FY 2021 Second Half: President's Start of Term Message

1. First Half General Overview

In the first half of this fiscal year, the spread of COVID-19 continued to affect our business activities as it did in FY 2020. As a result, while we do expect to achieve our goals regarding both the group consolidated profit and operating cash flow, we expect to fall short of our goal regarding sales. With most of our employees telecommuting, I would like to express my appreciation to our executives and employees who are carrying out our business activities while working to prevent the spread of infection. I would also like to ask for your cooperation as we work in the second half to make up for first half shortfalls and to achieve our goals for the fiscal year.
Throughout the first half of the year, employees responded to challenges including measures to prevent the spread of COVID-19 both inside and outside the company. In particular, our employees in Japan responded to special monitoring and maintenance support during the Olympic and Paralympic Games, as well as restoration efforts for natural disasters such as the heavy rain that fell primarily in western Japan during August. I would like to once again thank everyone involved for their efforts.

2. Towards the Second Half of FY 2021

(1) Hitachi, Ltd. Trends

During the opening of June's "Hitachi Investor Day 2021", Mr. Keiji Kojima, who was appointed as President & COO of Hitachi, Ltd. on June 23, stated that Hitachi's vision is to "create social, environmental, and economic value through the Social Innovation Business and ensure sustainable growth and profitability to return the benefits to stakeholders". As part of the 2021 Mid-term Management Plan, Hitachi Vantara joined together with Hitachi Consulting as one company to form a new Hitachi Vantara in January of 2020 that aims to be the global leader of the social innovation business. In addition to the global launch of the "Lumada Alliance Program", a partner program for accelerating open innovation, Hitachi has also purchased GlobalLogic, a leading digital engineering company headquartered in the United States, and taken other steps to gradually strengthen its IT business structure for implementing Lumada on the global market. Moving forward, Hitachi will work towards continued growth, including "growing with digital technology" wherein half of the overall profit is to be earned by the Lumada business, and "deepening ESG management" which involves diversity and inclusion, environmental management, and corporate governance.
In its next Mid-term Management Plan, Hitachi has declared that it will put priority on engaging in "Managerial SDG (Simplify, Digitalize, Globalize)" in order to leverage assets gained through large-scale M&A towards improving our corporate value. Specifically, priority measures include "simplified management" achieved by improving human resources and asset value, "digitalized management" achieved by increasing the speed of transformation, and "globalized management" achieved by creating value in regions and growing.

(2) Efforts at the Hitachi Systems Group

As a member supporting the Hitachi Group's social innovation business, the Hitachi Systems Group promotes sustainability management. Under our 2021 Mid-term Management Plan, we have focused on "improving collaboration with Hitachi Business Units and the Hitachi Group (promoting Scale by Digital)" and "'expanding digitalization services' using LSH (Lumada Solution Hub)". As we move toward finishing off the remaining six months, I would like to make a few requests regarding the following three points.

1)

"Promoting health and productivity management"
Corporate governance is a prerequisite for promoting sustainability management. In particular, we will continue to promote health and productivity management, promote work style reforms, and promote diversity with "health and safety take precedence over everything else" as our basic principal.
The COVID-19 pandemic continues to spread across the globe. Many people have been telecommuting for a long time now. I believe that new work styles, a lack of face-to-face communication, a lack of exercise, and other factors may lead to many people feeling stress and uncertainty in their work and daily lives. However, I urge you to manage your own health, always having the awareness that "you are responsible for protecting your own health" in your daily life and work.
Also, if someone is infected with COVID-19, the floor that person works on must be closed. Particularly in the Contact Centers and Data Centers which provide service 24 hours a day, 365 days a year, a floor closure would mean that work will stop. In Japan, we are carrying out BCP measures including human resources, such as operating in shifts and introducing telecommuting for some work. However, the risk has made itself abundantly clear in terms of business continuity. Moving forward, please continue to work to prevent the spread of COVID-19 in your daily life, as well as to carry out infection prevention measures such as refraining from attending dinners.

2)

"Expanding our digitalization business"
With no end in sight for the COVID-19 pandemic, please work to provide digitalization services that meet customer needs, including business services centered on cloud services that can be provided quickly as well as services related to telecommuting such as the construction of telecommuting environments.
I also ask that you implement any work that can be pushed forward, including work for standardizing the information systems of local administrations, work for the discontinuation of IE11 support, and switching to SAP S/4 HANA. Hitachi Systems also excels in outsourcing and streamlining work such as BPO services utilizing our Contact Centers. The Hitachi Systems Group will collaborate across divisions and make use of our service infrastructure as we efficiently contribute to the promotion of Digital Transformation (DX) for our customers.

Under the 2021 Mid-term Management Plan, we focused efforts on strengthening our base. However, for our next plan, the 2024 Mid-term Management Plan, we will shift to a stage for utilizing that strengthened base to aim for growth.

3)

"Strictly following Basics and Ethics"
While it is truly unfortunate, Hitachi Systems still sees compliance violations occurring. I find it extremely unfortunate that some employees have not truly taken to heart the idea that "S (Health and Safety) >> Q (Quality) > D (Delivery time) > C (Cost)". I will once again convey the standard for making decisions in work, and I ask that you strictly observe it.

• · Health, safety, and quality take priority over delivery time and cost.
• · Thoroughly construct preventative measures (project management, quality management, labor management, and the like) to avoid situations like those above.
• · If there are issues such as a lack of resources or the handling of customer-based staff, promptly take a top-down approach to solving that issue. Also, cultivate a corporate culture that is conducive to free and open discussions.

3. In Closing

Today, Hitachi Systems celebrates the 10th anniversary of its beginning. Over the three months from today, October 1, until December 31, we will hold the "Tsunagari - Hitachi Systems 10th Anniversary Event" in order to improve employee engagement. This event includes various online activities to improve communication between employees. On November 13 (Saturday), we plan to live-stream an online "Thanksgiving" event featuring many sessions our employees can enjoy at home with their families. I hope all employees actively participate as we make this 10th anniversary event a grand one.

October 1, 2021
Setsuo Shibahara
President and CEO
Hitachi Systems, Ltd.

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