H I T A C H I F I N A N C I A L H I G H L I G H T S 1 9 9 8

1998

OUTLINE / HIGHLIGHTS OF THE YEAR 1

OUTLINE(As of March 31, 1998)

HIGHLIGHTS OF THE YEAR ENDED MARCH 31, 1998

Net Sales % change from 1997

¥8,416,834 million -1%Net Income¥3,477 million –96%Net Income per Share¥1.00 –96%Stockholders’ Equity¥3,240,770 million -1%Number of Employees331,494

Corporate NameHitachi, Ltd. (Kabushiki Kaisha Hitachi Seisakusho)

Principal Office6, Kanda-Surugadai 4-chome,

Chiyoda-ku, Tokyo 101-8010, Japan

Founded1910 (Incorporated in 1920)

Common StockPar Value: ¥50

Authorized: 10,000,000,000 shares

Issued: 3,337,894,780 shares

Shareholders357,040

Internet Addresswww.hitachi.co.jp

ContentsOutline / Highlights of the Year 1

Main Products 2

Key Financial Data and Stock Information 3

Financial Statements 19

Major Consolidated Subsidiaries 23

Notes: 1. Hitachi’s fiscal year ends March 31.2. Not all data have been audited.3. During the year ended March 31, 1989, Hitachi, Ltd. adopted the method of inclusion of previously unconsolidated subsidiaries,

all of which had previously been accounted for under the equity method, to comply with the requirements of Statement of FinancialAccounting Standards (SFAS) No. 94, “Consolidation of All Majority-owned Subsidiaries.”

Accordingly, in this booklet, figures for the year ended March 31, 1989 encompass Hitachi, Ltd. and its 679 subsidiaries, up from the previous 46.

4. Hitachi, Ltd. made a free distribution of 153,642,327 shares of its common stock on May 21, 1990 to shareholders of record on March31, 1990 on the basis of one share for each twenty shares held. Figures for net income per share are after retroactive adjustment forthe free distribution.

5. Effective April 1, 1993, Hitachi, Ltd. adopted SFAS No. 109, ”Accounting for Income Taxes,“ and has reported the cumulative effect ofthe change in the method of accounting for income taxes in the 1994 consolidated statement of income. The cumulative effect of thischange in accounting for income taxes of ¥2,970 million is determined as of April 1, 1993.

6. All figures are consolidated figures of Hitachi, Ltd. (the Company) and its subsidiaries, except where specifically stated otherwise.7. The Company has not applied SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” 8. Net deferred tax assets of domestic consolidated companies as of the end of fiscal 1997 (year ended March 31, 1998) have been

measured by the normal tax rate of several corporate income taxes, which have been diminished in context of an enacted revision ofJapanese tax accounting for fiscal 1998 and are to be applied for the tax filings for fiscal 1998, as required by a tax effect accounting ofUnited States generally accepted accounting principles.

This accounting treatment has given a negative effect of ¥27,053 million ($205 million) to consolidated Net income as for fiscal 1997.

MAIN PRODUCTS 2

MAIN PRODUCTS

Information Systems & ElectronicsMainframe Computers, Software, Computer Terminals and Peripherals,

Workstations, PCs, Magnetic Disks, Telephone Exchanges, Broadcasting

Equipment, Semiconductors, Picture Tubes, Display Tubes, LCDs,

Semiconductor Manufacturing Equipment, Test and Measurement Equipment,

Medical Electronics Equipment

Power & Industrial SystemsNuclear Power Plants, Hydroelectric Power Plants, Thermal Power Plants,

Control Equipment, Compressors, Rolling Mill Equipment, Chemical Plants,

Elevators, Escalators, Air-Conditioning Equipment, Industrial Robots, Rolling

Stock, Automotive Equipment, Construction Machinery

Consumer ProductsRoom Air Conditioners, Refrigerators, Washing Machines, Microwave Ovens,

Vacuum Cleaners, Heating Appliances, Kitchen Appliances, Lighting Fixtures,

TVs, VCRs, Video Cameras, Hi-Fi Audio Equipment, Audiotapes, Videotapes,

Batteries

MaterialsSynthetic Resin Materials and Products, Printed Circuit Boards, Ceramic

Materials, Special Steels, Rolls for Rolling Mills, Malleable Cast-Iron Products,

Forged and Cast-Steel Products, Pipe Fittings, Electric Wire and Cable, Copper

Products, Rubber Products

Services & OtherGeneral Trading, Transportation, Property Management, Printing, Financial

Services

Results of OperationsNet Sales 4Net Income 4Industry Segments 5Geographic Segments 6Sales by Market 7ProfitabilityReturn on Sales 8Return on Equity 8Cost Composition 9Operating Income to Net Sales 9SafetyInterest Expense 10Interest Coverage 10Stockholders’ Equity to Total Assets 11Current Ratio 11Total Debt and Stockholders’ Equity 12Debt/Equity Ratio 12

EfficiencyAsset Turnover 13Fixed Asset Turnover 13Per Share DataNet Income per Share 14Stockholders’ Equity per Share 14Capital Investment

and R&D ExpenditureCapital Investment 15Retained Cash Flow and Depreciation 15R&D Expenditure 16R&D Expenditure to Net Sales 16Stock InformationCommon Stock Price(Tokyo Stock Exchange) 17

PER (Price Earnings Ratio) 17PBR (Price Book Value Ratio) 18PCFR (Price Cash Flow Ratio) 18

KEY F INANC IAL DATA AND STOCK INFORMATION

RESULTS OF OPERATIONS 4

RESULTS OF OPERATIONS

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Net Sales

(Billion ¥) 6,401 7,078 7,737 7,766 7,536 7,400 7,592 8,124 8,523 8,417Net Income

(Billion ¥) 186 211 230 128 77 65 114 142 88 3

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0

5,000

(Billion ¥)

6,000

3,000

1,000

7,000

8,000

4,000

2,000

’96’95’94’93’92’91’90’890

(Billion ¥)

150

’97 ’98

200

100

50

Net Sales Net Income

RESULTS OF OPERATIONS 5

(Million ¥)

1996 1997 1998

Sales Information Systems & Electronics ¥ 3,025,063 ¥ 3,289,337 ¥ 3,373,53229% 30% 31%

Power & Industrial Systems 2,523,508 2,719,775 2,543,18125% 25% 24%

Consumer Products 952,751 990,895 928,4479% 9% 9%

Materials 1,372,263 1,413,174 1,473,46113% 13% 14%

Services & Other 2,472,154 2,424,410 2,414,87924% 23% 22%

Subtotal 10,345,739 10,837,591 10,733,500100% 100% 100%

Eliminations (2,221,929%) (2,314,491%) (2,316,666)

Total 8,123,810 8,523,100 8,416,834

Operating Income Information Systems & Electronics 184,849 103,682 63,375(Loss) 47% 31% 24%

Power & Industrial Systems 114,080 116,067 93,55429% 35% 36%

Consumer Products (14,786%%) 7,372 (16,061)(4%) 2% (6%)

Materials 75,193 63,532 66,11919% 19% 26%

Services & Other 36,974 41,100 52,9189% 13% 20%

Subtotal 396,310 331,753 259,905100% 100% 100%

Eliminations & Corporate items (63,728%) (34,587%) (50,898)

Total 332,582 297,166 209,007Notes: 1. Net sales by segment include intersegment transactions.

2. This information is disclosed in accordance with a ministerial ordinance under the Securities and Exchange Law of Japan.3. From fiscal 1995, the Ministry of Finance is requiring the disclosure of “Eliminations & Corporate items” for Operating Income as part of the Industry Segments

and Geographic Segments.

Industry Segments

RESULTS OF OPERATIONS 6

Geographic Segments (Million ¥)

1996 1997 1998

Sales

Japan Outside customer sales ¥6,656,251 ¥6,948,021 ¥6,636,77273% 72% 68%

Intersegment transactions 841,413 893,496 1,053,8399% 9% 11%

Total 7,497,664 7,841,517 7,690,61182% 81% 79%

Other Areas Outside customer sales 1,467,559 1,575,079 1,780,06216% 16% 18%

Intersegment transactions 212,974 255,751 275,5922% 3% 3%

Total 1,680,533 1,830,830 2,055,65418% 19% 21%

Subtotal 9,178,197 9,672,347 9,746,265100% 100% 100%

Eliminations (1,054,387%) (1,149,247%) (1,329,431)

Total 8,123,810 8,523,100 8,416,834

Operating Income

Japan 369,848 318,998 232,83990% 94% 88%

Other Areas 41,615 21,597 32,09310% 6% 12%

Subtotal 411,463 340,595 264,932100% 100% 100%

Eliminations & Corporate items (78,881) (43,429%) (55,925)

Total 332,582 297,166 209,007

RESULTS OF OPERATIONS 7

Sales by Market (Million ¥)

1996 1997 1998

Japan ¥6,020,922 ¥6,070,552 ¥5,805,11174% 71% 69%

Outside Japan 2,102,888 2,452,548 2,611,72326% 29% 31%

North America 595,342 765,280 881,8477% 9% 10%

Asia 907,005 1,056,976 1,051,03511% 12% 13%

Europe 458,728 500,503 531,4536% 6% 6%

Other areas 141,813 129,789 147,3882% 2% 2%

Total 8,123,810 8,523,100 8,416,834Note: As for “Eliminations & Corporate items” for Operating Income as part of the Geographic Segments, see note 3 on page 5.

PROFITABILITY 8

PROFITABILITY

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Net Income

(Billion ¥) 186 211 230 128 77 65 114 142 88 3Return on Sales

(%) 2.9 3.0 3.0 1.6 1.0 0.9 1.5 1.8 1.0 0.0Return on Equity

(%) 8.1 8.2 8.2 4.4 2.6 2.2 3.8 4.4 2.7 0.1

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(%)

4

3

2

1

’97’96’95’94’93’92’91’90’89 ’980

(%)

12

9

6

3

Return on Sales Return on Equity

PROFITABILITY 9

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Net Sales

(Billion ¥) 6,401 7,078 7,737 7,766 7,536 7,400 7,592 8,124 8,523 8,417Cost of Sales

(Billion ¥) 4,552 5,024 5,417 5,489 5,438 5,312 5,394 5,829 6,251 6,230Cost of Sales to Net Sales (%) 71.1 71.0 70.0 70.7 72.2 71.8 71.0 71.7 73.3 74.0Selling, General and Administrative(SG&A) Expenses (Billion ¥) 1,416 1,553 1,813 1,925 1,876 1,875 1,894 1,962 1,975 1,978SG&A Expenses to Net Sales (%) 22.1 21.9 23.4 24.8 24.9 25.3 25.0 24.2 23.2 23.5Operating Income

(Billion ¥) 433 501 506 352 222 213 305 333 297 209Operating Income to Net Sales (%) 6.8 7.1 6.5 4.5 2.9 2.9 4.0 4.1 3.5 2.5Note: Figures may not agree due to rounding.

Cost Composition Operating Income to Net Sales

Operating Income

Selling, General andAdministrative Expenses

Cost of Sales

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(Billion ¥)

6,000

3,000

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8,000

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2,000

’97’96’95’94’93’92’91’90’89 ’982

(%)

8

7

6

5

4

3

SAFETY 10

SAFETY

Interest Expense Interest Coverage

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Interest Expense

(Billion ¥) 71 97 130 140 114 78 75 63 61 60Interest Coverage

(Times) 7.87 6.46 5.33 3.67 3.06 3.92 4.78 6.50 5.34 3.88

Note: Interest coverage= —————————————————————Income before income taxes + Interest expense

Interest expense

’97’96’95’94’93’92’91’90’89 ’980

(Billion ¥)

90

120

60

30

’97’96’95’94’93’92’91’90’89 ’982

(Times)

8

7

6

5

4

3

SAFETY 11

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Current Assets

(Billion ¥) 4,870 5,391 5,751 5,850 5,675 5,796 5,976 6,442 6,348 6,236Current Liabilities

(Billion ¥) 3,184 3,315 3,694 3,742 3,555 3,576 3,690 3,965 3,936 4,040Stockholders’ Equity

(Billion ¥) 2,282 2,561 2,811 2,918 2,940 2,959 3,033 3,200 3,284 3,241Stockholders’ Equity to Total Assets

(%) 32.9 32.8 33.0 32.9 33.6 33.1 33.2 32.6 33.0 32.0Current Ratio

(%) 153.0 162.6 155.7 156.3 159.6 162.1 162.0 162.5 161.3 154.4

Stockholders’ Equity to Total Assets Current Ratio

25.0

(%)

32.5

30.0

27.5

’97’96’95’94’93’92’91’90’89 ’98 ’97’96’95’94’93’92’91’90’89 ’98120

(%)

160

150

130

140

SAFETY 12

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Short-term Debt

(Billion ¥) 864 828 915 1,020 928 902 907 1,033 1,181 1,317Long-term Debt

(Billion ¥) 521 887 891 976 990 1,025 1,012 1,203 1,245 1,288Total Debt

(Billion ¥) 1,385 1,715 1,806 1,996 1,918 1,927 1,919 2,237 2,426 2,605Stockholders’ Equity

(Billion ¥) 2,282 2,561 2,811 2,918 2,940 2,959 3,033 3,200 3,284 3,241Debt/Equity Ratio

(Times) 0.61 0.67 0.64 0.68 0.65 0.65 0.63 0.70 0.74 0.80

Total Debt and Stockholders’ Equity Debt /Equity Ratio

’97’96’95’94’93’92’91’90’89 ’980

(Billion ¥)

3,000

2,500

2,000

1,500

1,000

500

0.5

(Times)

0.8

0.7

0.6

’97’96’95’94’93’92’91’90’89 ’98

Stockholders’ Equity

Total Debt(Long-term and Short-term)

EFFICIENCY 13

EFFICIENCY

Asset Turnover Fixed Asset Turnover

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Total Assets

(Billion ¥) 6,938 7,805 8,526 8,858 8,748 8,931 9,142 9,803 9,965 10,113Fixed Assets

(Billion ¥) 1,474 1,709 1,986 2,169 2,204 2,293 2,311 2,422 2,559 2,646Asset Turnover

(Times) 0.92 0.91 0.91 0.88 0.86 0.83 0.83 0.83 0.86 0.83Fixed Asset Turnover

(Times) 4.34 4.14 3.90 3.58 3.42 3.23 3.29 3.35 3.33 3.18Note: “Fixed Assets” represents the net carrying amounts of property, plant and equipment.

0.80

(Times)

0.95

0.90

0.85

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(Times)

5.0

4.5

3.5

4.0

PER SHARE DATA 14

PER SHARE DATA

Net Income per Share Stockholders’ Equity per Share

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Net Income per Share

(¥) 56.14 61.71 65.96 36.91 22.68 19.27 33.02 40.09 25.55 1.00Stockholders’ Equity per Share

(¥) 756.06 833.37 858.71 890.64 897.42 901.71 922.73 961.23 983.85 970.90Cash Dividends per Share

(¥) 9.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00 11.00Notes: 1. Net income per share is based on common stock and common stock equivalents of Hitachi, Ltd. Stockholders’ equity per share is based on common stock of

Hitachi, Ltd.2. Figures for net income per share are after retroactive adjustment for the free distribution. See note 4 on page 1.

’97’96’95’94’93’92’91’90’89 ’980

(¥)

40

30

20

10

50

60

’97’96’95’94’93’92’91’90’89 ’980

(¥)

400

600

800

200

CAPITAL INVESTMENT AND R&D EXPENDITURE 15

CAPITAL INVESTMENT AND R&D EXPENDITURE

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Capital Investment (Property, plant and equipment)

(Billion ¥) 532 658 781 757 615 662 655 723 740 713Retained Cash Flow

(Billion ¥) 545 608 663 609 529 530 604 687 662 574Depreciation(Property, plant and equipment)

(Billion ¥) 366 407 448 504 480 496 521 557 544 550Note: Retained cash flow = Net income + Depreciation + Minority interests - Dividends paid - Gain on ”equity method“ shareholdings + Dividend received from ”equity

method“ shareholdings

Capital Investment Retained Cash Flow and Depreciation

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500

(Billion ¥)

600

300

100

700

400

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0

(Billion ¥)

600

300

100

700

400

200

Retained Cash Flow

Depreciation

CAPITAL INVESTMENT AND R&D EXPENDITURE 16

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Net Sales

(Billion ¥) 6,401 7,078 7,737 7,766 7,536 7,400 7,592 8,124 8,523 8,417R&D Expenditure

(Billion ¥) 374 429 491 520 501 484 491 494 504 511R&D Expenditure to Net Sales

(%) 5.83 6.07 6.34 6.69 6.65 6.54 6.47 6.08 5.91 6.07

R&D Expenditure R&D Expenditure to Net Sales

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750

450

150

300

4.0

(%)

6.0

6.5

5.5

4.5

5.0

’97’96’95’94’93’92’91’90’89 ’98

STOCK INFORMATION 17

STOCK INFORMATION

Common Stock Price (Tokyo Stock Exchange) PER (Price Earnings Ratio)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Price Range 1,670*

(¥) High 2,040 1,740 1,720 1,270 873 979 1,120 1,140 1,180 1,3901,490*

(¥) Low 1,350 1,250 1,020 750 670 729 799 781 961 877Price at FiscalYear-End (¥) 1,510 1,590 1,230 785 848 930 900 1,040 1,100 970Net Income per Share

(¥) 56.14 61.71 65.96 36.91 22.68 19.27 33.02 40.09 25.55 1.00PER

(Times) 26.9 25.8 18.6 21.3 37.4 48.3 27.3 25.9 43.1 970.0Notes: 1. Figures marked * are the highest and lowest prices during the ex rights period accompanying the Company’s free distribution of new shares.

2. Common stock prices are those of Hitachi, Ltd.3. Net income per share is based on common stock and common stock equivalents of Hitachi, Ltd.

’97’96’95’94’93’92’91’90’89 ’980

(¥)

1,000

1,500

2,000

2,500

3,000

3,500

0

(¥)

5,000

10,000

15,000

20,000

25,000

30,000

35,000

Hitachi, Ltd.’s Common Stock Price at Fiscal Year-End (left scale)

Adjusted Average for 225 Stocks at Fiscal Year-End (right scale)

500

’97’96’95’94’93’92’91’90’89 ’980

800

600

400

200

(Times)

STOCK INFORMATION 18

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Stockholders’ Equity per Share

(¥) 756.1 833.4 858.7 890.6 897.4 901.7 922.7 961.2 983.8 970.9Retained Cash Flow per Share

(¥) 162.1 173.0 187.6 172.4 149.5 149.9 170.9 192.6 186.5 171.9Price at Fiscal Year-End

(¥) 1,510 1,590 1,230 785 848 930 900 1,040 1,100 970PBR

(Times) 2.0 1.9 1.4 0.9 0.9 1.0 1.0 1.1 1.1 1.0PCFR

(Times) 9.3 9.2 6.6 4.6 5.7 6.2 5.3 5.4 5.9 5.6Note: Stockholders’ equity per share is based on common stock of Hitachi, Ltd. Retained cash flow per share is based on common stock and common stock equivalents

of Hitachi, Ltd.

’97’96’95’94’93’92’91’90’89 ’980.0

(Times)

2.0

1.5

1.0

0.5

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(Times)

8

6

2

4

PBR (Price Book Value Ratio) PCFR (Price Cash Flow Ratio)

Consolidated Statements of Income 20Consolidated Balance SheetsAssets 21Liabilities and Stockholders’ Equity 22

F INANC IAL STATEMENTS

CONSOLIDATED STATEMENTS OF INCOME 20

CONSOLIDATED STATEMENTS OF INCOME (YEARS ENDED MARCH 31)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Net sales 6,401,417 7,077,855 7,736,961 7,765,545 7,536,166 7,400,205 7,592,266 8,123,810 8,523,100 8,416,834

Cost of sales 4,552,089 5,023,533 5,417,159 5,488,738 5,438,158 5,311,992 5,393,757 5,828,887 6,250,895 6,230,044

Gross profit 1,849,328 2,054,322 2,319,802 2,276,807 2,098,008 2,088,213 2,198,509 2,294,923 2,272,205 2,186,790

Selling, general and administrative expenses 1,416,142 1,553,218 1,813,383 1,924,780 1,875,847 1,874,824 1,893,919 1,962,341 1,975,039 1,977,783

Operating income 433,186 501,104 506,419 352,027 222,161 213,389 304,590 332,582 297,166 209,007

Other income:

Interest 118,597 151,488 173,692 168,991 126,176 94,434 74,550 51,126 37,632 41,084

Dividends 8,878 10,829 9,072 8,351 9,167 6,863 8,003 8,010 8,638 9,469

Other 15,751 14,760 22,153 10,456 3,563 3,675 13,319 51,827 41,561 111,176

143,226 177,077 204,917 187,798 138,906 104,972 95,872 110,963 87,831 161,729

Other deductions:

Interest and discount charges 71,438 97,047 129,886 140,282 113,839 78,113 74,998 63,375 60,669 59,635

Other 13,869 51,144 19,377 24,661 12,484 11,885 41,821 31,543 61,004 139,375

85,307 148,191 149,263 164,943 126,323 89,998 116,819 94,918 121,673 199,010

491,105 529,990 562,073 374,882 234,744 228,363 283,643 348,627 263,324 171,726

Income taxes 272,776 281,309 290,450 219,336 138,916 146,953 153,443 165,764 138,495 142,693

218,329 248,681 271,623 155,546 95,828 81,410 130,200 182,863 124,829 29,033

Minority interests 32,742 37,718 41,438 27,935 18,539 13,161 16,288 41,093 36,498 25,556

Income before cumulative effect of accounting change 185,587 210,963 230,185 127,611 77,289 68,249 113,912 141,770 88,331 3,477

Cumulative effect of accounting change (Note 3) — — — — — 2,970 — — — —

Net income 185,587 210,963 230,185 127,611 77,289 65,279 113,912 141,770 88,331 3,477

Net income per share (Yen) 56.14 61.71 65.96 36.91 22.68 19.27 33.02 40.09 25.55 1.00

R&D expenditure 373,511 429,470 490,708 519,525 501,191 484,237 491,481 493,788 503,508 510,878

Capital investment (Property, plant and equipment) 532,392 658,153 781,488 757,389 615,345 662,248 655,410 723,477 740,135 712,672

Notes: 1. Figures for net income per share are after retroactive adjustment for the free distribution. See note 4 on page 1.2. Cumulative effect to April 1, 1993 of the application of Statement of Financial Accounting Standards (SFAS) No.109, ”Accounting for Income Taxes.“ See note 5 on page 1.3. Net deferred tax assets of domestic consolidated companies as of the end of fiscal 1997 (year ended March 31, 1998) have been measured by the normal tax rate of several corporate income taxes, which

have been diminished in context of an enacted revision of Japanese tax accounting for fiscal 1998 and are to be applied for the tax filings for fiscal 1998, as required by a tax effect accounting of UnitedStates generally accepted accounting principles.

This accounting treatment has given a negative effect of ¥27,053 million ($205 million) to consolidated Net income as for fiscal 1997.

Income before minority interests and cumulative effect of accounting change

Income before income taxes, minority interests and cumulative effect of accounting change

(Million ¥)

CONSOLIDATED BALANCE SHEETS 21

CONSOLIDATED BALANCE SHEETS (AS OF MARCH 31)

Assets1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Current assets:

Cash and cash equivalents 1,638,328 1,853,734 1,648,460 1,495,794 1,368,270 1,331,605 1,620,936 1,627,716 1,309,949 1,199,540

Short-term investments 385,085 324,784 384,909 487,303 639,108 806,699 582,785 592,977 763,320 713,672

Total 2,023,413 2,178,518 2,033,369 1,983,097 2,007,378 2,138,304 2,203,721 2,220,693 2,073,269 1,913,212

Trade receivables:

Notes 395,852 433,037 481,258 493,303 418,489 403,311 402,024 462,685 411,459 369,838

Accounts 976,254 1,161,228 1,352,641 1,327,165 1,347,967 1,396,149 1,440,006 1,662,631 1,876,678 1,897,410

Inventories 1,249,806 1,355,007 1,597,129 1,750,263 1,605,178 1,523,593 1,572,259 1,707,159 1,576,751 1,626,684

Prepaid expenses and other current assets 224,419 263,112 286,559 295,727 295,658 335,093 357,922 389,214 409,750 428,912

Total current assets 4,869,744 5,390,902 5,750,956 5,849,555 5,674,670 5,796,450 5,975,932 6,442,382 6,347,907 6,236,056

Noncurrent receivables and restricted funds 121,766 134,868 155,680 172,427 185,130 169,170 180,464 161,795 188,473 195,546

Investments and advances, including affiliated companies 324,012 358,736 420,178 436,498 436,614 438,488 436,603 507,437 529,369 653,786

Property, plant and equipment:

Land 185,184 225,918 251,755 280,241 297,504 297,889 317,604 334,488 345,322 363,771

Buildings 742,070 872,128 1,017,059 1,149,894 1,237,429 1,392,564 1,434,417 1,514,113 1,635,937 1,703,708

Machinery and equipment 2,748,970 3,042,851 3,356,157 3,650,784 3,844,842 4,064,912 4,246,645 4,538,128 4,817,314 5,074,698

Construction in progress 47,796 64,942 89,474 106,136 78,733 42,575 51,599 90,481 117,290 99,755

3,724,020 4,205,839 4,714,445 5,187,055 5,458,508 5,797,940 6,050,265 6,477,210 6,915,863 7,241,932

Less accumulated depreciation 2,250,471 2,496,948 2,728,719 3,017,948 3,254,674 3,505,071 3,739,284 4,055,425 4,356,366 4,595,800

Net property, plant and equipment 1,473,549 1,708,891 1,985,726 2,169,107 2,203,834 2,292,869 2,310,981 2,421,785 2,559,497 2,646,132

Other assets 148,580 211,689 213,581 230,323 247,523 234,114 237,638 270,039 339,463 381,492

6,937,651 7,805,086 8,526,121 8,857,910 8,747,771 8,931,091 9,141,618 9,803,438 9,964,709 10,113,012

(Million ¥)

CONSOLIDATED BALANCE SHEETS 22

Liabilities and Stockholders’ Equity (Million ¥)

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

Current liabilities:

Short-term debt 819,542 781,590 861,859 906,002 825,060 794,250 823,402 882,605 994,469 1,103,217

Current installments of long-term debt 44,726 46,790 53,056 113,990 103,103 107,316 83,848 150,746 187,022 214,064

Trade payables:

Notes 280,165 317,389 335,938 318,625 273,520 245,175 212,007 212,789 140,067 132,159

Accounts 535,227 611,276 723,182 636,634 614,237 640,963 710,397 823,280 945,450 944,112

Accrued expenses 446,038 553,679 587,664 627,604 628,361 664,065 674,653 734,036 732,070 728,741

Income taxes 186,125 157,179 155,717 96,214 70,567 84,671 106,793 130,974 118,685 89,715

Advances received 510,342 434,234 495,183 572,081 573,583 544,449 578,137 500,889 411,752 395,674

Employees’ deposits 123,716 127,864 125,310 128,874 134,163 132,454 138,972 131,088 41,297 20,750

Other current liabilities 237,619 284,906 356,423 341,619 332,221 362,471 361,665 398,680 365,164 411,745

Total current liabilities 3,183,500 3,314,907 3,694,332 3,741,643 3,554,815 3,575,814 3,689,874 3,965,087 3,935,976 4,040,177

Long-term debt 520,885 886,798 891,022 975,605 990,113 1,025,305 1,011,996 1,203,353 1,244,612 1,287,532

Retirement and severance benefits 481,335 493,955 520,108 564,932 601,243 629,242 648,493 659,510 671,794 682,871

Other liabilities (Note 1) — — — — — 81,625 82,651 79,315 84,699 92,494

Total liabilities 4,185,720 4,695,660 5,105,462 5,282,180 5,146,171 5,311,986 5,433,014 5,907,265 5,937,081 6,103,074

Minority interests (Note 2) 470,375 548,591 609,518 657,779 661,442 659,940 675,227 696,101 743,738 769,168

Stockholders’ equity (Note 2):

Common stock of ¥50 par value 219,350 246,913 269,747 270,917 270,918 273,266 276,041 278,178 281,684 281,735

Capital surplus 302,651 357,775 410,381 436,753 436,819 440,517 445,260 480,718 486,695 492,272

Legal reserve 56,190 60,021 66,519 72,163 78,161 84,147 89,955 95,377 101,146 104,370

Retained earnings 1,740,285 1,911,144 2,093,902 2,173,995 2,209,261 2,231,914 2,303,612 2,404,388 2,447,391 2,406,253

Foreign currency translation adjustments (36,920) (15,018) (29,408) (35,877) (55,001) (70,679) (81,491) (58,589) (33,026) (43,860)

Total stockholders’ equity 2,281,556 2,560,835 2,811,141 2,917,951 2,940,158 2,959,165 3,033,377 3,200,072 3,283,890 3,240,770

6,937,651 7,805,086 8,526,121 8,857,910 8,747,771 8,931,091 9,141,618 9,803,438 9,964,709 10,113,012

Notes: 1. Other liabilities at March 31, 1994 to 1998 consist of long-term payables for property, deferred tax liabilities under SFAS No. 109 and other. See note 5 on Page 1.2. SFAS No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” effective for the fiscal year ended March 31, 1995, has not been implemented in the consolidated balance sheets as

allowed by the U.S. Securities and Exchange Commission. If implemented, unrealized holding gains (net) of the securities in the scope of SFAS No. 115 amounting to ¥306,497 million as of March 31, 1998,were included in measurement of these investments, and the balances of “Minority interests” and “Stockholders’ equity” were increased by ¥19,071 million and ¥143,611 million, respectively.

Major Consolidated SubsidiariesJapan/Manufacturing 24Japan/Engineering, Sales, and Service 25Abroad 26

MAJOR CONSOL IDATED SUBS ID IAR IES

MAJOR CONSOLIDATED SUBSIDIARIES 24

MAJOR CONSOLIDATED SUBSIDIARIES (AS OF MARCH 31, 1998)

Name of Subsidiary Issued Capital Percentage Line(s) of Business(Million ¥) of Ownership

Japan/Manufacturing

Babcock-Hitachi K.K. 5,000 100 Boilers, Chemical Plant Equipment

Hitachi Cable, Ltd. 25,940 52 Wire and Cable, Copper Products

Hitachi Chemical Co., Ltd. 15,022 57 Electric Insulating Materials, Synthetic Resin Materials, Housing Equipment

Hitachi Construction Machinery Co., Ltd. 22,199 55 Construction Machinery

Hitachi Denshi, Ltd. 5,021 64 Broadcasting Equipment, Radio Communications Equipment, Visual Communications Equipment

Hitachi Electronics Engineering Co., Ltd. 2,275 61 Automation Systems, Information Equipment, Semiconductor Manufacturing Equipment

Hitachi Hokkai Semiconductor, Ltd. 600 100 Semiconductors

Hitachi Hometec, Ltd. 800 100 Heating and Warming Appliances

Hitachi Kiden Kogyo, Ltd. 2,613 59 Cranes, Water Treatment Plants, Factory Automation Equipment

Hitachi Lighting, Ltd. 500 100 Lighting Fixtures

Hitachi Maxell, Ltd. 12,178 53 Magnetic Tapes, Magnetic and Optical Disks, Dry Batteries

Hitachi Media Electronics Co., Ltd. 250 100 Electronic Parts for Television Sets, Displays

Hitachi Medical Corporation 13,884 66 X-Ray Apparatus, Medical Electronics Equipment

Hitachi Metals, Ltd. 26,283 55 Steel and Special Steels, Forged and Cast-Steel Products, Pipe Fittings

Hitachi Seiko, Ltd. 1,650 100 Machine Tools, Printing Machines

Hitachi Setsubi Engineering Co., Ltd. 450 100 High-Speed Fully Automatic Assembly Systems, Installation of Electrical Equipment in Buildings

Hitachi Telecom Technologies, Ltd. 900 100 Telecommunications Equipment

Hitachi Tohbu Semiconductor, Ltd. 600 100 Semiconductors

Hitachi Tokyo Electronics Co., Ltd. 600 100 Semiconductors, Semiconductor Manufacturing Equipment

Japan Servo Co., Ltd. 2,547 53 Precision Electric Motors, Control Equipment

MAJOR CONSOLIDATED SUBSIDIARIES 25

Name of Subsidiary Issued Capital Percentage Line(s) of Business(Million ¥) of Ownership

Japan/Engineering, Sales, and Service

Chuo Shoji, Ltd. 1,600 100 Maintenance, Sales and Lease of Real Estate

Hitachi Air Conditioning & Refrigeration Co., Ltd. 1,455 100 Sales of Air Conditioners, Refrigeration Equipment, Housing Equipment and Environmental Control Systems

Hitachi Auto Systems Co., Ltd. 200 100 Sales of Automotive and Information Equipment

Hitachi Building Systems Co., Ltd. 5,105 100 Maintenance, Sales and Installation of Elevators and Escalators

Hitachi Credit Corporation 7,619 53 Installation and Lease Financing of OA Equipment, Consumer Product Sales

Hitachi Electronics Services Co., Ltd. 5,000 100 Installation and Maintenance of Computers and Communications Equipment

Hitachi Engineering & Services Co., Ltd. 1,500 100 Plant Engineering, Maintenance of Electrical and Electronic Equipment

Hitachi Engineering Co., Ltd. 1,500 100 Systems, Equipment and Software for FA, OA and Telecommunications, Plant Engineering

Hitachi Information Systems, Ltd. 9,719 59 Software Development, Data Processing Services, Computer Equipment Sales

Hitachi Keisho, Ltd. 1,000 100 Sales of Daily Necessities and Foods

Hitachi Life Corporation 1,000 100 Sales and Lease of Land and Buildings

Hitachi Plant Engineering & Construction Co., Ltd. 7,319 56 Design and Construction of Power Facilities

Hitachi Printing Co., Ltd. 700 98 Printing and Publication Services

Hitachi Semiconductor and Devices Sales Co., Ltd. 2,000 100 Sales of Electronic Components

Hitachi Service & Engineering (East), Ltd. 600 100 Sales of Industrial Equipment and Components, Engineering

Hitachi Service & Engineering (West), Ltd. 600 100 Sales of Industrial Equipment and Components, Engineering

Hitachi Software Engineering Co., Ltd. 25,527 60 Systems and Software Development

Hitachi Techno Engineering Co., Ltd. 1,000 100 Plant Engineering, Maintenance of Industrial Machinery

Hitachi Transport System, Ltd. 16,796 61 Transportation and Warehousing Services

Nissei Sangyo Co., Ltd. 5,438 58 Sales of Scientific Instruments, Information Systems and Electronic Components

MAJOR CONSOLIDATED SUBSIDIARIES 26

Name of Subsidiary Issued Capital Percentage Line(s) of Businessof Ownership

Abroad/Manufacturing

Hitachi Automotive Products (USA), Inc. US$32.7 million 100 Manufacture and Sales of Automotive Equipment

Hitachi Computer Products (America), Inc. US$14.0 million 100 Manufacture and Sales of Magnetic Disk Drives and Magnetic Tape Units

Hitachi Computer Products (Asia) Corp. P.P1,125.2 million 100 Manufacture and Sales of Small Hard Disk Drives and Magnetic Heads

Hitachi Computer Products (Europe) S.A. FFr100.0 million 100 Manufacture and Sales of Magnetic Disk Drives

Hitachi Consumer Products (S) Pte. Ltd. S$16.4 million 93 Manufacture and Sales of Television Sets, Audio Equipment and Vacuum Cleaners

Hitachi Electronic Devices (Singapore) Pte. Ltd. S$70.0 million 85 Manufacture and Sales of Display Tubes

Hitachi Electronic Devices (USA), Inc. US$140.0 million 100 Manufacture and Sales of Color Picture Tubes

Hitachi Electronic Products (Malaysia) Sdn. Bhd. M$30.0 million 100 Manufacture and Sales of Video Tape Recorders and Components for Television Sets, Displays and Video Tape Recorders

Hitachi Home Electronics (America), Inc. US$40.0 million 100 Manufacture and Sales of Consumer Goods

Hitachi Home Electronics (Europe) Ltd. £13.0 million 100 Manufacture and Sales of Consumer Products

Hitachi Semiconductor (America) Inc. US$205.0 million 100 Manufacture and Sales of Semiconductors

Hitachi Semiconductor (Europe) GmbH DM295.0 million 100 Manufacture and Sales of Semiconductors

Hitachi Semiconductor (Malaysia) Sdn. Bhd. M$84.0 million 90 Manufacture and Sales of Semiconductors

Shanghai Hitachi Household Appliances Co., Ltd. US$30.6 million 60 Manufacture and Sales of Air Conditioners and Other Home Appliances

Taiwan Hitachi Co., Ltd. NT$2,122.2 million 62 Manufacture and Sales of Air Conditioners

Abroad/Engineering, Sales, and Service

Hitachi America, Ltd. US$320.3 million 100 Sales of Plants, Computers and Electronic and Industrial Components

Hitachi Asia Pte. Ltd. S$24.0 million 100 Sales of Plants, Computers and Electronic and Industrial Components

Hitachi Australia Ltd. A$1.9 million 100 Sales of Plants, Air Conditioners and OA Equipment

Hitachi (China), Ltd. US$58.0 million 100 Strategic Planning for the Chinese Market

Hitachi Data Systems Holding Corp. US$240.2 million 84 Sales and Service of Computers and Peripheral Subsystems

Hitachi Europe Ltd. £10.0 million 100 Sales of Plants, Computers and Electronic and Industrial Components

Note: Hitachi Asia Pte. Ltd. was renamed Hitachi Asia Ltd. as of April 1, 1998.

Hitachi, Ltd.6, Kanda-Surugadai 4-chome, Chiyoda-ku, Tokyo 101-8010, Japan

Printed in Japan on paper treated with chlorine-free bleach