Hitachi (HTHIF) 6-K Current report (foreign)

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

For the month of February 2011

Commission File Number 1-8320

Hitachi, Ltd.

(Translation of registrant’s name into English)

6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8280, Japan

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F      X                Form 40-F              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):              

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):              

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes                           No      X    

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-                

This report on Form 6-K contains the following:

1. Translation of quarterly report filed with the Japanese government pursuant to the Financial Instruments and Exchange Law of Japan

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Hitachi, Ltd.
		(Registrant)
Date February 28, 2011	By	/s/    Toshiaki Kuzuoka
		Toshiaki Kuzuoka
		Vice President and Executive Officer

(English Summary)

Quarterly Report

pursuant to Article 24-4-7.1 of

the Financial Instruments and Exchange Law of Japan

For the Third Quarter of 142nd Business Term

(from October 1, 2010 to December 31, 2010)

Hitachi, Ltd.

Tokyo, Japan

Notes:

1. This is an English summary of the Quarterly Report filed with the Director of the Kanto Local Finance Bureau of the Financial Services Agency on February 14, 2011 pursuant to the Financial Instruments and Exchange Law of Japan. Certain information which has been previously filed with the SEC in other reports or is not material is omitted from this English summary.

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

CAUTIONARY STATEMENT

Certain statements found in this document may constitute “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. Such “forward-looking statements” reflect management’s current views with respect to certain future events and financial performance and include any statement that does not directly relate to any historical or current fact. Words such as “anticipate,” “believe,” “expect,” “estimate,” “forecast,” “intend,” “plan,” “project” and similar expressions which indicate future events and trends may identify “forward-looking statements.” Such statements are based on currently available information and are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or implied in the “forward-looking statements” and from historical trends. Certain “forward-looking statements” are based upon current assumptions of future events which may not prove to be accurate. Undue reliance should not be placed on “forward-looking statements,” as such statements speak only as of the date of this document.

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

• economic conditions, including consumer spending and plant and equipment investments in Hitachi’s major markets, particularly Japan, Asia, the United States and Europe, as well as levels of demand in the major industrial sectors which Hitachi serves, including, without limitation, the information, electronics, automotive, construction and financial sectors;

• exchange rate fluctuations for the yen and other currencies in which Hitachi makes significant sales or in which Hitachi’s assets and liabilities are denominated, particularly against the U.S. dollar and the euro;

• uncertainty as to Hitachi’s ability to access, or access on favorable terms, liquidity or long-term financing;

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

• the potential for significant losses on Hitachi’s investments in equity method affiliates;

• increased commoditization of information technology products and digital media-related products and intensifying price competition for such products, particularly in the Components & Devices and the Digital Media & Consumer Products segments;

• 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;

• rapid technological innovation;

• the possibility of cost fluctuations during the lifetime of or cancellation of long-term contracts, for which Hitachi uses the percentage-of-completion method to recognize revenue from sales;

• fluctuations in the price of raw materials including, without limitation, petroleum and other materials, such as copper, steel, aluminum and synthetic resins and shortage of materials, parts and components;

• fluctuations in product demand and industry capacity;

• uncertainty as to Hitachi’s ability to implement measures to reduce the potential negative impact of fluctuations in product demand, exchange rates and/or price of raw materials and shortage of materials, parts and components;

• uncertainty as to Hitachi’s ability to achieve the anticipated benefits of its strategy to strengthen its Social Innovation Business;

• uncertainty as to the success of restructuring efforts to improve management efficiency by divesting or otherwise exiting underperforming businesses and to strengthen competitiveness and other cost reduction measures;

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• general socio-economic and political conditions and the regulatory and trade environment of countries where Hitachi conducts business, particularly Japan, Asia, the United States and Europe, including, without limitation, direct or indirect restrictions by other nations on imports, or differences in commercial and business customs including, without limitation, contract terms and conditions and labor relations;

• 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;

• uncertainty as to Hitachi’s access to, or ability to protect, certain intellectual property rights, particularly those related to electronics and data processing technologies;

• uncertainty as to the outcome of litigation, regulatory investigations and other legal proceedings of which the Company, its subsidiaries or its equity method affiliates have become or may become parties;

• the possibility of incurring expenses resulting from any defects in products or services of Hitachi;

• the possibility of disruption of Hitachi’s operations in Japan by earthquakes or other natural disasters;

• uncertainty as to Hitachi’s ability to maintain the integrity of its information systems, as well as Hitachi’s ability to protect its confidential information and that of its customers;

• uncertainty as to the accuracy of key assumptions Hitachi uses to valuate its significant employee benefit related costs; and

• uncertainty as to Hitachi’s ability to attract and retain skilled personnel.

The factors listed above are not all-inclusive and are in addition to other factors contained elsewhere in this document and in other materials published by Hitachi.

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Outline

1. Consolidated Financial Summary

	(Millions of yen, except per share amounts and number of employees)
	Nine months ended December 31, 2009			Nine months ended December 31, 2010			Three months ended December 31, 2009		Three months ended December 31, 2010		Year ended March 31, 2010
Revenues		6,282,864			6,765,896			2,157,906		2,263,445		8,968,546
Income (loss) before income taxes		(52,534	)		370,849			57,605		107,041		63,580
Net income (loss) attributable to Hitachi, Ltd.		(111,339	)		220,140			21,882		62,091		(106,961	)
Total Hitachi, Ltd. stockholders’ equity		—			—			1,164,499		1,449,658		1,284,658
Total equity		—			—			2,096,401		2,450,131		2,267,845
Total assets		—			—			8,978,496		9,305,219		[8,951,762 8,964,464	]
Hitachi, Ltd. stockholders’ equity per share (yen)		—			—			260.28		321.03		287.13
Net income (loss) attributable to Hitachi, Ltd. per share, Basic (yen)		(32.78	)		48.75			6.18		13.75		(29.20	)
Net income (loss) attributable to Hitachi, Ltd. per share, Diluted (yen)		(32.78	)		45.52			6.02		12.84		(29.20	)
Total Hitachi, Ltd. stockholders’ equity ratio (%)		—			—			13.0		15.6		[14.4 14.3	]
Cash flows from operating activities		387,185			419,624			—		—		798,299
Cash flows from investing activities		(344,273	)		(154,666	)		—		—		(530,595	)
Cash flows from financing activities		(123,590	)		(259,208	)		—		—		(502,344	)
Cash and cash equivalents at end of period		—			—			726,161		556,694		577,584
Number of employees (persons)		—			—			359,314		354,499		359,746

Notes: 1.	The consolidated financial statements of the Company have been prepared in conformity with accounting principles generally accepted in the United States.
2.	The amount of “Total assets” as of March 31, 2010 was revised to adjust the provisional amounts in accordance with the provisions of Accounting Standards of Codification (ASC) 805, “Business Combinations,” issued by Financial Accounting Standards Board. The evaluation of the fair values of the assets and liabilities related to the business combination achieved in March 2010 was completed during the three months ended June 30, 2010. The revised amount is unaudited under the Financial Instruments and Exchange Law of Japan. The amount of “Total assets” prior to the revision is presented in a bracket. Accordingly, “Total Hitachi, Ltd. stockholders’ equity ratio” as of March 31, 2010 was also revised. The ratio prior to the revision is in a bracket.
3.	The Company adopted the provisions of ASC 860, “Transfers and Servicing” amended by Accounting Standards Update (ASU) 2009-16, “Accounting for Transfers of Financial Assets” and ASC 810, “Consolidation” amended by ASU 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” on April 1, 2010. See notes (2) (e) and (5) to the Consolidated Financial Statements for more information.

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2. Principal Businesses

There was no material change in principal businesses of Hitachi during the three months ended December 31, 2010.

3. Major Consolidated Subsidiaries

Hitachi Software Engineering Co., Ltd. merged with Hitachi Systems & Services, Ltd. as of October 1, 2010 to become Hitachi Solutions, Ltd.

4. Number of Employees by Segment (Consolidated basis)

	(As of December 31, 2010)
Information & Telecommunication Systems		68,707
Power Systems		16,337
Social Infrastructure & Industrial Systems		38,119
Electronic Systems & Equipment		24,039
Construction Machinery		18,826
High Functional Materials & Components		48,845
Automotive Systems		25,664
Components & Devices		55,651
Digital Media & Consumer Products		26,241
Financial Services		3,199
Others		26,784
Corporate		3,087
Total		355,499

Note: In addition to the employees shown above, the average number of temporary employees during the third quarter was 44,763.

The number of employees of Hitachi, Ltd. was 31,441 as of December 31, 2010. In addition, the average number of temporary employees during the third quarter was 3,260.

Business

1. Risk Factors

There was no material changes in the risk factors stated in the annual report for the 141st business term pursuant to the Financial Instruments and Exchange Law of Japan during the three months ended December 31, 2010.

2. Contracts

No material contracts were entered into during the three months ended December 31, 2010.

3. Financial Condition, Business Results and Cash Flows

(1) Outline of Business Results

Effective from the year ended March 31, 2010, Hitachi adopted ASC 280, “Segment Reporting,” and changed its segment reporting. The figures of revenues and profit (loss) by segment for the three months ended December 31, 2009 have been reclassified in conformity with the new segmentation.

Business Results

During the three months ended December 31, 2010, the global economy generally showed a moderate recovery trend, driven by growth in China and other emerging nations as well as moderate recovery in the U.S.

The Japanese economy seemed to be pausing due to lackluster consumer spending and decreasing of export, despite the recovery in capital expenditures due to improvement in corporate sector’s performance.

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Under these conditions, total revenues in the three months ended December 31, 2010 increased 5% compared with the three months ended December 31, 2009, to ¥2,263.4 billion. In addition to higher revenues in the Construction Machinery segment, centered on emerging countries, this overall increase was attributable to higher revenues, in particular, in the High Functional Materials & Components, Electronic Systems & Equipment and Automotive Systems segments.

Cost of sales in the three months ended December 31, 2010 increased 3% compared with the three months ended December 31, 2009, to ¥1,676.0 billion, and the ratio of cost of sales to revenues accounted for 74% in the three months ended December 31, 2010, compared with 75% in the three months ended December 31, 2009, due to cost reduction efforts including fixed costs reduction.

Selling, general and administrative expenses in the three months ended December 31, 2010 was ¥467.5 billion, which was the same level as in the three months ended December 31, 2009 and their ratio to revenues was 21% in the three months ended December 31, 2010, compared with 22% in the three months ended December 31, 2009.

Operating income in the three months ended December 31, 2010 increased 81% compared with the three months ended December 31, 2009, to ¥119.8 billion, as higher revenues, business structure reform measures, procurement cost and fixed expenses reduction efforts and improved project management led to profitability improvement in all segments, including the Construction Machinery, Electronic Systems & Equipment, Digital Media & Consumer Products and High Functional Materials & Components segments.

Hitachi did not record other income in the three months ended December 31 2010, a ¥6.4 billion decrease compared with the three months ended December 31, 2009 as Hitachi recognized exchange gain and net gain on securities in the three months ended December 31, 2009 and recognized exchange loss and net loss on securities during the three months ended December 31, 2010. Other deductions in the three months ended December 31, 2010 increased ¥7.2 billion compared with the three months ended December 31, 2009, to ¥10.2 billion, due mainly to the posting of exchange loss and net loss on securities. Equity in net earnings of affiliated companies was ¥1.5 billion, compared with a loss of ¥6.0 billion in the three months ended December 31, 2009, due to improved performance at the Company’s equity method affiliated company in the semiconductor industry.

As a result of the above, income before income taxes in the three months ended December 31, 2010 increased 86% compared with the three months ended December 31, 2009, to ¥107.0 billion.

Income taxes amounted to ¥26.6 billion in the three months ended December 31, 2010, an increase of ¥0.2 billion compared with the three months ended December 31, 2009.

As a result of the above, net income in the three months ended December 31, 2010 increased 158% compared with the three months ended December 31, 2009, to ¥80.4 billion.

Net income attributable to noncontrolling interests amounted to ¥18.3 billion in the three months ended December 31, 2010, an increase of ¥9.0 billion compared with the three months ended December 31, 2009, as a result of overall improvement in business results of the Company’s publicly-held subsidiaries.

As a result of the above, net income attributable to Hitachi, Ltd. in the three months ended December 31, 2010 increased 184% compared with the three months ended December 31, 2009, to ¥62.0 billion.

Business Results by Segment

The following is an overview of Hitachi’s results of operations by segment. Revenues for each segment include intersegment transactions.

(Information & Telecommunication Systems)

The segment recorded revenues of ¥388.6 billion, a decrease of 1% compared with the three months ended December 31, 2009, as a result of lower revenues in hardware business due to ongoing reductions in IT investment in Japan, partially offset by an increase in revenues from storage solutions business, particularly in overseas markets.

Segment profit increased 33% compared with the three months ended December 31, 2009, to ¥18.5 billion. This was the result of higher profits in hardware business due to cost cutting and other factors.

(Power Systems)

Revenues decreased 7% compared with the three months ended December 31, 2009, to ¥183.7 billion, reflecting lower sales of preventative maintenance and thermal power generation systems due to some projects being pushed back. The decrease was partially offset by solid performance in nuclear power generation systems due to the construction of new plants in Japan.

Segment profit increased 77% compared with the three months ended December 31, 2009, to ¥4.3 billion due primarily to improvement in project management and progress with cost reduction.

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(Social Infrastructure & Industrial Systems)

The segment recorded revenues of ¥275.6 billion, an increase of 2% compared with the three months ended December 31, 2009 due to higher plant-related equipment and construction sales and higher sales of elevators and escalators to China.

Segment profit increased 24% compared with the three months ended December 31, 2009, to ¥11.9 billion due primarily to higher revenues.

(Electronic Systems & Equipment)

Revenues rose 9% compared with the three months ended December 31, 2009, to ¥245.5 billion, due mainly to increased sales of semiconductor-related manufacturing equipment and electronic parts manufacturing systems on the back of rebounding capital expenditures in the electronics field.

Segment profit increased ¥6.8 billion compared with the three months ended December 31, 2009, to ¥7.3 billion due primarily to higher revenues.

(Construction Machinery)

Revenues rose 29% compared with the three months ended December 31, 2009, to ¥181.8 billion. In addition to growth in overseas sales of hydraulic excavators and other products, especially to emerging markets in Asia and elsewhere, the higher revenues reflected the impact of making Telco Construction Equipment Co., Ltd., an Indian company, a consolidated subsidiary in March 2010.

Segment profit increased 396% compared with the three months ended December 31, 2009, to ¥12.8 billion due primarily to higher revenues.

(High Functional Materials & Components)

Revenues rose 11% compared with the three months ended December 31, 2009, to ¥363.0 billion, as a result of higher revenues at Hitachi Metals, Ltd., Hitachi Cable, Ltd. and Hitachi Chemical Co., Ltd. due to solid demand for automotive-related components and other products.

Segment profit increased 32% compared with the three months ended December 31, 2009, to ¥23.7 billion due primarily to higher revenues.

(Automotive Systems)

Revenues increased 10% compared with the three months ended December 31, 2009, to ¥182.0 billion on the back of a global recovery in demand for automobiles, particularly in emerging markets. This growth came despite the impact of the scaling back of a government program in Japan to spur vehicle sales.

The segment recorded profit of ¥5.1 billion, an increase of 79% compared with the three months ended December 31, 2009, due primarily to improved capacity utilization in line with recovering demand, as well as the effects of business structural reforms.

(Components & Devices)

Revenues were ¥201.3 billion, which was the same level as in the three months ended December 31, 2009. Higher revenues of hard disk drives, mainly for use in PCs and servers, were offset by lower sales of LCDs, mainly for game consoles.

Segment profit increased 113% compared with the three months ended December 31, 2009, to ¥9.6 billion, as a result of improved profitability in hard disk drives due to increased revenues, new products contribution and cost reduction efforts.

(Digital Media & Consumer Products)

Revenues were ¥248.8 billion, an increase of 5% compared with the three months ended December 31, 2009. The segment revenue growth reflected higher sales of air conditioning equipment for enterprises, as well as growth in sales of flat-panel TVs, room air conditioners, refrigerators and other products, thanks to a surge in demand before changes to the eco-points system in Japan, partially offset by lower sales of optical disk drive-related products due to lackluster demand.

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Segment profit increased 207% compared with the three months ended December 31, 2009, to ¥9.9 billion due primarily to strong performances from products eligible for eco-points, partially offset by decreased profitability in optical disk drive-related products in line with lower sales.

(Financial Services)

Revenues increased 1% compared with the three months ended December 31, 2009, to ¥91.3 billion. This result was due to healthy growth in outsourcing and other businesses that generate revenues from commission services at Hitachi Capital Corporation.

Segment profit increased 103% compared with the three months ended December 31, 2009, to ¥6.6 billion. In addition to higher revenues, this was due to recording earnings related to receivables that were recorded as gains on sale up through March 31, 2010 in line with the consolidation of securitization entities from April 1, 2010, in accordance with changes in U.S. GAAP accounting standards. The improvement also reflected reduced financing costs at Hitachi Capital Corporation.

(Others)

Revenues rose 1%, to ¥189.6 billion, and segment profit increased 131%, to ¥8.9 billion in the three months ended December 31, 2010 compared with the three months ended December 31, 2009, as a result of growth in revenues at Hitachi Transport System, Ltd. due to increased revenues from third-party logistics solutions.

Revenues by Market

Revenues in Japan increased 2% compared with the three months ended December 31, 2009, to ¥1,259.9 billion, due to higher revenues in the Digital Media & Consumer Products segment driven by the impact of the eco-points system, and higher revenues mainly in the High Functional Materials & Components, Automotive Systems and Social Infrastructure & Industrial Systems segments in line with recovering demand in the electronics- and automotive-related fields, among other factors.

Overseas revenues increased 8% compared with the three months ended December 31, 2009, to ¥1,003.5 billion. In addition to higher revenues in the Construction Machinery segment, mainly in emerging countries, the Electronic Systems & Equipment, High Functional Materials & Components, Components & Devices and Automotive Systems segments posted higher revenues.

As a result, the ratio of overseas revenues to total revenues was 44%, compared with 43% in the three months ended December 31, 2009.

(2) Summary of Financial Position, etc.

Liquidity and Capital Resources

During the three months ended December 31, 2010, the Company had no major changes in the policies of maintaining liquidity and ensuring funds, efforts for improvement in fund management efficiency, and ideas regarding funding sources and fundraising.

Cash Flows

(Cash flows from operating activities)

Net income in the three months ended December 31, 2010 increased to ¥80.4 billion, an improvement of ¥49.2 billion compared with the three months ended December 31, 2009, mainly due to improved operating income. Increase in inventories in the three months ended December 31, 2010 was ¥134.5 billion, a ¥58.6 billion increase compared with the three months ended December 31, 2009, primarily due to seasonal reasons and increased revenues. As a result of the foregoing, operating activities provided net cash of ¥42.0 billion in the three months ended December 31, 2010, a decrease of ¥12.5 billion compared with the three months ended December 31, 2009.

(Cash flows from investing activities)

A net sum of ¥75.4 billion in the three months ended December 31, 2010 was recorded as investments related to property, plant and equipment, where the collection of investments in leases, the proceeds from disposal of property, plant and equipment and the proceeds from disposal of tangible assets and software to be leased were subtracted from the amount of the capital expenditures, the purchase of intangible assets and the purchase of tangible assets and software to be leased. This net sum decreased by ¥12.7 billion compared with the three months ended December 31, 2009, due primarily to a stricter selection of investments. As a result of the foregoing, investing activities used net cash of ¥49.0 billion in the three months ended December 31, 2010, a decrease of ¥39.3 billion compared with the three months ended December 31, 2009.

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(Cash flows from financing activities)

Net increase in short-term debt was ¥94.6 billion due mainly to the issuance of commercial papers by a subsidiary, an increase of ¥7.2 billion compared with the three months ended December 31, 2009. Proceeds from long-term debt was ¥16.2 billion, a decrease of ¥230.4 billion compared with the three months ended December 31, 2009 due mainly to absence of issuance of bonds with stock acquisition rights which the Company issued in the three months ended December 31, 2009. Payments on long-term debt were ¥145.6 billion, a decrease of ¥31.5 billion compared with the three months ended December 31, 2009. As a result of the foregoing, financing activities used net cash of ¥65.3 billion in the three months ended December 31, 2010, in contrast to the net cash of ¥141.9 billion provided in financing activities in the three months ended December 31, 2009.

As a result of the above items, in the three months ended December 31, 2010 cash and cash equivalents decreased ¥77.1 billion, to ¥556.6 billion as of December 31, 2010. Free cash flows, the sum of cash flows from operating and investing activities, were an outflow of ¥6.9 billion in the three months ended December 31, 2010. The outflow decreased by ¥26.8 billion compared with the three months ended December 31, 2009.

Assets, Liabilities, and Stockholders’ Equity

Total assets as of December 31, 2010 were ¥9,305.2 billion, an increase of ¥340.7 billion from March 31, 2010. This was mainly due to the recording of financial assets transferred to consolidated securitization entities on the consolidated balance sheet in accordance with the revision of provisions of ASC 860 “Transfers and Servicing” and ASC 810 “Consolidation,” and an increase in inventories due to seasonal reasons, and others.

Total interest-bearing debt as of December 31, 2010, which is the sum of short-term debt, long-term debt and non-recourse borrowings of consolidated securitization entities, increased to ¥2,824.3 billion, a ¥457.1 billion increase from March 31, 2010. This is mainly due to the recording of liabilities associated with the consolidation of securitization entities as a result of the abovementioned changes in accounting standards.

Noncontrolling interests as of December 31, 2010 increased by ¥17.2 billion from March 31, 2010, to ¥1,000.4 billion.

Total Hitachi, Ltd. stockholders’ equity as of December 31, 2010 increased by ¥165.0 billion from March 31, 2010, to ¥1,449.6 billion, due mainly to the posting of quarterly net income attributable to Hitachi, Ltd. As a result, the ratio of stockholders’ equity to total assets was 15.6%, compared with 14.3% as of March 31, 2010. The ratio of the interest-bearing debt to the total equity (the sum of total Hitachi, Ltd. stockholders’ equity and noncontrolling interests) increased to 1.15, compared with 1.04 as of March 31, 2010, due mainly to recording non-recourse borrowings of consolidated securitization entities as a result of the abovementioned changes in accounting standards.

(3)Business Strategy

There was no material change in Hitachi’s business strategy during the three months ended December 31, 2010.

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4. Research and Development Expense (Consolidated basis)

	(Billions of yen)
Segment	Three months  ended December 31, 2010
Information & Telecommunication Systems		17.4
Power Systems		3.7
Social Infrastructure & Industrial Systems		5.2
Electronic Systems & Equipment		11.4
Construction Machinery		4.0
High Functional Materials & Components		12.2
Automotive Systems		11.3
Components & Devices		18.3
Digital Media & Consumer Products		5.6
Financial Services		0.0
Others		0.7
Corporate		5.3
Total		95.5

Capital Expenditures (Accrual basis)

	(Billions of yen)
Segment	Three months  ended December 31, 2010
Information & Telecommunication Systems		5.8
Power Systems		1.6
Social Infrastructure & Industrial Systems		3.1
Electronic Systems & Equipment		2.9
Construction Machinery		11.2
High Functional Materials & Components		15.9
Automotive Systems		4.8
Components & Devices		16.2
Digital Media & Consumer Products		3.2
Financial Services		72.2
Others		11.3
Eliminations & Corporate items		(7.8	)
Total		140.8

Note: The amount shown in the table above includes ¥71.7 billion for investment in leasing assets.

Information on the Company

1. Capital as of December 31, 2010 408,818 million yen * 

* Capital increased 27 million yen during January 2011, due to exercise of stock acquisition rights pertaining to the bonds mentioned below.

2. Matters Concerning Shares

Authorized (Common Stock)	10,000,000,000 shares
Shares Issued (Common Stock)
Number of shares issued as of December 31, 2010:	4,518,179,679 shares	*
Number of shares issued as of February 14, 2011:	4,518,353,177 shares	**

* Number of shares issued increased 25,235 shares during the three months ended December 31, 2010, due to exercise of stock acquisition rights pertaining to the bonds mentioned below.

** This number does not include number of shares increased due to exercise of stock acquisition rights pertaining to the bonds mentioned below from February 1, 2011 to February 14, 2011. Number of shares issued increased 173,498 shares during January 2011, due to exercise of stock acquisition rights pertaining to the bonds mentioned below.

The common stock of the Company is listed on the Tokyo, Osaka, Nagoya, Fukuoka and Sapporo stock exchanges in Japan and on the New York Stock Exchange overseas.

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3. Matters Concerning Stock Acquisition Rights, etc.(As of December 31, 2010)

Bond with Stock Acquisition Rights

Name of Stock Acquisition Rights	130% Call Option Attached Unsecured Convertible Bond Type Bonds with Stock Acquisition Rights (8th Series) (with inter-bondpari passu clause)
Class and Number of Shares to Be Issued upon Exercise of Stock Acquisition Rights	Common Stock 315,403,785 shares
Amount to Be Paid upon Exercise of Stock Acquisition Rights	¥317 per share
Period during Which Stock Acquisition Rights May Be Exercised	From January 4, 2010 to December 10, 2014

4. Major Shareholders

		(As of December 31, 2010)
Name of Shareholders		Number of Shares Owned (Shares)		Percentage to Total  Shares Issued (%)
1	The Master Trust Bank of Japan, Ltd. (Trust Account)		347,292,000		7.69
2	Japan Trustee Services Bank, Ltd. (Trust Account)		299,201,000		6.62
3	State Street Bank and Trust Company 505224		130,897,100		2.90
4	Hitachi Employees’ Shareholding Association		122,042,384		2.70
5	SSBT OD05 Omnibus Account - Treaty Clients		101,962,031		2.26
6	Nippon Life Insurance Company		98,173,195		2.17
7	Japan Trustee Services Bank, Ltd. (Trust Account 9)		72,410,000		1.60
8	The Dai-Ichi Life Insurance Company, Limited		71,361,222		1.58
9	State Street Bank and Trust Company 505225		65,734,189		1.45
10	Mellon Bank N.A. as Agent for its Client Mellon Omnibus US Pension		53,685,803		1.19

Notes: 1.	The number of shares held by The Dai-Ichi Life Insurance Company includes its contribution of 6,560,000 shares to the retirement allowance trust (the holder of said shares, as listed in the Shareholders’ Register, is “Dai-Ichi Life Insurance Account, Retirement Allowance Trust, Mizuho Trust & Banking Co., Ltd.”)
2.	The Company received a copy of filing made to the Kanto Local Finance Bureau. This filing represents report on beneficial ownership of more than 5% of total issued voting shares under the Financial Instruments and Exchange Law of Japan. The summary of the copy is as follows.

Name of owners	Mitsubishi UFJ Trust and Banking Corporation etc.
Date of event which requires reporting	December 28, 2009
Amount of shares beneficially owned by the reporting person	270,491,767 shares
Percentage to total shares issued	5.97%

5. Total Number of Voting Rights Held by All the Shareholders

4,485,811 voting rights (as of September 30, 2010)

10

6. Share Price

The following table sets forth the reported high and low prices of the Company’s common stock on the first section of the Tokyo Stock Exchange.

	Price Per Share of Common Stock
	High		Low
	(Yen)
Monthly Information
April 2010		424		353
May 2010		415		345
June 2010		374		317
July 2010		360		313
August 2010		375		334
September 2010		387		340
October 2010		370		344
November 2010		407		363
December 2010		434		393

7. Change in Senior Management

There has been no change in senior management since the filing date of the annual report for the 141st business term pursuant to the Financial Instruments and Exchange Law of Japan.

11

Financial Statements

CONSOLIDATED BALANCE SHEETS

Hitachi, Ltd. and Subsidiaries

December 31, 2010 and March 31, 2010

	Millions of yen
Assets	December 31, 2010		March 31, 2010
Current assets:
Cash and cash equivalents (note 5)		556,694		577,584
Short-term investments (note 3)		16,626		53,575
Trade receivables, net of allowance for doubtful receivables of ¥43,172 million as of December 31, 2010 and ¥43,470 million as of March 31, 2010:
Notes (notes 5 and 13)		118,143		104,353
Accounts (note 5)		1,907,359		2,138,139
Investments in leases (note 5)		214,130		194,108
Current portion of financial assets transferred to consolidated securitization entities (note 5)		211,404		—
Inventories (note 4)		1,476,440		1,222,077
Prepaid expenses and other current assets (note 5)		481,455		485,361
Total current assets		4,982,251		4,775,197
Investments and advances, including affiliated companies (notes 3 and 5)		618,391		712,993
Property, plant and equipment:
Land		466,895		471,123
Buildings		1,912,184		1,931,104
Machinery and equipment		5,519,056		5,554,953
Construction in progress		61,351		62,717
		7,959,486		8,019,897
Less accumulated depreciation		5,831,554		5,800,093
Net property, plant and equipment		2,127,932		2,219,804
Intangible assets (note 6):
Goodwill		166,064		165,586
Other intangible assets		342,965		352,464
Total intangible assets		509,029		518,050
Financial assets transferred to consolidated securitization entities (note 5)		337,517		—
Other assets (note 5)		730,099		738,420
Total assets		9,305,219		8,964,464

See accompanying notes to consolidated financial statements.

12

	Millions of yen
Liabilities and Equity	December 31, 2010			March 31, 2010
Current liabilities:
Short-term debt		568,670			451,451
Current portion of long-term debt (note 5)		364,414			303,730
Current portion of non-recourse borrowings of consolidated securitization entities (note 5)		209,961			—
Trade payables:
Notes		22,413			25,737
Accounts		1,222,757			1,229,546
Accrued expenses (note 13)		814,152			919,849
Income taxes		15,524			50,446
Advances received		400,333			385,199
Other current liabilities (note 5)		459,444			565,245
Total current liabilities		4,077,668			3,931,203
Long-term debt (note 5)		1,413,557			1,611,962
Non-recourse borrowings of consolidated securitization entities (note 5)		267,735			—
Retirement and severance benefits		861,425			905,183
Other liabilities		234,703			248,271
Total liabilities		6,855,088			6,696,619
Equity (note 12):
Common stock (note 9)		408,818			408,810
Capital surplus		603,085			620,577
Legal reserve and retained earnings (note 5 and 11)		903,307			713,479
Accumulated other comprehensive loss (note 5)		(464,209	)		(432,057	)
Treasury stock, at cost (note 10)		(1,343	)		(26,151	)
Total Hitachi, Ltd. Stockholders’ equity		1,449,658			1,284,658
Noncontrolling interests (notes 5 and 12)		1,000,473			983,187
Total equity		2,450,131			2,267,845
Commitments and contingencies (note 13)
Total liabilities and equity		9,305,219			8,964,464

See accompanying notes to consolidated financial statements.

13

CONSOLIDATED STATEMENTS OF OPERATIONS

Hitachi, Ltd. and Subsidiaries

Nine months ended December 31, 2010 and 2009

	Millions of yen
	2010			2009
Revenues		6,765,896			6,282,864
Cost of sales		(5,009,909	)		(4,824,521	)
Selling, general and administrative expenses		(1,418,099	)		(1,416,743	)
Impairment losses for long-lived assets (note 14)		(5,940	)		(1,951	)
Restructuring charges (note 15)		(3,206	)		(16,312	)
Interest income		9,404			8,493
Dividends income		3,796			4,342
Gains on sales of stock by subsidiaries or affiliated companies		—			183
Other income (note 16)		71,277			—
Interest charges		(18,875	)		(19,984	)
Other deductions (note 16)		(19,613	)		(24,202	)
Equity in net loss of affiliated companies		(3,882	)		(44,703	)
Income (loss) before income taxes		370,849			(52,534	)
Income taxes (note 7)		(85,999	)		(55,136	)
Net income (loss)		284,850			(107,670	)
Less net income attributable to noncontrolling interests		64,710			3,669
Net income (loss) attributable to Hitachi, Ltd.		220,140			(111,339	)
	Yen
Net income (loss) attributable to Hitachi, Ltd. stockholders per share (note 17):
Basic		48.75			(32.78	)
Diluted		45.52			(32.78	)

See accompanying notes to consolidated financial statements.

14

CONSOLIDATED STATEMENTS OF OPERATIONS

Hitachi, Ltd. and Subsidiaries

Three months ended December 31, 2010 and 2009

	Millions of yen
	2010			2009
Revenues		2,263,445			2,157,906
Cost of sales		(1,676,078	)		(1,624,195	)
Selling, general and administrative expenses		(467,527	)		(467,351	)
Impairment losses for long-lived assets (note 14)		(71	)		(587	)
Restructuring charges (note 15)		(1,659	)		(2,675	)
Interest income		3,068			2,625
Dividends income		1,039			862
Other income (note 16)		—			6,482
Interest charges		(6,448	)		(6,426	)
Other deductions (note 16)		(10,228	)		(3,018	)
Equity in net earnings (loss) of affiliated companies		1,500			(6,018	)
Income before income taxes		107,041			57,605
Income taxes (note 7)		(26,628	)		(26,401	)
Net income		80,413			31,204
Less net income attributable to noncontrolling interests		18,322			9,322
Net income attributable to Hitachi, Ltd.		62,091			21,882
	Yen
Net income attributable to Hitachi, Ltd. stockholders per share (note 17):
Basic		13.75			6.18
Diluted		12.84			6.02

See accompanying notes to consolidated financial statements.

15

CONSOLIDATED STATEMENTS OF CASH FLOWS

Hitachi, Ltd. and Subsidiaries

Nine months ended December 31, 2010 and 2009

	Millions of yen
	2010			2009
Cash flows from operating activities:
Net income (loss)		284,850			(107,670	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		282,611			333,085
Amortization		85,614			86,570
Impairment losses for long-lived assets		5,940			1,951
Deferred income taxes		548			23,517
Equity in net loss of affiliated companies		3,882			44,703
Gain on sale of investments in securities and other		(72,499	)		(5,042	)
Impairment of investments in securities		2,905			13,925
Gain (loss) on disposal of rental assets and other property		(997	)		13,403
Decrease in receivables		153,487			177,137
Increase in inventories		(317,302	)		(15,204	)
Decrease in prepaid expenses and other current assets		31,904			38,165
Increase (decrease) in payables		54,221			(55,112	)
Decrease in accrued expenses and retirement and severance benefits		(90,772	)		(49,296	)
Increase (decrease) in accrued income taxes		(34,541	)		1,537
Decrease in other current liabilities		(20,603	)		(81,313	)
Net change in inventory-related receivables from financial services		20,040			(4,683	)
Other		30,336			(28,488	)
Net cash provided by operating activities		419,624			387,185
Cash flows from investing activities:
Capital expenditures		(178,929	)		(226,016	)
Purchase of intangible assets		(66,908	)		(55,382	)
Purchase of tangible assets and software to be leased		(206,626	)		(200,194	)
Proceeds from disposal of property, plant and equipment		17,997			12,314
Proceeds from disposal of tangible assets and software to be leased		13,710			15,573
Collection of investments in leases		221,219			122,385
Purchase of investments in securities and shares of newly consolidated subsidiaries		(82,265	)		(52,783	)
Proceeds from sale of investments in securities and shares of consolidated subsidiaries resulting in deconsolidation		142,827			21,068
Refund of deposit received for sale of investment in affiliated company		(43,550	)		—
Other		27,859			18,762
Net cash used in investing activities		(154,666	)		(344,273	)
Cash flows from financing activities:
Increase (decrease) in short-term debt, net		178,289			(164,543	)
Proceeds from long-term debt		159,250			564,400
Payments on long-term debt		(549,954	)		(493,778	)
Proceeds from issuance of common stock		—			252,447
Proceeds from sale of common stock by subsidiaries		300			504
Dividends paid to Hitachi, Ltd. stockholders		(22,625	)		(134	)
Dividends paid to noncontrolling interests		(18,192	)		(21,493	)
Acquisition of common stock for treasury		(146	)		(92	)
Proceeds from sales of treasury stock		43			83
Purchase of shares of consolidated subsidiaries from noncontrolling interest holders		(2,300	)		(260,390	)
Proceeds from sale of shares of consolidated subsidiaries from noncontrolling interest holders		225			392
Other		(4,098	)		(986	)
Net cash used in financing activities		(259,208	)		(123,590	)
Effect of consolidation of securitization entities upon initial adoption of the amended provisions of ASC 810		12,030			—
Effect of exchange rate changes on cash and cash equivalents		(38,670	)		(1,087	)
Net decrease in cash and cash equivalents		(20,890	)		(81,765	)
Cash and cash equivalents at beginning of period		577,584			807,926
Cash and cash equivalents at end of period		556,694			726,161

See accompanying notes to consolidated financial statements.

16

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(1) Nature of Operations

Hitachi, Ltd. (the Company) is a Japanese corporation, whose principal office is located in Japan. The Company’s and its subsidiaries’ businesses are diverse, and include information and telecommunication systems, power systems, social infrastructure and industrial systems, electronic systems and equipment, construction machinery, high functional materials and components, automotive systems, components and devices, digital media and consumer products, financial services, and others including logistics services.

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

(a) Basis of Presentation

The Company and its domestic subsidiaries keep their books of account in accordance with the financial accounting standards of Japan, and its foreign subsidiaries in accordance with those of the countries of their domicile.

The consolidated financial statements presented herein have been prepared to reflect the adjustments which are necessary to conform them with accounting principles generally accepted in the United States of America. However, in preparing the interim financial statements, certain disclosures have been omitted. 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, its majority-owned subsidiaries and all variable interest entities (VIEs) for which the Company or any of its consolidated entities is the primary beneficiary. The definition of a VIE is included in Accounting Standards Codification (ASC) 810, “Consolidation.” This guidance addresses how a business enterprise should evaluate whether it has a controlling financial interest in an entity through means other than voting rights and accordingly should consolidate the entity. The consolidated financial statements include accounts of certain subsidiaries whose closing dates differ from December 31 by 93 days or less to either comply with local statutory requirements or facilitate timely reporting. There have been no significant transactions, which would materially affect the Company’s financial position and results of operations, with such subsidiaries during the period from their closing dates to December 31. Intercompany accounts and significant intercompany transactions have been eliminated in consolidation.

Investments in corporate joint ventures and affiliated companies, where the Company has the ability to exercise significant influence over operational and financial policies generally by holding 20 - 50% ownership, are accounted for under the equity method. Investments where the Company does not have significant influence are accounted for under the cost method.

(c) Income Taxes

The Company computes interim income tax provisions by applying an estimated annual effective tax rate, which is reasonably determined considering the factors that will affect the tax rate including non-taxable transactions, tax credits and valuation allowances, to income before income taxes in accordance with the provisions for interim reporting included in ASC 740, “Income Taxes.” The effect of a change as a result of a change in judgement about the realizability of the related deferred tax asset is recognized in the interim period in which the change occurs.

17

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(d) Disclosures about Segments of an Enterprise and Related Information

ASC 280, “Segment Reporting,” establishes guidance about how a public business enterprise is required to report financial and descriptive information about its operating segments. This guidance 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. Measures of profit or loss, total assets and other related information are required to be disclosed for each operating segment. Furthermore, this guidance 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. Certain foreign private issuers (FPIs) were exempted from the segment disclosure requirements of ASC 280 in filings with the United States Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934, and the Company has not previously presented the segment information required to be disclosed in the footnotes to the consolidated financial statements based on ASC 280. However, in September 2008, the SEC issued its “Foreign Issuer Reporting Enhancements” (FIRE) rule. The FIRE rule eliminated an instruction to the Form 20-F that is filed under the Securities Exchange Act of 1934 that permitted certain FPIs to omit segment disclosures required by ASC 280, as well as other enhancements. This aspect of the FIRE rule regarding elimination of the ability to omit segment disclosures was effective for fiscal years ended on or after December 15, 2009. As a result, the Company retrospectively adopted ASC 280.

(e) Accounting Changes

The Company adopted the provisions of ASC 860, “Transfers and Servicing” amended by Accounting Standards Update (ASU) 2009-16, “Accounting for Transfers of Financial Assets” on April 1, 2010. These provisions remove the concept of a qualifying special-purpose entity and remove the exception from the application of variable interest accounting to qualifying special-purpose entities. These provisions modify the financial-components approach used to account for transfers of financial assets, limits the circumstances in which a transferor derecognizes a portion or component of a financial asset when the transferor has not transferred the original financial asset to an entity and/or when the transferor has continuing involvement with the financial asset, and establishes the “participating interests” conditions for reporting a transfer. The provisions also require enhanced disclosures to provide financial statement users with greater transparency about transfers of financial assets and a transferor’s continuing involvement.

The Company adopted the provisions of ASC 810, “Consolidation” amended by ASU 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities” on April 1, 2010. These provisions establish how a company determines when an entity that is insufficiently capitalized or is not controlled through voting or similar rights should be consolidated. The determination of whether a company is required to consolidate an entity is based on qualitative information such as an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The provisions also require enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity.

The effect of the adoption of the provisions amended by ASU 2009-16 and ASU 2009-17 is presented in note 5.

18

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(f) Revision to the Consolidated Balance Sheet

The amounts of goodwill, other intangible assets and other liabilities in the consolidated balance sheet as of March 31, 2010 were revised to adjust the provisional amounts in accordance with the provisions of ASC 805, “Business Combinations.” The evaluation of the fair values of the assets and liabilities related to the business combination achieved in March 2010 was completed during the three months ended June 30, 2010. Consequently, total assets and total liabilities and equity in the consolidated balance sheet as of March 31, 2010 are also revised. The effects on the consolidated balance sheet as of March 31, 2010 are presented in note 21.

(g) Reclassifications

The Company has reclassified certain amounts on the consolidated statements of cash flows for the nine months ended December 31, 2009 to conform to the December 31, 2010 presentation. Cash flows related to tangible and intangible assets have been separated into tangible assets, intangible assets and tangible assets and software to be leased. Increase (decrease) in short-term investments, which was previously presented separately, is included in investments in securities. Additionally, as a result of adopting the provisions of ASC 810, purchases and proceeds from sales of shares of subsidiaries that do not result in a change in the scope of consolidation, which were previously included in cash flows from investing activities, are included in cash flows from financing activities.

19

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(3) Investments in Securities and Affiliated Companies

Short-term investments as of December 31, 2010 and March 31, 2010 are as follows:

	Millions of yen
	December 31, 2010		March 31, 2010
Investments in securities:
Available-for-sale securities
Government debt securities		3,338		43,840
Corporate debt securities		9,628		6,074
Other securities		3,620		3,621
Held-to-maturity securities		40		40
		16,626		53,575
Investments and advances, including affiliated companies as of December 31, 2010 and March 31, 2010 are as follows:
	Millions of yen
	December 31, 2010		March 31, 2010
Investments in securities:
Available-for-sale securities
Equity securities		152,729		159,850
Government debt securities		325		316
Corporate debt securities		29,417		29,285
Other securities		6,513		10,639
Held-to-maturity securities		236		236
Cost-method investments		49,803		48,222
Investments in affiliated companies		332,346		300,956
Advances and other		47,022		163,489
		618,391		712,993

20

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

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 December 31, 2010 and March 31, 2010.

	Millions of yen
	December 31, 2010
	Amortized cost basis		Gross gains		Gross losses		Aggregate fair value
Short-term investments:
Government debt securities		3,338		—		—		3,338
Corporate debt securities		9,483		161		16		9,628
Other securities		3,618		2		—		3,620
		16,439		163		16		16,586
Investments and advances:
Equity securities		89,396		65,169		1,836		152,729
Government debt securities		309		16		—		325
Corporate debt securities		27,672		1,986		241		29,417
Other securities		6,488		86		61		6,513
		123,865		67,257		2,138		188,984
		140,304		67,420		2,154		205,570

	Millions of yen
	March 31, 2010
	Amortized cost basis		Gross gains		Gross losses		Aggregate fair value
Short-term investments:
Government debt securities		43,839		1		—		43,840
Corporate debt securities		6,071		8		5		6,074
Other securities		3,619		2		—		3,621
		53,529		11		5		53,535
Investments and advances:
Equity securities		90,339		70,998		1,487		159,850
Government debt securities		305		11		—		316
Corporate debt securities		26,419		3,032		166		29,285
Other securities		10,314		392		67		10,639
		127,377		74,433		1,720		200,090
		180,906		74,444		1,725		253,625

21

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The following is a summary of gross unrealized holding losses on available-for-sale securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, as of December 31, 2010 and March 31, 2010.

	Millions of yen
	December 31, 2010
	Less than 12 months				12 months or longer
	Aggregate fair value		Gross losses		Aggregate fair value		Gross losses
Short-term investments:
Corporate debt securities		5,183		16		—		—
Investments and advances:
Equity securities		13,414		1,442		531		394
Corporate debt securities		7,354		176		5,954		65
Other securities		32		5		208		56
		20,800		1,623		6,693		515
		25,983		1,639		6,693		515
	Millions of yen
	March 31, 2010
	Less than 12 months				12 months or longer
	Aggregate fair value		Gross losses		Aggregate fair value		Gross losses
Short-term investments:
Corporate debt securities		1,498		2		697		3
Investments and advances:
Equity securities		3,491		532		4,718		955
Corporate debt securities		2,646		44		5,669		122
Other securities		—		—		327		67
		6,137		576		10,714		1,144
		7,635		578		11,411		1,147

22

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Equity securities consist primarily of stocks issued by Japanese listed companies. Government debt securities consist primarily of Japan treasury bonds. Corporate debt securities consist primarily of structured bonds. Other securities consist primarily of investments funds.

The proceeds from the sale of available-for-sale securities for the nine months ended December 31, 2010 and 2009 were ¥11,375 million and ¥2,789 million, respectively. The proceeds from the sale of available-for-sale securities for the three months ended December 31, 2010 and 2009 were ¥1,563 million and ¥657 million, respectively. The gross realized gain on the sale of those securities for the nine months ended December 31, 2010 and 2009 were ¥3,231 million and ¥451 million, respectively. The gross realized gain on the sale of those securities for the three months ended December 31, 2010 and 2009 were ¥614 million and ¥12 million, respectively. The gross realized loss on the sale of those securities for the nine months ended December 31, 2010 and 2009 were ¥384 million and ¥2 million. There was no gross realized loss on the sale of those securities for the three months ended December 31, 2010 and 2009.

The contractual maturities of debt securities and other securities classified as investments and advances in the consolidated balance sheet as of December 31, 2010 are as follows:

	Millions of yen
	Held-to-maturity		Available-for-sale		Total
Due within five years		236		14,484		14,720
Due after five years through ten years		—		5,508		5,508
Due after ten years		—		16,263		16,263
		236		36,255		36,491

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

The aggregate carrying amounts of cost-method investments which were not evaluated for impairment as of December 31, 2010 and March 31, 2010 were ¥49,792 million and ¥47,900 million, respectively, mainly because it is not practicable to estimate the fair value of the investments due to lack of a market price and difficulty in estimating fair value without incurring excessive cost and the Company did not identify any events or changes in circumstances that might have had a significant adverse effect on their fair value.

23

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(4) Inventories

Inventories as of December 31, 2010 and March 31, 2010 are summarized as follows:

	Millions of yen
	December 31, 2010		March 31, 2010
Finished goods		551,618		505,918
Work in process		692,883		513,556
Raw materials		231,939		202,603
		1,476,440		1,222,077

(5) Securitizations

The Company and certain subsidiaries securitize certain financial assets, such as lease, trade and mortgage loans receivable, and arrange other forms of asset-backed financing for the purpose of providing diversified and stable fund raising as part of their ongoing securitization activities. Historically, they have used Hitachi-supported and third-party Special Purpose Entities (SPEs) to execute securitization transactions funded with commercial paper and other borrowings. These securitization transactions are similar to those used by many financial institutions.

Investors in these entities only have recourse to the assets owned by the entity and not to their general credit, unless noted below. The Company and certain subsidiaries do not provide non-contractual support to SPEs and do not have implicit support arrangements with any SPEs. The majority of their involvement with SPEs related to the securitization activities are assisting in the formation and financing of an entity, providing limited credit enhancements, servicing the assets and receiving fees for services provided.

The transferred assets have similar risks and characteristics to the Company’s and certain subsidiaries’ receivables recorded on the consolidated balance sheets. Accordingly, the performance, such as collections or expected credit loss, of these transferred assets has been similar to the receivables recorded on the consolidated balance sheets for the Company and certain subsidiaries; however, the blended performance of the pools of transferred assets reflects the eligibility screening requirements that the Company and certain subsidiaries apply to determine which receivables are selected for transfer. Therefore, the blended performance may differ from receivables recorded on the consolidated balance sheets.

A portion of these lease, trade and mortgage loans receivable is transferred to SPEs sponsored by financial institutions, which operate those SPEs as a part of their businesses. Accordingly, the amount of assets transferred by the Company and its subsidiaries is considerably small compared to the total assets of the SPEs sponsored by these financial institutions that purchase a large amount of assets from entities other than the Company and its subsidiaries. In certain transactions, investors have recourse with a scope that is considerably limited.

Most of the transactions transferring lease and mortgage loans receivable utilize securitization trusts. In those transactions, certain subsidiaries initially transfer the receivables to trusts that had satisfied the conditions of Qualifying SPEs (QSPEs), which under guidance in effect through March 31, 2010 were excluded from the scope of consolidation provisions and receive the beneficial interests in trusts originated from the transferred assets. Subsequently, the subsidiaries transfer the interests to and receive cash as consideration from SPEs that are not former QSPEs, as a part of securitization arrangements.

24

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The remaining financial assets, consisting mainly of trade receivables, were transferred to former QSPEs established by certain of the Company’s subsidiaries in the Cayman Island. In those transactions, the Company and certain subsidiaries received cash as consideration from the former QSPEs that were funded through the issuance of asset-backed securities or other borrowings from investors that were secured by the transferred assets. The Company and certain subsidiaries retained subordinated interests in the transferred assets relating to these transactions, or otherwise investors had recourse with considerably limited scope. Furthermore, the Company and certain subsidiaries retained servicing responsibility, and certain of the Company’s subsidiaries provided credit facilities to the former QSPEs in accordance with the service agency business contracts from which temporary payments on behalf of the former QSPEs were made.

As of March 31, 2010, the Company and its subsidiaries have three QSPEs with outstanding balances of transferred receivables and the total amount of their assets was ¥117,159 million. Since the Company and its subsidiaries terminated the transactions with the former QSPEs by December 31, 2010, there are no outstanding balances of transferred receivables to the former QSPEs as of December 31, 2010. The Company and its subsidiaries did not hold any of the voting shares issued by those former QSPEs, and none of the directors of those former QSPEs were executives or employees of the Company or its subsidiaries. Additionally, the former QSPEs also purchased receivables from third-party customers.

In accordance with the new consolidation provisions effective April 1, 2010, the Company and certain subsidiaries are deemed to have a controlling financial interest and are the primary beneficiary of a SPE if it has both the power to direct the activities of the SPE that most significantly impact the SPE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPE. As a result of this change in accounting, the Company consolidated former QSPEs that were unconsolidated prior to April 1, 2010 using the carrying amounts of the SPE’s assets and liabilities as of April 1, 2010.

The incremental impact of these entities on the Company’s total assets and liabilities, net of our investment in them, was an increase of ¥670,558 million and ¥688,477 million, respectively. There also was a net reduction of total equity of ¥17,919 million, principally related to the reversal of previously recognized gains on sales of financial assets as a cumulative effect adjustment to retained earnings.

25

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The incremental impact of this accounting change on the Company’s consolidated balance sheet as of April 1, 2010 is set forth in the following table:

	Millions of yen
	Net increase  (decrease)
Cash and cash equivalents		12,030
Current portion of financial assets transferred to consolidated securitization entities		339,875
Prepaid expenses and other current assets		(33,283	)
Investments and advances, including affiliated companies		(117,370	)
Financial assets transferred to consolidated securitization entities		457,104
Other assets		12,202
Total assets		670,558
Current portion of long-term debt		(4,898	)
Current portion of non-recourse borrowings of consolidated securitization entities		347,367
Other current liabilities		(55,163	)
Long-term debt		(2,081	)
Non-recourse borrowings of consolidated securitization entities		403,252
Total liabilities		688,477
Legal reserve and retained earnings		(7,732	)
Accumulated other comprehensive loss		(2,977	)
Noncontrolling interests		(7,210	)
Total equity		(17,919	)

Consolidated SPEs

The Company consolidated SPEs mainly because the Company has both the power to direct the activities of the SPEs that most significantly impact the SPE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the SPEs. The consolidated SPEs are mainly trusts for the securitizations of lease receivables and mortgage loans receivable.

26

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The table below summarizes the assets and liabilities of the consolidated SPEs as of December 31, 2010 by type of transferred financial assets that those SPEs hold:

	Millions of yen
	December 31, 2010
	Lease receivables		Mortgage loans receivable		Others		Total
Cash and cash equivalents		4,340		3,113		1,081		8,534
Current portion of financial assets transferred to consolidated securitization entities		120,286		11,451		79,667		211,404
Financial assets transferred to consolidated securitization entities		148,382		183,411		5,724		337,517
Current portion of non-recourse borrowings of consolidated securitization entities:
Loans, mainly from banks		92,392		—		25,365		117,757
Beneficial interests in trusts		53,107		22,199		16,898		92,204
		145,499		22,199		42,263		209,961
Non-recourse borrowings of consolidated securitization entities:
Loans, mainly from banks		74,070		—		—		74,070
Beneficial interests in trusts		39,663		149,813		4,189		193,665
		113,733		149,813		4,189		267,735

The assets and liabilities of the consolidated SPEs on the table above exclude intercompany balances that are eliminated in consolidation. Substantially, all of the assets of the consolidated SPEs can only be used to settle obligations of those SPEs.

Transfers to unconsolidated entities

The following information is related to financial assets transferred to unconsolidated entities and accounted for as sales. Those financial assets are transferred mainly to SPEs sponsored by financial institutions.

Securitizations of lease receivables:

Hitachi Capital Corporation and certain other financing subsidiaries sold lease receivables to unconsolidated SPEs and other entities. Net gains recognized on the sale of these lease receivables for the nine months ended December 31, 2010 and 2009 were ¥6,096 million and ¥6,699 million, respectively. Net gains recognized on the sale of these lease receivables for the three months ended December 31, 2010 and 2009 were ¥2,170 million and ¥1,835 million, respectively. The subsidiaries retained servicing responsibilities, but did not record a servicing asset or liability because the cost to service the receivables approximated the servicing income.

27

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The table below summarizes cash flows received from and paid to the SPEs and other entities during the nine months ended December 31, 2010 and 2009:

	Millions of yen
	Nine months ended December 31, 2010		Nine months ended December 31, 2009
Proceeds from transfer of lease receivables		86,545		112,089
Servicing fees received		—		55
Purchases of delinquent or ineligible assets		—		(55,949	)
The table below summarizes cash flows received from and paid to the SPEs and other entities during the three months ended December 31, 2010 and 2009:
	Millions of yen
	Three months ended December 31, 2010		Three months ended December 31, 2009
Proceeds from transfer of lease receivables		27,530		30,591
Servicing fees received		—		18
Purchases of delinquent or ineligible assets		—		(5,425	)
The amounts of initial fair value of subordinated interests for the nine and three months ended December 31, 2010 were ¥14,402 million and ¥5,394 million, respectively. The subordinated interests relating to securitizations of lease receivables are initially classified as Level 3 assets within the fair value hierarchy. The initial fair value of the subordinated interests is determined based on economic assumptions including weighted-average life, expected credit risks, and discount rates. 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 nine months ended December 31, 2010 and as of and for the year ended March 31, 2010 is as follows:

	Millions of yen
	December 31, 2010
	Total principal amount  of receivables			Principal amount of receivables 90 days or more past due		Net credit loss
Total assets managed or transferred:
Lease receivables		1,031,880			207		751
Assets transferred		(137,086	)
Assets held in portfolio		894,794

28

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

	Millions of yen
	March 31, 2010
	Total principal amount of receivables			Principal amount of receivables 90 days or more past due		Net credit loss
Total assets managed or transferred:
Lease receivables		1,103,804			243		1,943
Assets transferred		(491,038	)
Assets held in portfolio		612,766

As of December 31, 2010, the amount of the maximum exposure to loss was ¥25,240 million. It mainly consists of the subordinated interests and the obligations to purchase assets with a scope that is considerably limited relating to these securitizations of lease receivables. As of December 31, 2010 and March 31, 2010, the amount of the subordinated interests measured at fair value relating to these securitizations of lease receivables were ¥15,081 million and ¥77,756 million, respectively.

These securitizations were designed to transfer the lease receivables through trusts that satisfied the conditions of former QSPEs. Since almost all of those trusts were consolidated upon the adoption of the new consolidation provisions, the lease receivables transferred to the consolidated trusts were recognized on the Company’s consolidated balance sheet and classified as financial assets transferred to consolidated securitization entities on April 1, 2010.

Securitizations of trade receivables excluding mortgage loans receivable:

The Company and certain subsidiaries sold trade receivables excluding mortgage loans receivable mainly to unconsolidated SPEs and other entities. During the nine months ended December 31, 2010 and 2009, proceeds from the transfer of trade receivables excluding mortgage loans receivable were ¥313,584 million and ¥560,987 million, respectively, and net losses recognized on those transfers were ¥284 million and ¥1,433 million, respectively. During the three months ended December 31, 2010 and 2009, proceeds from the transfer of trade receivables excluding mortgage loans receivable were ¥124,037 million and ¥171,141 million, respectively, and net losses recognized on those transfers were ¥118 million and ¥485 million, respectively. The Company and certain subsidiaries retained servicing responsibilities, but did not record a servicing asset or liability because the cost to service the receivables approximated the servicing income.

29

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Quantitative information about delinquencies, net credit loss, and components of trade receivables excluding mortgage loans receivable subject to transfer and other assets managed together as of and for the nine months ended December 31, 2010 and as of and for the year ended March 31, 2010 is as follows:

	Millions of yen
	December 31, 2010
	Total principal amount of receivables			Principal amount of receivables 90 days or more past due		Net credit loss
Total assets managed or transferred:
Trade receivables excluding mortgage loans receivable		579,617			190		267
Assets transferred		(142,020	)
Assets held in portfolio		437,597
	Millions of yen
	March 31, 2010
	Total principal amount of receivables			Principal amount of receivables 90 days or more past due		Net credit loss
Total assets managed or transferred:
Trade receivables excluding mortgage loans receivable		979,148			5,414		2,809
Assets transferred		(279,245	)
Assets held in portfolio		699,903

As of December 31, 2010, the amount of the maximum exposure to loss was ¥21,520 million. It mainly consists of the subordinated interests and obligations to purchase assets with a scope that is considerably limited relating to these securitizations of trade receivables excluding mortgage loans receivable. As of March 31, 2010, the amount of the subordinated interests relating to these securitizations of trade receivables excluding mortgage loans receivable was ¥45,249 million.

A portion of these trade receivables excluding mortgage loans receivable was transferred to former QSPEs, which were established by certain of the Company’s subsidiaries, through December 31, 2010. During the nine months ended December 31, 2010, proceeds from the transfer of trade receivables excluding mortgage loans receivable to the former QSPEs and net losses recognized on those transfers were immaterial and there is no outstanding balance of transferred receivables in these former QSPEs as of December 31, 2010. During the nine and three months ended December 31, 2009, proceeds from the transfer of trade receivables excluding mortgage loans receivable to the former QSPEs were ¥291,826 million and ¥76,518 million, and net losses recognized on those transfers were ¥523 million and ¥148 million, respectively. As of March 31, 2010, outstanding balance of transferred receivables in these former QSPEs was ¥75,654 million.

30

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Securitizations of mortgage loans receivable:

Hitachi Capital Corporation sold mortgage loans receivable to unconsolidated SPEs. For the nine and three months ended December 31, 2009, no proceeds from the transfer of mortgage loans receivable were recorded. The subsidiary retained servicing responsibilities but did not record a servicing asset or liability because the cost to service the receivables approximated the servicing income.

Quantitative information about delinquencies, net credit loss, and components of mortgage loans receivable subject to transfer and other assets managed together as of and for the year ended March 31, 2010 is as follows:

	Millions of yen
	March 31, 2010
	Total principal amount of receivables			Principal amount of receivables 90 days or more past due		Net credit loss
Total assets managed or transferred:
Mortgage loans receivable		224,449			—		12
Assets transferred		(210,834	)
Assets held in portfolio		13,615

As of March 31, 2010, the amount of the subordinated interests measured at fair value relating to securitizations of mortgage loans receivable was ¥37,661 million.

These securitizations were designed to transfer the mortgage loans receivable through trusts that satisfied the conditions of former QSPEs. Since all of the trusts were consolidated upon the adoption of the new consolidation provisions, the mortgage loans receivable transferred to the consolidated trusts was recognized on the Company’s consolidated balance sheet and classified as financial assets transferred to consolidated securitization entities on April 1, 2010.

31

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(6) Goodwill and Other Intangible Assets

Goodwill and other intangible assets included in other assets as of December 31, 2010 and March 31, 2010 are as follows:

	Millions of yen
	December 31, 2010						March 31, 2010
	Gross carrying amount		Accumulated amortization		Net carrying amount		Gross carrying amount		Accumulated amortization		Net carrying amount
Goodwill		166,064		—		166,064		165,586		—		165,586
Amortized intangible assets:
Software		702,825		593,690		109,135		691,856		580,138		111,718
Software for internal use		502,667		371,611		131,056		473,621		343,733		129,888
Patents		99,421		83,033		16,388		106,815		87,526		19,289
Other		173,381		103,988		69,393		173,823		99,952		73,871
		1,478,294		1,152,322		325,972		1,446,115		1,111,349		334,766
Indefinite-lived intangible assets		16,993		—		16,993		17,698		—		17,698

(7) Income Taxes

The Company’s combined statutory income tax rate for the year ended March 31, 2010 was approximately 40.6%. However, the estimated annual effective tax rate applied to income (loss) before income taxes was different from the statutory rate for the year ended March 31, 2010, because the estimated annual effective tax rates of the consolidated tax group including the Company and certain subsidiaries were computed including the effect of a valuation allowance that was necessary to reduce the carrying value of deferred tax assets related to deductible temporary differences and carryforwards originating during the year.

(8) Retirement and Severance Benefits

Net periodic benefit cost for the contributory funded benefit pension plans and the unfunded lump-sum payment plans for the nine months ended December 31, 2010 and 2009 consists of the following components:

	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Service cost		53,445			53,551
Interest cost		39,863			40,887
Expected return on plan assets for the period		(25,189	)		(24,373	)
Amortization of prior service benefit		(17,692	)		(16,848	)
Recognized actuarial loss		66,240			73,291
Transfer to defined contribution pension plan		(121	)		40
Employees’ contributions		(100	)		(101	)
		116,446			126,447

32

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Net periodic benefit cost for the contributory funded benefit pension plans and the unfunded lump-sum payment plans for the three months ended December 31, 2010 and 2009 consists of the following components:

	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Service cost		17,571			17,624
Interest cost		13,248			13,649
Expected return on plan assets for the period		(8,405	)		(8,128	)
Amortization of prior service benefit		(5,794	)		(5,558	)
Recognized actuarial loss		22,150			24,199
Employees’ contributions		(20	)		(39	)
		38,750			41,747

(9) Common Stock

Issued shares of common stock as of December 31, 2010 and March 31, 2010 are as follows:

	Issued shares
	December 31, 2010		March 31, 2010
Issued shares of common stock		4,518,179,679		4,518,132,365

(10) Treasury Stock

Shares of treasury stock as of December 31, 2010 and March 31, 2010 are as follows:

	Shares
	December 31,     2010		March 31,     2010
Shares of treasury stock		2,481,292		44,014,251

(11) Dividends

Decision	Class of Shares	Cash dividends (Millions of yen)		Appropriation from	Cash dividends per share (Yen)		Record date	Effective Date
The Board of Directors on November 2, 2010	Common stock		22,580	Retained earnings		5.0	September 30, 2010	November 25, 2010

33

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(12) Equity

The changes in the equity for the nine months ended December 31, 2010 and 2009 are summarized as follows:

	Millions of yen
	Nine months ended December 31, 2010
	Total Hitachi, Ltd. stockholders’ equity			Noncontrolling interests			Total equity
Balance at beginning of period		1,284,658			983,187			2,267,845
Effect on retained earnings due to consolidation of securitization entities upon initial adoption of the amended provisions of ASC 810		(7,732	)		(5,225	)		(12,957	)
Effect on accumulated other comprehensive loss due to consolidation of securitization entities upon initial adoption of the amended provisions of ASC 810		(2,977	)		(1,985	)		(4,962	)
Dividends to Hitachi, Ltd. stockholders		(22,580	)		—			(22,580	)
Dividends to noncontrolling interests		—			(17,337	)		(17,337	)
Equity transactions and other		7,079			(3,889	)		3,190
Comprehensive income (loss)
Net income		220,140			64,710			284,850
Other comprehensive income (loss), net of income taxes and reclassification adjustments:
Foreign currency translation adjustments		(69,111	)		(24,464	)		(93,575	)
Pension liability adjustments		44,478			3,594			48,072
Net unrealized holding gain on available-for-sale securities		(5,812	)		482			(5,330	)
Cash flow hedges		1,515			1,400			2,915
Comprehensive income		191,210			45,722			236,932
Balance at end of period		1,449,658			1,000,473			2,450,131

34

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

	Millions of yen
	Nine months ended December 31, 2009
	Total Hitachi, Ltd. stockholders’ equity			Noncontrolling interests			Total equity
Balance at beginning of period		1,049,951			1,129,401			2,179,352
Issuance of common stock		252,447			—			252,447
Dividends to noncontrolling interests		—			(21,493	)		(21,493	)
Equity transactions and other		(77,777	)		(188,303	)		(266,080	)
Comprehensive income (loss)
Net income (loss)		(111,339	)		3,669			(107,670	)
Other comprehensive income (loss), net of income taxes and reclassification adjustments:
Foreign currency translation adjustments		(8,834	)		(2,672	)		(11,506	)
Pension liability adjustments		45,280			6,517			51,797
Net unrealized holding gain on available-for-sale securities		15,243			4,267			19,510
Cash flow hedges		(472	)		516			44
Comprehensive income (loss)		(60,122	)		12,297			(47,825	)
Balance at end of period		1,164,499			931,902			2,096,401

For the three months ended December 31, 2010, total comprehensive income was ¥73,379 million, and for the three months ended December 31, 2009, total comprehensive income was ¥39,329 million.

Accumulated other comprehensive loss, net of income taxes, as of December 31, 2010 and March 31, 2010 consists of the following:

	Millions of yen
	December 31, 2010			March 31, 2010
Foreign currency translation adjustments		(252,178	)		(182,783	)
Pension liability adjustments		(227,939	)		(272,410	)
Net unrealized holding gain on available-for-sale securities		16,821			25,564
Cash flow hedges		(913	)		(2,428	)
Accumulated other comprehensive loss		(464,209	)		(432,057	)

35

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(13) Commitments and Contingencies

The Company and its operating subsidiaries are contingently liable for loan guarantees to its affiliates and others in the amount of approximately ¥47,355 million as of December 31, 2010.

Hitachi Capital Corporation (HCC) and certain other financial subsidiaries provide guarantees to financial institutions for extending loans to customers of the subsidiaries. As of December 31, 2010, the undiscounted maximum potential future payments under such guarantees amounted to ¥406,856 million. For providing these guarantees, the subsidiaries obtain collateral equal to the amount of the guarantees, and therefore, the Company considers the risk to be low. The Company accrued ¥13,563 million as an obligation to stand ready to perform over the term of the guarantees in the event the customer cannot make scheduled payments.

The subsidiaries provide certain revolving lines of credit to its credit card holders in accordance with the terms of the credit card business customer service contracts. In addition, the Company and HCC provide loan commitments to affiliates and others.

The outstanding balance of these revolving lines of credit and loan commitments as of December 31, 2010 is as follows:

	Millions of yen
Total commitment available		12,527
Less amount utilized		2,413
Balance available		10,114

A portion of these revolving lines of credit is pending credit approval and cannot be utilized.

The Company and certain subsidiaries have line of credit arrangements with banks in order to secure a financing source for business operations. The unused lines of credit as of December 31, 2010 amounted to ¥409,468 million, primarily related to unused lines of credit belonging to the Company. The Company maintains commitment line agreements with a number of banks and pays commissions as consideration. These commitment agreements generally provide a one-year term, and are subject to renewal at the end of the term. The unused availability under these agreements as of December 31, 2010 amounted to ¥200,000 million. The Company also maintains another commitment line agreement, whose three years and two months term ends in May 2013, with financing companies. The unused availability under this agreement as of December 31, 2010 amounted to ¥100,000 million.

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 December 31, 2010 and March 31, 2010, the Company and subsidiaries were contingently liable for trade notes discounted and endorsed in the following amounts:

	Millions of yen
	December 31, 2010		March 31, 2010
Notes discounted		2,776		3,497
Notes endorsed		2,656		2,538
		5,432		6,035

36

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

A certain subsidiary is contingently liable for the transfer of export receivables with recourse. As of December 31, 2010, the amount of transfer of export receivables with recourse was ¥6,517 million.

The Company and its subsidiaries provide warranties for certain of their products. The accrued product warranty costs are based primarily on historical experience of actual warranty claims. The changes in accrued product warranty costs for the nine months ended December 31, 2010 and 2009 are summarized as follows:

	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Balance at beginning of period		56,957			60,449
Expense recognized upon issuance of warranties		23,051			15,374
Usage		(14,175	)		(18,909	)
Other, including effect of foreign currency translation		(3,337	)		(368	)
Balance at end of period		62,496			56,546
The changes in accrued product warranty costs for the three months ended December 31, 2010 and 2009 are summarized as follows:
	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Balance at beginning of period		54,156			57,697
Expense recognized upon issuance of warranties		13,991			5,276
Usage		(4,384	)		(5,726	)
Other, including effect of foreign currency translation		(1,267	)		(701	)
Balance at end of period		62,496			56,546

On June 15, 2006, Hamaoka Nuclear Power Station No. 5 of Chubu Electric Power Co., Inc. shut down due to turbine damage. As a precautionary measure, on July 5, 2006, Shika Nuclear Power Station No. 2 of Hokuriku Electric Power Company, which uses the same type of turbines, was shut down for an examination of the turbines and the examination revealed damage to the turbine vanes. The Company accrued a provision for the repair costs.

In September 2008, Chubu Electric Power Co., Inc. filed suit against the Company to claim for compensation for consequential losses of ¥41,800 million mostly composed of the additional costs to switch to thermal power arising from shutdown at Hamaoka Nuclear Power Station No.5. In May 2009, Hokuriku Electric Power Company filed suit against the Company to claim for compensation for consequential losses of ¥20,200 million mostly composed of the additional costs to switch to thermal power arising from shutdown at Shika Nuclear Power Station No.2. The Company is vigorously defending itself in these lawsuits. The Company has not accrued for consequential losses related to these lawsuits. However, there can be no assurance that the Company will not be liable for any amount claimed.

37

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

In January 2007, the European Commission ordered the Company and one of its affiliated companies to pay a fine for infringement of EC antitrust rules regarding alleged antitrust violations for the gas insulated switchgear equipment used at substations. In April 2007, the Company lodged an appeal with the Court of First Instance of the European Communities requesting the court to annul the decision of the European Commission. The determination has not been rendered at present, but the Company accrued the reasonably estimated amount for the fine.

In December 2006, the Company and a subsidiary in Europe received requests for information from the European Commission, and a subsidiary in Japan received a grand jury subpoena in connection with the investigation conducted by the Antitrust Division of the U.S. Department of Justice, all in respect of alleged antitrust violations relating to the liquid crystal displays. The Japanese subsidiary paid the fine in relation to the investigation by the Antitrust Division of the U.S. Department of Justice in June 2009.

In June 2007, the Company received requests for information from the European Commission in respect of alleged antitrust violations relating to dynamic random access memories. In May 2010, the European Commission ordered the Company to pay a fine for infringement of EC antitrust rules. The Company paid that fine in August 2010.

In November 2007, a subsidiary of the Company in the U.S. received a grand jury subpoena in connection with the investigation conducted by the Antitrust Division of the U.S. Department of Justice in respect of alleged antitrust violations relating to cathode ray tubes. In addition, in November 2007, two subsidiaries in Asia and in Europe received requests for information from the European Commission. Furthermore, in November 2007, a subsidiary in Canada received requests for information from the Canadian Competition Bureau.

In June 2009, a subsidiary of the Company in Japan received a grand jury subpoena in connection with the investigation conducted by the Antitrust Division of the U.S. Department of Justice and received requests for information from the European Commission, and a subsidiary of the Company in Korea was investigated in Singapore by the Competition Commission of Singapore, all in respect of alleged antitrust violations relating to optical disk drives.

The Company and these companies have cooperated with the competent authorities in connection with the above matters. Depending upon the outcome of these matters, fines or surcharge payments, the amount of which is uncertain, may be imposed on them. In addition, subsequent to these actions by the competent authorities, a number of civil lawsuits including class action lawsuits have been filed against the Company and some of these companies in the U.S. and Canada.

Depending upon the outcome of the above legal proceedings, there may be an adverse effect on the consolidated financial position or results of operations. Currently the Company is unable to estimate the adverse effect, if any, of many of these proceedings. Accordingly, except as otherwise stated, no accrual for potential loss has been made. The actual amount of fines, surcharge payments or any other payments resulting from these legal proceedings may be different from the accrued amounts.

In addition to the above, 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 consolidated financial position or results of operations of the Company and subsidiaries.

38

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(14) Impairment Losses for Long-Lived Assets

For the nine months ended December 31, 2010, the majority of the impairment losses were recorded on long-lived property, plant and equipment located in Japan and China. For the nine months ended December 31, 2010, the Components & Devices segment recognized a loss of ¥4,371 million, primarily due to a specific type of liquid crystal display components that was projected to have lower production because of smaller demand in the market. The fair value estimates used to determine these losses were based primarily on discounted future cash flows.

(15) Restructuring Charges

Certain losses incurred in the reorganization of the Company’s operations are considered restructuring charges. Components and related amounts of the restructuring charges, before the related tax effects, for the nine months ended December 31, 2010 and 2009 are as follows:

	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Special termination benefits		3,123			16,202
Loss on fixed assets		83			110
		3,206			16,312
Components and related amounts of the restructuring charges, before the related tax effects, for the three months ended December 31, 2010 and 2009 are as follows:
	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Special termination benefits		1,659			2,579
Loss on fixed assets		—			96
		1,659			2,675
The Company and certain subsidiaries provided special termination benefits to those employees voluntarily leaving the companies. The accrued special termination benefits were recognized at the time voluntary termination was offered and benefits were accepted by the employees. An analysis of the accrued special termination benefits and one-time termination benefits, which certain subsidiaries provided due to the subsidiaries’ liquidations, for the nine months ended December 31, 2010 and 2009 is as follows:
	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Balance at beginning of the period		8,170			7,543
New charges		3,123			16,202
Cash payments		(8,378	)		(15,342	)
Foreign currency exchange rate changes		(97	)		(12	)
Balance at end of the period		2,818			8,391

39

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

An analysis of the accrued special termination benefits for the three months ended December 31, 2010 and 2009 is as follows:

	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Balance at beginning of the period		3,018			10,764
New charges		1,659			2,579
Cash payments		(1,842	)		(4,943	)
Foreign currency exchange rate changes		(17	)		(9	)
Balance at end of the period		2,818			8,391

The restructuring charges for the nine months ended December 31, 2010 mainly consist of special termination benefits for the early-terminated employees of subsidiaries for the purpose of reducing costs and improving profitability in the Components & Devices segment.

The restructuring charges for the nine months ended December 31, 2009 mainly consist of special termination benefits for the early-terminated employees of subsidiaries for the purpose of reorganizing the automotive products business, which has encountered severe deterioration, in the Automotive Systems segment, reducing costs and improving profitability in the High Functional Materials & Components segment and strengthening its storage business on a global basis in the Components & Devices segment.

The restructuring charges for the three months ended December 31, 2010 mainly consist of special termination benefits for the early-terminated employees of subsidiaries for the purpose of reducing costs and improving profitability in the Components & Devices segment.

The restructuring charges for the three months ended December 31, 2009 mainly consist of special termination benefits for the early-terminated employees of subsidiaries for the purpose of reducing costs and improving profitability in the Electronic Systems & Equipment segment and Others segment.

(16) Other Income and Other Deductions

The following items are included in other income or other deductions for the nine months ended December 31, 2010 and 2009.

	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Net gain (loss) on securities		69,126			(9,668	)
Net gain (loss) on sale and disposal of rental assets and other property		2,151			(12,305	)
Exchange loss		(18,908	)		(1,923	)

40

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The following items are included in other income or other deductions for the three months ended December 31, 2010 and 2009.

	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Net gain (loss) on securities		(3,174	)		3,386
Net loss on sale and disposal of rental assets and other property		(1,467	)		(2,893	)
Exchange gain (loss)		(5,361	)		3,096

The major component of net gain on securities for the nine months ended December 31, 2010 was related to a sale of shares of IPS Alpha Technology, Ltd.

41

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(17) Net Income Per Share Information

The reconciliations of the numbers and the amounts used in the basic and diluted net income (loss) attributable to Hitachi, Ltd. stockholders per share computations for the nine months ended December 31, 2010 and 2009 are as follows:

	Number of shares
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Weighted average number of shares on which basic net income (loss) per share is calculated		4,515,808,586			3,396,991,472
Effect of dilutive securities:
130% call option attached unsecured convertible bonds (8th series)		315,430,146			—
Number of shares on which diluted net income (loss) per share is calculated		4,831,238,732			3,396,991,472
	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Net income (loss) attributable to Hitachi, Ltd. stockholders		220,140			(111,339	)
Effect of dilutive securities:
130% call option attached unsecured convertible bonds (8th series)		54			—
Other		(287	)		0
Net income (loss) attributable to Hitachi, Ltd. stockholders on which diluted net income (loss) per share is calculated		219,907			(111,339	)
	Yen
Net income (loss) attributable to Hitachi, Ltd. stockholders per share:
Basic		48.75			(32.78	)
Diluted		45.52			(32.78	)

The net loss attributable to Hitachi, Ltd. stockholders per share computation for the nine months ended December 31, 2009 excludes all convertible bonds and some stock options because their effect would have been antidilutive.

42

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The reconciliations of the numbers and the amounts used in the basic and diluted net income attributable to Hitachi, Ltd. stockholders per share computations for the three months ended December 31, 2010 and 2009 are as follows:

	Number of shares
	Three months ended December 31, 2010			Three months ended December 31, 2009
Weighted average number of shares on which basic net income per share is calculated		4,515,748,906			3,541,933,632
Effect of dilutive securities:
Series A zero coupon convertible bonds		—			11,900,983
Series B zero coupon convertible bonds		—			11,900,983
130% call option attached unsecured convertible bonds (8th series)		315,423,261			61,719,928
Number of shares on which diluted net income per share is calculated		4,831,172,167			3,627,455,526
	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Net income attributable to Hitachi, Ltd. stockholders		62,091			21,882
Effect of dilutive securities:
130% call option attached unsecured convertible bonds (8th series)		18			3
Other		(69	)		(61	)
Net income attributable to Hitachi, Ltd. stockholders on which diluted net income per share is calculated		62,040			21,824
	Yen
Net income attributable to Hitachi, Ltd. stockholders per share:
Basic		13.75			6.18
Diluted		12.84			6.02

The net income attributable to Hitachi, Ltd. stockholders per share computation for the three months ended December 31, 2009 excludes some stock options because their effect would have been antidilutive.

43

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(18) 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 approximately 45% of their sales from overseas. These overseas sales are mainly denominated in the U.S. dollar or Euro. As a result, the Company and its subsidiaries are exposed to market risks from changes in foreign currency exchange rates.

The Company’s financing subsidiaries in the U.K., the U.S. and Singapore issue 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 rates and interest rates.

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 that are rated A or higher and contracts are diversified into a number of major financial institutions.

The Company and its subsidiaries have an insignificant amount of derivative instruments containing credit-risk-related contingent features, such as provisions that require the Company’s debt to maintain an investment grade credit rating from each of the major credit rating agencies.

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 principal policy that the Company and its subsidiaries do not enter into derivative financial instruments for speculation 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 currency. In accordance with the Company’s 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 debt to fix cash flows from long-term debt 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.

44

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Interest rate risk management

The Company’s and certain subsidiaries’ exposure to interest rate risk is related principally to long-term debt obligations. Management believes it is prudent to minimize the variability caused by interest rate risk.

To meet this objective, the Company and certain subsidiaries principally enter into interest rate swaps to manage fluctuations in cash flows. The interest rate swaps entered into are receive-variable, pay-fixed interest rate swaps. Under the interest rate swaps, the Company and certain subsidiaries receive variable interest rate payments on long-term debt associated with medium-term notes and make fixed interest rate payments, thereby creating fixed interest rate long-term debt.

Certain financing subsidiaries mainly finance a portion of their operations using long-term debt with a fixed interest rate and lend funds at variable interest rates. Therefore, such companies are exposed to interest rate risk. Management believes it is prudent to minimize the variability caused by interest rate risk. To meet this objective, certain financing subsidiaries principally enter into interest rate swaps converting the fixed rate to a variable rate to manage fluctuations in fair value resulting from interest rate risk. Under the interest rate swaps, certain financing subsidiaries receive fixed interest rate payments associated with long-term debt, including medium-term notes and make variable interest rate payments, thereby creating variable-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 and fair value resulting from interest rate risk.

Fair value hedge

Changes in the 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, cross currency swap agreements and interest rate swaps associated with financing transactions.

Cash flow hedge

Foreign currency exposure:

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

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.

(19) 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 they are diversified and spread globally.

45

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(20) Fair Value

ASC 820 establishes a fair value hierarchy that prioritizes the use of observable inputs in markets over the use of unobservable inputs when measuring fair value as follows:

Level 1

Quoted prices for identical assets or liabilities in active markets.

Level 2

Quoted prices for similar assets or liabilities in active markets; quoted prices associated with transactions that are not distressed for identical or similar assets or liabilities in markets that are not active; or valuations whose significant inputs are derived from or corroborated by observable market data.

Level 3

Valuations using inputs that are not observable.

Investments in debt and equity securities

When available, quoted market prices are used to determine the fair value of investment securities included in Level 1. Level 1 securities include available-for-sale securities such as listed stocks on exchange markets, debt securities such as Japan treasury bonds and U.S. treasury bonds and exchange traded funds.

In the absence of an active market for investment securities, quoted prices for similar investment securities, quoted prices associated with transactions that are not distressed for identical or similar investment securities or other relevant information including market interest rate curves, referenced credit spreads or default rates, are used to determine fair value. These investments are included in Level 2. Level 2 securities include short-term investments and available-for-sale securities such as listed stocks traded over-the-counter, investment funds and debt securities traded over-the-counter.

In infrequent circumstances, the significant inputs of fair value for investment securities are unobservable and the Company mainly uses an income or market approach to corroborate relevant information provided by financial institutions. These investments are included in Level 3. Level 3 securities include available-for-sale securities such as subordinated debentures and structured bonds with little market activity.

Derivatives

Closing prices are used for derivatives included in Level 1, which are traded on active markets. The majority of derivatives are traded on over-the-counter markets, which the Company does not deem to represent active markets. Derivative assets and liabilities for which fair value is based on quoted prices associated with transactions that are not distressed, in markets that are not active, or based on models using interest rate curves and forward and spot prices for currencies and commodities are included in Level 2. Derivatives included in Level 2 primarily consist of interest rate swaps, cross-currency swaps and foreign currency and commodity forward and option contracts. In infrequent circumstances, the significant inputs of fair value are unobservable and the Company mainly uses an income or market approach to corroborate relevant information provided by financial institutions. These derivatives are included in Level 3.

46

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Subordinated interests resulting from securitization

When fair value is determined using observable inputs, including prices of recent transactions in markets that are not distressed, subordinated interests are included in Level 2. When significant inputs are not observable, fair value is determined based on economic assumptions used in measuring the fair value of the subordinated interests, including weighted-average life, expected credit risks, and discount rates, and the subordinated interests are included in Level 3.

The following tables present the assets and liabilities that are measured at fair value on a recurring basis and the fair value hierarchy classification as of December 31, 2010 and March 31, 2010. The carrying value of the consolidated balance sheets are equal to the fair value.

	Millions of yen
	December 31, 2010
	Total Balance			Fair value hierarchy classification
				Level 1		Level 2			Level 3
Assets:
Investments in securities
Equity securities		152,729			151,862		867			—
Government debt securities		3,663			3,642		21			—
Corporate debt securities		39,045			—		5,047			33,998
Other		10,133			6,255		3,878			—
Derivatives		36,467			—		36,467			—
Subordinated interests resulting from securitization		15,081			—		—			15,081
		257,118			161,759		46,280			49,079
Liabilities:
Derivatives		(7,429	)		—		(7,429	)		—
	Millions of yen
	March 31, 2010
	Total Balance			Fair value hierarchy classification
				Level 1		Level 2			Level 3
Assets:
Investments in securities
Equity securities		159,850			156,879		2,971			—
Government debt securities		44,156			43,989		167			—
Corporate debt securities		35,359			—		6,426			28,933
Other		14,260			5,903		8,357			—
Derivatives		26,880			—		26,880			—
Subordinated interests resulting from securitization		115,417			—		—			115,417
		395,922			206,771		44,801			144,350
Liabilities:
Derivatives		(15,135	)		—		(15,135	)		—

47

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The following tables present the changes in Level 3 instruments measured on a recurring basis for the nine months ended December 31, 2010 and 2009.

	Millions of yen
	Nine months ended December 31, 2010
	Corporate debt securities			Subordinated interests resulting from securitization			Total
Balance at beginning of period		28,933			115,417			144,350
Effect of consolidation of securitization entities upon initial adoption of the amended provisions of ASC 810 (a)		—			(113,651	)		(113,651	)
Purchases, sales, issuances and settlements		2,928			13,315			16,243
Total gains or losses (realized/unrealized)
Included in earnings (b)		327			—			327
Included in other comprehensive income		1,810			—			1,810
Balance at end of period		33,998			15,081			49,079
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2010		—			—			—
(a)    A portion of subordinated interests resulting from securitization was eliminated because of the consolidation of securitization entities. (b)    Level 3 gains and losses (realized and unrealized) included in earnings for the nine months ended December 31, 2010 are reported in other income (deductions) for corporate debt securities and are reported in revenue for subordinated interests resulting from securitization.
	Millions of yen
	Nine months ended December 31, 2009
	Corporate debt securities			Subordinated interests resulting from securitization			Total
Balance at beginning of period		26,532			123,465			149,997
Purchases, sales, issuances and settlements		(971	)		(11,069	)		(12,040	)
Total gains or losses (realized/unrealized)
Included in earnings (a)		(15	)		2,873			2,858
Included in other comprehensive income (loss)		2,166			(860	)		1,306
Balance at end of period		27,712			114,409			142,121
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2009		(14	)		2,819			2,805

48

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(a) Level 3 gains and losses (realized and unrealized) included in earnings for the nine months ended December 31, 2009 are reported in other income (deductions) for corporate debt securities and are reported in revenue for subordinated interests resulting from securitization.

The following tables present the changes in Level 3 instruments measured on a recurring basis for the three months ended December 31, 2010 and 2009.

	Millions of yen
	Three months ended December 31, 2010
	Corporate debt securities			Subordinated interests resulting from securitization			Total
Balance at beginning of period		34,391			9,941			44,332
Purchases, sales, issuances and settlements		(573	)		5,140			4,567
Total gains or losses (realized/unrealized)
Included in earnings (a)		—			—			—
Included in other comprehensive income		180			—			180
Balance at end of period		33,998			15,081			49,079
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2010		—			—			—
(a)    Level 3 gains and losses (realized and unrealized) included in earnings for the three months ended December 31, 2010 are reported in other income (deductions) for corporate debt securities and are reported in revenue for subordinated interests resulting from securitization.
	Millions of yen
	Three months ended December 31, 2009
	Corporate debt securities			Subordinated interests resulting from securitization			Total
Balance at beginning of period		27,324			113,997			141,321
Purchases, sales, issuances and settlements		(166	)		(612	)		(778	)
Total gains or losses (realized/unrealized)
Included in earnings (a)		(15	)		901			886
Included in other comprehensive income		569			123			692
Balance at end of period		27,712			114,409			142,121
The amount of total gains or losses for the period included in earnings attributable to the change in unrealized gains or losses relating to assets still held at December 31, 2009		(14	)		901			887

49

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(a) Level 3 gains and losses (realized and unrealized) included in earnings for the three months ended December 31, 2009 are reported in other income (deductions) for corporate debt securities and are reported in revenue for subordinated interests resulting from securitization.

Assets that are measured at fair value during the period on a non-recurring basis because they are deemed to be impaired are not included in the above tables.

The Company has written down the carrying amount of certain equity-method and cost-method investments on the consolidated balance sheets because the Company deems the decline of fair value to be other-than-temporary.

The fair value of the equity-method investments which are listed on an active market is included in Level 1. The fair value of equity-method investments determined using an income approach, based on discounted cash flows using unobservable inputs are included in Level 3. Also, a weighted-average fair value determined using both a market approach and an income approach, which incorporate both observable inputs, such as quoted market prices of comparable companies, and discounted cash flow using unobservable inputs, is included in Level 3. The Company has calculated discounted cash flows of these equity-method investments based on business forecasts, market trends, and assumptions of projected business plans. The Company uses both a market approach and an income approach to determine the fair value of the cost-method investments. The fair value based on observable inputs such as quoted market prices of similar investments is included in Level 2. The fair value primarily based on discounted cash flows using unobservable inputs based on business forecasts, market trends, and assumptions of projected business plans is included in Level 3.

The Company has also written down the carrying amount of long-lived assets on the consolidated balance sheets mainly because the Company deems the carrying amount of certain long-lived assets is not recoverable and exceeds its fair value. The Company mainly uses an income approach or a market approach to calculate the fair value of long-lived assets. These measurements are included in Level 3 since they are based primarily on discounted cash flows using unobservable inputs based on business forecasts, market trends, and assumptions of projected business plans.

The following tables present the assets measured at fair value on a non-recurring basis and the gains or losses recognized for the nine months ended December 31, 2010 and 2009.

	Millions of yen
	Nine months ended December 31, 2010
	Fair value hierarchy classification						Total  gains (losses)
	Level 1		Level 2		Level 3
Long-lived assets (a)
Components & Devices segment		—		—		911		(4,371	)
Other		—		—		2,546		(1,569	)
Total		—		—		3,457		(5,940	)
(a)    The carrying value as of December 31, 2010 is not equal to the fair value at the time of impairment because of depreciation expense subsequent to impairment.
	Millions of yen
	Nine months ended December 31, 2009
	Fair value hierarchy classification						Total  gains (losses)
	Level 1		Level 2		Level 3
Equity-method investments		—		—		81,900		(10,881	)

50

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

(21) Merger and Acquisition

On November 8, 2010, Hitachi Medical Corporation. (Hitachi Medical), a subsidiary of the Company in the Electronic Systems & Equipment segment, announced its decision to purchase additional shares of Aloka Co., Ltd.(Aloka), through a tender offer to make Aloka its subsidiary. The tender offer price was ¥1,075 per share, which was determined by comprehensively taking into consideration the market price of Aloka’s common stock, Aloka’s financial condition, future earnings prospects and a valuation of Aloka stock conducted by a third party appraiser. The price included a premium of approximately 99% over the average share price of Aloka’s common stock traded on the First Section of the Tokyo Stock Exchange for the three month period ended November 5, 2010. As a result, Hitachi Medical purchased 23,157,518 shares in the tender offer, for ¥24,894 million in the period from November 9, 2010 through December 27, 2010, resulting in a 84.65% increase of Hitachi Medical’s ownership from 12.79% to 97.45%. Accordingly, Hitachi Medical obtained control of Aloka and it became a consolidated subsidiary effective January 5, 2011, the settlement date of the tender offer (the acquisition date).

Aloka manufactures and sells medical instruments, general-purpose analysis devices and medical analysis devices. Hitachi Medical made the acquisition to strengthen its diagnostic ultrasound device businesses and increase its corporate value.

The following table presents the consideration paid for Aloka and the fair value as of the acquisition date of the noncontrolling interest in Aloka. Due to the limited period of time since the acquisition date, the initial accounting for the business combination is incomplete at this time. As a result, the Company is unable to provide the disclosures related to the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed, and the amount of goodwill.

	Millions of yen
Previously acquired equity interest measured at fair value		3,699
Cash paid for acquisition		24,894
Fair value of noncontrolling interests		738
		29,331

The Company recognizes a gain of ¥1,224 million as a result of remeasuring its equity interest in Aloka held before the business combination at the acquisition date fair value.

The fair value of both the equity interest held before the business combination and the noncontrolling interest in Aloka, a listed entity, are determined by quoted market price and included in Level 1.

On a pro forma basis, the effect on revenue, net income (loss) and the per share information of the Company for the year ending March 31, 2011 and the year ended March 31, 2010 with assumed acquisition dates for Aloka of April 1, 2010 and 2009 would not be material.

On March 30, 2010, Hitachi Construction Machinery Co., Ltd. (Hitachi Construction Machinery), a subsidiary of the Company in the Construction Machinery segment, agreed with Tata Motors Limited to purchase an additional 20% interest in Telco Construction Equipment Co., Ltd. (Telcon). As a result, Hitachi Construction Machinery purchased a total of 20,000,000 shares for ¥23,704 million on March 30, 2010, resulting in the percentage of Hitachi Construction Machinery’s ownership interests in Telcon increasing from 40.0% to 60.0%. Accordingly, Hitachi Construction Machinery obtained control over Telcon and it became a consolidated subsidiary effective March 30, 2010 (the acquisition date).

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HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Telcon manufactures and sells major construction machinery including hydraulic excavators, backhoe loaders and wheel loaders. Hitachi Construction Machinery decided to purchase an additional 20% interest to obtain a strong lead in the India market, which is expected to grow significantly.

The following table summarizes the consideration paid for Telcon, the assets acquired and liabilities assumed and recognized as of the acquisition, as well as the fair value as of the acquisition date of the noncontrolling interest in Telcon.

	Millions of yen
	(As adjusted)
Current assets		29,741
Non-current assets (excluding intangible assets)		16,912
Intangible assets (excluding goodwill)		37,370
Goodwill (not deductible for tax purposes)		32,981
		117,004
Current liabilities		(35,105	)
Non-current liabilities		(14,095	)
		(49,200	)
Previously acquired equity interest measured at fair value		(22,050	)
Cash paid for acquisition		(23,704	)
Fair value of noncontrolling interests		(22,050	)
		(67,804	)

The acquired intangible assets subject to amortization amounted to ¥27,931 million including mainly customer contracts and relationships.

The acquired intangible assets not subject to amortization amounted to ¥9,439 million of brands.

Since the evaluation of the fair values of the assets and liabilities was completed during the three months ended June 30, 2010, the Company retrospectively adjusted the provisional amounts as of the acquisition date. As a result, the amounts of other intangible assets and related deferred tax liability, which is included in other liabilities, increased by ¥37,370 million and ¥12,702 million, respectively, whereas goodwill decreased by ¥24,668 million in the consolidated balance sheet as of March 31, 2010.

(22) Segment Information

The operating segments of the Company are the components for which separate financial information is available and for which segment profit or loss amounts are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company has aggregated certain operating segments into reportable segments for reporting purpose, since such aggregation helps financial statement users better understand the Company’s performance.

The reportable segments correspond to categories of activities classified primarily by markets, products and services.

The Company discloses its business in eleven reportable segments: Information & Telecommunication Systems, Power Systems, Social Infrastructure & Industrial Systems, Electronic Systems & Equipment, Construction Machinery, High Functional Materials & Components, Automotive Systems, Components & Devices, Digital Media & Consumer Products, Financial Services, and Others.

52

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The primary products and services included in each segment are as follows:

Information & Telecommunication Systems:

Systems integration, Outsourcing services, Software, Disk array subsystems, Servers, Mainframes, Telecommunication equipment and ATMs

Power Systems:

Thermal power generation systems, Nuclear power generation systems, Hydroelectric power generation systems and Wind power generation systems

Social Infrastructure & Industrial Systems:

Industrial machinery and plants, Elevators, Escalators and Railway vehicles and systems

Electronic Systems & Equipment:

Semiconductor and LCDs manufacturing equipment, Test and measurement equipment, Medical electronics equipment, Power tools and Electronic parts manufacturing system

Construction Machinery:

Hydraulic excavators, Wheel loaders and Mining dump trucks

High Functional Materials & Components:

Wires and cables, Copper products, Semiconductor and display related materials, Circuit boards and materials, Specialty steels, Magnetic materials and components and High grade casting components and materials

Automotive Systems:

Engine management systems, Electric powertrain systems, Drive control systems and Car information systems

Components & Devices:

Hard disk drives, LCDs, Information storage media and Batteries

Digital Media & Consumer Products:

Optical disk drives, Flat-panel TVs, LCD projectors, Mobile phones, Room air conditioners, Refrigerators, Washing machines and Air-conditioning equipment

Financial Services:

Leasing and Loan guarantees

Others:

Logistics, Property management, Insurance agency and others

53

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The following tables show segment information for the nine months ended December 31, 2010 and 2009.

Revenues from Outside Customers

	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Information & Telecommunication Systems		1,036,411			1,058,934
Power Systems		517,524			538,688
Social Infrastructure & Industrial Systems		624,014			667,475
Electronic Systems & Equipment		674,060			585,974
Construction Machinery		511,752			395,527
High Functional Materials & Components		1,004,372			855,306
Automotive Systems		543,760			448,761
Components & Devices		564,578			511,489
Digital Media & Consumer Products		704,380			650,614
Financial Services		242,482			239,226
Others		341,994			327,781
Subtotal		6,765,327			6,279,775
Corporate items		569			3,089
Total		6,765,896			6,282,864
Revenues from Intersegment Transactions
	Millions of yen
	Nine months ended December 31, 2010			Nine months ended December 31, 2009
Information & Telecommunication Systems		127,014			127,907
Power Systems		51,028			48,797
Social Infrastructure & Industrial Systems		160,534			136,953
Electronic Systems & Equipment		100,580			91,623
Construction Machinery		4,508			4,446
High Functional Materials & Components		59,208			52,785
Automotive Systems		2,942			3,454
Components & Devices		51,534			46,185
Digital Media & Consumer Products		51,383			48,169
Financial Services		35,556			81,002
Others		222,971			226,597
Subtotal		867,258			867,918
Eliminations and Corporate items		(867,258	)		(867,918	)
Total		—			—

54

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Total Revenues

	Millions of yen
	Nine months  ended December 31, 2010			Nine months  ended December 31, 2009
Information & Telecommunication Systems		1,163,425			1,186,841
Power Systems		568,552			587,485
Social Infrastructure & Industrial Systems		784,548			804,428
Electronic Systems & Equipment		774,640			677,597
Construction Machinery		516,260			399,973
High Functional Materials & Components		1,063,580			908,091
Automotive Systems		546,702			452,215
Components & Devices		616,112			557,674
Digital Media & Consumer Products		755,763			698,783
Financial Services		278,038			320,228
Others		564,965			554,378
Subtotal		7,632,585			7,147,693
Eliminations and Corporate items		(866,689	)		(864,829	)
Total		6,765,896			6,282,864

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HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Segment Profit (Loss)

	Millions of yen
	Nine months  ended December 31, 2010			Nine months  ended December 31, 2009
Information & Telecommunication Systems		53,071			46,271
Power Systems		18,655			6,271
Social Infrastructure & Industrial Systems		22,712			8,728
Electronic Systems & Equipment		23,675			(12,810	)
Construction Machinery		31,100			4,166
High Functional Materials & Components		73,960			23,036
Automotive Systems		16,102			(14,208	)
Components & Devices		39,928			(8,614	)
Digital Media & Consumer Products		20,876			(8,008	)
Financial Services		17,919			5,843
Others		21,765			11,184
Subtotal		339,763			61,859
Eliminations and Corporate items		(1,875	)		(20,259	)
Total Segment profit		337,888			41,600
Impairment losses for long-lived assets		(5,940	)		(1,951	)
Restructuring charges		(3,206	)		(16,312	)
Interest income		9,404			8,493
Dividends income		3,796			4,342
Gains on sales of stock by subsidiaries or affiliated companies		—			183
Other income		71,277			—
Interest charges		(18,875	)		(19,984	)
Other deductions		(19,613	)		(24,202	)
Equity in net loss of affiliated companies		(3,882	)		(44,703	)
Income (loss) before income taxes		370,849			(52,534	)

56

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

The following tables show segment information for the three months ended December 31, 2010 and 2009.

Revenues from Outside Customers

	Millions of yen
	Three months ended December 31, 2010		Three months ended December 31, 2009
Information & Telecommunication Systems		347,101		348,261
Power Systems		168,539		179,434
Social Infrastructure & Industrial Systems		221,006		227,384
Electronic Systems & Equipment		213,303		196,650
Construction Machinery		179,948		138,890
High Functional Materials & Components		341,854		308,858
Automotive Systems		180,929		164,415
Components & Devices		184,808		184,656
Digital Media & Consumer Products		232,081		221,257
Financial Services		79,022		75,803
Others		114,631		111,904
Subtotal		2,263,222		2,157,512
Corporate items		223		394
Total		2,263,445		2,157,906

Revenues from Intersegment Transactions

	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Information & Telecommunication Systems		41,508			43,785
Power Systems		15,200			18,378
Social Infrastructure & Industrial Systems		54,632			42,391
Electronic Systems & Equipment		32,296			29,627
Construction Machinery		1,911			2,062
High Functional Materials & Components		21,243			18,739
Automotive Systems		1,110			1,182
Components & Devices		16,564			17,196
Digital Media & Consumer Products		16,768			16,173
Financial Services		12,364			14,269
Others		75,061			76,013
Subtotal		288,657			279,815
Eliminations and Corporate items		(288,657	)		(279,815	)
Total		—			—

57

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Total Revenues

	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Information & Telecommunication Systems		388,609			392,046
Power Systems		183,739			197,812
Social Infrastructure & Industrial Systems		275,638			269,775
Electronic Systems & Equipment		245,599			226,277
Construction Machinery		181,859			140,952
High Functional Materials & Components		363,097			327,597
Automotive Systems		182,039			165,597
Components & Devices		201,372			201,852
Digital Media & Consumer Products		248,849			237,430
Financial Services		91,386			90,072
Others		189,692			187,917
Subtotal		2,551,879			2,437,327
Eliminations and Corporate items		(288,434	)		(279,421	)
Total		2,263,445			2,157,906

58

HITACHI, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2010

Segment Profit

	Millions of yen
	Three months ended December 31, 2010			Three months ended December 31, 2009
Information & Telecommunication Systems		18,515			13,967
Power Systems		4,343			2,453
Social Infrastructure & Industrial Systems		11,958			9,680
Electronic Systems & Equipment		7,394			533
Construction Machinery		12,869			2,595
High Functional Materials & Components		23,706			17,980
Automotive Systems		5,185			2,894
Components & Devices		9,635			4,518
Digital Media & Consumer Products		9,902			3,226
Financial Services		6,650			3,277
Others		8,927			3,866
Subtotal		119,084			64,989
Eliminations and Corporate items		756			1,371
Total Segment profit		119,840			66,360
Impairment losses for long-lived assets		(71	)		(587	)
Restructuring charges		(1,659	)		(2,675	)
Interest income		3,068			2,625
Dividends income		1,039			862
Other income		—			6,482
Interest charges		(6,448	)		(6,426	)
Other deductions		(10,228	)		(3,018	)
Equity in net earnings (loss) of affiliated companies		1,500			(6,018	)
Income before income taxes		107,041			57,605

Intersegment transactions are recorded at the same prices used in transactions with third parties. Corporate items include unallocated corporate expenses such as leading edge R&D expenditures.

As of December 31, 2010 and March 31, 2010, total assets of the Financial Services segment were ¥2,142,258 million and ¥1,789,409 million, respectively. Total assets of the Financial Services segment increased because of consolidation of securitization entities upon initial adoption of the amended provisions of ASC 810.

59