside
director of a company as a director who is not engaged in the business affairs
of the company and has never assumed the position of executive director (a
director who is engaged in the business affairs of a company), executive
officer, manager or employee of the company or its subsidiaries, and who does
not currently assume the position of executive director or executive officer of
its subsidiaries or the position of manager or employee of the company or its
subsidiaries. Under the Committee System, a company is not allowed to have
corporate auditors but is instead required to delegate auditing function
responsibilities to the audit committee. For more information, see "C. Board
Practices" below.

Set forth below are the names of the Company's Directors and Executive Officers
as of September 1, 2003. All Directors were elected at the Company's general
meeting of shareholders held on June 25, 2003. Three Directors, Mr. Etsuhiko
Shoyama, Mr. Yoshiki Yagi and Mr. Yoshiro Kuwata, concurrently assume the office
of Executive Officer. Ms. Ginko Sato, Mr. Hiromichi Seya, Mr. Akira Chihaya and
Mr. Toshiro Nishimura are outside Directors who fulfill the qualification
requirements as provided for in the provision of the Commercial Code. All
Executive Officers were subsequently appointed at the meeting of the Board of
Directors held on June 25, 2003.

Directors

<TABLE>
<CAPTION>
                             Current position and principal               Business experience, including
         Name                 position outside the Company           experience in the Company, and functions
         ----                 ----------------------------           ----------------------------------------
   (Date of birth)
<S>                          <C>                                  <C>
Tsutomu Kanai                Chairman of the Board and            5/1958  Joined Hitachi, Ltd.
(Feb. 26, 1929)              Director                             6/1985  Group Executive, Power Group
                                                                          Executive Managing Director
                                                                  6/1987  Senior Executive Managing Director
                                                                  6/1989  Executive Vice-President and Director
                                                                  6/1991  President and Director
                                                                  4/1999  Chairman of the Board and Director

Etsuhiko Shoyama             President and Chief Executive        4/1959  Joined Hitachi, Ltd.
(Mar. 9, 1936)               Officer                              6/1991  General Manager, Consumer Electronics
                             Director                                     Division
                                                                          Director
                                                                  6/1993  Executive Managing Director
                                                                  6/1995  Senior Executive Managing Director
                                                                  6/1997  Executive Vice-President and Director
                                                                  4/1999  President and Director
                                                                  6/2003  President, Chief Executive Officer and Director
</TABLE>

                                       37

<PAGE>

<TABLE>
<CAPTION>
                             Current position and principal            Business experience, including
         Name                 position outside the Company        experience in the Company, and functions
         ----                 ----------------------------        ----------------------------------------
   (Date of birth)
<S>                          <C>                                  <C>
Yoshiki Yagi                 Executive Vice President and         4/1960  Joined Hitachi, Ltd.
(Feb. 27, 1938)              Executive Officer                    6/1988  General Manager, Accounting Controls Dept.
                             Director                             6/1991  Director
                                                                  6/1993  Executive Managing Director
                                                                  6/1997  Senior Executive Managing Director
                                                                  4/1999  Executive Vice President and Director
                                                                  6/2003  Executive Vice President, Executive Officer and
                                                                          Director

Yoshiro Kuwata               Executive Vice President and         6/1961  Joined Hitachi, Ltd.
(Sep. 1, 1936)               Executive Officer                    7/1992  General Manager, Overseas Operations
                             Director                                     Promotion Office
                                                                  6/1993  Director
                                                                  6/1995  Executive Managing Director
                                                                  6/1997  Senior Executive Managing Director
                                                                  4/1999  Executive Vice President and Director
                                                                  6/2003  Executive Vice President, Executive Officer and
                                                                          Director

Shigemichi Matsuka           Director                             4/1961  Joined Hitachi, Ltd.
(May 19, 1937)                                                    6/1989  General Manager, Omika Works
                                                                  6/1991  Director
                                                                  6/1993  Executive Managing Director
                                                                  6/1997  Senior Executive Managing Director
                                                                  4/1999  Executive Vice President and Director
                                                                  4/2001  Director
                                                                  6/2001  Corporate Auditor
                                                                  6/2003  Director

Kotaro Muneoka               Director                             4/1964  Joined Hitachi, Ltd.
(Oct. 30, 1940)                                                   6/1997  General Manager, Corporate Personnel &
                                                                          Education Dept.
                                                                          Director
                                                                  4/1999  Senior Vice President and Director
                                                                  4/2001  Director
                                                                  6/2001  Corporate Auditor
                                                                  6/2003  Director

Ginko Sato                   Director                             7/1990  Assistant Minister of Labour
(Jul. 6, 1934)                                                    10/1991 Ambassador Extraordinary and Plenipotentiary of
                             President, Japan Association for             Japan to Kenya
                             the Advancement of Working Women     7/1995  Commissioner, Securities and Exchange
                                                                          Surveillance Commission
                                                                  7/1998  Chairperson, Securities and Exchange
                                                                          Surveillance Commission
                                                                  8/2001  President, Japan Association for the
                                                                          Advancement of Working Women
                                                                  6/2003  Director

Hiromichi Seya               Director                             3/1992  President, Asahi Glass Company, Limited
(Oct. 7, 1930)                                                    6/1998  Chairman & CEO, Asahi Glass Company, Limited
                             Chairman of the Board, Asahi         6/2002  Chairman of the Board, Asahi Glass Company,
                             Glass Company, Limited                       Limited
                                                                  6/2003  Director
</TABLE>

                                       38

<PAGE>

<TABLE>
<CAPTION>
                             Current position and principal           Business experience, including
         Name                 position outside the Company        experience in the Company, and functions
         ----                 ----------------------------        ----------------------------------------
   (Date of birth)
<S>                          <C>                                  <C>
Akira Chihaya                Director                             4/1998  Representative Director and President, NIPPON
(Mar. 6, 1935)                                                            STEEL CORPORATION
                             Representative Director and          4/2003  Representative Director and Chairman of the
                             Chairman of the Board, NIPPON                Board, NIPPON STEEL CORPORATION
                             STEEL CORPORATION                    6/2003  Director

Toshiro Nishimura            Director                             4/1961  Member of the First Tokyo Bar Association
(Apr. 10, 1933)                                                   5/1966  Senior Partner of Nishimura & Partners
                             Attorney at Law                      6/2003  Director

Hiroshi Kuwahara             Director                             4/1960  Joined Hitachi, Ltd.
(Nov. 23, 1935)                                                   6/1989  General Manager, Industrial Processing Division
                             Chairman of the Board and                    Director
                             Representative Executive             6/1991  Executive Managing Director
                             Officer, Hitachi Maxell, Ltd.        6/1993  Senior Executive Managing Director
                                                                  6/1995  Executive Vice-President and Director
                                                                  6/1999  Vice Chairman of the Board and Director
                                                                  1/2001  Director
                                                                          Executive member of Council for Science &
                                                                          Technology Policy, Cabinet Office
                                                                  1/2003  Vice Chairman of the Board and Director
                                                                  4/2003  Director
                                                                  6/2003  Chairman of the Board and Representative
                                                                          Executive Officer, Hitachi Maxell, Ltd.

Takashi Kawamura             Director                             4/1962  Joined Hitachi, Ltd.
(Dec. 19, 1939)                                                   6/1992  General Manager, Hitachi Works
                             Chairman of the Board and            6/1995  Director
                             Representative Executive             6/1997  Executive Managing Director
                             Officer, Hitachi Software            4/1999  Executive Vice President and Director
                             Engineering Co., Ltd.                4/2003  Director
                                                                  6/2003  Chairman of the Board and Representative
                                                                          Executive Officer, Hitachi Software Engineering
                                                                          Co., Ltd.

Masayoshi Hanabusa           Director                             6/1991  President and Representative Director, Hitachi
(Oct. 10, 1934)                                                           Credit Corporation (currently Hitachi Capital
                             Chairman of the Board and                    Corporation)
                             Director, Hitachi Capital            6/2001  Chairman of the Board and Representative
                             Corporation                                  Director, Hitachi Capital Corporation
                                                                  6/2003  Chairman of the Board and Director, Hitachi
                                                                          Capital Corporation
                                                                          Director
</TABLE>

Members of each committee are as follows.
     Nominating Committee: Tsutomu Kanai (Chairman), Etsuhiko Shoyama, Ginko
          Sato, Hiromichi Seya, Toshiro Nishimura
     Audit Committee: Shigemichi Matsuka (Chairman), Kotaro Muneoka, Ginko Sato,
          Hiromichi Seya, Toshiro Nishimura
     Compensation Committee: Tsutomu Kanai (Chairman), Etsuhiko Shoyama,
          Hiromichi Seya, Akira Chihaya, Toshiro Nishimura

                                       39

<PAGE>

Executive Officers

<TABLE>
<CAPTION>
         Name                  Current position and principal                 Business experience, including
         ----                   position outside the Company             experience in the Company, and functions
   (Date of birth)              ----------------------------             ----------------------------------------
<S>                          <C>                                  <C>
Etsuhiko Shoyama             President and Chief Executive        See "Directors."
(Mar. 9, 1936)               Officer
                             Director

Yoshiki Yagi                 Executive Vice President and         See "Directors."
(Feb. 27, 1938)              Executive Officer
                             Director

Yoshiro Kuwata               Executive Vice President and         See "Directors."
(Sep. 1, 1936)               Executive Officer
                             Director

Kazuo Kumagai                Executive Vice President and         4/1961   Joined Hitachi, Ltd.
(Mar. 2, 1938)               Executive Officer                    6/1989   Deputy General Manager, Secretary's Office
                                                                  6/1993   Director
                                                                  6/1997   Executive Managing Director
                                                                  4/1999   Senior Vice President and Director
                                                                  4/2001   Executive Vice President and Director
                                                                  6/2003   Executive Vice President and Executive Officer

Katsukuni Hisano             Executive Vice President and         4/1962   Joined Hitachi, Ltd.
(Mar. 2, 1940)               Executive Officer                    6/1995   General Manager, Hitachi Works
                                                                  6/1997   Director
                                                                  4/1999   Senior Vice President and Director
                                                                  6/2002   Director
                                                                  10/2002  Senior Vice President and Director
                                                                  4/2003   Executive Vice President and Director
                                                                  6/2003   Executive Vice President and Executive Officer

Takao Matsui                 Senior Vice President and            4/1963   Joined Hitachi, Ltd.
(Mar. 18, 1939)              Executive Officer                    6/1993   General Manager, Kansai Area Operation
                                                                  6/1997   Director
                                                                  4/1999   General Manager, Sales Management Division
                                                                  6/1999   Retired from Director
                                                                  6/2001   Senior Vice President and Director
                                                                  6/2003   Senior Vice President and Executive Officer

Isao Ono                     Senior Vice President and            4/1968   Joined Hitachi, Ltd.
(May 23, 1944)               Executive Officer                    4/2002   General Manager, Information Business Group and
                             (General Manager, Information                 President & CEO, Information & Telecommunication
                             Business Group)                               Systems
                                                                  6/2002   Senior Vice President and Director
                                                                  4/2003   General Manager, Information Business Group
                                                                  6/2003   Senior Vice President and Executive Officer

Masaharu Sumikawa            Senior Vice President and            4/1972   Joined Hitachi, Ltd.
(Jul. 2, 1943)               Executive Officer                    2/2002   President, Power & Industrial Systems and CEO,
                                                                           Power systems operation
                                                                  6/2002   Senior Vice President and Director
                                                                  6/2003   Senior Vice President and Executive Officer
</TABLE>

                                       40

<PAGE>

<TABLE>
<CAPTION>
         Name                  Current position and principal                 Business experience, including
         ----                   position outside the Company             experience in the Company, and functions
   (Date of birth)              ----------------------------             ----------------------------------------

<S>                          <C>                                  <C>
Michiharu Nakamura           Senior Vice President and            4/1967  Joined Hitachi, Ltd.
(Sep. 9, 1942)               Executive Officer                    4/2001  General Manager, Research & Development Group
                             (General Manager, Research &         6/2003  Senior Vice President and Executive Officer
                             Development Group)

Hiromi Kuwahara              Senior Vice President and            4/1968  Joined Hitachi, Ltd.
(Aug. 23, 1945)              Executive Officer                    4/2003  General Manager, Corporate Strategy
                             (General Manager, Corporate          6/2003  Senior Vice President and Executive Officer
                             Strategy)

Minoru Tsukada               Vice President and Executive         4/1969  Joined Hitachi, Ltd.
(Jan. 1, 1947)               Officer                              4/2003  General Manager, Kansai Area Operation
                             (General Manager, Kansai Area        6/2003  Vice President and Executive Officer
                             Operation)

Yoshito Tsunoda              Vice President and Executive         4/1971  Joined Hitachi, Ltd.
(Sep. 20, 1944)              Officer                              4/2003  President & CEO, Urban Planning and Development
                             (President & CEO, Urban Planning             Systems
                             and Development Systems)             6/2003  Vice President and Executive Officer

Hiroaki Nakanishi            Vice President and Executive         4/1970  Joined Hitachi, Ltd.
(Mar. 14, 1946)              Officer                              4/2003  General Manager, Global Business
                             (General Manager, Global Business)   6/2003  Vice President and Executive Officer

Tadahiko Ishigaki            Vice President and Executive         4/1968  Joined Hitachi, Ltd.
(Jan. 14, 1946)              Officer                              4/2003  General Manager, Corporate Marketing
                             (General Manager, Corporate          6/2003  Vice President and Executive Officer
                             Marketing)

Shozo Saito                  Vice President and Executive         4/1970  Joined Hitachi, Ltd.
(Nov. 5, 1945)               Officer                              4/2003  President & CEO, Power & Industrial Systems
                             (President & CEO, Power &            6/2003  Vice President and Executive Officer
                             Industrial Systems)

Manabu Shinomoto             Vice President and Executive         7/1971  Joined Hitachi, Ltd.
(Mar. 30, 1948)              Officer                              4/2003  CEO, Platform and network systems operation,
                             (CEO, Platform and network systems           Information & Telecommunication Systems
                             operation, Information &             6/2003  Vice President and Executive Officer
                             Telecommunication Systems)

Takuya Tajima                Vice President and Executive         4/1968  Joined Hitachi, Ltd.
(Jan. 21, 1945)              Officer                              4/2003  CEO, Social and industrial infrastructure systems
                             (CEO, Social and industrial                  operation, Power & Industrial Systems
                             infrastructure systems operation,    6/2003  Vice President and Executive Officer
                             Power & Industrial Systems)

Takashi Hatchoji             Vice President and Executive         4/1970  Joined Hitachi, Ltd.
(Jan. 27, 1947)              Officer                              4/2003  General Manager, Legal and Corporate
                             (General Manager, Legal and                  Communications and General Manager, Corporate
                             Corporate Communications and                 Auditing
                             General Manager, Corporate           6/2003  Vice President and Executive Officer
                             Auditing)
</TABLE>

                                       41

<PAGE>

<TABLE>
<CAPTION>
         Name                  Current position and principal                 Business experience, including
         ----                   position outside the Company             experience in the Company, and functions
   (Date of birth)              ----------------------------             ----------------------------------------

<S>                          <C>                                  <C>
Kazuo Furukawa               Vice President and Executive         4/1971  Joined Hitachi, Ltd.
(Nov. 3, 1946)               Officer                              4/2003  President & CEO, Information & Telecommunication
                             (President & CEO, Information &              Systems
                             Telecommunication Systems)           6/2003  Vice President and Executive Officer

Makoto Ebata                 Executive Officer                    4/1970  Joined Hitachi, Ltd.
(Feb. 23, 1947)              (General Manager, Group Management   2/2002  General Manager, Group Management Office
                             Office)                              6/2003  Executive Officer

Yasuo Sakuta                 Executive Officer                    4/1972  Joined Hitachi, Ltd.
(Oct. 6, 1945)               (General Manager, Intellectual       8/2001  General Manager, Intellectual Property Group
                             Property Group)                      6/2003  Executive Officer

Takao Suzuki                 Executive Officer                    4/1969  Joined Hitachi, Ltd.
(Jan. 12, 1946)              (General Manager, Chugoku Area       4/2003  General Manager, Chugoku Area Operation
                             Operation)                           6/2003  Executive Officer

Koichiro Nishikawa           Executive Officer                    4/1970  Joined Hitachi, Ltd.
(Jul. 12, 1947)              (General Manager, Business           4/2003  General Manager, Business Development
                             Development)                         6/2003  Executive Officer

Tsugio Momose                Executive Officer                    4/1970  Joined Hitachi, Ltd.
(Jun. 30, 1945)              (President & CEO, Ubiquitous         4/2002  President & CEO, Ubiquitous Platform Systems
                             Platform Systems)                    6/2003  Executive Officer

Kazuhiro Mori                Executive Officer                    4/1969  Joined Hitachi, Ltd.
(Oct. 7, 1946)               (General Manager, Chubu Area         2/1999  General Manager, Chubu Area Operation
                             Operation)                           6/2003  Executive Officer

Iwao Hara                    Executive Officer                    4/1970  Joined Hitachi, Ltd.
(May 11, 1945)               (General Manager, Human Capital)     4/2003  General Manager, Human Capital
                                                                  6/2003  Executive Officer

Takashi Miyoshi              Executive Officer                    4/1970  Joined Hitachi, Ltd.
(Sep. 25, 1947)              (General Manager, Finance)           4/2003  General Manager, Finance
                                                                  6/2003  Executive Officer

Taiji Hasegawa               Executive Officer                    4/1969  Joined Hitachi, Ltd.
(Feb. 18, 1947)              (President & CEO, Automotive         4/2003  President & CEO, Automotive Systems
                             Systems)                             6/2003  Executive Officer

Masahiro Hayashi             Executive Officer                    4/1969  Joined Hitachi, Ltd.
(Apr. 11, 1946)              (CEO, System solutions operation,    4/2003  CEO, System solutions operation, Information &
                             Information & Telecommunication              Telecommunication Systems
                             Systems)                             6/2003  Executive Officer
</TABLE>

There are no family relationships between any Director or Executive Officer and
any other Director or Executive Officer of the Company.

                                       42

<PAGE>

B. Compensation

The aggregate amount of compensation, including bonuses but excluding retirement
allowances, paid by Hitachi during the year ended March 31, 2003 to all
Directors and Corporate Auditors of the Company who served during that year was
JPY 602 million.

Under the corporate governance system prior to June 25, 2003, in accordance with
customary Japanese business practice, when a Director or Corporate Auditor
retires, a proposal to pay a lump-sum retirement allowance is submitted at a
general meeting of shareholders for approval. After the shareholders' approval
is obtained, the amount of the retirement allowance for a Director or Corporate
Auditor is fixed by the Board of Directors and the Board of Corporate Auditors
and generally reflects his position at the time of retirement, the length of his
service as a Director or Corporate Auditor and the retiring member's
contribution to the Company's performance. The Company does not set aside
reserves for such retirement payments. The aggregate amount of retirement
allowances paid during the year ended March 31, 2003 to retired Directors of the
Company was JPY 86 million. With the adoption of the Committee System in June
2003, the Compensation Committee determines the matters relating to the
compensation including retirement allowances for each Director and Executive
Officer. See "C. Board Practices."

In June 2000, the ordinary general meeting of shareholders of the Company
approved a stock option plan under which rights to subscribe for 527,000 shares
of Common Stock of the Company were granted to 14 Directors and 57 employees
including Senior Corporate Officers, Corporate Officers, Managing Officers and
Corporate Fellows. The exercise price of the rights is JPY 1,451 per share and
the rights are exercisable from July 27, 2001 until July 26, 2005.

In June 2001, the ordinary general meeting of shareholders of the Company
approved a stock option plan under which rights to subscribe for 1,090,000
shares of Common Stock of the Company were granted to 13 Directors and 64
employees including Senior Corporate Officers, Corporate Officers, Managing
Officers and Corporate Fellows. The exercise price of the rights is JPY 1,270
per share and the rights are exercisable from August 4, 2002 until August 3,
2006.

In June 2003, the ordinary general meeting of shareholders of the Company
approved a stock option plan. Pursuant to such approval, the Board of Directors
set and approved the details of the plan under which rights to subscribe for
1,305,000 shares of Common Stock of the Company were granted to a total of 85
persons, including Directors, Executive Officers, Corporate Officers and Fellows
of the Company. The exercise price of the rights is JPY 561 per share and the
rights are exercisable from August 1, 2004 through July 31, 2007. See note (26)
to the consolidated financial statements.

C. Board Practices

The Company, by special resolution of the general meeting of shareholders held
on June 25, 2003, adopted the Committee System pursuant to the amended
Commercial Code. Each company adopting the Committee System is required to
establish within its board of directors a nominating, audit and compensation
committee, a majority of the members of each of which must be outside directors
who are not executive officers of the company, and to have executive officers
responsible for executing the business of the company. Under the Committee
System, a company is not allowed to have corporate auditors but is instead
required to delegate auditing function responsibilities to the audit committee.
Through the adoption of the Committee System, the Company aims to clear the way
for much speedier management with the strict separation of execution of business
and supervision thereof and simultaneously foster fair and highly transparent
management.

The Company's amended Articles of Incorporation provide for a Board of Directors
of not more than 20 members. All Directors are elected at a general meeting of
shareholders. The Company's Articles of Incorporation provide that the Board of
Directors must appoint a Chairman of the Board from among its members. The term
of office

                                       43

<PAGE>

of a Director expires at the close of the ordinary general meeting of
shareholders relating to the last closing of accounts within one year after the
relevant Director's assumption of office. A Director may serve any number of
consecutive terms. The term of office of the Directors currently in office will
expire at the close of the ordinary general meeting of shareholders to be held
within three months from March 31, 2004.

Under the Committee System, the Board of Directors focuses on the functions of
decision-making with respect to fundamental management policies and certain
important matters prescribed by law, as well as supervision of execution by the
Directors and Executive Officers of their respective duties. The Board of
Directors has, by resolution, delegated to the Executive Officers most of its
authority to make decisions with regard to the Company's business affairs.

The Nominating Committee is authorized to determine the particulars of proposals
concerning the election and dismissal of Directors to be submitted to a general
meeting of shareholders. As stated above, a majority of the members of the
Nominating Committee must be outside Directors.

The Compensation Committee is authorized to determine the policy on the
determination of the particulars of compensation for each Director and Executive
Officer and determine the particulars of compensation for each Director and
Executive Officer in accordance with the established policy. In addition,
pursuant to the Board of Directors Regulations of the Company, the Compensation
Committee is authorized to determine the policy on the grant of stock options.
As stated above, under the Commercial Code, a majority of the members of the
Compensation Committee must be outside Directors.

The Audit Committee is authorized to audit the execution by the Directors and
Executive Officers of their respective duties and determine the particulars of
proposals concerning the election, dismissal and non-retention of the Company's
outside auditor to be submitted to the general meeting of shareholders. The
Audit Committee has the statutory duty to examine the financial statements and
business reports prepared by Executive Officers designated by the Board of
Directors and to prepare its audit report to be submitted to the Board of
Directors. Pursuant to the Board of Directors Regulations of the Company, the
Audit Committee has the authority to pre-approve audit and non-audit services
provided by the outside auditor for the purpose of complying with applicable
U.S. law and regulations. As stated above, a majority of the members of the
Audit Committee must be outside Directors. In addition, a member of the Audit
Committee may not concurrently be an Executive Officer, a manager or any other
employee of the Company or any of its subsidiaries, or a director who is engaged
in the business affairs of any of such subsidiaries.

For a list of the members of each committee, see "A. Directors and Senior
Management" above.

The Company's Articles of Incorporation provide for a maximum of 40 Executive
Officers. All Executive Officers are appointed by the Board of Directors. The
term of office of an Executive Officer expires at the close of the first meeting
of the Board of Directors after the ordinary general meeting of shareholders
relating to the last closing of accounts within one year after the relevant
Executive Officer's assumption of office. An Executive Officer may serve any
number of consecutive terms. The term of office of the Executive Officers
currently in office will expire at the close of the first meeting of the Board
of Directors after the ordinary general meeting of shareholders to be held
within three months from March 31, 2004.

Under the Committee System, Executive Officers have the power to make decisions
on matters delegated to them by the Board of Directors. An Executive Officer
executes the business affairs of the Company within the scope of assignment
determined by the Board of Directors. From among the Executive Officers, the
Board of Directors must appoint one or more Representative Executive Officers.
Each of the Representative Executive Officers has the statutory authority to
represent the Company generally in the conduct of its affairs. Pursuant to the
Company's Articles of Incorporation, the Board of Directors must appoint a
President and Chief Executive Officer who must also be a Representative
Executive Officer.

No Directors have service contracts with Hitachi providing for benefits upon
termination of service as a Director.

Pursuant to the Commercial Code and the Company's Articles of Incorporation, the
Company may, by resolution of the Board of Directors, exempt any Director and
Executive Officer from liabilities to the Company arising in respect of his/her
failure to execute duties to the extent provided in laws or regulations. In
addition, the

                                       44

<PAGE>

Company has entered into an agreement with each outside Director to limit such
Director's liabilities to the Company arising in respect of his/her failure to
execute duties to the maximum aggregate amount provided in the items of
paragraph 19 of Article 266 of the Commercial Code.

D. Employees

The following table shows the number of full-time employees of Hitachi by
industry segment as of March 31, 2001, 2002 and 2003.

<TABLE>
<CAPTION>
                                                                As of March 31
                                             ------------------------------------------------------
                                               2001                  2002                  2003
                                               ----                  ----                  ----
<S>                                          <C>                    <C>                   <C>
Information & Telecommunication Systems       65,864                 68,381                83,304
Electronic Devices                            50,152                 42,216                41,763
Power & Industrial Systems                    74,935                 72,250                76,685
Digital Media & Consumer Products             37,389                 33,742                33,046
High Functional Materials & Components        57,101                 52,720                48,821
Logistics, Services & Others                  31,124                 30,197                29,520
Financial Services                             4,012                  4,184                 4,116
Corporate                                      3,320                  3,299                 3,273
                                             -------                -------               -------
   Total                                     323,897                306,989               320,528
                                             =======                =======               =======
</TABLE>

The activities of the Hitachi Workers Union and those unions representing the
employees of certain domestic subsidiaries are organized under the Federation of
Hitachi Group Workers Unions. Each company has a collective bargaining agreement
with its workers union. Under the agreements, all employees of the Company and
its domestic subsidiaries that have labor unions, except management and a
limited number of other employees, must become union members. The collective
bargaining agreements are customarily for two-year terms and the present
provisions, other than those relating to wages, extend to March 31, 2004.
Hitachi considers its relations with the labor unions to be excellent and there
have been no significant strikes or labor disputes in recent years.

                                       45

<PAGE>

E. Share Ownership

The following table shows the number of shares of Common Stock owned by the
Directors and Executive Officers of the Company as of June 25, 2003. The total
amount is 0.02% of total shares issued.

<TABLE>
<CAPTION>
           Name                                 Position                              Number of shares owned
           ----                                 --------                              ----------------------
                                                                                              (shares)
     <S>                           <C>                                                <C>
     Tsutomu Kanai                 Chairman of the Board and Director                          68,500
     Etsuhiko Shoyama              President, Chief Executive Officer and Director             51,000
     Yoshiki Yagi                  Executive Vice President, Executive Officer                 65,250
                                   and Director
     Yoshiro Kuwata                Executive Vice President, Executive Officer                 24,700
                                   and Director
     Shigemichi Matsuka            Director                                                    31,000
     Kotaro Muneoka                Director                                                    21,000
     Ginko Sato                    Director                                                         0
     Hiromichi Seya                Director                                                     2,000
     Akira Chihaya                 Director                                                         0
     Toshiro Nishimura             Director                                                         0
     Hiroshi Kuwahara              Director                                                    29,600
     Takashi Kawamura              Director                                                    35,000
     Masayoshi Hanabusa            Director                                                     5,050
     Kazuo Kumagai                 Executive Vice President and Executive Officer              23,000
     Katsukuni Hisano              Executive Vice President and Executive Officer              17,000
     Takao Matsui                  Senior Vice President and Executive Officer                 19,200
     Isao Ono                      Senior Vice President and Executive Officer                 44,000
     Masaharu Sumikawa             Senior Vice President and Executive Officer                 15,000
     Michiharu Nakamura            Senior Vice President and Executive Officer                 15,000
     Hiromi Kuwahara               Senior Vice President and Executive Officer                 10,000
     Minoru Tsukada                Vice President and Executive Officer                        10,000
     Yoshito Tsunoda               Vice President and Executive Officer                        15,000
     Hiroaki Nakanishi             Vice President and Executive Officer                        10,000
     Tadahiko Ishigaki             Vice President and Executive Officer                        17,250
     Shozo Saito                   Vice President and Executive Officer                        19,050
     Manabu Shinomoto              Vice President and Executive Officer                        10,000
     Takuya Tajima                 Vice President and Executive Officer                        18,000
     Takashi Hatchoji              Vice President and Executive Officer                        24,000
     Kazuo Furukawa                Vice President and Executive Officer                        14,000
     Makoto Ebata                  Executive Officer                                           11,000
     Yasuo Sakuta                  Executive Officer                                           10,000
     Takao Suzuki                  Executive Officer                                           10,000
     Koichiro Nishikawa            Executive Officer                                           16,150
     Tsugio Momose                 Executive Officer                                           16,050
     Kazuhiro Mori                 Executive Officer                                           10,000
     Iwao Hara                     Executive Officer                                           11,050
     Takashi Miyoshi               Executive Officer                                           10,000
     Taiji Hasegawa                Executive Officer                                           13,050
     Masahiro Hayashi              Executive Officer                                           10,050
                                                                                              -------
                 Total                                                                        730,950
                                                                                              =======
</TABLE>

                                       46


<PAGE>

The aggregate number of shares to be subscribed for by the rights granted to the
Directors and Executive Officers, listed above, under the stock option plans
approved in June 2000, 2001 and 2003 is 193,000, 440,000 and 795,000 shares,
respectively. For additional information on the Company's stock option plan, see
"B. Compensation" of this Item.

No Director or Executive Officer has different voting rights from any other
shareholder of the Company's Common Stock.

Hitachi Employees' Shareholding Association owned approximately 80,448 thousand
shares as of March 31, 2003, which amounted to 2.4% of total shares issued. The
Association consists of employees of the Company and certain of its
subsidiaries. Membership in the Association is voluntary.

Item 7.  Major Shareholders and Related Party Transactions

A. Major Shareholders

The following table provides information concerning shareholders holding more
than five percent of the outstanding Common Stock as of March 31, 2003.

<TABLE>
<CAPTION>
                                                                                                       Percent
       Title of class                       Name                        Number of shares owned        of class
       --------------                       ----                        ----------------------        --------
                                                                           (thousand shares)
     <S>                    <C>                                         <C>                           <C>
     Common Stock           Japan Trustee Services Bank, Ltd.                   212,081                 6.3%
     Common Stock           NATS CUMCO*                                         172,918                 5.1%
     Common Stock           The Master Trust Bank of Japan, Ltd.                169,035                 5.0%
</TABLE>

      * NATS CUMCO is the nominee name for the aggregate of the Company's
      American Depositary Receipts (ADRs) holders.

Major shareholders of the Company do not have different voting rights from any
other shareholder of the Company's Common Stock.

As of March 31, 2003, approximately 12.3% of the Company's Common Stock was
owned by 192 United States shareholders as a whole, including the Depositary's
nominee as one shareholder of record, the percentage ownership of which was
about 5.1%.

Hitachi is not directly or indirectly owned or controlled by any other
corporation, by any foreign country or by any other natural or legal person
severally or jointly. To the knowledge of Hitachi, there are no arrangements,
the operation of which may at a subsequent date result in a change in control of
Hitachi.

B. Related Party Transactions

No loans have been extended to Directors or Executive Officers of the Company
except home loans extended to certain Directors by a subsidiary of the Company
engaged in the business of financial services. These loans were (1) made or
provided in the ordinary course of the business of such subsidiary; (2) of a
type that is generally made available by such subsidiary to the public; and (3)
made by such subsidiary on market terms, or terms that are no more favorable
than those offered by such subsidiary to the general public for such extensions
of credit. The aggregate outstanding balance of such loans to Directors as of
March 31, 2003 was JPY 130 million, and the largest aggregate outstanding
balance during fiscal 2002 was JPY 132 million.

C. Interests of Experts and Counsel

Not applicable.

                                       47

<PAGE>

Item 8.  Financial Information

A. Consolidated Statements and Other Financial Information

Consolidated Financial Statements

See "Item 17. Financial Statements."

Legal Proceedings

The Company and certain of its subsidiaries are subject to several legal and
arbitration proceedings and claims which have arisen in the ordinary course of
business. However, based upon the information currently available to Hitachi,
management of the Company does not expect those legal and arbitration
proceedings and claims to have a material effect on Hitachi's financial
condition or results of operations.

Dividend Policy

The Company views enhancement of the long-term and overall interests of
shareholders as an important management objective. The industrial sector
encompassing the information systems and electronics and other primary
businesses of the Company is undergoing rapid technological innovation and
changes in market structure. This makes vigorous upfront investment in R&D and
plant and equipment essential for securing and maintaining market
competitiveness and improving profitability. Dividends are therefore decided
based on medium-to-long term business plans with an eye to ensuring the
availability of internal funds for reinvestment and the stable growth of
dividends, with appropriate consideration of the Company's financial condition
and results of operations.

For information on restrictions imposed by the indentures relating to the
Company's unsecured convertible debentures on its ability to pay cash dividends,
see note (9) to the consolidated financial statements.

The Company paid a dividend of JPY 6 per share for fiscal 2002.

B. Significant Changes

No significant changes have occurred since the date of the annual financial
statements included in this report.

Item 9.  The Offer and Listing

A. Offer and Listing Details

The primary market for the Company's Common Stock is the Tokyo Stock Exchange
(the "TSE"). The Common Stock is traded on the First Section of the TSE and is
also listed on four other Japanese stock exchanges: Osaka, Nagoya, Fukuoka and
Sapporo. In addition, the Company's Common Stock is listed on Euronext
Amsterdam, the Frankfurt Stock Exchange, the Luxembourg Stock Exchange and
Euronext Paris. In the United States, the Company's American Depositary Shares
("ADSs") are listed and traded on the New York Stock Exchange (the "NYSE") in
the form of American Depositary Receipts ("ADRs"). There may from time to time
be a differential between the Common Stock's price on exchanges outside the
United States and the market price of the ADSs in the United States.

ADRs are issuable pursuant to the Deposit Agreement dated July 9, 1963, as
amended and restated on March 6, 1981 and as further amended on February 17,
1982 (the "Deposit Agreement"), among Hitachi, Ltd., Citibank, N.A. as
Depositary (the "Depositary"), and the holders of ADRs. Each ADR evidences ADSs,
each representing 10 shares of Common Stock deposited under the Deposit
Agreement with The Fuji Bank, Limited, Tokyo, or The Industrial Bank of Japan,
Limited, Tokyo, as agents of the Depositary, or any successor or successors to
such agent or agents. On April 1, 2002, all the rights, liabilities and
obligations of The Fuji Bank, Limited and The Industrial Bank of Japan, Limited
under the Deposit Agreement were succeeded by Mizuho Corporate Bank, Ltd.

                                       48

<PAGE>

The following table sets forth for the periods indicated the reported high and
low sales prices of the Company's Common Stock on the TSE and the reported high
and low sales prices of the Company's ADSs on the NYSE.

<TABLE>
<CAPTION>
                                       Tokyo Stock Exchange                      New York Stock Exchange
                                          Price Per Share                          Price Per American
                                          of Common Stock                           Depositary Share
                                          ---------------                           ----------------
                                                (Yen)                                (U.S. Dollars)

                                        High            Low                     High                 Low
                                        ----            ---                     ----                 ---
   <S>                                 <C>            <C>                      <C>                  <C>
   Annual Information
     Fiscal year ended March 31
     --------------------------
        1999                           1,015            532                     77.000              40.188
        2000                           1,709            814                    164.500              67.000
        2001                           1,549            899                    146.250              73.750
        2002                           1,380            745                    113.000              57.000
        2003                             997            398                     77.950              33.330

   Quarterly Information
     Fiscal year ended March 31, 2002
     --------------------------------
        1st quarter                    1,380          1,012                    113.000              80.500
        2nd quarter                    1,214            775                     98.000              64.050
        3rd quarter                      979            777                     79.000              65.500
        4th quarter                    1,008            745                     76.500              57.000

     Fiscal year ended March 31, 2003
     --------------------------------
        1st quarter                      997            736                     77.950              61.250
        2nd quarter                      800            592                     66.550              49.030
        3rd quarter                      619            398                     50.650              33.330
        4th quarter                      557            412                     45.190              34.750

     Fiscal year ended March 31, 2004
     --------------------------------
        1st quarter                      520            366                     43.500              31.300

   Monthly Information
    March 2003                           505            412                     43.000              34.750
    April 2003                           441            366                     37.290              31.300
    May 2003                             478            402                     40.650              34.500
    June 2003                            520            465                     43.500              39.800
    July 2003                            643            514                     53.500              44.480
    August 2003                          642            484                     54.740              40.950
</TABLE>

Notes:   (a)  Prices per share of Common Stock are as reported by the TSE.
         (b)  Prices per American Depositary Share are based upon one American
              Depositary Share representing 10 shares of Common Stock and are as
              reported by the NYSE via the NYSEnet system.

B. Plan of Distribution

Not applicable.

C. Markets

See "A. Offer and Listing Details" in this Item.

D. Selling Shareholders

Not applicable.

                                       49

<PAGE>

E. Dilution

Not applicable.

F. Expenses of the Issue

Not applicable.

Item 10.  Additional Information

A. Share Capital

Not applicable.

B. Memorandum and Articles of Association

Organization

Hitachi, Ltd. was incorporated in Japan under the Commercial Code. It is
registered in the Commercial Register (shogyo tokibo) maintained by the Tokyo
Legal Affairs Bureau of the Ministry of Justice.

Objects and Purposes

Article 2 of the Articles of Incorporation of the Company provides that its
purpose is to carry on the following businesses: manufacture and sale of
electrical machinery and appliances; manufacture and sale of industrial
machinery and appliances; manufacture and sale of rolling stock; manufacture and
sale of telecommunication and electronic machinery and appliances; manufacture
and sale of lighting and household machinery and appliances; manufacture and
sale of optical and medical machinery and instruments; manufacture and sale of
measuring and other general machinery and appliances; manufacture and sale of
materials related to the products mentioned in any of the foregoing items;
preparation and sale of software; preparation and sale of images, software and
data related to multimedia; leasing and maintenance services of the products
mentioned in any of the foregoing items; supply of electricity;
telecommunication, information processing and information supply services, as
well as broadcasting; undertaking of commercial transactions and payment
transactions by utilizing the Internet; provision of results of research and
development related to biotechnology; consulting on any of the foregoing items;
licensing of industrial property rights and know-how; undertaking of engineering
related to any of the foregoing items; design, supervision and undertaking of
construction work; money lending, factoring, debt guarantee and investment
advisory business; home health care support business under the Health Care
Insurance Law and the operation of health care and nursing facilities; any and
all businesses related to the foregoing items.

Directors

Under the Committee System, the Board of Directors focuses on the functions of
decision-making with respect to fundamental management policies and certain
important matters prescribed by law, as well as supervision of execution by the
Directors and Executive Officers of their respective duties. The Board of
Directors may, by resolution, delegate to the Executive Officers its authority
to make decisions with regard to the Company's business affairs.

Under the Commercial Code, the adoption of a resolution of the Board of
Directors requires a majority vote of the Directors present who must in turn
constitute a majority of the full Board of Directors. Any Director who has a
conflict of interest or a vested interest with respect to any given resolution
cannot participate in voting for the resolution. Under the Commercial Code, each
Director must refrain from engaging in any business competing with the Company
unless approved by the Board of Directors.

                                       50

<PAGE>

The Commercial Code provides that, under the Committee System, the Compensation
Committee established within the Board of Directors determines matters relating
to compensation for each Director and Executive Officer. A member of the
Compensation Committee cannot participate in voting for any resolution relating
to his/her own compensation.

There is no mandatory retirement age for the Directors required by the
Commercial Code or the Company's Articles of Incorporation. No shares are
required for a Director's qualification under the Commercial Code or the
Company's Articles of Incorporation.

Pursuant to the Commercial Code, under the Committee System, the Board of
Directors has, by resolution, delegated to Executive Officers powers regarding
the incurrence by the Company of a significant amount of debt.

Common Stock

     Dividends

     Under the Company's Articles of Incorporation, its financial accounts will
     be closed on March 31 of each year and annual dividends, if any, will be
     paid to shareholders of record as of that date. The Commercial Code permits
     a joint stock corporation to distribute retained earnings by way of interim
     dividends if the articles of incorporation of a company so provide. The
     Company's Articles of Incorporation permit it to make interim dividends and
     such interim dividends, if any, will be paid to shareholders of record as
     of September 30 of each year.

     Under the Company's Articles of Incorporation, the Company is not obligated
     to pay any dividends which are left unclaimed for a period of three years
     after the date on which they first became payable.

     Voting Rights

     A shareholder is generally entitled to one vote per one unit of shares with
     respect to whole units of shares, as described in this paragraph and under
     "Unit Share System" below. In general, under the Commercial Code, a
     resolution can be adopted at a general meeting of shareholders by a
     majority of the number of voting rights represented at the meeting. The
     Commercial Code and the Company's Articles of Incorporation require for the
     election of Directors a quorum of not less than one-third of the total
     number of voting rights of all the shareholders. The Company's shareholders
     are not entitled to cumulative voting in the election of directors. A
     corporate shareholder whose voting rights are in turn more than one-quarter
     directly or indirectly owned by the Company does not have voting rights.
     The Company does not have voting rights with respect to its own shares.
     Shareholders may cast their votes in writing and may also exercise their
     voting rights through proxies, provided that those proxies are also
     shareholders who have voting rights. Shareholders may also cast their votes
     by electronic means in accordance with the Company's Share Handling
     Regulations.

     The Commercial Code and the Company's Articles of Incorporation provide
     that a quorum of not less than one-third of the voting rights of all the
     shareholders must be present at a shareholders' meeting to approve any
     material corporate actions such as: a reduction of the stated capital;
     amendment of the Articles of Incorporation; the removal of a Director;
     establishment of a 100% parent-subsidiary relationship by way of share
     exchange or share transfer; a dissolution, merger or consolidation; a
     company split; the transfer of the whole or an important part of the
     business; the taking over of the whole of the business of any other
     corporation; and any issuance of new shares at a "specially favorable"
     price (or any issuance of rights to subscribe for or acquire shares ("stock
     acquisition rights") with "specially favorable" conditions or of bonds or
     debentures with stock acquisition rights with "specially favorable"
     conditions) to persons other than shareholders. At least two-thirds of the
     voting rights represented at the meeting must approve these actions.

     Issue of Additional Shares and Pre-emptive Rights

     Holders of the Company's shares of Common Stock have no pre-emptive rights
     under its Articles of Incorporation. Authorized but unissued shares may be
     issued at such times and upon such terms as Executive Officers determine,
     subject to the limitations as to the issuance of new shares at a "specially
     favorable" price

                                       51

<PAGE>

     mentioned above. Executive Officers may determine that shareholders be
     given subscription rights to new shares, in which case they must be given
     on uniform terms to all shareholders as of a record date of which not less
     than two weeks' prior public notice must be given. Each of the shareholders
     to whom such subscription rights are given must also be given at least two
     weeks' prior notice of the date on which such rights expire.

     Rights to subscribe for shares of Common Stock given to the shareholders
     may be made generally transferable by Executive Officers. If subscription
     rights are not made generally transferable, a transfer by a foreign
     investor not resident in Japan will be enforceable against the Company and
     third parties only if prior written consent to each such transfer is
     obtained from the Company. When such consent is necessary in the future for
     the transfer of subscription rights, the Company intends to consent, on
     request, to all such transfers by foreign investors not resident in Japan.

     Pursuant to the Commercial Code, the Company may issue stock acquisition
     rights. Except where the issuance of stock acquisition rights would be on
     "specially favorable" terms, Executive Officers may determine the issuance
     of stock acquisition rights other than those for stock option purposes,
     which in contrast, must be approved by the Board of Directors. Holders of
     stock acquisition rights may exercise their rights to acquire a certain
     number of shares within the exercise period as prescribed in the terms of
     their stock acquisition rights. Upon exercise of stock acquisition rights,
     the Company will be obliged to issue the relevant number of new shares, or
     alternatively, to transfer the necessary number of existing shares held by
     it.

     Liquidation Rights

     In the event of a liquidation of the Company, the assets remaining after
     payment of all debts and liquidation expenses and taxes will be distributed
     among the holders of shares of Common Stock in proportion to the respective
     numbers of shares of Common Stock held by each of them.

     Stock Splits

     The Company, by decision of the Executive Officers, may at any time split
     shares of Common Stock in issue. When Executive Officers decide to effect a
     stock split, the Company may amend its Articles of Incorporation without
     shareholder approval to increase the number of authorized shares in
     proportion to the stock split if the Company has only one class of
     outstanding shares.

     Generally, shareholders do not need to exchange share certificates for new
     ones following a stock split; however, certificates representing the
     additional shares resulting from the stock split will be issued to
     shareholders. Before a stock split, the Company must give public notice of
     the stock split specifying the record date for the stock split, not less
     than two weeks prior to the record date. In addition, promptly after the
     stock split takes effect, the Company must send notice to each shareholder
     specifying the number of shares to which each such shareholder is entitled.

     Unit Share System

     Pursuant to the Commercial Code, the Company has designated 1,000 shares as
     one unit of shares. Under the unit share system, a shareholder is generally
     entitled to one voting right for each unit of shares. The Company may not
     issue share certificates for a number of shares not constituting a whole
     number of units unless the Company deems the issuance of such share
     certificates to be necessary for shareholders. Since transfers of less than
     one unit of the underlying shares of common stock are normally prohibited
     under the unit share system, under the Deposit Agreement currently in
     force, the right of ADR holders to surrender their ADRs and withdraw the
     underlying shares of common stock may only be exercised as to whole units
     of common stock.

     Although the number of shares which constitute one unit is stipulated in
     the Articles of Incorporation, Executive Officers have the power to amend
     the Articles of Incorporation to reduce the number of shares which
     constitute one unit or abolish the unit share system. Pursuant to the
     Commercial Code, the number of shares constituting one unit, however,
     should neither exceed 1,000 nor one-two hundredths of the total number of
     outstanding shares of the Company.

                                       52

<PAGE>

     A holder of shares representing less than one unit may at any time require
     the Company to purchase his/her shares. These shares will be purchased at
     (a) the closing price of the shares reported by the Tokyo Stock Exchange on
     the day when the request to purchase is made or (b) if no sale takes place
     on the Tokyo Stock Exchange on that day, the price at which sale of shares
     is effected on such stock exchange immediately thereafter. However, because
     holders of ADSs representing less than one unit are not able to withdraw
     the underlying shares from deposit, these holders will not be able to
     exercise this right as a practical matter.

     The Company's Articles of Incorporation also provide that a holder of
     shares representing less than one unit may require the Company to sell any
     fractional shares it may have to such holder so that the holder can raise
     his/her fractional ownership up to a whole unit. These shares will be sold
     at (a) the closing price of the shares reported by the Tokyo Stock Exchange
     on the day when the request to sell becomes effective or (b) if no sale
     takes place on the Tokyo Stock Exchange on that day, the price at which
     sale of shares is effected on such stock exchange immediately thereafter.
     However, because holders of ADSs representing less than one unit are not
     able to withdraw the underlying shares from deposit, these holders will not
     be able to exercise this right as a practical matter.

     Acquisition by the Company of Shares

     Under the Commercial Code, the Company may acquire shares of its Common
     Stock for any purpose subject to authorization by (i) ordinary resolution
     of an ordinary general meeting of shareholders for (a) purchases of its
     shares on any Japanese stock exchange on which its shares are listed or (b)
     tender offers, or (ii) special resolution of an ordinary general meeting of
     shareholders for purchases of its shares from a specific shareholder other
     than a subsidiary of the Company. In the case of (ii) above, any other
     shareholder may make a request directly to an Executive Officer, five days
     prior to the relevant shareholders' meeting, that the Company also acquire
     the shares held by such requesting shareholder.

     Any such acquisition of shares by the Company must satisfy certain
     requirements, including that the total amount of the purchase price may not
     exceed the amount of the retained earnings available for annual dividend
     payments after taking into account any reduction of the stated capital,
     capital surplus or legal reserve (if such reduction is authorized by a
     resolution of the relevant general meeting of shareholders) less the sum of
     the amount to be paid by way of appropriation of retained earnings and the
     amount of retained earnings to be transferred to the stated capital in
     respect of the relevant fiscal year pursuant to a resolution of such
     general meeting of shareholders. The Company may hold the shares acquired
     in compliance with the provisions of the Commercial Code, and Executive
     Officers may generally dispose or cancel such shares.

     A resolution of the ordinary general meeting of shareholders held on June
     25, 2003 authorizes the Company to acquire up to 300 million shares for up
     to JPY 150 billion prior to the ordinary general meeting of shareholders
     held in 2004.

General Meeting of Shareholders

The Company normally holds its ordinary general meeting of shareholders within
three months following the date of closing of accounts of each year in Tokyo.
The record date for an ordinary general meeting of shareholders is March 31 of
each year. In addition, the Company may hold an extraordinary general meeting of
shareholders whenever necessary by giving at least two weeks' advance notice.
Under the Commercial Code, notice of any shareholders' meeting must be mailed to
each shareholder having voting rights or, in the case of a non-resident
shareholder, to his resident proxy or mailing address in Japan in accordance
with the Company's Share Handling Regulations, at least two weeks prior to the
date of the meeting. Under the Commercial Code, such notice may be given to
shareholders by electronic means, subject to the consent by the relevant
shareholders.

Reporting of Substantial Shareholdings

The Securities and Exchange Law of Japan, as amended, requires any person who
has become, beneficially and solely or jointly, a holder of more than 5% of the
total issued voting shares of capital stock of a company listed on any Japanese
stock exchange or whose shares are traded on the over-the-counter market in
Japan to file with the Prime Minister of Japan within five business days a
report concerning such share holdings. A similar report must also be made in
respect of any subsequent change of one percentage point or more in any such
holding. For

                                       53

<PAGE>

this purpose, shares issuable to such person upon exercise of any rights to
subscribe for or acquire shares are taken into account in determining both the
number of shares held by such holder and the issuer's total issued share
capital. Copies of each such report must also be furnished to the issuer of such
shares and all Japanese stock exchanges on which the shares are listed or (in
the case of shares traded over-the-counter) the Japan Securities Dealers
Association.

There is no provision in the Company's Articles of Incorporation that would have
an effect of delaying, deferring or preventing a change in control of the
Company and that would operate only with respect to a merger, acquisition or
corporate restructuring involving the Company.

C. Material Contracts

None.

D. Exchange Controls

The Foreign Exchange and Foreign Trade Law of Japan, as amended, and the cabinet
orders and ministerial ordinances thereunder (the "Foreign Exchange Law") govern
certain matters relating to the issuance of equity-related securities by the
Company and the acquisition and holding of shares of Common Stock or ADSs
representing such shares by "exchange non-residents" and by "foreign investors"
as hereinafter defined. The Foreign Exchange Law currently in effect does not
affect the right of an exchange non-resident to purchase or sell an ADS outside
Japan.

"Exchange non-residents" are defined under the Foreign Exchange Law as
individuals who are not resident in Japan and corporations whose principal
offices are located outside Japan. Generally branches and other offices of
Japanese corporations located outside Japan are regarded as exchange
non-residents, but branches and other offices located within Japan of
non-resident corporations are regarded as residents of Japan. "Foreign
investors" are defined to be (i) individuals not resident in Japan, (ii)
corporations which are organized under the laws of foreign countries or whose
principal offices are located outside Japan and (iii) corporations of which (a)
50% or more of the shares are held by (i) and/or (ii) above, (b) a majority of
officers consists of non-resident individuals or (c) a majority of the officers
having the power of representation consists of non-resident individuals.

     Dividends and Proceeds of Sales

     Under the Foreign Exchange Law, dividends paid on, and the proceeds of
     sales in Japan of, shares of Common Stock held by exchange non-residents in
     general may be converted into any foreign currency and repatriated abroad.
     The acquisition of shares of Common Stock by exchange non-resident
     shareholders by way of stock splits is not subject to any requirements
     under the Foreign Exchange Law.

     Acquisition of Shares

     Under the Foreign Exchange Law, acquisition of shares of a Japanese company
     listed on any Japanese stock exchange or traded on the over-the-counter
     market in Japan ("listed shares") by an exchange non-resident from a
     resident of Japan is generally not subject to a prior filing requirement.

     In case a foreign investor acquires listed shares (whether from a resident
     of Japan or an exchange non-resident, from another foreign investor or from
     or through a designated securities company) and as a result of such
     acquisition the number of shares held directly or indirectly by such
     foreign investor would become 10% or more of the total outstanding shares
     of the company, the foreign investor is required to make a subsequent
     report on such acquisition to the Minister of Finance and other Ministers
     having jurisdiction over the business of the subject company (the
     "Competent Ministers"). In certain exceptional cases, a prior filing is
     required and the Competent Ministers may recommend the modification or
     abandonment of the proposed acquisition and, if the foreign investor does
     not accept the recommendation, order its modification or prohibition.

     The deposit of shares of Common Stock by an exchange non-resident of Japan,
     the issuance of ADRs in exchange therefor and the withdrawal of the
     underlying shares of Common Stock by an exchange non-resident upon
     surrender of ADRs are not subject to any requirements under the Foreign
     Exchange Law, except where

                                       54

<PAGE>

     as a result of such deposit or withdrawal the aggregate number of shares of
     Common Stock held by the Depositary (or its nominee) or the holder
     surrendering ADRs, as the case may be, would be 10% or more of the total
     outstanding shares of Common Stock, in which event a subsequent reporting
     may be required as described above.

E. Taxation

Japanese Taxation

The discussion of Japanese taxation set forth below is intended only as a
summary and does not purport to be a complete analysis or discussion of all the
potential Japanese tax consequences that may be relevant to the ownership of the
Company's shares or American depositary shares by a person who is not a resident
of Japan.

A non-resident of Japan or a non-Japanese corporation is generally subject to a
Japanese withholding tax on cash dividends. Stock splits, in general, are not
subject to Japanese withholding tax since they are characterized merely as an
increase in the number of shares (as opposed to an increase in the value of the
shares) from a Japanese tax perspective. Due to the 2001 Japanese tax
legislation effective April 1, 2001, a conversion of retained earnings or legal
earned reserve into stated capital is not deemed a dividend payment to
shareholders for Japanese tax purposes and therefore such a conversion does not
trigger Japanese withholding taxation.

Pursuant to the tax treaty between the United States and Japan ("the Treaty")
currently in force, a Japanese withholding tax at the rate of 15% is imposed, in
general, on dividend payments made by a Japanese corporation to a U.S. resident
or corporation, unless the recipient of the dividend has a "permanent
establishment" in Japan and the shares with respect to which such dividends are
paid are effectively connected with such "permanent establishment." For Japanese
tax purposes, the treaty rate generally supersedes the tax rate under domestic
tax law. However, due to the so-called "preservation doctrine" under Article
4(2) of the Treaty, and/or due to Article 3-2 of the Special Measurement Law for
the Income Tax Law, Corporation Tax Law and Local Taxes Law with respect to the
Implementation of Tax Treaties, if the tax rate under domestic tax law is lower
than the treaty rate, the domestic tax rate applies.

The amount of withholding tax imposed on dividends payable to the holders of the
Company's shares or ADRs who reside in a country other than the United States is
dependent upon the provisions of such treaties or agreements as may exist
between such country and Japan. In the absence of any applicable treaty or
agreement reducing the maximum rate of withholding tax, the rate of Japanese
withholding tax applicable to dividends paid by Japanese corporations to
non-residents of Japan or non-Japanese corporations is generally 20%. However,
with respect to dividends paid on listed shares issued by a Japanese corporation
(such as the shares of Common Stock of the Company) to any corporate or
individual shareholders (including those shareholders who are non-Japanese
corporations or Japanese non-resident individuals), except for any individual
shareholder who holds 5% or more of the outstanding total of the shares issued
by the relevant Japanese corporation, the aforementioned 20% withholding tax
rate is reduced to (i) 10% for dividends due and payable on or after April 1,
2003 but on or before December 31, 2003, (ii) 7% for dividends due and payable
on or after January 1, 2004 but on or before March 31, 2008, and (iii) 15% for
dividends due and payable on or after April 1, 2008.

Gains derived from the sale outside Japan of shares of Common Stock or ADRs by a
non-resident of Japan or a non-Japanese corporation, or from the sale of the
shares within Japan by a non-resident of Japan as an occasional transaction or
by a non-Japanese corporation not having a permanent establishment in Japan, are
in general not subject to Japanese income or corporation taxes. Japanese
inheritance and gift taxes at progressive rates may be payable by an individual
who has acquired shares of Common Stock or ADRs as a distributee, legatee or
donee.

United States Federal Income Taxation

The following summarizes the material U.S. federal income tax consequences
applicable to a beneficial owner of Common Stock or ADRs that holds the Common
Stock or ADRs as a capital asset, that is entitled to the benefits of the income
tax convention between the United States and Japan (or the Tax Convention), and
that, for U.S. federal income tax purposes, is (1) a citizen or resident of the
United States, (2) a corporation, or other entity taxable as a corporation,
organized under the laws of the United States or of any political subdivision of
the United States, or (3) an estate or trust the income of which is includible
in gross income for U.S. federal income

                                       55

<PAGE>

tax purposes regardless of its source. Such beneficial owner is referred to as a
U.S. holder. This summary does not apply to certain U.S. holders that are
members of a special class of holders subject to special rules, and does not
take into account circumstances particular to a U.S. holder.

Subject to the discussion regarding passive foreign investment companies (or
PFICs) below, dividends received by a U.S. holder, including the amount of any
Japanese taxes withheld, other than certain pro rata distributions of Common
Stock or rights to acquire Common Stock to all shareholders (including ADR
holders), will be includible in the income of the U.S. holder as ordinary
dividend income to the extent of the current or accumulated earnings and profits
(as determined for U.S. federal income tax purposes) of the Company. A U.S.
holder will not be entitled to a dividends-received deduction for dividends
received from the Company. The amount a U.S. holder will be required to include
in income for any dividend paid in Japanese yen will be equal to the U.S. dollar
value of the Japanese yen received, calculated by reference to the exchange rate
in effect on the date of receipt by the ADR depositary in the case of U.S.
holders of ADRs, or by the shareholder in the case of U.S. holders of Common
Stock, regardless of whether the payment is in fact converted into U.S. dollars
at that time. If the Japanese yen received in the distribution are not converted
into U.S. dollars on the date of receipt, U.S. holders will have a basis in the
Japanese yen equal to their U.S. dollar value on the date of receipt. Any gain
or loss on a subsequent conversion or other disposition of the Japanese yen will
be generally treated as U.S. source ordinary income or loss. Subject to
applicable limitations and restrictions, Japanese taxes withheld at the rate
provided in the Tax Convention from dividend distributions by the Company will
be eligible for credit against a U.S. holder's U.S. federal income tax
liability. The limitation on foreign taxes eligible for credit is calculated
separately with respect to specific classes of income. For this purpose,
dividends distributed by the Company will constitute "passive income" or, in the
case of certain U.S. holders, "financial services income."

Subject to the discussion regarding PFICs below, gain or loss realized by a U.S.
holder on the sale, exchange or other disposition of Common Stock or ADRs will
be subject to U.S. federal income tax as capital gain or loss in an amount equal
to the difference between the amount realized on the disposition and the U.S.
holder's adjusted tax basis in the Common Stock or ADRs. The gain or loss will
generally be U.S. source income or loss.

Special adverse U.S. federal income tax rules apply if a U.S. holder holds stock
or ADRs of a company that is treated as a PFIC for any taxable year during which
the U.S. holder held stock or ADRs. Based upon certain management estimates of
the Company and the nature of the business activities to be conducted by the
Hitachi corporate group, the Company believes it will not be considered a PFIC
for the taxable year 2003 or future taxable years. However, since PFIC
determinations are made based on the composition of the Company's income and
assets and the value of its assets from time to time, there can be no assurance
that the Company will not be considered a PFIC for any taxable year.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

H. Documents on Display

The documents filed by the Company with the U.S. Securities and Exchange
Commission (the "SEC") can be inspected at its public reference room located at
450 Fifth Street, N.W., Washington D.C. 20549. The documents filed via the
Electronic Data Gathering, Analysis, and Retrieval system can be also available
for inspection on the SEC's website (http://www.sec.gov).

I. Subsidiary Information

Not applicable.

                                       56

<PAGE>

Item 11.  Quantitative and Qualitative Disclosures About Market Risk

Primary market risk exposure

Hitachi operates globally and is exposed to market risks from changes in foreign
currency exchange rates, interest rates and equity security prices. Hitachi uses
certain derivative financial instruments in order to reduce these market risks,
and does not enter into derivative financial instruments for any purpose other
than hedging purpose. Hitachi is also exposed to credit-related losses in the
event of non-performance by counterparties to the financial instruments and
derivative financial instruments, but it is not expected that any counterparties
will fail to meet their obligations, because most of the counterparties are
internationally recognized financial institutions and contracts are diversified
into a number of major financial institutions.

Equity price risk

Hitachi holds marketable securities which are subject to price risks arising
from changes in their market prices for such securities. Marketable securities
classified as short-term investments are considered to be highly liquid and low
risk in the investment portfolio, and those classified as investments and
advances are held as long-term investments.

The tables below provide information about the contractual maturities of
available-for-sale securities and held-to-maturity securities and fair value of
the market risk sensitive securities as of March 31, 2003 and 2002, regardless
of the consolidated balance sheet classification as follows.

<TABLE>
<CAPTION>
                                                                        (Millions of yen)
                                                                        -----------------
                                                      Carrying Amount (year ended March 31, 2003)           Fair Value
                                          ------------------------------------------------------------------------------
                                                               Contractual maturity date
                                          ------------------------------------------------------------
                                                          Due after one
                                            Due within     year through      Due after
                                             one year       five years      five years       Total
                                          -------------- ---------------- --------------- ------------
        <S>                               <C>            <C>              <C>             <C>               <C>
        Available-for-sale securities
          Equity securities                                                                159,178            159,178
          Debt securities                       52,443         38,228           77,288     167,959            167,959
          Other securities                      47,845          5,707           17,255      70,807             70,807
        Held-to-maturity securities              6,057          1,380              107       7,544              7,539

<CAPTION>
                                                                        (Millions of yen)
                                                                        -----------------
                                                      Carrying Amount (year ended March 31, 2002)           Fair Value
                                          ------------------------------------------------------------------------------
                                                               Contractual maturity date
                                          ------------------------------------------------------------
                                                          Due after one
                                            Due within     year through      Due after
                                             one year       five years      five years       Total
                                          -------------- ---------------- --------------- ------------
        <S>                               <C>            <C>              <C>             <C>               <C>
        Available-for-sale securities
          Equity securities                                                                282,522            282,522
          Debt securities                      62,111          46,550           74,822     183,483            183,483
          Other securities                     31,549          14,827           21,276      67,652             67,652
        Held-to-maturity securities             4,866           5,654              497      11,017             11,008
</TABLE>

                                       57

<PAGE>

Foreign currency exchange rate risk and interest rate risk

Hitachi has assets and liabilities which are exposed to foreign currency
exchange rate risks and interest rate risks. Hitachi enters into forward
exchange contracts, cross currency swap agreements and interest rate swaps for
the purpose of hedging these risk exposures.

   (1) Foreign currency exchange rate risk

       Hitachi principally uses forward exchange contracts to manage certain
       foreign currency exchange exposures principally from the exchange of U.S.
       dollars (USD) and Euros (EUR) into Japanese yen (JPY). These contracts,
       which principally mature within one year, are primarily used to fix
       future net cash flows principally from trade receivables and payables
       recognized, and forecasted transactions, which are denominated in foreign
       currencies. Hitachi measures the volume and due date of future net cash
       flows by currencies every month. In accordance with the policy, a certain
       portion of measured net cash flows is covered using forward exchange
       contracts.

       Hitachi principally enters into cross currency swap agreements with the
       same maturities as underlying debts to fix cash flows from long-term
       debts denominated in foreign currencies. The hedging relationship between
       these derivative financial instruments and the hedged items is highly
       effective in achieving offsetting changes in foreign exchange rates.

       The tables below provide information about Hitachi's financial
       instruments that are sensitive to foreign currency exchange rates,
       including primary forward exchange contracts to sell U.S. dollars (USD)
       and Euros (EUR) as of March 31, 2003 and 2002. The tables present the
       contract amounts in Japanese yen (JPY) equivalents and weighted average
       contractual exchange rates by expected maturity dates. Cross currency
       swap agreements and the corresponding foreign currency denominated debt
       instruments are not included in the table below because all foreign
       currency exposures in cash flows are eliminated.

                                       58

<PAGE>

<TABLE>
<CAPTION>
Forward exchange contracts (year ended March 31, 2003)                                                  (Millions of yen)
-------------------------------------------------------------------------------------------------------------------------
                                                                               Expected maturity date
                                                         ----------------------------------------------------------------
                                                                                                              Estimated
                                                               2004            2005             Total        fair value
                                                         --------------- ---------------- ---------------- --------------
<S>                                                      <C>             <C>              <C>              <C>
Forward exchange contracts
(Pay USD/Receive JPY) contract amount                         128,925               -          128,925              (49)
Average contractual exchange rate (JPY/USD)                    119.80               -           119.80

Forward exchange contracts
(Pay EUR/Receive JPY) contract amount                          38,162               -           38,162           (1,111)
Average contractual exchange rate (JPY/EUR)                    125.31               -           125.31

<CAPTION>
Forward exchange contracts (year ended March 31, 2002)                                                  (Millions of yen)
-------------------------------------------------------------------------------------------------------------------------
                                                                               Expected maturity date
                                                         ----------------------------------------------------------------
                                                                                                              Estimated
                                                               2003            2004             Total        fair value
                                                         --------------- ---------------- ---------------- --------------
<S>                                                      <C>             <C>              <C>              <C>
Forward exchange contracts
(Pay USD/Receive JPY) contract amount                          65,452               -           65,452           (2,728)
Average contractual exchange rate (JPY/USD)                    127.27               -           127.27

Forward exchange contracts
(Pay EUR/Receive JPY) contract amount                          24,300               -           24,300             (465)
Average contractual exchange rate (JPY/EUR)                    112.83               -           112.83
</TABLE>

   (2) Interest rate risk

       Hitachi's exposure to interest rate risk is related principally to debt
       obligations. These debt obligations expose Hitachi to variability in the
       future cash outflow of interest payments due to changes in interest
       rates. To minimize the variability caused by interest rate risk, Hitachi
       principally enters into interest rate swaps to manage fluctuations in
       cash flows resulting from interest rate risk. The interest rate swaps
       principally change the variable-rate cash flows on debt obligations to
       fixed-rate cash flows principally associated with medium-term notes by
       entering into receive-variable, pay-fixed interest rate swaps. Under the
       interest rate swaps, Hitachi receives variable interest rate payments and
       makes fixed interest rate payments, thereby creating fixed-rate long-term
       debt.

       Hitachi has long-term debt including amounts due within one year with
       fixed and floating interest rates. The tables below provide information
       about Hitachi's financial instruments that are sensitive to changes in
       interest rates, including debt obligations. For debt obligations, the
       tables below present principal cash flows in Japanese yen (JPY)
       equivalents and related weighted average interest rates by expected
       maturity dates. However, the tables do not include information in
       relation to short-term borrowings because the Company believes that their
       risk exposures are insignificant. For interest rate swaps, the table
       below presents primary notional amounts by currencies and weighted
       average pay/receive interest rates by expected maturity dates. Notional
       amounts are used to calculate the contractual payments to be exchanged
       under the contract. The tables present the contract amounts in Japanese
       yen equivalents and weighted average contractual pay/receive rates by
       expected maturity dates.

                                       59

<PAGE>

<TABLE>
<CAPTION>
Long-term debt (year ended March 31, 2003)                                                                 (Millions of yen)
----------------------------------------------------------------------------------------------------------------------------
                                                                   Expected maturity date
                                --------------------------------------------------------------------------------------------
                                                                                                                  Estimated
                                   2004        2005       2006        2007        2008     Thereafter    Total    fair value
                                ----------  ---------- ----------  ----------  ----------  ---------- ----------  ----------
<S>                             <C>         <C>        <C>         <C>         <C>         <C>        <C>         <C>
Fixed rate (notes and debentures):
----------------------------------------------------------------------------------------------------------------------------
JPY debentures                      87,770      32,193    290,500      60,000      37,865     174,998    683,326     718,318
Average interest rate                2.35%       2.30%      2.32%       1.69%       1.66%       1.65%      2.15%

JPY convertible debentures          93,933     231,541          -           -       6,757           -    332,231     338,778
Average interest rate                1.36%       1.38%          -           -       0.00%           -      1.32%

JPY medium term notes               34,895      23,025      6,403       9,338      23,924      24,110    121,695     121,916
Average interest rate                1.06%       1.24%      1.36%       1.37%       1.51%       1.87%      1.29%

USD medium term notes                1,288           -          -       1,313           -           -      2,601       2,804
Average interest rate                4.60%           -          -       5.92%           -           -      5.39%

Floating rate (notes and debentures):
----------------------------------------------------------------------------------------------------------------------------
JPY debenture                            -       2,960          -           -       3,000       7,000     12,960      13,553
Average interest rate                    -       0.34%          -           -       0.44%       0.63%      0.42%

JPY medium term notes               51,719      18,551      2,919       3,075       4,614      19,877    100,755     100,755
Average interest rate                0.55%       0.75%      1.03%       1.11%       1.12%       1.32%      0.82%

USD medium term notes                7,212      18,030          -       1,574           -           -     26,816      26,816
Average interest rate                1.69%       1.72%          -       1.98%           -           -      1.72%

Other currency medium
 term notes and debentures             147         228          -         353           -           -        728         728
Average interest rate                3.85%       3.85%          -       3.83%           -           -      3.84%

Fixed and floating rate (loans):
----------------------------------------------------------------------------------------------------------------------------
Loans, principally from            220,486     177,291    111,406      54,494      83,113      66,769    713,559     720,457
  Banks
Average interest rate                2.19%       1.92%      1.78%       1.72%       1.62%       1.71%      1.85%
</TABLE>

Weighted average floating rates are based on forward interest rates as of March
31, 2003.

                                       60

<PAGE>

<TABLE>
<CAPTION>
Long-term debt (year ended March 31, 2002)                                                                 (Millions of yen)
----------------------------------------------------------------------------------------------------------------------------
                                                                   Expected maturity date
                                --------------------------------------------------------------------------------------------
                                                                                                                  Estimated
                                   2003        2004       2005        2006        2007     Thereafter    Total    fair value
                                ----------  ---------- ----------  ----------  ----------  ---------- ----------  ----------
Fixed rate (notes and debentures):
----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>        <C>         <C>         <C>         <C>        <C>         <C>
JPY debentures                     30,993      86,165     33,000     290,500      60,000     161,992    662,650     696,303
Average interest rate               2.48%       2.50%      2.47%       2.50%       1.98%       2.06%      2.42%

USD debentures                     25,483           -          -           -           -           -     25,483      25,848
Average interest rate               6.63%           -          -           -           -           -      6.63%

JPY convertible debentures         21,364      93,933    231,542           -           -           -    346,839     368,373
Average interest rate               1.39%       1.38%      1.42%           -           -           -      1.40%

USD convertible debenture              26           -          -           -           -           -         26          26
Average interest rate               1.75%           -          -           -           -           -      1.75%

JPY medium term notes              32,280      15,308     10,418       5,436      11,136      20,503     95,081      95,230
Average interest rate               1.45%       1.80%      1.99%       2.05%       2.15%       2.67%      1.85%

USD medium term notes               1,999       1,291          -           -       1,316           -      4,606       4,832
Average interest rate               4.49%       4.60%          -           -       5.92%           -      5.02%

Floating rate (notes and debentures):
----------------------------------------------------------------------------------------------------------------------------
JPY debenture                           -           -      4,983           -           -       3,000      7,983       7,983
Average interest rate                   -           -      1.31%           -           -       0.50%      1.09%

JPY medium term notes              20,638      51,480      8,449       2,995       3,038      39,887    126,487     126,487
Average interest rate               0.82%       0.92%      1.47%       1.60%       1.66%       1.74%      1.19%

USD medium term notes               6,352       7,996     19,988           -       1,578       1,947     37,861      37,861
Average interest rate               3.20%       3.33%      3.02%           -       6.15%       8.93%      3.51%

Other currency medium
 term notes and debentures          1,085           -          -           -           -           -      1,085       1,085
Average interest rate               2.26%           -          -           -           -           -      2.26%

Fixed and floating rate (loans):
----------------------------------------------------------------------------------------------------------------------------
Loans, principally from
  Banks                           222,696     231,555    163,793      86,327      48,772      91,850    844,993     847,265
Average interest rate               2.19%       1.08%      1.00%       0.53%       0.43%       0.56%      0.89%
</TABLE>

Weighted average floating rates are based on forward interest rates as of March
31, 2002.

                                       61

<PAGE>

<TABLE>
<CAPTION>
Interest rate swaps (year ended March 31, 2003)                                                            (Millions of yen)
----------------------------------------------------------------------------------------------------------------------------
                                                                   Expected maturity date
                                --------------------------------------------------------------------------------------------
                                                                                                                  Estimated
                                   2004        2005       2006        2007        2008     Thereafter    Total    fair value
                                ----------  ---------- ----------  ----------  ----------  ---------- ----------  ----------
Notional amounts (JPY):
----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>        <C>         <C>         <C>         <C>        <C>         <C>
Variable to Fixed                  47,042      13,717     54,386      49,157      20,159       6,452    190,913      (3,945)
Average pay rate                    1.62%       1.53%      1.46%       1.55%       1.63%       2.76%      1.57%
Average receive rate                0.51%       0.49%      0.50%       0.62%       0.63%       1.15%      0.53%

Fixed to Variable                  12,500       7,557     13,000      40,000      11,000      32,000    116,057       3,789
Average pay rate                    0.59%       0.64%      0.68%       0.79%       0.68%       0.90%      0.68%
Average receive rate                2.19%       2.19%      2.23%       2.09%       2.07%       1.91%      2.15%

Variable to Variable               22,000       3,000      4,500       4,000           -           -     33,500          (5)
Average pay rate                    0.55%       1.49%      2.01%       1.01%           -           -      0.99%
Average receive rate                0.73%       1.74%      2.25%       1.32%           -           -      1.20%

Notional amounts (USD):
----------------------------------------------------------------------------------------------------------------------------
Variable to Fixed                   6,851      18,030      1,923           -           -           -     26,804        (557)
Average pay rate                    3.53%       3.55%      4.31%           -           -           -      3.57%
Average receive rate                1.29%       1.28%      1.30%           -           -           -      1.29%

Fixed to Variable                   7,971           -          -           -           -           -      7,971          37
Average pay rate                    1.76%           -          -           -           -           -      1.76%
Average receive rate                0.43%           -          -           -           -           -      0.43%

Notional amounts (STP):
----------------------------------------------------------------------------------------------------------------------------
Variable to Fixed                  53,574      32,256     15,393       1,451           -           -    102,674      (1,047)
Average pay rate                    4.67%       4.39%      4.38%       4.96%           -           -      4.57%
Average receive rate                3.62%       3.66%      3.81%       4.01%           -           -      3.65%
</TABLE>

Weighted average pay/receive rates are based on forward interest rates as of
March 31, 2003.

                                       62

<PAGE>

<TABLE>
<CAPTION>
Interest rate swaps (year ended March 31, 2002)                                                            (Millions of yen)
----------------------------------------------------------------------------------------------------------------------------
                                                                   Expected maturity date
                                --------------------------------------------------------------------------------------------
                                                                                                                  Estimated
                                   2003        2004       2005        2006        2007     Thereafter    Total    fair value
                                ----------  ---------- ----------  ----------  ----------  ---------- ----------  ----------
Notional amounts (JPY):
----------------------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>        <C>         <C>         <C>         <C>        <C>         <C>
Variable to Fixed                  46,090      49,749     18,759      64,360      30,051      29,546    238,555      (5,394)
Average pay rate                    1.73%       1.54%      1.47%       1.37%       1.35%       1.17%      1.53%
Average receive rate                0.76%       0.54%      0.56%       0.58%       0.81%       1.22%      0.66%

Fixed to Variable                  32,000      15,500      4,557      13,000      26,999      32,500    124,556       4,163
Average pay rate                    0.39%       0.27%      0.29%       0.30%       0.37%       0.20%      0.32%
Average receive rate                2.06%       2.18%      2.11%       2.12%       1.92%       2.15%      2.09%

Variable to Variable               12,250      24,000      3,000       3,500       1,000       5,505     49,255         131
Average pay rate                    0.64%       0.38%      0.92%       1.19%       0.01%          0%      0.57%
Average receive rate                0.81%       0.70%      1.58%       1.97%       1.18%       1.38%      1.00%

Notional amounts (USD):
----------------------------------------------------------------------------------------------------------------------------
Variable to Fixed                  25,653       4,397     10,926         800           -           -     41,776        (561)
Average pay rate                    5.48%       4.66%      4.78%       7.03%           -           -      5.19%
Average receive rate                1.90%       1.87%      1.87%       1.87%           -           -      1.89%

Fixed to Variable                  26,650           -          -           -           -           -     26,650       1,480
Average pay rate                    2.02%           -          -           -           -           -      2.02%
Average receive rate                6.63%           -          -           -           -           -      6.63%

Variable to Variable                3,065           -          -           -           -       1,333      4,398         470
Average pay rate                    2.18%           -          -           -           -       1.93%      2.03%
Average receive rate                2.54%           -          -           -           -       3.68%      3.23%

Notional amounts (STP):
----------------------------------------------------------------------------------------------------------------------------
Variable to Fixed                  81,643      25,632      3,797         949       1,454           -    113,475        (467)
Average pay rate                    5.57%       5.82%      5.40%       5.33%       4.96%           -      5.61%
Average receive rate                4.41%       4.77%      4.84%       4.53%       4.08%           -      4.50%
</TABLE>

Weighted average pay/receive rates are based on forward interest rates as of
March 31, 2002.

Factors that could cause actual results to differ materially from those
projected or implied in any forward-looking statements in this section include,
but are not limited to, ability of counterparties to the financial instruments
to perform contractual obligations; the general economic condition in the
markets where financial assets Hitachi holds are traded; and the volatility of
the market prices of securities, interest rates and foreign currency exchange
rates. In addition, see "Item 3. Key Information - Risk Factors" for other
examples of factors that could cause actual results to differ materially from
those projected.

                                       63

<PAGE>

Item 12.  Description of Securities Other than Equity Securities

Not applicable.

                                     PART II

Item 13.  Defaults, Dividend Arrearages and Delinquencies

None.

Item 14.  Material Modifications to the Rights of Security Holders and Use of
          Proceeds

None.

Item 15.  Controls and Procedures

An evaluation was carried out, under the supervision and with the participation
of the Company's management including its Chief Executive Officer and principal
financial officer, of the effectiveness of its disclosure controls and
procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act) as of a
date within 90 days prior to the filing date of this report. Based on that
evaluation, the Chief Executive Officer and principal financial officer
concluded that the disclosure controls and procedures as of such date were
effective to ensure that information required to be disclosed by the Company in
the reports that it files or submits under the Securities Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms.

There have been no significant changes in the Company's internal controls over
financial reporting that occurred subsequent to the date of its most recent
evaluation that has materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.

Item 16.  [Reserved]

Item 16A.  Audit Committee Financial Expert

Not applicable because this Form 20-F covers a period ending before July 15,
2003.

Item 16B.  Code of Ethics

Not applicable because this Form 20-F covers a period ending before July 15,
2003.

Item 16C.  Principal Accountant Fees and Services

Not applicable because this Form 20-F covers a period ending before December 15,
2003.

Item 16D.  Exemptions from the Listing Standards for Audit Committees

Not applicable.

                                       64

<PAGE>

                                    PART III

Item 17.  Financial Statements

   Consolidated Financial Statements of Hitachi, Ltd. and
   Subsidiaries:
                                                                           Page
                                                                          Number
                                                                          ------
      Independent Auditors' Report                                            66

      Consolidated Balance Sheets as of March 31, 2003 and 2002               67

      Consolidated Statements of Income for the years ended
      March 31, 2003, 2002 and 2001                                           69

      Consolidated Statements of Stockholders' Equity for the
      years ended March 31, 2003, 2002 and 2001                               70

      Consolidated Statements of Cash Flows for the years
      ended March 31, 2003, 2002 and 2001                                     71

      Notes to Consolidated Financial Statements                              72

   Schedule:

      Independent Auditors' Report                                            66

      Schedule II  Reserves for the years ended March 31,
                   2003, 2002 and 2001                                       123

      All other schedules are omitted as permitted by the rules and regulations
      of the Securities and Exchange Commission, as the required information is
      presented in the notes to consolidated financial statements, or the
      schedules are not applicable.

      Financial statements of affiliates are omitted because none of these meets
      the 20% level tests.

                                       65

<PAGE>

                          Independent Auditors' Report

The Board of Directors and Stockholders
Hitachi, Ltd.:

We have audited the consolidated financial statements of Hitachi, Ltd. and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These consolidated
financial statements and financial statement schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The segment information required to be disclosed in financial statements under
accounting principles generally accepted in the United States of America is not
presented in the accompanying consolidated financial statements. Foreign issuers
are presently exempted from such disclosure requirement in Securities Exchange
Act filings with the United States Securities and Exchange Commission.

In our opinion, except for the omission of segment information, as discussed in
the third paragraph, the consolidated financial statements referred to in the
first paragraph above present fairly, in all material respects, the financial
position of Hitachi, Ltd. and subsidiaries as of March 31, 2003 and 2002, and
the results of their operations and their cash flows for each of the years in
the three-year period ended March 31, 2003 in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.

KPMG
Tokyo, Japan
May 15, 2003, except as to Note 27 which is as of May 30, 2003

                                       66

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                             March 31, 2003 and 2002

                                                          Yen (millions)
                                                      ----------------------
                Assets                                   2003        2002
                ------                                   ----        ----

Cash and cash equivalents                                828,171   1,029,374
Short-term investments (note 2)                          186,972     178,933

Trade receivables:
   Notes (note 6)                                        155,277     206,867
   Accounts (notes 3 and 6)                            1,942,470   1,929,029
   Allowance for doubtful receivables and
    unearned income                                      (40,520)    (35,891)
                                                      ----------   ---------
      Net trade receivables                            2,057,227   2,100,005
                                                      ----------   ---------

Inventories (note 4)                                   1,187,529   1,214,399
Prepaid expenses and other current assets (note 8)       496,490     457,392
Investment in leases (notes 5 and 6)                     437,076     527,432
Investments and advances,
 including affiliated companies (note 2)                 726,442     834,907
Property, plant and equipment (notes 5 and 9):
   Land                                                  445,283     383,781
   Buildings                                           1,838,853   1,748,509
   Machinery and equipment                             5,709,409   5,510,651
   Construction in progress                               67,909      97,790
                                                      ----------   ---------
                                                       8,061,454   7,740,731
   Less accumulated depreciation                       5,460,404   5,226,307
                                                      ----------   ---------
      Net property, plant and equipment                2,601,050   2,514,424
                                                      ----------   ---------



Other assets (notes 7 and 8)                           1,658,432   1,058,788
                                                      ----------   ---------
                                                      10,179,389   9,915,654
                                                      ==========   =========

See accompanying notes to consolidated financial statements.

                                       67

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                           Consolidated Balance Sheets

                             March 31, 2003 and 2002

                                                            Yen (millions)
                                                        ----------------------
        Liabilities and Stockholders' Equity                2003        2002
        ------------------------------------                ----        ----

Short-term debt (note 9)                                   825,860     833,838
Current installments of long-term debt (notes 5 and 9)     502,586     366,083

Trade payables:
   Notes                                                    71,934      92,799
   Accounts                                              1,140,130     991,037
Accrued expenses                                           799,211     882,148
Income taxes (note 8)                                       54,091      60,518
Advances received                                          252,861     334,172
Other current liabilities (note 8)                         358,555     324,670
Long-term debt (notes 5 and 9)                           1,512,152   1,798,303
Retirement and severance benefits (note 10)              1,932,646   1,049,054
Other liabilities (note 8)                                 124,573      80,064
                                                        ----------   ---------
        Total liabilities                                7,574,599   6,812,686
                                                        ----------   ---------


Minority interests                                         751,578     798,744


Stockholders' equity:
   Common stock (notes 9 and 11)                           282,032     282,032
   Capital surplus (note 11)                               562,214     527,010
   Legal reserve (note 12)                                 111,309     110,751
   Retained earnings (notes 9 and 12)                    1,655,029   1,643,248
   Accumulated other comprehensive loss (note 14)         (755,525)   (258,484)
   Treasury stock (note 13)                                 (1,847)       (333)
                                                        ----------   ---------
        Total stockholders' equity                       1,853,212   2,304,224

Commitments and contingencies (note 15)
                                                        ----------   ---------
                                                        10,179,389   9,915,654
                                                        ==========   =========

See accompanying notes to consolidated financial statements.

                                       68

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                        Consolidated Statements of Income

                    Years ended March 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                                               Yen (millions)
                                                                 ----------------------------------------
                                                                     2003           2002          2001
                                                                     ----           ----          ----
<S>                                                              <C>           <C>             <C>
Revenues:
    Product sales (note 3)                                         7,235,069      7,005,470     7,425,460
    Financial and other services                                     956,683        988,314       991,522
                                                                 -----------   ------------    ----------
       Total revenues                                              8,191,752      7,993,784     8,416,982
Cost of sales:
    Product sales                                                 (5,617,932)    (5,563,709)   (5,518,014)
    Financial and other services                                    (622,561)      (620,687)     (637,009)
                                                                 -----------   ------------    ----------
       Total cost of sales                                        (6,240,493)    (6,184,396)   (6,155,023)
Selling, general and administrative expenses                      (1,798,292)    (1,926,803)   (1,919,647)

Impairment losses for long-lived assets (note 16)                     (8,474)       (46,115)            -
Restructuring charges (note 17)                                            -       (288,096)       (8,814)
Interest income                                                       14,158         22,481        32,428
Dividends received                                                     8,921          6,134         9,641
Other income (note 18)                                                23,658          7,424        27,544
Interest charges                                                     (34,338)       (45,830)      (58,759)
Other deductions (note 18)                                           (60,064)      (124,655)      (20,697)
                                                                 -----------   ------------    ----------
    Income (loss) before income taxes and minority interests          96,828       (586,072)      323,655

Income taxes (note 8)                                                (52,662)        71,114      (164,861)
                                                                 -----------   ------------    ----------
    Income (loss) before minority interests                           44,166       (514,958)      158,794

Minority interests                                                   (16,299)        31,121       (54,414)
                                                                 -----------   ------------    ----------
    Net income (loss)                                                 27,867       (483,837)      104,380
                                                                 ===========   ============    ==========

Net income (loss) per share (note 19):                                                Yen
                                                                 ----------------------------------------
    Basic                                                               8.31        (144.95)        31.27
                                                                 ===========   ============    ==========
    Diluted                                                             8.19        (144.95)        30.32
                                                                 ===========   ============    ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       69

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                    Years ended March 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                                                            Yen (millions)
                                                                                 ------------------------------------
                                                                                     2003        2002         2001
                                                                                     ----        ----         ----
<S>                                                                              <C>          <C>         <C>
Common stock (notes 9 and 11):
     Balance at beginning of year                                                    282,032      281,754     281,738
     Conversion of convertible debentures                                                  -          278          16
                                                                                 -----------  ----------- -----------
     Balance at end of year                                                          282,032      282,032     281,754
                                                                                 ===========  =========== ===========

Capital surplus (note 11):
     Balance at beginning of year                                                    527,010      501,243     499,081
     Conversion of convertible debentures                                                370          359       1,069
     Increase arising from issuance of common stock and other                         34,834       25,408       1,093
                                                                                 -----------  ----------- -----------
     Balance at end of year                                                          562,214      527,010     501,243
                                                                                 ===========  =========== ===========

Legal reserve (note 12):
     Balance at beginning of year                                                    110,751      109,815     106,885
     Transfers from retained earnings                                                    554          978       2,971
     Transfers to minority interests arising from conversion of subsidiaries'
       convertible debentures                                                            (24)          (5)        (17)
     Transfers from (to) minority interests arising from issuance of
       subsidiaries' common stock and other                                               28          (37)        (24)
                                                                                 -----------  ----------- -----------
     Balance at end of year                                                          111,309      110,751     109,815
                                                                                 ===========  =========== ===========

Retained earnings (notes 9 and 12):
     Balance at beginning of year                                                  1,643,248    2,157,136   2,082,541
     Net income (loss)                                                                27,867     (483,837)    104,380
     Cash dividends                                                                  (10,013)     (28,373)    (28,371)
     Transfers to legal reserve                                                         (554)        (978)     (2,971)
     Net transfer to minority interests arising from conversion of
       subsidiaries' convertible debentures                                             (291)         (64)       (347)
     Net transfer from (to) minority interests arising from newly consolidated
       subsidiaries and other                                                         (5,228)        (636)      1,904
                                                                                 -----------  ----------- -----------
     Balance at end of year                                                        1,655,029    1,643,248   2,157,136
                                                                                 ===========  =========== ===========

Accumulated other comprehensive loss (note 14):
     Balance at beginning of year                                                   (258,484)    (188,446)     17,442
     Other comprehensive loss, net of reclassification adjustments                  (495,861)     (69,948)   (205,111)
     Net transfer from (to) minority interests arising from conversion of
       subsidiaries' convertible debentures                                               30            1          (9)
     Net transfer to minority interests arising from issuance of
       subsidiaries' common stock and other                                           (1,210)         (91)       (768)
                                                                                 -----------  ----------- -----------
     Balance at end of year                                                         (755,525)    (258,484)   (188,446)
                                                                                 ===========  =========== ===========

Treasury stock (note 13):
     Balance at beginning of year                                                       (333)           -           -
     Acquisition for treasury                                                         (1,514)        (333)          -
                                                                                 -----------  ----------- -----------
     Balance at end of year                                                           (1,847)        (333)          -
                                                                                 ===========  =========== ===========
              Total stockholders' equity                                           1,853,212    2,304,224   2,861,502
                                                                                 ===========  =========== ===========

Comprehensive loss (note 14):
     Net income (loss)                                                                27,867     (483,837)    104,380
     Other comprehensive loss arising during the year                               (492,476)    (114,912)   (194,560)
     Reclassification adjustments for net loss (gain)
       included in net income (loss)                                                  (3,385)      44,964     (10,551)
                                                                                 -----------  ----------- -----------
              Comprehensive loss                                                    (467,994)    (553,785)   (100,731)
                                                                                 ===========  =========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       70

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                    Years ended March 31, 2003, 2002 and 2001

<TABLE>
<CAPTION>
                                                                                      Yen (millions)
                                                                             -------------------------------
                                                                                2003       2002       2001
                                                                                ----       ----       ----
<S>                                                                          <C>        <C>        <C>
Cash flows from operating activities (note 21):
     Net income (loss)                                                          27,867   (483,837)   104,380
     Adjustments to reconcile net income (loss) to net cash provided by
       operating activities:
         Depreciation                                                          480,274    529,418    505,507
         Impairment losses for long-lived assets                                 8,474     46,115          -
         Deferred income taxes                                                 (35,526)  (182,072)    12,505
         Equity in earnings of affiliated companies                             15,803     35,756     (2,559)
         Gain on sale of investments and subsidiaries' common stock            (54,849)    (4,035)   (17,437)
         Impairment of investment in securities                                 65,828     76,867      6,876
         Loss (gain) on disposal of rental assets and other property           (14,064)    59,687     19,165
         Income (loss) applicable to minority interests                         16,299    (31,121)    54,414
         (Increase) decrease in receivables                                      2,280    450,904    (72,035)
         (Increase) decrease in inventories                                      7,994    261,229   (128,477)
         (Increase) decrease in prepaid expenses and other current assets        3,170       (999)   (38,234)
         Increase (decrease) in payables                                        96,777   (271,698)    95,855
         Increase (decrease) in accrued expenses and retirement and
          severance benefits                                                   (71,969)    70,813      8,171
         Increase (decrease) in accrued income taxes                            (5,825)   (48,174)    26,337
         Increase (decrease) in other liabilities                               11,989    (69,671)   (62,858)
         Other                                                                  91,996     43,684     23,823
                                                                             ---------  ---------  ---------
             Net cash provided by operating activities                         646,518    482,866    535,433

Cash flows from investing activities (note 21):
     (Increase) decrease in short-term investments                              (8,162)   253,236    198,610
     Capital expenditures                                                     (323,825)  (429,835)  (463,585)
     Purchase of assets to be leased                                          (459,036)  (444,931)  (532,142)
     Collection of investment in leases                                        411,522    469,108    421,527
     Proceeds from disposal of rental assets and other property                142,973     59,574     70,442
     Proceeds from sale of investments and subsidiaries' common stock          167,350     55,354     50,473
     Purchase of investments and subsidiaries' common stock                   (262,424)  (129,527)  (125,473)
     Purchase of software                                                     (152,492)  (112,506)   (36,405)
     Other                                                                    (135,191)     6,656     45,836
                                                                             ---------  ---------  ---------
             Net cash used in investing activities                            (619,285)  (272,871)  (370,717)

Cash flows from financing activities (note 21):
     Decrease in short-term debt                                               (12,490)  (408,514)    (5,153)
     Proceeds from long-term debt                                              375,802    573,373    518,872
     Payments on long-term debt                                               (547,759)  (743,385)  (642,594)
     Proceeds from sale of common stock by subsidiaries                          1,872     42,466     13,342
     Dividends paid to stockholders                                             (9,973)   (28,318)   (28,235)
     Dividends paid to minority stockholders of subsidiaries                   (13,108)   (13,401)   (15,739)
     Acquisition of common stock for treasury                                   (1,514)      (333)         -
                                                                             ---------  ---------  ---------
             Net cash used in financing activities                            (207,170)  (578,112)  (159,507)

                                                                             ---------  ---------  ---------
Effect of exchange rate changes on cash and cash equivalents                   (21,266)    15,888     18,962
                                                                             ---------  ---------  ---------
Net increase (decrease) in cash and cash equivalents                          (201,203)  (352,229)    24,171
Cash and cash equivalents at beginning of year                               1,029,374  1,381,603  1,357,432
                                                                             ---------  ---------  ---------
Cash and cash equivalents at end of year                                       828,171  1,029,374  1,381,603
                                                                             =========  =========  =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       71

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(1)    Basis of Presentation and Summary of Significant Accounting Policies

       (a)   Basis of Presentation
             Hitachi, Ltd. (the Company) and its domestic subsidiaries maintain
             their books of account in conformity with the financial accounting
             standards of Japan, and its foreign subsidiaries in conformity with
             those of the countries of their domicile.

             The consolidated financial statements presented herein have been
             prepared in a manner and reflect the adjustments which are
             necessary to conform them with accounting principles generally
             accepted in the United States of America. Management of the Company
             has made a number of estimates and assumptions relating to the
             reporting of assets and liabilities and the disclosure of
             contingent assets and liabilities to prepare these financial
             statements. Actual results could differ from those estimates.

       (b)   Principles of Consolidation
             The consolidated financial statements include the accounts of the
             Company and those of its majority-owned subsidiaries, whether
             directly or indirectly controlled. Intercompany accounts and
             significant intercompany transactions have been eliminated in
             consolidation.

             Investments in corporate joint ventures and affiliated companies
             that are accounted for using the equity method primarily relate to
             20% to 50% owned companies to which the Company has the ability to
             exercise significant influence over operational and financial
             policies of the investee company. Investments of less than 20% or
             where the Company does not have significant influence are accounted
             for using the cost method. On a continuous basis, but no less
             frequently than at the end of each semi-annual period, the Company
             evaluates the carrying amount of its ownership interests in
             investee companies for possible impairment. Factors considered in
             assessing whether an indication of other than temporary impairment
             exists include the achievement of business plan objectives and
             milestones including cash flow projections and the results of
             planned financing activities, the financial condition and prospects
             of each investee company, the fair value of the ownership interest
             relative to the carrying amount of the investment, the period of
             time the fair value of the ownership interest has been below the
             carrying amount of the investment and other relevant factors.
             Impairment to be recognized is measured based on the amount by
             which the carrying amount of the investment exceeds the fair value
             of the investment. Fair value is determined based on quoted market
             prices, projected discounted cash flows or other valuation
             techniques as appropriate.

       (c)   Cash Equivalents
             For the purpose of the statement of cash flows, the Company
             considers all highly liquid investments with insignificant risk of
             changes in value which have maturities of generally three months or
             less when purchased to be cash equivalents.

       (d)   Foreign Currency Translation
             Foreign currency financial statements have been translated in
             accordance with Statement of Financial Accounting Standards (SFAS)
             No. 52, "Foreign Currency Translation." Under this standard, the
             assets and liabilities of the Company's subsidiaries located
             outside Japan are translated into Japanese yen at the rates of
             exchange in effect at the balance sheet date. Income and expense
             items are translated at the average exchange rates prevailing
             during the year. Gains and losses resulting from foreign currency
             transactions are included in other income (deductions), and those
             resulting from translation of financial statements are excluded
             from the consolidated statements of income and are reported in
             other comprehensive income.

                                       72

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (e)   Investment in Securities
             The Company classifies investments in securities that have readily
             determinable fair values and all investments in debt securities in
             three categories, such as held-to-maturity securities, trading
             securities and available-for-sale securities.

             Held-to-maturity securities are debt securities that the Company
             has the positive intent and ability to hold to maturity. Trading
             securities are debt and equity securities that are bought and held
             principally for the purpose selling them in the near term.
             Available-for-sale securities are debt and equity securities not
             classified as either held-to-maturity securities or trading
             securities.

             Held-to-maturity securities are reported at amortized cost. Trading
             securities are reported at fair value, with unrealized gains and
             losses included in earnings. Available-for-sale securities are
             reported at fair value, with unrealized gains and losses reported
             in other comprehensive income.

             A decline in fair value of any available-for-sale or
             held-to-maturity security below the amortized cost basis that is
             deemed to be other than temporary results in a write-down of the
             amortized cost basis to fair value as a new cost basis and the
             amount of the write-down is included in earnings.

             On a continuous basis, but no less frequently than at the end of
             each semi-annual period, the Company evaluates the cost basis of an
             available-for-sale security for possible impairment. Factors
             considered in assessing whether an indication of other than
             temporary impairment exists include: the degree of change in ratio
             of market prices per share to book value per share at date of
             evaluation compared to that at date of acquisition, the financial
             condition and prospects of each investee company, industry
             conditions in which the investee company operates, the fair value
             of an available-for-sale security relative to the cost basis of the
             investment, the period of time the fair value of an
             available-for-sale security has been below the cost basis of the
             investment and other relevant factors.

             The Company evaluates the cost basis of a held-to-maturity security
             for possible impairment by taking into consideration the financial
             condition, business prospects and credit worthiness of the issuer.
             The published credit ratings of investee companies that are
             generally "BB" or lower are considered an indication of other than
             temporary impairment.

             Impairment to be recognized is measured based on the amount by
             which the carrying amount of the investment exceeds the fair
             value of the investment. Fair value is determined based on quoted
             market prices, projected discounted cash flows or other valuation
             techniques as appropriate.

             The cost of a security sold or the amount reclassified out of
             accumulated other comprehensive income into earnings was determined
             by the average method.

                                       73

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (f)   Securitization
             The Company and certain subsidiaries have securitized certain
             financial assets such as lease receivables, trade receivables and
             others. In the securitization process, securitized assets are sold
             to Special Purpose Entities (SPE) which are funded through the
             issuance of asset-backed securities to investors. When the Company
             and its subsidiaries sell the financial assets to the SPE in a
             securitization transaction, the carrying amount of the financial
             assets is allocated based on relative fair values to the portions
             to be retained and sold. The Company and its subsidiaries recognize
             a gain or loss for the difference between the net proceeds received
             and the allocated carrying amount of the assets sold when the
             transaction is consummated.

             Fair values are based on the present value of estimated future cash
             flows which take into consideration various factors such as
             expected credit loss and others.

       (g)   Inventories
             Inventories are stated at the lower of cost or market. Cost is
             determined by the specific identification method for job order
             inventories and generally by the average method for raw materials
             and other inventories.

       (h)   Property, Plant and Equipment
             Property, plant and equipment are stated at cost. Property, plant
             and equipment are principally depreciated by the declining-balance
             method, except for some assets which are depreciated by the
             straight-line method, over the following estimated useful lives:

             Buildings
               Buildings and building equipment        3 to 50 years
               Structures                              7 to 60 years
             Machinery and equipment
               Machinery                               4 to 13 years
               Vehicles                                4 to  7 years
               Tools, furniture and fixtures           2 to 20 years

       (i)   Goodwill and Other Intangible Assets
             Effective April 1, 2002, the Company accounts for goodwill and
             other intangible assets in accordance with SFAS No. 142," Goodwill
             and Other Intangible Assets." Goodwill and intangible assets with
             indefinite useful lives are no longer amortized, but instead are
             tested for impairment at least annually in accordance with the
             provisions of this statement. Intangible assets with finite useful
             lives are amortized over their respective estimated useful lives
             and are reviewed for impairment in accordance with SFAS No. 144,
             "Accounting for the Impairment or Disposal of Long-Lived Assets."

                                       74

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (j)   Capitalized Software Costs
             Costs incurred for computer software developed or obtained for
             internal use are capitalized and amortized on a straight-line basis
             over their estimated useful lives. In addition, the Company and its
             subsidiaries develop certain computer software to be sold where
             related costs are capitalized after establishment of technological
             feasibility. Such capitalized costs are amortized based on the
             ratio of each software's expected future revenue to current year's
             revenue.

       (k)   Retirement and Severance Benefits
             The Company accounts for retirement and severance benefits in
             accordance with SFAS No. 87, "Employers' Accounting for Pensions."
             Unrecognized gains and losses are amortized using the straight-line
             method over the average remaining service period of active
             employees.

       (l)   Derivative Financial Instruments
             The Company accounts for derivative financial instruments in
             accordance with SFAS No. 133, "Accounting for Derivative
             Instruments and Hedging Activities," as amended. SFAS No. 133
             requires that all derivative financial instruments, such as forward
             exchange and interest rate swap contracts, be recognized in the
             financial statements as either assets or liabilities and measured
             at fair value regardless of the purpose or intent for holding them.

             The Company designates and 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. The
               changes in fair value of the recognized assets or liabilities or
               unrecognized firm commitment and the derivatives are recorded in
               earnings if the hedge is considered highly effective.

             . "Cash flow" hedge: a hedge of a forecasted transaction or of the
               variability of cash flows to be received or paid related to a
               recognized asset or liability. The changes in the fair value of
               the derivatives designated as cash flow hedges are recorded as
               other comprehensive income if the hedge is considered highly
               effective. This treatment is continued until earnings are
               affected by the variability in cash flows or the unrecognized
               firm commitment of the designated hedged item, at which point
               changes in fair value of the derivative is recognized in income.

             . "Foreign currency" hedge: a hedge of foreign-currency fair value
               or cash flow. The changes in fair value of the recognized assets
               or liabilities or unrecognized firm commitment and the
               derivatives are recorded as either earnings or other
               comprehensive income if the hedge is considered highly effective.
               Recognition as earnings or other comprehensive income is
               dependent on the treatment of foreign currency hedges as fair
               value or cash flow hedges.

             The Company follows the documentation requirements as prescribed by
             the standard, which includes risk management objective and strategy
             for undertaking various hedge transactions. In addition, a formal
             assessment is made at the hedge's inception and periodically on an
             ongoing basis, as to whether the derivative used in hedging
             activities is highly effective in offsetting changes in fair values
             or cash flows of hedged items. Hedge accounting is discontinued for
             ineffective hedges, if any. Subsequent changes in the fair value of
             derivatives related to discontinued hedges are recognized in
             earnings immediately.

                                       75

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (m)   Revenue Recognition

             Staff Accounting Bulletin No. 101 (SAB 101) expresses certain views
             of the United States Securities and Exchange Commission (SEC) in
             applying generally accepted accounting principles to revenue
             recognition in the financial statements. In accordance with SAB
             101, we generally recognize revenue when persuasive evidence of an
             arrangement exists, delivery has occurred or services are rendered,
             the sales price is fixed and determinable and collectibility is
             probable. Our more specific revenue recognition policies based on
             the type of revenue earned and our product offerings are discussed
             below.

             The Company enters into transactions that include multiple element
             arrangements which may include any combinations of hardware
             products, related software products, installment and maintenance.
             When some elements are delivered prior to others in an arrangement,
             revenue is deferred until the delivery of the last service element,
             unless transactions are such that vendor specific objective
             evidence ("VSOE") of fair value of the undelivered elements is
             available, the functionality of the delivered element is not
             dependent on the undelivered elements and delivered elements
             represents the culmination of the earnings process. VSOE is the
             price charged by the Company to an external customer for the same
             element when such element is sold separately. The Company allocates
             revenue on software arrangements involving multiple elements to
             each element based on its relative fair value.


             Product Sales:
             Revenue from sales of these products are recognized when title and
             risk of loss have been transferred to the customer. Depending upon
             the terms of the contract or arrangement with the customer, this
             may occur at the time of shipment, when installation is completed
             or upon the attainment of customer acceptance. The Company's policy
             is not to accept product returns unless the products are defective.
             The conditions of acceptance are governed by the terms of the
             contract or customer arrangement and those not meeting the
             predetermined specification are not recorded as revenue. Product
             warranties are offered on our products and a warranty accrual is
             established when sales are recognized and is based on estimated
             future costs of repair and replacement principally using our
             historical experience of warranty claims.

             Price protections are provided to the Company's semiconductor
             memory business customers and retailers of the Company's consumer
             products business. Price protection is provided to compensate the
             customers and retailers for decline in product's value due mainly
             to competition. Price protection granted to our customers is
             classified as a reduction of revenue on our consolidated statement
             of income. In addition, it is our policy to accrue reasonably and
             reliably estimated price adjustment at the later of the date at
             which the related sales are recognized, or the date at which the
             price protection is offered. The estimate is made based primarily
             upon historical experience or agreement on the adjustment rate and
             the number of units that are subject to such adjustment (e.g.,
             units in distribution channel).

                                       76

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

             Product revenues which are recognized upon shipment are IT system
             products, Large Scale Integrated Circuits, semiconductor
             manufacturing equipment, test and measurement equipments,
             construction equipment, displays, disk drives, televisions, air
             conditioners, batteries, magnetic tapes, high functional materials,
             cable products and automotive equipment. Product revenues which are
             recognized upon acceptance or shipment are railway vehicles.
             Product revenues that are recognized upon acceptance are medical
             electronic devices, industrial machinery and equipment, nuclear,
             thermal and hydroelectric power plant, and elevators and
             escalators.

             Revenue from sales of tangible products under long-term
             construction type arrangements, principally in connection with the
             construction of nuclear, thermal and hydroelectric power plants,
             are recognized under the percentage-of-completion method. Under the
             percentage-of-completion method, revenue is recognized as
             percentage of estimated total revenue that incurred costs to date
             bear to estimated total costs after giving effect to estimates of
             costs to complete based upon most recent information. Any
             anticipated losses on fixed price contracts are charged to
             operations when such losses can be estimated. Provisions are made
             for contingencies (i.e. performance penalty, benchmarking, etc.) in
             the period in which they become known pursuant to specific contract
             terms and conditions and are estimable.

             The Company recognizes revenue in accordance with the provisions of
             Statement of Position No. 97-2, "Software Revenue Recognition" as
             amended by Statement of Position No. 98-9. Revenue from software
             consists of software licensing, customized software development and
             post contract customer support. Revenues from software license
             arrangements are recognized upon shipment of the software if
             evidence of the arrangement exists, pricing is fixed and
             determinable and collectibility is probable. Customized software
             revenue is recognized upon customer acceptance. Revenue from post
             contract customer support is amortized over the period of the post
             contract customer support. Consulting and training services are
             recognized when the services are rendered.

             Our standard software license agreement provides for a limited
             warranty that the license will operate substantially in accordance
             with the functionality described in the documentation provided with
             the products. The standard software license does not provide for
             right of return. We provide for warranty at the time of revenue
             recognition using our historical experience of warranty claims. To
             date such warranty provisions have been insignificant.

             Service Revenues:
             Service revenues from maintenance and distribution services are
             recognized upon completion of service delivery. Revenue from time
             service contracts is recognized as services are rendered. Revenue
             from long-term fixed price service contracts such as support or
             maintenance contracts is recognized ratably over the contractual
             period. Finance lease income is recognized at level rates of return
             over the term of the leases. Operating lease income is recognized
             on a straight-line basis over the term of the lease.

                                       77

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (n)   Advertising
             Advertising costs are charged to the statement of income as
             incurred.

       (o)   Research and Development Costs
             Research and development costs are charged to the statement of
             income as incurred. Costs incurred in connection with the
             development of software products are accounted for in accordance
             with SFAS No.86, "Accounting for the Costs of Computer Software to
             Be Sold, Leased or Otherwise Marketed." Development costs incurred
             in the research and development of new software products and
             enhancements to existing products are expensed as incurred until
             technological feasibility has been established.

       (p)   Income Taxes
             Deferred income taxes are accounted for under the asset and
             liability method in accordance with SFAS No. 109, "Accounting for
             Income Taxes." Deferred tax assets and liabilities are recognized
             for the future tax consequences attributable to differences between
             the financial statement carrying amounts of existing assets and
             liabilities and their respective tax bases and operating loss and
             tax credit carryforwards. Under this method, deferred tax assets
             and liabilities are measured using enacted tax rates expected to
             apply to taxable income in the years in which those temporary
             differences are expected to be recovered or settled. Under SFAS No.
             109, the effect on deferred tax assets and liabilities of a change
             in tax rates is recognized in income in the period that includes
             the enactment date.

       (q)   Sales of Stock by Subsidiaries
             The change in the Company's proportionate share of subsidiary
             equity resulting from issuance of stock by the subsidiaries is
             accounted for as an equity transaction.

       (r)   Treasury Stock
             Treasury stock is accounted for by the cost method.

       (s)   Net Income Per Share
             Net income per share is computed in accordance with SFAS No. 128,
             "Earnings per Share." This standard requires a dual presentation of
             basic and diluted net income per share amounts on the face of the
             statement of income. Under this standard, basic net income per
             share is computed based upon the weighted average number of shares
             of common stock outstanding during each year. Diluted net income
             per share reflects the potential dilution that could occur if
             securities or other contracts to issue common stock were exercised
             or converted into common stock or resulted in the issuance of
             common stock that then shared in the earnings of the Company.

                                       78

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (t)   Stock-based Compensation
             As of March 31, 2003, the Company has two stock-based employee
             compensation plans, which are described more fully in note 26. The
             Company accounts for those plans under the recognition and
             measurement principles of Accounting Principles Board Opinion (APB)
             No. 25, "Accounting for Stock Issued to Employees." No stock-based
             employee compensation cost is reflected in net income, as all
             options granted under those plans had an exercise price not less
             than market value of the underlying common stock on the date of
             grant.

             SFAS No. 123, "Accounting for Stock-based Compensation," prescribes
             the recognition of compensation expense based on the fair value of
             options on the grant date and allows continuous application of APB
             No. 25 if certain pro forma disclosures are made assuming
             hypothetical fair value method application. The Company elected to
             continue applying APB No. 25, however, the pro forma effects of
             applying SFAS No. 123 on net income (loss) and the per share
             information for the years ended March 31, 2003, 2002 and 2001 were
             not material.

       (u)   Disclosures about Segments of an Enterprise and Related Information
             SFAS No. 131, "Disclosures about Segments of an Enterprise and
             Related Information," was issued in June 1997. This standard
             establishes standards for the manner in which a public business
             enterprise is required to report financial and descriptive
             information about its operating segments. This standard defines
             operating segments as components of an enterprise for which
             separate financial information is available and evaluated regularly
             as a means for assessing segment performance and allocating
             resources to segments. A measure of profit or loss, total assets
             and other related information is required to be disclosed for each
             operating segment. Further, this standard requires the disclosure
             of information concerning revenues derived from the enterprise's
             products or services, countries in which it earns revenue or holds
             assets and major customers. This standard is effective for the
             Company's fiscal year ended March 31, 1999. However, foreign
             issuers are presently exempted from the segment disclosure
             requirements of SFAS No. 131 in Securities Exchange Act filings
             with SEC, and the Company has not presented the segment information
             required to be disclosed in the footnotes to the consolidated
             financial statements under SFAS No. 131.

                                       79

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       (v)   New Accounting Standards
             In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
             Retirement Obligations," which addresses financial accounting and
             reporting for obligations associated with the retirement of
             tangible long-lived assets and the associated asset retirement
             costs. The standard applies to legal obligations associated with
             the retirement of long-lived assets that result from the
             acquisition, construction, development and (or) normal use of the
             asset. SFAS No. 143 requires that the fair value of a liability for
             an asset retirement obligation be recognized in the period in which
             it is incurred if a reasonable estimate of fair value can be made.
             The Company is required and plans to adopt the provisions of SFAS
             No. 143 for the fiscal year beginning April 1, 2003. SFAS No. 143
             will have no material impact on the consolidated financial position
             or results of operations.

             In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
             Associated with Exit or Disposal Activities." This statement
             addresses financial accounting and reporting for costs associated
             with exit or disposal activities and nullifies the FASB's Emerging
             Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
             Certain Employee Termination Benefits and Other Costs to Exit an
             Activity (including Certain Costs Incurred in a Restructuring)."
             SFAS No. 146 applies to costs associated with an exit activity that
             does not involve an entity newly acquired in a business combination
             covered by EITF Issue No. 95-3, "Recognition of Liabilities in
             Connection with a Purchase Business Combination," or with a
             disposal activity covered by SFAS No. 144. This statement requires
             that a liability for a cost associated with an exit or disposal
             activity be recognized when the liability is incurred and measured
             at fair value. The provisions of the statement are effective for
             exit or disposal activities that are initiated after December 31,
             2002. The adoption of this statement did not have a material effect
             on the Company's financial position or results of operations.

             In January 2003, the FASB issued Interpretation No. 46,
             "Consolidation of Variable Interest Entities, an interpretation of
             ARB No. 51." This interpretation addresses the consolidation by
             business enterprises of variable interest entities as defined in
             the interpretation. The interpretation applies immediately to
             variable interests in variable interest entities created and
             acquired after January 31, 2003. For variable interest in a
             variable interest entity created before February 1, 2003, the
             interpretation is applicable no later than the beginning of the
             first interim or annual reporting period beginning after June 15,
             2003. The application of this interpretation did not have a
             material effect on the Company's consolidated financial statements
             for the year ended March 31, 2003 and is not expected to have a
             material effect for the year ending March 31, 2004.

                                       80

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(2)  Investment in Securities

     Short-term investments as of March 31, 2003 and 2002 are as follows:

                                                              Yen (millions)
                                                          ----------------------
                                                             2003        2002
                                                             ----        ----
          Investment in securities:
               Available-for-sale securities                 100,288      93,660
               Held-to-maturity securities                     6,057       4,866
               Trading securities                             80,627      80,407
                                                          ----------  ----------
          Short-term investments                             186,972     178,933
                                                          ==========  ==========

     Investments and advances, including affiliated companies as of March 31,
     2003 and 2002 are as follows:

                                                              Yen (millions)
                                                          ----------------------
                                                             2003        2002
                                                             ----        ----
          Investment in securities:
               Available-for-sale securities                 297,656     439,997
               Held-to-maturity securities                     1,487       6,151
               Securities without readily determinable
                fair values                                   75,860      73,639
          Investments in affiliated companies                237,024     240,748
          Advances and others                                114,415      74,372
                                                          ----------  ----------
          Investments and advances,
           including affiliated companies                    726,442     834,907
                                                          ==========  ==========

     The following is a summary of the amortized cost basis, gross unrealized
     holding gains, gross unrealized holding losses and aggregate fair value of
     available-for-sale securities by the consolidated balance sheets
     classification as of March 31, 2003 and 2002.

<TABLE>
<CAPTION>
                                                                        Yen (millions)
                              --------------------------------------------------------------------------------------------------
                                                   2003                                                2002
                              -----------------------------------------------    -----------------------------------------------
                              Amortized       Gross     Gross      Aggregate     Amortized      Gross      Gross      Aggregate
                              cost basis      gains     losses     fair value    cost basis     gains      losses     fair value
                              ----------      -----     ------     ----------    ----------     -----      ------     ----------
<S>                           <C>            <C>        <C>        <C>           <C>            <C>        <C>        <C>
Short-term investments:
     Debt securities             52,432           61         50       52,443        62,114           48         51       62,111
     Other securities            47,897            5         57       47,845        31,717            4        172       31,549
                               --------     --------    -------     --------      --------     --------    -------     --------
                                100,329           66        107      100,288        93,831           52        223       93,660
Investments and advances:
     Equity securities          115,999       51,951      8,772      159,178       173,204      116,411      7,093      282,522
     Debt securities            117,394          606      2,484      115,516       125,059          589      4,276      121,372
     Other securities            23,033           75        146       22,962        36,741          234        872       36,103
                               --------     --------    -------     --------      --------     --------    -------     --------
                                256,426       52,632     11,402      297,656       335,004      117,234     12,241      439,997
                               --------     --------    -------     --------      --------     --------    -------     --------
                                356,755       52,698     11,509      397,944       428,835      117,286     12,464      533,657
                               ========     ========    =======     ========      ========     ========    =======     ========
</TABLE>

     Debt securities consist mainly of national, local and foreign governmental
     bonds, debentures issued by banks and corporate bonds. Other securities
     consist mainly of investment trusts.

                                       81

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The proceeds from sale of available-for-sale securities for the years ended
     March 31, 2003, 2002 and 2001 are JPY 112,861 million, JPY 62,783 million
     and JPY 167,923 million, respectively. The gross realized gains on the sale
     of those securities for the years ended March 31, 2003, 2002 and 2001 are
     JPY 40,119 million, JPY 6,585 million and JPY 10,525 million, respectively,
     while gross realized losses on the sale of those securities for the years
     ended March 31, 2003, 2002 and 2001 are JPY 4,660 million, JPY 2,700
     million and JPY 460 million, respectively.

     In addition, during the year ended March 31, 2001, certain subsidiaries
     contributed available-for-sale securities to pension fund trusts in the
     amount of JPY 25,684 million. Gross realized gains on those contributions
     for the year ended March 31, 2001 were JPY 15,651 million. For the years
     ended March 31, 2003, 2002 and 2001 the amount of the net unrealized
     holding gain or loss on available-for-sale securities that has been
     included in accumulated other comprehensive loss is a loss of JPY 60,907
     million, JPY 97,972 million and JPY 61,073 million, respectively, and the
     amount of gains and losses reclassified out of accumulated other
     comprehensive loss is net gain of JPY 5,999 million, net loss of JPY 74,842
     million and net gain of JPY 30,892 million, respectively.

     Various held-to-maturity securities are held by certain subsidiaries. Gross
     unrealized holding gains and losses of these securities were not material.

     Trading securities consist mainly of investments in trust accounts. The
     portions of trading losses for the years ended March 31, 2003, 2002 and
     2001 that relate to trading securities still held at the balance sheet date
     are JPY 437 million, JPY 2,356 million and JPY 13,659 million,
     respectively.

                                       82

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The contractual maturities of debt securities and other securities
     classified as Investments and advances in the consolidated balance sheets
     as of March 31, 2003 are as follows:

                                              Yen (millions)
                                  -------------------------------------
                                   Held-to-    Available-
                                   maturity     for-sale       Total
                                   --------     --------       -----

     Due within five years            1,380        43,935       45,315
     Due after five years               107        94,543       94,650
                                     ------      --------     --------
                                      1,487       138,478      139,965
                                     ======      ========     ========

     Expected redemptions may differ from contractual maturities because these
     securities are redeemable at the option of the issuers.

     The aggregate fair values of investments in affiliated companies based on
     the quoted market price as of March 31, 2003 and 2002 are JPY 179,884
     million and JPY 241,589 million, respectively. The aggregate carrying
     amount of such investments as of March 31, 2003 and 2002 are JPY 127,343
     million and JPY 167,805 million, respectively.

     As of March 31, 2003, recognitions of other than temporary declines in
     values of investments in certain affiliated companies resulted in the
     difference of JPY 25,061 million between the carrying amount and the amount
     of underlying equity in net assets. In addition, equity method goodwill of
     JPY 11,145 million is included in investments in certain affiliated
     companies as of March 31, 2003 and 2002.

                                       83

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(3)  Receivables

     The aggregated annual maturities of the long-term trade receivables after
     March 31, 2004 included in Trade receivables- Accounts are as follows:

                                                           Yen
          Years ending March 31                         (millions)
          ---------------------                         ----------

                   2005                                     26,889
                   2006                                      1,699
                   2007                                      1,299
                   2008                                      1,224
                Thereafter                                   3,440
                                                          --------
                                                            34,551
                                                          ========

     Sales on an installment contract basis for the years ended March 31, 2003,
     2002 and 2001 totaled JPY 14,618 million, JPY 17,647 million and JPY 11,663
     million, respectively.

(4)  Inventories

     Inventories as of March 31, 2003 and 2002 are summarized as follows:

                                                              Yen (millions)
                                                        ------------------------
                                                            2003        2002
                                                            ----        ----

          Finished goods                                    373,317      347,391
          Work in process                                   646,932      711,226
          Raw materials                                     167,280      155,782
                                                        -----------  -----------
                                                          1,187,529    1,214,399
                                                        ===========  ===========

     Inventories include items associated with major contracts which, because of
     long-term processing requirements, have been or are expected to be
     performed over a period of more than 12 months. Those items as of March 31,
     2003 and 2002 aggregated JPY 40,585 million and JPY 72,886 million,
     respectively.

(5)  Leases

     The Company and certain subsidiaries are lessors of manufacturing machinery
     and equipment under financing and operating leasing arrangements with terms
     ranging from 3 to 6 years.

     Machinery and equipment at cost under operating leases and accumulated
     depreciation as of March 31, 2003 amounted to JPY 1,207,877 million and JPY
     895,013 million, respectively. The leased assets are recorded at cost and
     depreciated using the straight-line method over their estimated useful
     lives.

                                       84

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The following table shows the future minimum lease receivables of financing
     and non-cancelable operating leases as of March 31, 2003 and the future
     minimum lease receivables of financing leases as of March 31, 2002:

                                                            Yen (millions)
                                                            --------------
                                                                 2003
                                                                 ----
                                                        Financing     Operating
                Years ending March 31                     leases       leases
                ---------------------                     ------       ------

     2004                                                  177,413        53,566
     2005                                                  133,530        42,131
     2006                                                   87,493        28,651
     2007                                                   49,049        14,705
     2008                                                   22,291         4,910
     Thereafter                                             26,462         5,876
                                                      ------------  ------------
     Total minimum payments to be received                 496,238       149,839
                                                                    ============
     Amount representing executory costs                   (28,364)
     Unearned income                                       (25,591)
     Allowance for doubtful receivables                     (5,207)
                                                      ------------
     Net investment in financing leases                    437,076
                                                      ============

                                                     Yen (millions)
                                                     --------------
                                                          2002
                                                          ----
                                                        Financing
                                                         leases
                                                         ------

     Total minimum payments to be received                 619,574
     Amount representing executory costs                   (42,205)
     Unearned income                                       (43,056)
     Allowance for doubtful receivables                     (6,881)
                                                      ------------
     Net investment in financing leases                    527,432
                                                      ============

     Allowance for doubtful receivables is determined on the basis of loss
     experiences and assessment of inherent risks.

     The Company and certain subsidiaries lease certain manufacturing machinery
     and equipment. The amount of leased assets at cost under capital leases as
     of March 31, 2003 and 2002 amounted to JPY 32,669 million and JPY 20,154
     million, respectively, and accumulated depreciation as of March 31, 2003
     and 2002 amounted to JPY 14,231 million and JPY 9,782 million,
     respectively.

                                       85

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     In March 2003, the Company entered into a sale and lease back agreement for
     its headquarter land and building for a total proceeds of JPY 40,000
     million. The lease back is classified as an operating lease with a term of
     thirty-eight months. A part of the gain on sale of JPY 8,551 million which
     represents the present value of the minimum lease payments over the lease
     term has been deferred and will be recognized over the lease term.

     The following table shows the future minimum lease payments of capital and
     non-cancelable operating leases as of March 31, 2003:

<TABLE>
<CAPTION>
                                                               Yen (millions)
                                                               --------------
                                                            Capital      Operating
                Years ending March 31                        leases       leases
                ---------------------                        ------       ------
     <S>                                                 <C>           <C>
     2004                                                       5,774        13,174
     2005                                                       4,976        10,868
     2006                                                       2,857         6,582
     2007                                                       2,293         3,132
     2008                                                       2,078         1,958
     Thereafter                                                 4,607         8,578
                                                         ------------  ------------
     Total minimum lease payments                              22,585        44,292
                                                                       ============
     Amount representing executory costs                         (654)
     Amount representing interest                              (1,864)
                                                         ------------
     Present value of net minimum lease payments               20,067
     Less current portion of capital lease obligations          5,136
                                                         ------------
     Long-term capital lease obligations                       14,931
                                                         ============
</TABLE>

(6)  Securitization

     For the years ended March 31, 2003 and 2002, Hitachi Capital Corporation
     (HCC), a financing subsidiary, transferred lease receivables. In these
     transactions, HCC sold mainly lease receivables to Special Purpose Entities
     (SPE), and the SPE issued asset-backed commercial papers to investors. The
     investors and the SPE have no recourse to HCC's other assets for failure of
     debtors to pay when due. HCC retained servicing responsibilities and
     subordinated interests, but has not recorded a servicing asset or liability
     since the cost to service the receivables approximates the servicing
     income. The retained interests are not material and subordinate to
     investors' interests. For the years ended March 31, 2003 and 2002, gains
     recognized on the transfer of lease receivables amounted to JPY 8,278
     million and JPY 6,261 million, respectively.

     The table below summarizes certain cash flows received from and paid to the
     SPE during the years ended March 31, 2003 and 2002:

                                                               Yen (millions)
                                                            --------------------
                                                              2003       2002
                                                              ----       ----

          Proceeds from transfer of lease receivables        249,430    252,210
          Servicing fees received                                 27         36
          Purchases of delinquent or ineligible assets        (8,174)    (7,242)

                                       86

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Quantitative information about delinquencies, net credit losses, and
     components of lease receivables subject to transfer and other assets
     managed together as of and for the year ended March 31, 2003 are as
     follows:

<TABLE>
<CAPTION>
                                                         Yen (millions)
                                            --------------------------------------
                                                           Principal
                                                           amount of
                                               Total      receivables
                                             principal    90 days or
                                             amount of     more past    Net credit
                                            receivables       due         losses
                                            -----------       ---         ------
     <S>                                    <C>           <C>           <C>
     Total assets managed or transferred:
          Lease receivables                     819,937        950         1,720
          Assets transferred                   (382,861)
                                            -----------
     Assets held in portfolio                   437,076
                                            ===========
</TABLE>

     For the years ended March 31, 2003 and 2002, the Company and certain
     subsidiaries sold trade receivables mainly through the SPE which
     securitized these receivables. In these securitizations, the Company and
     certain subsidiaries retained servicing responsibility. No servicing asset
     or liability has been recorded because the fees for servicing the
     receivable approximate the related costs. In addition, the Company and
     certain subsidiaries retained subordinated interests which were not
     material.

     During the years ended March 31, 2003 and 2002, proceeds from transfer of
     trade receivables were JPY 1,080,805 million and JPY 482,831 million,
     respectively and losses recognized on those transfers were JPY 2,965
     million and JPY 621 million, respectively.

(7)  Goodwill and Other Intangible Assets

     In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," on
     April 1, 2002, the Company reassessed the useful lives of previously
     recognized intangible assets and completed an impairment test. No
     impairment loss was recognized.

     Intangible assets excluding goodwill acquired during the year ended March
     31, 2003 and related amortization expense amounted to JPY 262,460 million,
     and JPY 86,095 million, respectively. The main component of intangible
     assets subject to amortization was capitalized software. Amortization of
     capitalized computer software costs for software to be sold, leased or
     otherwise marketed is charged to cost of sales.

                                       87

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       Intangible assets excluding goodwill as of March 31, 2003 and April 1,
       2002 are presented below:

<TABLE>
<CAPTION>
                                                                         Yen (millions)
                              ---------------------------------------------------------------------------------------------
                                                 March 31, 2003                                  April 1, 2002
                              ---------------------------------------------    --------------------------------------------
                              Gross carrying   Accumulated     Net carrying    Gross carrying   Accumulated    Net carrying
                                  amount       amortization       amount           amount       amortization      amount
                                  ------       ------------       ------           ------       ------------      ------
<S>                           <C>              <C>             <C>             <C>              <C>            <C>
Amortized intangible assets
 Software                        288,066         169,239         118,827          216,200         128,228         87,972
 Software for internal use       290,204         132,917         157,287          191,539         107,100         84,439
 Other                           153,130          47,997         105,133           71,652          39,113         32,539
                                 -------         -------         -------          -------         -------         ------
                                 731,400         350,153         381,247          479,391         274,441        204,950
                                 =======         =======         =======          =======         =======        =======
Unamortized intangible
 assets                           13,603               -          13,603            8,165               -          8,165
</TABLE>

       The changes in the carrying amount of goodwill for the year ended March
       31, 2003 are as follows:

<TABLE>
<CAPTION>
                                                                        Yen (millions)
                              ---------------------------------------------------------------------------------------------
                                        Balance at          Acquired                     Translation        Balance
                                       beginning of          during        Impairment     adjustment       at end of
                                         the year           the year          loss        and other        the year
                                         --------           --------          ----        ---------        --------
       <S>                             <C>                  <C>            <C>           <C>               <C>
       Goodwill                           27,299             39,986         (4,235)        (2,733)          60,317
</TABLE>

       The following table shows the estimated aggregate amortization expense
       for the next five years.

           Years ending March 31                              Yen (millions)
           ---------------------                              --------------
                   2004                                           80,813
                   2005                                           76,043
                   2006                                           65,633
                   2007                                           56,128
                   2008                                           48,909

                                       88

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       The following tables show reconciliation of reported net income (loss),
       basic net income (loss) per share and diluted net income (loss) per share
       to the amounts adjusted to exclude the amortization expense of goodwill
       for the years ended March 31, 2003, 2002 and 2001:
<TABLE>
<CAPTION>

                                                                Yen (millions)
                                                        -----------------------------
                                                         2003        2002       2001
                                                         ----        ----       ----
        <S>                                         <C>          <C>       <C>
       Reported net income (loss)                       27,867     (483,837)  104,380
       Goodwill amortization                                 -          785       307
                                                        ------     --------   -------
       Adjusted net income (loss)                       27,867     (483,052)  104,687
                                                        ======     ========   =======

                                                                      Yen
                                                        -----------------------------
                                                         2003        2002      2001
                                                         ----        ----      ----

       Reported basic net income (loss) per share        8.31       (144.95)    31.27
       Goodwill amortization                                -          0.23      0.09
                                                         ----      --------   -------
       Adjusted basic net income (loss) per share        8.31       (144.72)    31.36
                                                         ====      ========   =======

                                                                      Yen
                                                        -----------------------------
                                                         2003        2002      2001
                                                         ----        ----      ----

       Reported diluted net income (loss) per share      8.19       (144.95)    30.32
       Goodwill amortization                                -          0.23      0.09
                                                         ----      --------   -------
       Adjusted diluted net income (loss) per share      8.19       (144.72)    30.41
                                                         ====       =======   =======
</TABLE>

                                       89

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(8)  Income Taxes

     Components, as either domestic or foreign, of income (loss) before income
     taxes and minority interests, and income taxes attributable to continuing
     operations are as follows:

<TABLE>
<CAPTION>
                                                                      Yen (millions)
                                                           -----------------------------------
                                                                           2003
                                                           -----------------------------------
                                                           Domestic      Foreign      Total
                                                           --------      -------      -----
    <S>                                                    <C>           <C>          <C>
     Income before income taxes and minority interests        69,248        27,580      96,828
     Income taxes:
       Current tax expense                                    76,782        11,406      88,188
       Deferred tax expense (benefit)                        (38,996)        3,470     (35,526)
                                                           ---------     ---------    --------
                                                              37,786        14,876      52,662

                                                                      Yen (millions)
                                                           -----------------------------------
                                                                           2002
                                                           -----------------------------------
                                                           Domestic      Foreign      Total
                                                           --------      -------      -----
     Loss before income taxes and minority interests        (538,556)      (47,516)   (586,072)
     Income taxes:
       Current tax expense                                   100,698        10,260     110,958
       Deferred tax benefit                                 (176,170)       (5,902)   (182,072)
                                                           ---------     ---------    --------
                                                             (75,472)        4,358     (71,114)

                                                                      Yen (millions)
                                                           -----------------------------------
                                                                           2001
                                                           -----------------------------------
                                                           Domestic      Foreign      Total
                                                           --------      -------      -----

     Income before income taxes and minority interests       282,372        41,283     323,655
     Income taxes:
       Current tax expense                                   134,639        17,717     152,356
       Deferred tax expense                                    7,157         5,348      12,505
                                                           ---------     ---------    --------
                                                             141,796        23,065     164,861
</TABLE>

                                       90

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Significant components of income tax expense (benefit) attributable to
     continuing operations and other comprehensive income (loss), net of
     reclassification adjustments, for the years ended March 31, 2003, 2002 and
     2001 are as follows:

<TABLE>
<CAPTION>
                                                                               Yen (millions)
                                                                       ------------------------------
                                                                         2003       2002        2001
                                                                         ----       ----        ----
         <S>                                                          <C>        <C>        <C>
          Continuing operations:
             Current tax expense                                         88,188    110,958    152,356
             Deferred tax benefit (exclusive of the effects of
               other components listed below)                           (20,525)  (263,449)      (892)
             Adjustments of deferred tax assets and liabilities for
               enacted changes in tax laws and rates in Japan            27,993          -          -
             Change in valuation allowance                              (42,994)    81,377     13,397
                                                                       --------   --------   --------
                                                                         52,662    (71,114)   164,861
          Other comprehensive income (loss), net of
            reclassification adjustments:
             Minimum pension liability adjustments                     (333,700)   (59,985)  (149,588)
             Net unrealized holding gain on
               available-for-sale securities                            (27,878)    (9,717)   (37,832)
             Cash flow hedges                                              (335)      (646)       490
                                                                       --------   --------   --------
                                                                       (361,913)   (70,348)  (186,930)
                                                                       --------   --------   --------
                                                                       (309,251)  (141,462)   (22,069)
                                                                       ========   ========   ========
</TABLE>

     The Company and its domestic subsidiaries are subject to a national
     corporate tax of 30%, an inhabitant tax of between 17.3% and 20.7% and a
     deductible business tax between 5% and 10.08%, which in the aggregate
     resulted in a combined statutory income tax rate of approximately 41.8% for
     the years ended March 31, 2003, 2002 and 2001.

     On March 31, 2003, a reduction of income tax rate for business tax was
     enacted in Japan, and is effective from April 1, 2004. With this adoption,
     the aggregated statutory income tax rate for domestic companies will be
     approximately 40.8% for the year ending March 31, 2005.

     The Company adopted the consolidated taxation system effective from the
     year ended March 31, 2003. Under the consolidated taxation system, the
     Company has consolidated, for Japanese tax purpose, all wholly-owned
     domestic subsidiaries. A temporary 2% surtax for the period between April
     1, 2002 through March 31, 2004 is assessed for adopting the consolidated
     taxation system. The aggregated statutory income tax rate for the
     consolidated group for tax purposes will be approximately 43.6% for the
     year ending March 31, 2004.

     In accordance with EITF Issue No. 93-13, "Effect of a Retroactive Change in
     Enacted Tax Rates That Is Included in Income from Continuing Operations,"
     the Company determined the tax effect of retroactive changes or changes in
     enacted tax rates on current and deferred tax assets and liabilities, and
     included the cumulative tax effect in the amount of JPY 27,993 million in
     income from continuing operations for the year ended March 31, 2003.

                                       91

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Reconciliations between the combined statutory income tax rate and the
     effective income tax rate as a percentage of income (loss) before income
     taxes and minority interests are as follows:

<TABLE>
<CAPTION>
                                                                         2003      2002      2001
                                                                         ----      ----      ----
         <S>                                                             <C>      <C>        <C>
          Combined statutory income tax rate                             41.8%    (41.8)%    41.8%
            Equity in earnings of affiliated companies                    6.8       2.6      (0.3)
            Impairment of investments in affiliated companies            10.8         -         -
            Adjustment of net gain on sale of investments in
              subsidiaries and affiliated companies                       5.6       0.5       0.0
            Expenses not deductible for tax purposes                     12.9       6.7       6.0
            Enacted changes in tax laws and rates in Japan               28.9         -         -
            Change in valuation allowance                               (44.4)     13.9       4.1
            Difference in statutory tax rates of foreign
              subsidiaries                                               (9.1)      5.0      (2.3)
            Other                                                         1.1       1.0       1.6
                                                                         ----     -----      ----
          Effective income tax rate                                      54.4%    (12.1)%    50.9%
                                                                         ====     =====      ====
</TABLE>

     The tax effects of temporary differences and carryforwards that give rise
     to significant portions of the deferred tax assets and liabilities as of
     March 31, 2003 and 2002 are presented below:

<TABLE>
<CAPTION>
                                                                             Yen (millions)
                                                                         ---------------------
                                                                           2003        2002
                                                                           ----        ----
         <S>                                                             <C>         <C>
          Total gross deferred tax assets:
            Retirement and severance benefits                              736,731     387,345
            Accrued expenses                                               183,990     168,165
            Property, plant and equipment, due to differences in
              depreciation                                                  34,521      35,822
            Net operating loss carryforwards                               288,113     319,822
            Other                                                          286,259     271,332
                                                                         ---------   ---------
                                                                         1,529,614   1,182,486
          Valuation allowance                                             (187,687)   (239,965)
                                                                         ---------   ---------
                                                                         1,341,927     942,521
          Total gross deferred tax liabilities:
            Deferred profit on sale of properties                          (35,421)    (35,795)
            Tax purpose reserves regulated by Japanese tax laws            (31,563)    (33,728)
            Net unrealized gain on securities                               (8,951)    (42,517)
            Other                                                          (32,702)    (13,531)
                                                                         ---------   ---------
                                                                          (108,637)   (125,571)
                                                                         ---------   ---------
            Net deferred tax asset                                       1,233,290     816,950
                                                                         =========   =========
</TABLE>

                                       92

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     In addition to the above, income taxes paid on net intercompany profit on
     assets remaining within the group, which had been deferred in accordance
     with Accounting Research Bulletin No. 51, "Consolidated Financial
     Statements," as of March 31, 2003 and 2002 are reflected in the
     accompanying consolidated balance sheets under the following captions:

<TABLE>
<CAPTION>
                                                                          Yen (millions)
                                                                      ----------------------
                                                                       2003            2002
                                                                       ----            ----
         <S>                                                          <C>             <C>
          Prepaid expenses and other current assets                   12,269          12,042
          Other assets                                                63,951          63,077
                                                                      ------          ------
                                                                      76,220          75,119
                                                                      ======          ======
</TABLE>

     Net deferred tax assets as of March 31, 2003 and 2002 are reflected in the
     accompanying consolidated balance sheets under the following captions:

<TABLE>
<CAPTION>
                                                                          Yen (millions)
                                                                      ----------------------
                                                                         2003         2002
                                                                         ----         ----
         <S>                                                            <C>          <C>
          Prepaid expenses and other current assets                     274,865      237,209
          Other assets                                                  976,368      595,588
          Other current liabilities                                      (5,454)      (4,822)
          Other liabilities                                             (12,489)     (11,025)
                                                                      ---------      -------
            Net deferred tax asset                                    1,233,290      816,950
                                                                      =========      =======
</TABLE>

     Under the tax laws of various jurisdictions in which the Company and its
     subsidiaries operate, the valuation allowance was recorded against deferred
     tax assets for deductible temporary differences, net operating loss
     carryforwards and tax credit carryforwards. The net change in the total
     valuation allowance for the years ended March 31, 2003 and 2002 was a
     decrease of JPY 52,278 million and an increase of JPY 82,344 million,
     respectively.

     In assessing the realizability of deferred tax assets, management of the
     Company considers whether it is more likely than not that some portion or
     all of the deferred tax assets will not be realized. The ultimate
     realization of deferred tax assets is entirely dependent upon the
     generation of future taxable income in specific tax jurisdictions during
     the periods in which these deductible differences become deductible.
     Although realization is not assured, management considered the scheduled
     reversals of deferred tax liabilities and projected future taxable income
     in making this assessment. Based on these factors, management believes it
     is more likely than not the Company will realize the benefits of these
     deductible differences, net of the existing valuation allowance as of March
     31, 2003.

     As of March 31, 2003, the Company and various subsidiaries have operating
     loss carryforwards of JPY 725,579 million which are available to offset
     future taxable income, if any. Operating loss carryforwards of JPY 619,001
     million expire by March 31, 2008, and JPY 106,578 million expire in various
     years thereafter or do not expire.

                                       93

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

 (9) Short-term and Long-term Debts

     The components of short-term debt as of March 31, 2003 and 2002 are
     summarized as follows:

<TABLE>
<CAPTION>
                                                                     Yen (millions)
                                                                 ---------------------
                                                                   2003         2002
                                                                 ---------   ---------
        <S>                                                      <C>           <C>
        Borrowings not from affiliates, mainly from banks        481,867       647,886
        Commercial paper                                         254,536       139,239
        Borrowings from affiliates                                89,457        46,713
                                                                 -------       -------
                                                                 825,860       833,838
                                                                 =======       =======
</TABLE>

     The weighted average interest rates on short-term debt outstanding as of
     March 31, 2003 and 2002 are 0.1% and 0.2%, respectively.

     The components of long-term debt as of March 31, 2003 and 2002 are
     summarized as follows:

<TABLE>
<CAPTION>
                                                                     Yen (millions)
                                                                 ---------------------
                                                                   2003         2002
                                                                 ---------   ---------
        <S>                                                      <C>         <C>
        Mortgage debentures:
          Due 2004, interest 2.1%, issued by a subsidiary              300         400
        Unsecured notes and debentures:
          Due 2006, interest 3.45% debenture                       200,000     200,000
          Due 2003-2018, interest 0.028-5.92%, issued by
            subsidiaries                                           748,581     760,836
        Unsecured convertible debentures:
          6th series, due 2003, interest 1.3%                       92,828      92,828
          7th series, due 2004, interest 1.4%                      218,471     218,471
          Due 2003-2008, interest 0.6-1.8%, issued by
            subsidiaries                                            20,932      35,566
        Loans, principally from banks and insurance companies:
          Secured by various assets and mortgages on property,
            plant and equipment, maturing 2003-2011,
            interest 0.93-8.77%                                     31,620      14,692
          Unsecured, maturing 2003-2015, interest 0.5225-
            7.04%                                                  681,939     830,301
        Capital lease obligations                                   20,067      11,292
                                                                 ---------   ---------
                                                                 2,014,738   2,164,386
        Less current installments                                  502,586     366,083
                                                                 ---------   ---------
                                                                 1,512,152   1,798,303
                                                                 =========   =========
</TABLE>

                                       94

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The aggregate annual maturities of long-term debt after March 31, 2004 are
     as follows:

        Years ending March 31                             Yen (millions)
        ---------------------                           ----------------
                 2005                                            508,283
                 2006                                            413,699
                 2007                                            132,101
                 2008                                            161,082
              Thereafter                                         296,987
                                                               ---------
                                                               1,512,152
                                                               =========

     The Company and its subsidiaries provide their investment in certain
     subsidiaries as collateral for bank loans of JPY 14,240 million.

     The collateralized number of shares and their fair values as of March 31,
     2003 are as follows:

<TABLE>
<CAPTION>
                                                                                                           Yen
                                                                                                       (millions)
                                                                                                       ----------
                                                    Number of                     Collateralized       Fair value
                                                  shares owned    Percent of     number of shares         as of
                   Subsidiary name                 in thousand     ownership       in thousand       March 31, 2003
     --------------------------------------------  -----------     ---------       -----------       --------------
     <S>                                              <C>           <C>               <C>                 <C>
     Hitachi Capital Corporation                      71,074         55.3%           13,000              17,602
     Hitachi Maxell, Ltd.                             51,528         52.1               800               1,426
     Hitachi Powdered Metals Co., Ltd.                17,072         53.3             4,700               2,637
</TABLE>

     As is customary in Japan, both short-term and long-term bank loans are made
     under general agreements which provide that security and guarantees for
     present and future indebtedness will be given upon request of the bank, and
     that the bank shall have the right, as the obligations become due, or in
     the event of their default, to offset cash deposits against such
     obligations.

     Generally, the mortgage debenture trust agreements and certain secured and
     unsecured loan agreements provide, among other things, that the lenders or
     trustees shall have the right to have any distribution of earnings,
     including the payment of dividends and the issuance of additional capital
     stock, submitted to them for prior approval and also grant them the right
     to request additional security or mortgages on property, plant and
     equipment.

     The unsecured convertible debentures due in 2003 are redeemable in whole or
     in part, at the option of the Company, from October 1, 1996 to September
     30, 2002 at premiums ranging from 6% to 1%, and at par thereafter. The
     debentures are currently convertible into approximately 49,503,000 shares
     of common stock, based on a fixed conversion price not less than the fair
     market value of the Company's common stock on the date of issuance.
     Commencing September 30, 1999, the Company is required to make annual
     payments to the Trustee of JPY 10 billion less the aggregate amounts of the
     debentures converted, repurchased or redeemed which have not been deducted
     before.

                                       95

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The unsecured convertible debentures due in 2004 are redeemable in whole or
     in part, at the option of the Company, from October 1, 1997 to September
     30, 2003 at premiums ranging from 6% to 1%, and at par thereafter. The
     debentures are currently convertible into approximately 128,945,000 shares
     of common stock, based on a fixed conversion price not less than the fair
     market value of the Company's common stock on the date of issuance.
     Commencing September 30, 1999, the Company is required to make annual
     payments to the Trustee of JPY 20 billion less the aggregate amounts of the
     debentures converted, repurchased or redeemed which have not been deducted
     before.

     In accordance with Trustee agreements for the unsecured debentures due in
     2003 and 2004 as mentioned above, the 16,977,000 shares of investments in
     Hitachi Software Engineering Co., Ltd. and the 48,401,000 shares of
     investments in Hitachi High-Technologies Co., Ltd. are held in trust. The
     fair values of the shares held in trust as of March 31, 2003 are JPY 31,747
     million and JPY 81,749 million, respectively.

     Pursuant to the terms of the indentures under which the unsecured
     convertible debentures due in 2004 were issued, accumulated cash dividends
     (including interim dividends) paid by the Company for the fiscal years
     beginning after March 31, 1989 may not exceed accumulated net income in the
     audited consolidated statements of income for the fiscal years beginning
     after March 31, 1989 plus JPY 65,000 million as long as these debentures
     are outstanding. In determining the accumulated cash dividends, interim
     cash dividends to be paid on and after April 1, 1990 are considered to be a
     part of the cash dividends of the previous fiscal year. As of March 31,
     2003, the accumulated cash dividends and the accumulated net income
     including JPY 65,000 million, which are defined by the above terms,
     amounted to JPY 419,072 million and JPY 452,233 million, respectively.

(10) Retirement and Severance Benefits

     (a) Defined benefit plans
     The Company and its domestic subsidiaries have a number of contributory and
     noncontributory pension plans to provide retirement and severance benefits
     to substantially all employees.

     Under unfunded defined benefit pension plans, employees are entitled to
     lump-sum payments based on the current rate of pay and the length of
     service upon retirement or termination of employment for reasons other than
     dismissal for cause.

     Directors and certain employees are not covered by the programs described
     above. Benefits paid to such persons and meritorious service awards paid to
     employees in excess of the prescribed formula are charged to income as paid
     as it is not practicable to compute the liability for future payments since
     amounts vary with circumstances.

                                       96

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     In addition to unfunded defined benefit pension plans, the Company and
     certain of its subsidiaries contribute to each Employees Pension Fund (EPF)
     as is stipulated by the Japanese Welfare Pension Insurance Law and other
     pension plans. The pension plans under the EPF are composed of the
     substitutional portion of Japanese Welfare Pension Insurance and the
     corporate portion which is the contributory defined benefit pension plan
     covering substantially all of their employees and provides benefits in
     addition to the substitutional portion. The Company, certain of its
     subsidiaries and their employees contribute the pension premiums for the
     substitutional portion and the corporate portion to each EPF. The plan
     assets of each EPF cannot be specifically allocated to the individual
     participants nor to the substitutional and corporate portions.

     The benefits for the substitutional portion are based on standard
     remuneration scheduled by the Welfare Pension Insurance Law and the length
     of participation. The benefits of the corporate portion are based on the
     current rate of pay and the length of service. Under EPF pension plans, the
     participants are eligible for these benefits after a one-month period of
     participation in the plan. EPF contributions and cost for the
     substitutional portion were determined in accordance with the open
     aggregate cost method (actuarial funding method) as stipulated by the
     Welfare Pension Insurance Law. Contributions and cost for the corporate
     portion were determined in accordance with the entry age normal cost method
     (actuarial funding method).

     Net periodic benefit costs for the funded benefit pension plans and the
     unfunded lump-sum payment plans for the years ended March 31, 2003, 2002
     and 2001 consist of the following components:

<TABLE>
<CAPTION>
                                                                          Yen (millions)
                                                                    --------------------------
                                                                     2003      2002     2001
                                                                     ----      ----     ----
         <S>                                                        <C>       <C>       <C>
         Service cost                                              112,948   110,173   117,104
         Interest cost                                              97,161   118,094   115,163
         Expected return on plan assets for the period             (71,679)  (77,194)  (86,879)
         Amortization of transition asset                             (421)     (421)     (421)
         Amortization of prior service (benefit) cost              (10,115)   (2,999)      218
         Recognized actuarial loss                                 107,478    60,867    25,869
         Transfer to defined contribution pension plan               5,167     3,807         -
         Curtailment and settlement loss                               700     1,823         -
         Employees' contributions                                  (16,558)  (18,330)  (18,111)
                                                                   -------   -------   -------
         Net periodic benefit cost                                 224,681   195,820   152,943
                                                                   =======   =======   =======
</TABLE>

     Unrecognized transition asset, unrecognized prior service benefit and cost
     and unrecognized actuarial gain and loss are amortized using the
     straight-line method over the average remaining service period of active
     employees.

                                       97

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Reconciliations of beginning and ending balances of the benefit obligation
     of the funded defined benefit pension plans and the unfunded defined
     benefit pension plans and the fair value of the plan assets, and actuarial
     assumptions used at March 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                                                     Yen (millions)
                                                                               --------------------------
                                                                                  2003            2002
                                                                                  ----            ----
          <S>                                                                  <C>             <C>
         Change in benefit obligation:
            Benefit obligation at beginning of year                             3,022,170       3,016,520
            Service cost                                                          112,948         110,173
            Interest cost                                                          97,161         118,094
            Plan amendments                                                       (17,138)        (23,110)
            Actuarial loss                                                        681,822          49,427
            Benefits paid                                                        (223,946)       (177,974)
            Acquisitions and divestitures                                         106,792          (1,725)
            Transfer to defined contribution pension plan                          (7,882)        (72,476)
            Curtailment and settlement                                            (14,396)            387
            Foreign currency exchange rate changes                                 (4,156)          2,854
                                                                               ----------      ----------
            Benefit obligation at end of year                                   3,753,375       3,022,170
                                                                               ----------      ----------

         Change in plan assets:
            Fair value of plan assets at beginning of year                      1,767,560       1,835,533
            Actual return on plan assets                                         (283,651)       (108,453)
            Employers' contributions                                              121,036         116,196
            Employees' contributions                                               16,558          18,330
            Benefits paid                                                        (141,917)        (95,718)
            Acquisitions and divestitures                                          52,198            (568)
            Transfer to defined contribution pension plan                          (3,582)              -
            Settlement                                                             (9,634)              -
            Foreign currency exchange rate changes                                 (4,894)          2,240
                                                                               ----------      ----------
            Fair value of plan assets at end of year                            1,513,674       1,767,560
                                                                               ----------      ----------

         Funded status                                                         (2,239,701)     (1,254,610)
         Unrecognized transition asset                                               (831)         (1,252)
         Unrecognized prior service benefit                                       (86,411)        (74,277)
         Unrecognized actuarial loss                                            1,713,702         786,913
                                                                               ----------      ----------
         Net amount recognized in the consolidated balance sheet                 (613,241)       (543,226)
                                                                               ----------      ----------

         Amounts recognized in the consolidated balance sheet consist of:
            Prepaid benefit cost                                                      861           3,974
            Accrued benefit cost                                               (1,932,646)     (1,049,054)
            Intangible asset                                                        4,765             735
            Accumulated other comprehensive loss                                1,313,779         501,119
                                                                               ----------      ----------
         Net amount recognized                                                   (613,241)       (543,226)
                                                                               ----------      ----------

         Actuarial assumptions on a weighted-average basis:
            Discount rate                                                             2.5%            3.7%
            Expected rate of return on plan assets                                    3.7%            3.9%
            Rate of compensation increase                                             3.3%            3.2%
</TABLE>

                                       98

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

      The components of the net periodic benefit cost are determined using the
      assumptions as of the beginning of the fiscal year, and the components of
      benefit obligation are determined using the assumptions as of the end of
      the fiscal year.

      The projected benefit obligation, accumulated benefit obligation, and fair
      value of plan assets for the pension plan with accumulated benefit
      obligations in excess of plan assets were JPY 3,744,219 million, JPY
      3,428,655 million and JPY 1,503,085 million, respectively, as of March 31,
      2003, and JPY 2,981,740 million, JPY 2,739,092 million and JPY 1,730,108
      million, respectively, as of March 31, 2002.

      On June 15, 2001, the Japanese government issued a new law concerning the
      defined benefit plan. This law allows a company, at its own discretion, to
      apply for an exemption from the future benefit obligation and return the
      past benefit obligation of the substitutional portion of the EPF to the
      government. Under the new law, a company may apply for the exemption from
      the future benefit obligation on or after April 1, 2002 and the return of
      the past benefit obligation on or after July 1, 2003. The past benefit
      obligation and the related pension assets will be returned to the
      government on or after September 1, 2003. In accordance with the new law,
      the Company and certain subsidiaries obtained an approval for the
      exemption from the future benefit obligation on or after April 2002 and
      will apply for the return of the past benefit obligation.

      The Company's plans to return the substitutional portion of the EPF to the
      government had been considered in the actuarial assumptions. In January
      2003, the FASB issued EITF Issue No. 03-2, "Accounting for the Transfer to
      the Japanese Government of the Substitutional Portion of Employee Pension
      Fund Liabilities," which addresses accounting for the transfer of the
      substitutional portion of the EPF to the Japanese government. The EITF
      requires employers to account for the entire separation process of the
      transfer of the substitutional portion as a single settlement transaction
      upon the completion of the transfer to the government of the benefit
      obligation and related plan assets. In addition, the EITF requires
      employers to measure the obligation at current market rates of interest
      that could be obtained in a transaction with a third-party,
      nongovernmental entity to settle the obligation.

      The Company and certain subsidiaries remeasured the substitutional portion
      of the benefit obligation at April 1, 2002 in accordance with EITF Issue
      No. 03-2. As a result of this remeasurement, the benefit obligation as of
      April 1, 2002 and net periodic benefit costs for the year ended March 31,
      2003 increased by JPY 283,084 million and JPY 24,857 million,
      respectively.

      (b) Defined contribution plans
      Certain subsidiaries have a number of defined contribution plans.

      Effective December 31, 2001, the Company implemented a defined
      contribution plan allowing employees to transfer a portion of their
      unfunded defined benefit plans to the new defined contribution plan. The
      amount to be transferred to the new plan will be contributed over 8 years.
      The Company will make contributions in accordance with the plan
      provisions.

      The amount of cost recognized for the Company's and certain subsidiaries'
      contribution to the plans for the years ended March 31, 2003 and 2002 were
      JPY 6,895 million and JPY 3,557 million, respectively.

                                       99

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(11)   Common Stock

       The Company has authorized for issuance 10 billion shares of common
       stock. The Japanese Commercial Code (JCC) had required designation of par
       value to all common stock at least 50% of new share issuance price, or
       the common stock par value prescribed by the JCC. Effective October 1,
       2001, the JCC was amended to eliminate the provision of common stock par
       value resulting in all common stock being recorded with no par value.

       Issued shares, changes in shares and the amount of common stock for the
       years ended March 31, 2003, 2002 and 2001 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                 Yen(millions)
                                                                                 -------------
                                                                  Issued shares     Amount
                                                                  -------------     ------
       <S>                                                        <C>               <C>
       Balance as of March 31, 2000                               3,337,900,251     281,738
         Issued upon conversion of convertible debentures                31,606          16
                                                                  -------------     -------

       Balance as of March 31, 2001                               3,337,931,857     281,754
         Issued upon conversion of convertible debentures               549,184         278
                                                                  -------------     -------

       Balance as of March 31, 2002                               3,338,481,041     282,032
         Issued under exchange offerings                             29,643,245           -
                                                                  -------------     -------

       Balance as of March 31, 2003                               3,368,124,286     282,032
                                                                  =============     =======
</TABLE>

       Issued shares under exchange offerings for the year ended March 31, 2003
       include the issuance of 25,143,245 shares as discussed in note 25.

       Conversions of convertible debt issued subsequent to October 1, 1982 into
       common stock were accounted for in accordance with the provisions of the
       JCC by crediting one-half of the conversion price to each of the common
       stock account and the capital surplus account.

                                       100

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(12)   Legal Reserve and Cash Dividends

       The Japanese Commercial Code (JCC) had provided that earnings in an
       amount equal to at least 10 percent of appropriations of retained
       earnings to be paid in cash should be appropriated as a legal reserve
       until such reserve equals 25 percent of stated common stock. This legal
       reserve was not available for dividends but might be used to reduce a
       deficit by resolution of the shareholders or might be transferred to
       stated common stock by resolution of the Board of Directors.

       Effective October 1, 2001, the JCC was amended to require earnings in an
       amount equal to at least 10 percent of appropriations of retained
       earnings to be paid in cash should be appropriated as a legal reserve
       until total additional paid in capital and legal reserve equals 25
       percent of stated common stock. Either additional paid in capital or
       legal reserve may be available for dividends by resolution of the
       shareholders to the extent that the amount of total additional paid in
       capital and legal reserve exceeds 25 percent of stated common stock.

       Cash dividends and appropriations to the legal reserve charged to
       retained earnings during the years ended March 31, 2003, 2002 and 2001
       represent dividends resolved during those years and the related
       appropriations to the legal reserve. Provision had not been made in the
       accompanying consolidated financial statements for the dividend for the
       second half year of JPY 3.0 per share, aggregating JPY 10,094 million,
       subsequently would be proposed by the Board of Directors at the ordinary
       general shareholders' meeting in respect to the year ended March 31,
       2003.

       Cash dividends per share for the years ended March 31, 2003, 2002 and
       2001 are computed at JPY 6.0, JPY 3.0 and JPY 11.0, respectively, based
       on dividends declared with respect to earnings for the periods.

(13)   Treasury Stock

       The Japanese Commercial Code (JCC) had imposed certain restrictions on
       acquisition and disposal of treasury stock. Effective October 1, 2001,
       the JCC eliminated the provision of these restrictions and allowed
       acquisitions of treasury stock to the extent of funds appropriated by a
       resolution of shareholders.

       As of March 31, 2003, the Company held 3,216,077 shares of the Company's
       common stock as treasury stock as a result of acquisitions of shares from
       shareholders holding less than a trading lot (1,000 shares) upon request
       by the shareholder pursuant to the provisions of the JCC. The
       shareholders may request the Company to acquire their shares below a
       trading lot as any number of shares below a trading lot cannot be
       publicly traded and does not carry on a voting right.

       In April 2003, the Board of Directors proposed to acquire up to
       300,000,000 shares of the Company's common stock for aggregate
       acquisition price not exceeding JPY 150,000 million as treasury stock for
       the period from the close of the ordinary general shareholders' meeting
       to the close of the next ordinary general shareholders' meeting, pursuant
       to the provisions of the JCC. This proposal is subject to an approval at
       the ordinary general shareholders' meeting on June 25, 2003.

       At the ordinary general shareholders' meeting on June 26, 2002, the
       Company was approved to acquire up to 300,000,000 shares of its common
       stock for aggregate acquisition price not exceeding JPY 300,000 million
       as treasury stock for the period from the close of the ordinary general
       shareholders' meeting to the close of the next ordinary general
       shareholders' meeting, pursuant to the provision of the JCC. In May 2003,
       based on this approval, the Company acquired its own shares as indicated
       in note 27.

                                       101

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(14)   Accumulated Other Comprehensive Loss

       Accumulated other comprehensive loss, net of related tax effects,
       displayed in the consolidated statements of stockholders' equity is
       classified as follows:

<TABLE>
<CAPTION>
                                                                                     Yen (millions)
                                                                          -------------------------------
                                                                            2003         2002      2001
                                                                            ----         ----      ----
        <S>                                                               <C>         <C>        <C>
        Foreign currency translation adjustments:
           Balance at beginning of year                                    (38,012)    (57,647)   (77,577)
           Other comprehensive income (loss),
             net of reclassification adjustments                           (21,833)     19,986     20,804
           Net transfer from (to) minority interests arising from
             conversion of subsidiaries' convertible debentures                  7           -         (3)
           Net transfer to minority interests arising from issuance
              of subsidiaries' common stock and other                       (1,110)       (351)      (871)
                                                                          --------    --------   --------
           Balance at end of year                                          (60,948)    (38,012)   (57,647)
                                                                          --------    --------   --------
        Minimum pension liability adjustments:
           Balance at beginning of year                                   (260,100)   (182,936)         -
           Other comprehensive loss                                       (438,799)    (77,338)  (182,936)
           Net transfer from minority interests arising from
             conversion of subsidiaries' convertible debentures                 20           -          -
           Net transfer from (to) minority interests arising from
             issuance of subsidiaries' common stock and other                  (37)        174          -
                                                                          --------    --------   --------
           Balance at end of year                                         (698,916)   (260,100)  (182,936)
                                                                          --------     -------   --------
        Net unrealized holding gain on available-for-sale securities:
           Balance at beginning of year                                     39,997      51,041     95,019
           Other comprehensive loss,
             net of reclassification adjustments                           (35,082)    (11,132)   (43,991)
           Net transfer from (to) minority interests arising from
             conversion of subsidiaries' convertible debentures                  1           1         (6)
           Net transfer from (to) minority interests arising from
              issuance of subsidiaries' common stock and other                 (42)         87         19
                                                                          --------    --------   --------
           Balance at end of year                                            4,874      39,997     51,041
                                                                          --------    --------   --------
</TABLE>

                                       102

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                            Yen (millions)
                                                                  ---------------------------------
                                                                    2003        2002          2001
                                                                    ----        ----          ----
<S>                                                               <C>         <C>          <C>
Cash flow hedges:
   Balance at beginning of year                                       (369)      1,096            -
   Other comprehensive income (loss),
     net of reclassification adjustments                              (147)     (1,464)       1,012
   Net transfer from minority interests arising from
     conversion of subsidiaries' convertible debentures                  2           -            -
   Net transfer from (to) minority interests arising from
     issuance of subsidiaries' common stock and other                  (21)         (1)          84
                                                                  --------    --------     --------
   Balance at end of year                                             (535)       (369)       1,096
                                                                  --------    --------     --------
Total accumulated other comprehensive loss:
   Balance at beginning of year                                   (258,484)   (188,446)      17,442
   Other comprehensive loss,
     net of reclassification adjustments                          (495,861)    (69,948)    (205,111)
   Net transfer from (to) minority interests arising from
     conversion of subsidiaries' convertible debentures                 30           1           (9)
   Net transfer to minority interests arising from
     issuance of subsidiaries' common stock and other               (1,210)        (91)        (768)
                                                                  --------    --------     --------
   Balance at end of year                                         (755,525)   (258,484)    (188,446)
                                                                  ========    ========     ========
</TABLE>

                                       103

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The following is a summary of reclassification adjustments by each
     classification of other comprehensive income (loss) arising during the
     years ended March 31, 2003, 2002 and 2001 and the amounts of income tax
     expense or benefit allocated to each component of other comprehensive
     income (loss), including reclassification adjustments.

<TABLE>
<CAPTION>
                                                                                Yen (millions)
                                                                     ----------------------------------
                                                                                     2003
                                                                     ----------------------------------
                                                                     Before-tax    Tax benefit  Net-of-tax
                                                                       amount       (expense)     amount
                                                                       ------      ---------      ------
     <S>                                                             <C>           <C>          <C>
     Other comprehensive loss arising during the year:
        Foreign currency translation adjustments                       (21,294)           -      (21,294)
        Minimum pension liability adjustments                         (744,779)     305,980     (438,799)
        Net unrealized holding gain on available-for-sale
          securities                                                   (54,607)      22,789      (31,818)
        Cash flow hedges                                                  (953)         388         (565)
                                                                     ---------     --------     --------
                                                                      (821,633)     329,157     (492,476)
     Reclassification adjustments for net loss (gain) included in
       net income:
        Foreign currency translation adjustments                          (539)           -         (539)
        Net unrealized holding gain on available-for-sale
          securities                                                    (5,642)       2,378       (3,264)
        Cash flow hedges                                                   707         (289)         418
                                                                     ---------     --------     --------
                                                                        (5,474)       2,089       (3,385)
     Other comprehensive loss, net of reclassification
       adjustments:
        Foreign currency translation adjustments                       (21,833)           -      (21,833)
        Minimum pension liability adjustments                         (744,779)     305,980     (438,799)
        Net unrealized holding gain on available-for-sale
          securities                                                   (60,249)      25,167      (35,082)
        Cash flow hedges                                                  (246)          99         (147)
                                                                     ---------     --------     --------
                                                                      (827,107)     331,246     (495,861)
                                                                     =========     ========     ========
</TABLE>

                                       104

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                               Yen (millions)
                                                                     ----------------------------------
                                                                                    2002
                                                                     ----------------------------------
                                                                      Before-tax   Tax benefit  Net-of-tax
                                                                        amount      (expense)     amount
                                                                        ------      ---------     ------
     <S>                                                             <C>           <C>          <C>
     Other comprehensive income (loss) arising during the year:
        Foreign currency translation adjustments                         19,511             -     19,511
        Minimum pension liability adjustments                          (132,882)       55,544    (77,338)
        Net unrealized holding gain on available-for-sale
          securities                                                    (97,342)       40,679    (56,663)
        Cash flow hedges                                                   (948)          526       (422)
                                                                     ----------    ----------   --------
                                                                       (211,661)       96,749   (114,912)
     Reclassification adjustments for net loss (gain) included in
       net loss:
        Foreign currency translation adjustments                            475             -        475
        Net unrealized holding gain on available-for-sale
          securities                                                     78,232       (32,701)    45,531
        Cash flow hedges                                                   (767)         (275)    (1,042)
                                                                     ----------    ----------   --------
                                                                         77,940       (32,976)    44,964
     Other comprehensive income (loss), net of reclassification
       adjustments:
        Foreign currency translation adjustments                         19,986             -     19,986
        Minimum pension liability adjustments                          (132,882)       55,544    (77,338)
        Net unrealized holding gain on available-for-sale
          securities                                                    (19,110)        7,978    (11,132)
        Cash flow hedges                                                 (1,715)          251     (1,464)
                                                                     ----------    ----------   --------
                                                                       (133,721)       63,773    (69,948)
                                                                     ==========    ==========   ========
</TABLE>

                                       105

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                   Yen (millions)
                                                                       ----------------------------------
                                                                                        2001
                                                                       ----------------------------------
                                                                       Before-tax   Tax benefit   Net-of-tax
                                                                         amount      (expense)      amount
                                                                         ------      ---------      ------
    <S>                                                                <C>          <C>           <C>
    Other comprehensive income (loss) arising during the year:
        Foreign currency translation adjustments                          18,990             -       18,990
        Minimum pension liability adjustments                           (314,158)      131,222     (182,936)
        Net unrealized holding gain on available-for-sale
          securities                                                     (55,311)       22,759      (32,552)
        Cash flow hedges                                                   2,742          (804)       1,938
                                                                       ---------    ----------    ---------
                                                                        (347,737)      153,177     (194,560)
    Reclassification adjustments for net loss (gain) included in
      net income:
        Foreign currency translation adjustments                           1,814             -        1,814
        Net unrealized holding gain on available-for-sale
          securities                                                     (19,652)        8,213      (11,439)
        Cash flow hedges                                                  (1,670)          744         (926)
                                                                       ---------    ----------    ---------
                                                                         (19,508)        8,957      (10,551)
    Other comprehensive income (loss), net of reclassification
      adjustments:
        Foreign currency translation adjustments                          20,804             -       20,804
        Minimum pension liability adjustments                           (314,158)      131,222     (182,936)
        Net unrealized holding gain on available-for-sale
          securities                                                     (74,963)       30,972      (43,991)
        Cash flow hedges                                                   1,072           (60)       1,012
                                                                       ---------    ----------    ---------
                                                                        (367,245)      162,134     (205,111)
                                                                       =========    ==========    =========
</TABLE>

                                       106

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(15) Commitments and Contingencies

     The Company and its operating subsidiaries are contingently liable for loan
     guarantees to its affiliates in the amount of approximately JPY 38,599
     million as of March 31, 2003.

     Hitachi Capital Corporation (HCC), a financing subsidiary of the Company,
     provides guarantees to financial institutions for extending loans to
     customers of HCC. As of March 31, 2003, the undiscounted maximum potential
     future payments under such guarantees amounted to JPY 590,028 million of
     which JPY 139,878 million is covered by consumer credit insurance. The
     Company has accrued JPY 1,751 million as an obligation to stand ready to
     perform over the term of the guarantees.

     HCC provides certain revolving lines of credit to its credit card holders
     in accordance with the terms of the credit card business customer service
     contracts. Furthermore, HCC provides credit facilities to parties in
     accordance with the service agency business contracts from which temporary
     payments on behalf of such parties are made. In addition, the Company
     provides a loan commitment to an affiliated company.

     The outstanding balance of the revolving lines of credits, credit
     facilities and a loan commitment as of March 31, 2003 is as follows:

                                                              Yen (millions)
                                                              -------------
          Total commitment available                             664,634
          Amount utilized                                         (1,897)
                                                                 -------
          Balance available                                      662,737
                                                                 =======

     A portion of the revolving lines of credit which are pending credit
     approval cannot be utilized.

     The Company and certain of its subsidiaries hold line of credit
     arrangements with banks in order to secure source of working capital. The
     unused line of credit as of March 31, 2003 amounted to JPY 147,042 million.

     As of March 31, 2003, outstanding commitments for the purchase of property,
     plant and equipment were approximately JPY 30,214 million.

                                       107

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The Company and its subsidiaries generally warrant its products over
     respective warranty periods. The accrued product warranty costs are based
     primarily on historical experience of actual warranty claims. Change in
     accrued product warranty cost for the year ended March 31, 2003 is as
     follows:

                                                            Yen (millions)
                                                            --------------
                                                                 2003
                                                                 ----
           Balance at beginning of year                         98,865
           Addition                                             26,740
           Utilization                                         (20,987)
           Other                                                   679
                                                               -------
           Balance at end of year                              105,297
                                                               =======

     It is a common practice in Japan for companies, in the ordinary course of
     business, to receive promissory notes in the settlement of trade accounts
     receivable and to subsequently discount such notes to banks or to transfer
     them by endorsement to suppliers in the settlement of accounts payable.

     As of March 31, 2003 and 2002, the companies were contingently liable for
     trade notes discounted and endorsed in the following amounts:

                                                        Yen (millions)
                                                     --------------------
                                                      2003          2002
                                                      ----          ----
           Notes discounted                           3,639         3,452
           Notes endorsed                            24,924        33,062
                                                     ------        ------
                                                     28,563        36,514
                                                     ======        ======

     The Company and certain subsidiaries are subject to several legal
     proceedings and claims which have arisen in the ordinary course of business
     and have not been finally adjudicated. These actions when ultimately
     concluded and determined will not, in the opinion of management, have a
     material adverse effect on the financial position and results of operations
     of the Company and certain subsidiaries.

                                       108

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(16) Impairment losses for long-lived assets

     Under the provision of SFAS No. 144, "Accounting for the Impairment or
     Disposal of Long-Lived Assets" the Company and certain subsidiaries
     recognized impairment losses for the year ended March 31, 2003 in the
     amount of JPY 8,474 million. The majority of the impairment losses were
     recorded by the Company's Device Development Center, which provides
     semiconductor product development and design services. The significant
     decline in the demand for such development resulted from the Company's
     realignment of the semiconductor operations.

     The impairment losses were measured as the amount by which the carrying
     amount of the assets exceeded their fair values. In calculating those fair
     values, the Company and certain subsidiaries used present value techniques
     based on the estimated future cash flows expected to result from the use of
     the assets and their eventual disposition.

     Under the provision of SFAS No. 121, "Accounting for the Impairment of
     Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," certain
     subsidiaries recognized impairment losses for the year ended March 31, 2002
     in the amount of JPY 46,115 million. Impairment losses resulted due mainly
     to the significant decline in demand and prices of semiconductor products.

(17) Restructuring charges

     Certain losses incurred in the reorganization of the Company's operations
     are considered as restructuring charges. Components and related amounts
     of the restructuring charges, before the related tax effects, for the
     years ended March 31, 2003, 2002 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                                             Yen (millions)
                                                                   -------------------------------
                                                                   2003           2002        2001
                                                                   ----           ----        ----
<S>                                                                <C>        <C>         <C>
         Special termination benefits                                    -      185,105      5,275
         Loss on fixed assets                                            -       51,316        914
         Loss on disposal of inventories                                 -       19,451          -
         Lease termination and business partner compensation             -       11,487          -
         Cost incurred in association with employee termination
          including retraining and outplacement                          -        7,404          -
         Others                                                          -       13,333      2,625
                                                                   -------    ---------   --------
     Total restructuring charges                                         -      288,096      8,814
                                                                   =======    =========   ========
</TABLE>

                                       109

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

       For the year ended March 31, 2002, the Company and certain subsidiaries
       incurred restructuring charges in the amount of JPY 288,096 million. The
       restructure resulted from the Company's corporate strategy to realign its
       organization to cope with the weak global demand for IT related products,
       intense price competition and continuous economic slow down in Japan. The
       restructuring charges by major division are as follows:

<TABLE>
<CAPTION>
                                                                            Yen (millions)
                                               -------------------------------------------------------------------------
                                                                           Digital       High
                                                                            Media &   Functional
                                                            Electronic     Consumer   Materials &
                                               IT Systems     Devices      Products   Components     Other       Total
                                               ----------     -------      --------   ----------     -----       -----
        <S>                                    <C>          <C>            <C>        <C>            <C>        <C>
           Special termination benefits          45,294       46,301        21,510       11,613      60,387     185,105
           Loss on fixed assets                   2,220       25,695         7,485       10,321       5,595      51,316
           Loss on disposal of
              inventories                        14,548        1,902         1,410          275       1,316      19,451
           Lease termination and business
               partner compensation                 877        3,061         5,486          276       1,787      11,487
           Cost incurred in association
               with employee termination
               including retraining and
               outplacement                         678        2,210         2,318          894       1,304       7,404
           Others                                   173        3,549         1,036        2,314       6,261      13,333
                                                 ------       ------        ------       ------      ------     -------
        Total restructuring charges              63,790       82,718        39,245       25,693      76,650     288,096
                                                 ======       ======        ======       ======      ======     =======
</TABLE>

        The Company provided special termination benefits to those employees
        voluntarily leaving the Company. The accrued special termination
        benefits were recognized at the time voluntary termination was offered
        and benefits accepted by the employees. An analysis of the accrued
        special termination benefits for the years ended March 31, 2003, 2002
        and 2001 is as follows:

<TABLE>
<CAPTION>
                                                                                Yen (millions)
                                                                    ------------------------------------
                                                                       2003          2002        2001
                                                                       ----          ----        ----
             <S>                                                    <C>           <C>         <C>
             Balance at beginning of the year                         114,266         2,371     18,545
             New charges                                                    -       185,105      5,275
                (employees to be terminated)                                -        22,422        772
             Cash payments                                           (114,213)      (73,252)   (21,567)
                (employees actually terminated)                        10,077        12,681      6,538
             Foreign currency exchange rate changes                       (53)           42        118
                                                                    ---------     ---------   --------
             Balance at end of the year                                     -       114,266      2,371
                                                                    =========     =========   ========
</TABLE>

       Restructuring charges related to lease termination and business partner
       compensation, cost incurred in association with employee termination
       including retraining and outplacement, and others have been accrued as
       liabilities. Majority of the liabilities were paid by March 2002. In
       addition to the liabilities above, special termination benefits have been
       accrued as liability and were substantially paid by March 2003.

                                       110

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The following represent significant restructuring activities by business
     line:

     1.   Information & Telecommunication Systems ("IT Systems") division
          restructured its telecommunications business in North America. The
          exit strategy called for a complete exit except for the after-service
          business by March 2002. The decision culminated as the result of
          bankruptcy filing by its major customer and required liquidation of
          all financial assets and obligations of the business. As a result, the
          Company and certain subsidiaries disposed inventories and fixed
          assets. The charges in connection with such restructuring amounted to
          JPY 23,369 million, including accrual of JPY 9,342 million mainly for
          special termination benefits. The liabilities recognized were paid by
          March 2003.

     2.   Electronic Devices division decided to shut down several cathode ray
          tube monitor-manufacturing plants and production lines in Japan,
          Singapore and Malaysia, and direct view color televisions product
          lines in North America. This decision was due to intense competition
          and general overcapacity in the market. The exit plan called for a
          complete exit from the business by the end of April 2002 and involved
          the Company and certain subsidiaries disposing inventories and fixed
          assets. The charges in connection with such restructuring amounted to
          JPY 30,412 million, and the amount of JPY 13,921 million for special
          termination benefits and JPY 4,851 million mainly for cancellation
          penalties were accrued. The liabilities for special termination
          benefits were paid by March 2003 and the remaining liabilities were
          substantially paid by March 2002.

          Semiconductor facilities and production lines were reorganized in
          Japan in response to a sharp decline in semiconductor product prices
          and general overcapacity in the market. This stagnation was as the
          result of decline in demand for semiconductor products used in PCs and
          mobile communications equipment. The reorganization plan included
          moving front-end production operations to newer lines to maximize
          efficiency and back-end production bases were consolidated to fewer
          numbers of bases. The associated restructuring charges amounted to JPY
          45,510 million, including accrual of JPY 37,156 million. The
          liabilities for special termination benefits in the amount of JPY
          28,479 million were paid out by March 2003, and the liabilities in the
          amount of JPY 8,677 million incurred mainly for removal costs were
          substantially paid by March 2002.

     3.   Digital Media & Consumer Products division restructured its television
          manufacturing plants and related distribution network in order to
          address the general weakness in consumer demand for consumer products.
          This restructuring was in response to the slow down of the global
          economy and general decline in the color television prices. In order
          to strengthen the global competitiveness, the Company decided to
          consolidate its manufacturing operation and streamlining the sales
          channels. As part of the restructuring effort within Asia, the Company
          decided to transfer color television product management, R&D and
          manufacturing capabilities, and vacuum cleaner production from
          Singapore to certain subsidiaries in China, Indonesia and Thailand.
          One of the Company's UK sales and manufacturing subsidiary was
          liquidated in February 2002 in an effort to reorganize the European
          sales channel. The Company disposed of inventories and fixed assets in
          the process of implementing its restructuring measures. The charges in
          connection with such restructuring amounted to JPY 9,581 million. The
          liabilities for special termination benefits in the amount of JPY
          3,634 million were paid by March 2002, and the liabilities for lease
          termination and others amounted to JPY 2,719 million were almost paid
          by March 2002.

     4.   In High Functional Materials & Components division, the mobile
          telephone parts business was restructured as the result of weak demand
          for information technology related parts and supplies. Restructuring
          measures taken included streamlining of the production lines in Japan,
          and shutting down of manufacturing plants in Malaysia and Japan. The
          charges in connection with such restructuring amounted to JPY 23,474
          million, and the JPY 11,940 million were accrued mainly for special
          termination benefits. The liabilities were paid by March 2003.

     5.   Restructuring charge of JPY 76,650 million of which JPY 60,387 million
          represented special termination benefits were incurred in the other
          remaining businesses of the Company.

(18) Other Income and Other Deductions

     "Other deductions" for the year ended March 31, 2003, the Company and
     certain subsidiaries recorded a net periodic benefit cost of JPY 24,857
     million which were generated as the result of adopting EITF Issue No. 03-2
     "Accounting for the Transfer to the Japanese Government of the
     Substitutional Portion of Employee Pension Fund Liabilities" as shown in
     note 10.

     "Other deductions" for the years ended March 31, 2003 and 2002 and "Other
     income" for the year ended March 31, 2001 includes the net loss on
     securities in the amount of JPY 660 million and JPY 80,938 million and the
     net gain on securities in the amount of JPY 9,334 million, respectively. In
     addition, JPY 15,651 million of gross realized gains on contributions of
     available-for-sale securities to pension fund trusts is included in "Other
     income" for the year ended March 31, 2001. Equity in earnings of affiliated
     companies included in "Other deductions" for the years ended March 31, 2003
     and 2002 and "Other income" for the year ended March 31, 2001 is a loss of
     JPY 15,803 million, JPY 35,756 million and a gain of JPY 2,559 million,
     respectively.

     For the year ended March 31, 2003 net gain on sale and disposal of rental
     assets and other property, classified as "Other income," amounted to JPY
     23,658 million while net loss on sale and disposal of rental assets and
     other property of JPY 15,150 million and JPY 7,776 million were included in
     "Other deductions" for the years ended March 31, 2002 and 2001,
     respectively.

                                       111

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(19) Net Income (Loss) Per Share Information

     The reconciliations of the numbers and the amounts used in the basic and
     diluted net income (loss) per share computations are as follows:

<TABLE>
<CAPTION>
                                                                     Number of shares
                                                      -----------------------------------------------
                                                           2003             2002            2001
                                                           ----             ----            ----
       <S>                                            <C>              <C>             <C>
       Weighted average number of shares on
         which basic net income (loss) per share
         is calculated                                 3,351,624,705    3,337,850,007   3,337,926,578
       Effect of dilutive securities:
            5th series convertible debentures                      -                -      28,442,656
            6th series convertible debentures                      -                -      49,502,986
            7th series convertible debentures                      -                -     128,944,696
                                                      --------------   --------------  --------------
       Number of shares on which diluted net
         income (loss) per share is calculated         3,351,624,705    3,337,850,007   3,544,816,916
                                                      ==============   ==============  ==============

<CAPTION>
                                                                       Yen (millions)
                                                      -----------------------------------------------
                                                           2003             2002            2001
                                                           ----             ----            ----
       <S>                                            <C>              <C>             <C>
       Net income (loss) applicable to common
        stockholders                                          27,867         (483,837)        104,380
       Effect of dilutive securities:
            5th series convertible debentures                      -                -             325
            6th series convertible debentures                      -                -             831
            7th series convertible debentures                      -                -           2,065
            Other                                               (402)               -            (119)
                                                            --------         --------        --------
       Net income (loss) on which diluted
         net income (loss) per share is calculated            27,465         (483,837)        107,482
                                                            ========         ========        ========

<CAPTION>
                                                                            Yen
                                                      -----------------------------------------------
       <S>                                            <C>              <C>                  <C>
       Net income (loss) per share:
            Basic                                               8.31          (144.95)          31.27
            Diluted                                             8.19          (144.95)          30.32
</TABLE>

     The net loss per share computation for the year ended March 31, 2002
     excludes all series convertible debentures because their effect would have
     been antidilutive. The net income per share computation for the year ended
     March 31, 2003 excludes 6th and 7th series convertible debentures because
     their effect would have been antidilutive. In addition, 5th series
     convertible debentures were redeemed in March 2002.

                                       112

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(20) Supplementary Income Information

<TABLE>
<CAPTION>
                                                                   Yen (millions)
                                                        -----------------------------------
                                                           2003         2002         2001
                                                           ----         ----         ----
          <S>                                           <C>          <C>          <C>
          Taxes other than income taxes consist
           of the following:
               Property                                    45,318       43,396       43,825
               Welfare                                    203,196      202,369      198,447
               Other                                       12,277       15,596       15,828
                                                        ---------    ---------    ---------
                                                          260,791      261,361      258,100
                                                        =========    =========    =========

          Maintenance and repairs                          83,660       89,786      106,542
          Research and development expense                377,154      415,448      435,579
          Provision for retirement and severance
           benefits and pension expense                   224,681      195,820      152,943
          Advertising expense                              52,165       55,075       50,940
          Rent                                            156,552      155,237      148,463
          Exchange (gain) loss                             18,262       (7,424)      11,307
</TABLE>

(21) Supplementary Cash Flows Information

<TABLE>
<CAPTION>
                                                                   Yen (millions)
                                                        -----------------------------------
                                                           2003         2002         2001
                                                           ----         ----         ----
          <S>                                           <C>          <C>          <C>
          Cash paid during the year for:
               Interest                                    35,932       52,881       50,073
               Income taxes                                94,013      159,132      126,019
</TABLE>

     Convertible debentures issued by the Company of JPY 556 million in 2002 and
     JPY 32 million in 2001 were converted into common stock. Convertible
     debentures issued by subsidiaries of JPY 4,728 million in 2003, JPY 579
     million in 2002 and JPY 2,305 million in 2001 were converted into
     subsidiaries' common stock. Capital lease assets of JPY 4,050 million in
     2003, JPY 3,874 million in 2002 and JPY 4,672 million in 2001 were
     capitalized.

     During the years ended March 31, 2003 and 2001, the Company acquired and
     integrated some of its subsidiaries and affiliates through exchange of
     equity securities procedure as shown in note 25.

     The proceeds from sale of securities classified as available-for-sale
     discussed in note 2 are included in both "(Increase) decrease in short-term
     investments" and "Proceeds from sale of investments and subsidiaries'
     common stock" on the consolidated statements of cash flows.

                                       113

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(22) Derivative Instruments and Hedging Activities

     Overall risk profile
     The major manufacturing bases of the Company and its subsidiaries are
     located in Japan and Asia. The selling bases are located globally, and the
     Company and its subsidiaries generate approximate 30% of their sales from
     overseas. These sales are mainly denominated in U.S. dollar or Euro. As a
     result, the Company and its subsidiaries are exposed to market risks from
     changes in foreign currency exchange rate.

     The financing subsidiaries in London, New York and Singapore issue U.S.
     dollar denominated, variable rate, medium-term notes mainly through the
     Euro markets to finance its overseas long-term operating capital. As a
     result, the Company and its subsidiaries are exposed to market risks from
     changes in foreign currency exchange rate and interest rate.

     The Company and its subsidiaries are also exposed to credit-related losses
     in the event of non-performance by counterparties to derivative financial
     instruments, but it is not expected that any counterparties will fail to
     meet their obligations, because most of the counterparties are
     internationally recognized financial institutions and contracts are
     diversified into a number of major financial institutions.

     Risk management policy
     The Company and its subsidiaries assess foreign currency exchange rate risk
     and interest rate risk by continually monitoring changes in these exposures
     and by evaluating hedging opportunities. It is the Company's policy that
     the Company and its subsidiaries do not enter into derivative financial
     instruments for any purpose other than hedging purposes.

     Foreign currency exchange rate risk management
     The Company and its subsidiaries have assets and liabilities which are
     exposed to foreign currency exchange rate risk and, as a result, they enter
     into forward exchange contracts and cross currency swap agreements for the
     purpose of hedging these risk exposures.

     In order to fix the future net cash flows principally from trade
     receivables and payables recognized, which are denominated in foreign
     currencies, the Company and its subsidiaries on a monthly basis measure the
     volume and due date of future net cash flows by currencies. In accordance
     with their policy, a certain portion of measured net cash flows is covered
     using forward exchange contracts, which principally mature within one year.

     The Company and its subsidiaries enter into cross currency swap agreements
     with the same maturities as underlying debts to fix cash flows from
     long-term debts denominated in foreign currencies. The hedging relationship
     between the derivative financial instrument and its hedged item is highly
     effective in achieving offsetting changes in foreign currency exchange
     rates.

                                       114

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Interest rate risk management
     The Company's and its subsidiaries' exposure to interest rate risk is
     related principally to long-term debt obligations. These debt obligations
     expose the Company and its subsidiaries to variability in the future cash
     outflow of interest payments due to changes in interest rates. Management
     believes it is prudent to minimize the variability caused by interest rate
     risk.

     To meet this objective, the Company and its subsidiaries principally enter
     into interest rate swaps to manage fluctuations in cash flows resulting
     from interest rate risk. The interest rate swaps principally change the
     variable-rate cash flows on debt obligations to fixed-rate cash flows
     principally associated with medium-term notes by entering into
     receive-variable, payfixed interest rate swaps. Under the interest rate
     swaps, the Company and its subsidiaries receive variable interest rate
     payments and make fixed interest rate payments, thereby creating fixed-rate
     long-term debt. The hedging relationship between the interest rate swaps
     and its hedged item is highly effective in achieving offsetting changes in
     cash flows resulting from interest rate risk.

     Fair value hedge
     Changes in fair value of both recognized assets and liabilities, and
     derivative financial instruments designated as fair value hedges of these
     assets and liabilities are recognized in other income (deductions).
     Derivative financial instruments designated as fair value hedges include
     forward exchange contracts associated with operating transactions and cross
     currency swap agreements associated with financing transactions.

     The sum of the amount of the hedging ineffectiveness and net gain or loss
     excluded from the assessment of hedge effectiveness is not material for the
     years ended March 31, 2003, 2002 and 2001, respectively.

     Cash flow hedge
     Foreign Currency Exposure
     Changes in fair value of forward exchange contracts designated and
     qualifying as cash flow hedges of forecasted transactions and recognized
     assets and liabilities are reported in accumulated other comprehensive
     income (AOCI). These amounts are reclassified into earnings in the same
     period as the hedged items affect earnings.

     The sum of the amount of the hedging ineffectiveness and net gain or loss
     excluded from the assessment of hedge effectiveness is not material for the
     years ended March 31, 2003, 2002 and 2001.

     It is expected that approximately gains of JPY 130 million of AOCI relating
     to existing forward exchange contracts will be reclassified into other
     income and other deductions during the year ending March 31, 2004.

     As of March 31, 2003, the maximum length of time over which the Company and
     its subsidiaries are hedging their exposure to the variability in future
     cash flows associated with foreign currency forecasted transactions is
     approximately 12 months.

                                       115

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Interest Rate Exposure
     Changes in fair values of interest rate swaps designated as hedging
     instruments for the variability of cash flows associated with long-term
     debt obligations are reported in AOCI. These amounts subsequently are
     reclassified into interest charges as a yield adjustment in the same period
     in which the hedged debt obligations affect earnings.

     Interest charges for the years ended March 31, 2003, 2002 and 2001 includes
     losses of JPY 497 million, gains of JPY 667 million and losses of JPY 1,357
     million, respectively, which represents the component excluded from the
     assessment of hedge effectiveness.

     During the year ending March 31, 2004, approximately losses of JPY 476
     million of AOCI related to the interest rate swaps are expected to be
     reclassified into interest charges as a yield adjustment of the hedged debt
     obligations.

     The contract or notional amounts of derivative financial instruments held
     as of March 31, 2003 and 2002 are summarized as follows:

                                                      Yen (millions)
                                                 -----------------------
                                                    2003          2002
                                                    ----          ----
          Forward exchange contracts:
             To sell foreign currencies           187,093       105,054
             To buy foreign currencies             27,584        15,489
          Cross currency swap agreements:
             To sell foreign currencies            51,789        71,798
             To buy foreign currencies            128,717       170,802
          Interest rate swaps                     484,961       606,847

(23) Concentrations of Credit Risk

     The Company and its subsidiaries generally do not have significant
     concentrations of credit risk to any counterparties nor any regions,
     because those are diversified and spread globally.

(24) Fair Value of Financial Instruments

     The following methods and assumptions are used to estimate the fair values
     of financial instruments:

     Investment in securities
     The fair value of investment in securities is estimated based on quoted
     market prices for these or similar securities.

     Long-term debt
     The fair value of long-term debt is estimated based on quoted market prices
     or the present value of future cash flows using the companies' incremental
     borrowing rates for similar borrowing arrangements.

     Cash and cash equivalents, Trade receivables, Short-term debt and Trade
     payables
     The carrying amount approximates the fair value because of the short
     maturity of these instruments.

                                       116

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Derivative financial instruments
     The fair values of forward exchange contracts, cross currency swap
     agreements and interest rate swaps are estimated on the basis of the market
     prices of derivative financial instruments with similar contract
     conditions.

     The carrying amounts and estimated fair values of the financial instruments
     as of March 31, 2003 and 2002 are as follows:

<TABLE>
<CAPTION>
                                                                      Yen (millions)
                                                  ------------------------------------------------------
                                                           2003                          2002
                                                  ------------------------      ------------------------
                                                  Carrying       Estimated       Carrying       Estimated
                                                   amounts     fair values        amounts     fair values
                                                   -------     -----------      --------      -----------
     <S>                                        <C>            <C>             <C>            <C>
     Investment in securities:
          Short-term investments                   186,972         186,972        178,933         178,933
          Investments and advances                 299,143         299,138        446,148         446,139
     Derivatives (Assets):
          Forward exchange contracts                   668             668            225             225
          Cross currency swap agreements               279             279          3,456           3,456
          Interest rate swaps                        1,921           1,921          2,672           2,672
     Long-term debt                             (2,014,738)     (2,064,192)    (2,164,386)     (2,222,585)
     Derivatives (Liabilities):
          Forward exchange contracts                (1,333)         (1,333)        (3,128)         (3,128)
          Cross currency swap agreements            (3,045)         (3,045)        (7,778)         (7,778)
          Interest rate swaps                       (3,853)         (3,853)        (3,021)         (3,021)
</TABLE>

     It is not practicable to estimate the fair value of investments in unlisted
     common stock because of the lack of a market price and difficulty in
     estimating fair value without incurring excessive cost. The carrying
     amounts of these investments at March 31,2003 and 2002 totaled JPY 75,860
     million and JPY 73,639 million, respectively.

                                       117

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

(25) Merger and Acquisition

     On May 28, 2002, the Company signed a share exchange agreement with Hitachi
     Unisia Automotive, Ltd., former UNISIA JECS Corporation (UJ), to assume
     full ownership of UJ by exchanging 0.197 shares of the Company's common
     stock for each share of UJ common stock outstanding. The Company and UJ
     obtained third party valuations of the respective share prices which were
     used as a basis in negotiating the share exchange ratio. On October 1,
     2002, the Company issued 25,143,245 shares of common stock, in the amount
     of JPY 23,635 million based on the quoted market price of JPY 940 per share
     as of the announcement date, April 18, 2002, for exchange with the UJ
     registered shareholders as of September 30, 2002.

     UJ manufactures automotive systems and components that support every area
     of basic vehicle function. The Company has strategically targeted the
     automotive products business and the purpose of making UJ a wholly owned
     subsidiary is to further expand this business.

     The effects of the acquisition to the balance sheet as of October 1, 2002
     are as follows:

                                                      Yen (millions)
                                                      -------------
          Current assets                                    68,427
          Non-current assets                               121,248
          Goodwill                                          10,435
          Current liabilities                              (99,453)
          Non-current liabilities                          (76,120)
          Net assets acquired                              (23,635)
          Net assets previously acquired                      (902)

     The results of operations of UJ for the period from October 1, 2002 to
     March 31, 2003 are included in the accompanying consolidated statements of
     income. On a pro forma basis, revenue, net income and the per share
     information of the Company, with assumed acquisition dates for UJ of April
     1, 2002 and 2001, respectively, would not differ materially from the amount
     reported in the accompanying consolidated financial statements as of and
     for the years ended March 31, 2003 and 2002.

     On December 31, 2002, the Company purchased a majority ownership in a
     company to which hard disk drive operations and related intellectual
     property portfolio had been transferred from International Business
     Machines Corp. (IBM) for a total cash purchase price, subject to
     adjustment, of JPY 243,480 million. This purchase price adjustment may
     reduce the purchase price and the amount of goodwill recorded upon
     acquisition. The purchase price is payable in three installments, of which
     the first installment payment was paid on December 31, 2002 with the
     remaining payments due in December 2003 and 2005.

     On January 1, 2003, this company began operating as Hitachi Global Storage
     Technologies Netherlands B.V. (HGST). HGST offers full array of hard-disk
     and this acquisition will complement and expand the Company's product
     portfolio, production capacity, research and development and distribution
     channel globally.

                                       118

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     Upon closing, the Company obtained full voting rights to HGST and, as a
     result, has consolidated all of its assets and liabilities in the
     consolidated balance sheet, with the remaining installment payments
     recorded as liabilities.

     The effects of this purchase as of December 31, 2002 are as follows:

                                                                Yen (millions)
                                                                -------------

             Current assets                                         106,357
             Non-current assets                                     184,326
             Goodwill                                                13,653
             Current liabilities                                    (24,737)
             Non-current liabilities                                (32,159)
             Net assets acquired                                   (247,440)

     The purchase price upon closing is as follows:

                                                                Yen (millions)
                                                                -------------

             Cash paid to IBM as of December 31, 2002               169,680
             Cash to be paid to IBM                                  73,800
             Direct acquisition costs                                 3,960
                                                                    -------
             Total purchase price                                   247,440
                                                                    =======

     In-process research and development assets amounting to JPY 2,787 million
     have been acquired as part of the purchase and have been written off at the
     date of acquisition as these assets are considered as not having
     alternative use. The write-off has been recorded as selling, general and
     administrative expenses.

     The results of operations of the acquired company on December 31, 2002 are
     included in the accompanying consolidated statements of income. On a pro
     forma basis, revenue, net loss and the per share information of the
     Company, with assumed acquisition dates of April 1, 2002 and 2001,
     respectively, are as follows:

                                                             Yen (millions)
                                                      ------------------------
                                                         2003           2002
                                                         ----           ----

             Revenue                                  8,541,202      8,480,778
             Net loss                                  (149,891)      (529,055)

                                                                 Yen
                                                      -----------------------
                                                         2003          2002
                                                         ----          ----

             Basic net loss                              (44.72)       (158.50)
             Diluted net loss                            (44.84)       (158.50)

                                       119

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     On October 1, 2000, Hitachi Credit Corporation acquired all common stock of
     Hitachi Leasing, Ltd. in exchange for 13,386,240 shares of Hitachi Credit
     Corporation's common stock. Prior to this transaction, the ownership of
     Hitachi Credit Corporation, a core financial service business, and Hitachi
     Leasing, Ltd., a leasing and other corporate financing service business,
     were 53.4% and 50.0%, respectively. Consequently, the surviving entity
     changed its name to Hitachi Capital Corporation and became the Company's
     53.0% owned subsidiary. The merger was accounted for using the purchase
     method and the Company consolidated Hitachi Leasing, Ltd. and its
     subsidiaries as if it had been merged effective April 1, 2000. The excess
     of purchase price over net assets acquired of the 50% interest in Hitachi
     Leasing, Ltd. not previously owned by the Company was not material.

     The effects of the purchase to the balance sheet as of April 1, 2000 are as
     follows:

                                                            Yen (millions)
                                                            -------------

             Cash and cash equivalent                           49,768
             Investment in leases                              736,505
             Other assets                                       73,018
             Short-term and long-term debt                    (743,985)
             Other liabilities                                 (90,532)

     On a pro forma basis, revenue, net income and the per share information of
     the Company, with the assumed acquisition of April 1, 1999, would not
     differ materially from the amount reported in the accompanying consolidated
     financial statements as of and for the year ended March 31, 2000.

     On October 1, 2000, Kokusai Electric Co., Ltd. merged into Yagi Antenna
     Co., Ltd. and Hitachi Denshi, Ltd. and changed its name to Hitachi Kokusai
     Electric Inc. Prior to the merger, Kokusai Electric Co., Ltd. and Yagi
     Antenna Co., Ltd., manufacturers and distributors of wireless
     telecommunication equipment, were 26.7% and 40.9% owned affiliates of the
     Company. Hitachi Denshi Co., Ltd., a manufacturer and distributor of
     broadcasting and telecommunication equipment, was a 63.7% owned subsidiary
     of the Company. Kokusai Electric Co., Ltd. issued common stock in exchange
     for common stock of Yagi Antenna Co., Ltd. and Hitachi Denshi, Ltd. As a
     result, Hitachi Kokusai Electric Inc. became a 37.4% owned affiliate of the
     Company and is accounted for using the equity method. Total assets and net
     assets of Hitachi Denshi, Ltd. and its subsidiaries as of September 30,
     2000 amounted to approximately JPY 56,959 million and JPY 23,237 million,
     respectively.

     On October 31, 2000, Hitachi Consulting Corporation (former Experio
     Solutions Corporation (Experio)), a wholly owned subsidiary of the Company,
     acquired the e-business consulting department of Grant Thornton LLP for JPY
     15,674 million in cash. In addition, Experio issued its common stock valued
     at JPY 1,601 million to the department partners in lieu of a cash payment,
     and accordingly became a 91.4% owned subsidiary of the Company. The
     acquisition was recorded under the purchase method and the results of
     operations of the acquired e-business consulting have been included in the
     consolidated financial statements since the date of acquisition. This
     transaction resulted in an excess of purchase price over net assets
     acquired of JPY 15,895 million, which was amortized on the straight-line
     method over 10 years. The amortization has been terminated effective April
     1, 2002, with the implementation of SFAS No. 142, "Goodwill and Other
     Intangible Assets."

                                       120

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     The allocation of acquisition costs to the assets and liabilities acquired
     is as follows:

                                                                  Yen (millions)
                                                                  -------------
             Assets acquired                                             2,009
             Goodwill                                                   15,895
             Liabilities assumed                                          (263)
             Common stock issued to department partners                 (1,601)
             Direct acquisition costs                                     (366)
             Cash paid to Grant Thornton                               (15,674)

     On a pro forma basis, revenue, net income and the per share information of
     the Company with the assumed acquisition of April 1, 2000 and 1999 would
     not differ materially from the amount reported in the accompanying
     consolidated financial statements as of and for the years ended March 31,
     2001 and 2000.

(26) Stock Option Plans

     The Company has two stock option plans under which non-employee directors
     and certain employees have been granted stock options to purchase the
     Company's common stock. Under these stock option plans, options were
     granted at prices not less than market value at the date of grant, are
     exercisable from one year after the date of grant and expire 5 years after
     the date of grant. Under APB No. 25, the Company recognized no compensation
     expense related to employee stock options for the years ended March 31,
     2003, 2002 and 2001 as no options were granted at a price below the market
     price on the day of the grant.

     A summary of stock option plans activity for the years ended March 31,
     2003, 2002 and 2001 is as follows:

<TABLE>
<CAPTION>
                                                                 2003                  2002                    2001
                                                        ---------------------- ----------------------  --------------------
                                                                    Weighted-              Weighted-              Weighted-
                                                                     average                average                average
                                                          Stock     exercised    Stock     exercised     Stock    exercised
                                                         options      price     options      price      options     price
                                                         (shares)     (yen)     (shares)     (yen)      (shares)    (yen)
                                                         -------      -----     --------     -----     --------     -----
         <S>                                            <C>         <C>        <C>         <C>         <C>        <C>
         Outstanding at beginning of year               1,437,000     1,314      527,000      1,451           -         -
         Granted                                                -         -    1,090,000      1,270     527,000     1,451
         Forfeited                                       (272,000)    1,311     (180,000)     1,451           -         -
                                                        ---------     -----    ---------      -----     -------    ------
         Outstanding at end of year                     1,165,000     1,314    1,437,000      1,314     527,000     1,451
                                                        =========     =====    =========      =====     =======    ======

         Weighted-average remaining
         contractual life                                         3.1 years               4.1 years             4.3 years
         Options exercisable at end of year                1,165,000 shares          347,000 shares                     -
</TABLE>

     The exercise prices of the stock options outstanding as of March 31, 2003
     are JPY 1,451 and JPY 1,270.

                                        121

<PAGE>

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

     In addition, in April 2003, the Board of Directors decided to propose the
     adoption of stock option plans for non-employee directors, executive
     officers and certain employees to general shareholders' meeting to be held
     in June 2003. In accordance with the proposals, options to purchase the
     Company's common stock less than 1,500,000 shares were granted at prices
     not less than market value at the date of grant, are exercisable from one
     year after the date of grant and expire 4 years after the date of grant.

(27) Subsequent Events

     On April 1, 2003, Renesas Technology Corp., which focuses on system LSI
     (Large Scale Integration) operation, was incorporated through a corporate
     split procedure, where Semiconductor & Integrated Circuits operations of
     the Company and Mitsubishi Electric Corporation were spun-off. Renesas
     Technology Corp. was capitalized with JPY 50,000 million through the
     issuance of 5,000,000 shares of common stock. The Company and Mitsubishi
     Electric Corporation received 2,750,000 shares and 2,250,000 shares,
     respectively. Renesas Technology Corp. is to be accounted for under the
     equity method by the Company as major decisions require consensus between
     the Company and Mitsubishi Electric Corporation in accordance with the
     joint venture agreement and assets and liabilities of the operations will
     be excluded from the consolidated balance sheet. Total assets and net
     assets of the operations as of April 1, 2003 amounted to approximately JPY
     596,118 million and JPY 147,443 million, respectively.

     On April 28, 2003, the Company decided to issue up to JPY 300,000 million
     of straight bonds by May 2005. On May 27, 2003, the Company issued JPY
     80,000 million of straight bonds with a 0.72% interest rate. These bonds,
     which are unsecured with interest payable semi-annually, are due May 27,
     2013.

     As indicated in note 13, at the ordinary general shareholders' meeting on
     June 26, 2002, the Company was approved to acquire up to 300,000,000 shares
     of its common stock for an aggregate acquisition price not exceeding JPY
     300,000 million as treasury stock pursuant to the Japanese Commercial Code.
     On April 28, 2003, the Company announced that it would acquire up to
     80,000,000 shares of its common stock for an aggregate acquisition price
     not exceeding JPY 30,000 million. The share purchase is specifically
     limited to shares traded during the period from May 1 through May 30, 2003
     on the Tokyo Stock Exchange. The Company acquired a total of 66,338,000
     shares for JPY 29,934 million during this period.

                                       122

<PAGE>

                                                                     Schedule II
                                                                     -----------

                                  HITACHI, LTD.
                                AND SUBSIDIARIES

                                    Reserves

                    Years ended March 31, 2003, 2002 and 2001

                              (In millions of yen)
<TABLE>
<CAPTION>
                               Balance at    Charged    Net decrease   Bad debts    Balance
                                beginning      to       in unearned     written     at end
                                of period    income        income        off       of period
                               ----------   ---------   ------------   ---------   ---------
<S>                            <C>          <C>         <C>            <C>         <C>
Year ended March 31, 2003:
   Allowance for doubtful
    receivables                    34,884       9,656             --      (4,772)     39,768

   Unearned income-
    installment financing           1,007          --           (255)         --         752
                               ----------   ---------   ------------   ---------   ---------
                                   35,891       9,656           (255)     (4,772)     40,520
                               ==========   =========   ============   =========   =========
Year ended March 31, 2002:
   Allowance for doubtful
    receivables                    21,028      19,200             --      (5,344)     34,884

   Unearned income-
    installment financing           1,231          --           (224)         --       1,007
                               ----------   ---------   ------------   ---------   ---------
                                   22,259      19,200           (224)     (5,344)     35,891
                               ==========   =========   ============   =========   =========
Year ended March 31, 2001:
   Allowance for doubtful
    receivables                    14,430      11,307             --      (4,709)     21,028

   Unearned income-
    installment financing           7,767          --         (6,536)         --       1,231
                               ----------   ---------   ------------   ---------   ---------
                                   22,197      11,307         (6,536)     (4,709)     22,259
                               ==========   =========   ============   =========   =========
</TABLE>

                                       123

<PAGE>

Item 18.  Financial Statements

Not applicable.

Item 19.  Exhibits

1.1       Articles of Incorporation of Hitachi, Ltd., as amended (English
          Translation)

1.2       Share Handling Regulations of Hitachi, Ltd., as amended (English
          Translation)

1.3       Board of Directors Regulations of Hitachi, Ltd. (English Translation)

12.1      Certification of Chief Executive Officer or Equivalent Pursuant to
          Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

12.2      Certification of Chief Financial Officer or Equivalent Pursuant to
          Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

13.1      Certification of Chief Executive Officer or Equivalent Pursuant to
          Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and
          Section 1350 of Chapter 63 of Title 18 of the United States Code

13.2      Certification of Chief Financial Officer or Equivalent Pursuant to
          Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and
          Section 1350 of Chapter 63 of Title 18 of the United States Code

                                       124

<PAGE>

                                   SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing
on Form 20-F and that it has duly caused and authorized the undersigned to sign
this annual report on its behalf.


                                                         Hitachi, Ltd.
                                                     ------------------------
                                                         (Registrant)


Date: September 30, 2003           By  /s/ Takashi Hatchoji
                                      -----------------------------------------
                                          Takashi Hatchoji
                                          Vice President and Executive Officer

                                       125

<PAGE>

Exhibit Index

1.1       Articles of Incorporation of Hitachi, Ltd., as amended (English
          Translation)

1.2       Share Handling Regulations of Hitachi, Ltd., as amended (English
          Translation)

1.3       Board of Directors Regulations of Hitachi, Ltd. (English Translation)

12.1      Certification of Chief Executive Officer or Equivalent Pursuant to
          Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

12.2      Certification of Chief Financial Officer or Equivalent Pursuant to
          Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

13.1      Certification of Chief Executive Officer or Equivalent Pursuant to
          Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and
          Section 1350 of Chapter 63 of Title 18 of the United States Code

13.2      Certification of Chief Financial Officer or Equivalent Pursuant to
          Rule 13a-14(b) or 15d-14(b) of the Securities Exchange Act of 1934 and
          Section 1350 of Chapter 63 of Title 18 of the United States Code

                                       126