July 28, 2009
To whom it may concern
Company name: Hitachi Software Engineering Co., Ltd.
Representative: Isao Ono, President, Chief Executive Officer
(Code Number: 9694, First Section of the Tokyo Stock Exchange)
Contact: Tohru Takehashi, General Manager,
PR & Advertising Department, CSR Headquarters
Phone: +81-3-5780-2013

Announcement concerning Expression of Opinion for
Tender Offer by Hitachi, Ltd., for Shares of the Company

Hitachi Software Engineering Co., Ltd. (the “Company”), today announces that the Board of Directors of the Company resolved to express the following opinion in favor of the tender offer (the “Tender Offer”) for the common stock of the Company (the “Shares of the Company”) by Hitachi, Ltd. (the “Tender Offeror”), and to recommend that the shareholders of the Company subscribe to the Tender Offer, at the meeting of its board of directors held today. The aforementioned resolution at the meeting was adopted on the assumption that the Tender Offeror intends to make the Company a wholly owned subsidiary through the Tender Offer and a series of subsequent procedures and that the Shares of the Company may be subject to delisting.

1. Outline of the Tender Offeror
(1) Corporate
Name
Hitachi,
Ltd.
(2) Description of Business
Manufacturing and selling of Electric and Electronic Equipment and Systems
(3) Date Established
February 1, 1920
(4) Head Office
6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo
(5) Name
and
Title
of
Representative
Takashi Kawamura, Chairman, President and Chief Executive Officer
(6) Paid-in
Capital
¥282,033 million (As of March 31, 2009)
(7)
Major Shareholders and Shareholdings
The Master Trust Bank of Japan, Ltd. (Trust Account)

6.22%
NATS CUMCO

5.60%
Japan Trustee Services Bank, Ltd. (Trust Account4G)

5.39%
Japan Trustee Services Bank, Ltd. (Trust Account)

4.88%
Hitachi Employees’ Shareholding Association

3.24%
Nippon Life Insurance Company

2.91%
The Dai-Ichi Mutual Life Insurance Company

2.12%
State Street Bank and Trust Company 505224

1.63%
State Street Bank and Trust Company

1.44%
Meiji Yasuda Life Insurance Company

1.43%
(As of March 31, 2009)
Capital Relationships
The Tender Offeror holds 33,238,836 shares of the Company, equivalent to a shareholding of 51.55% of the total number of issued shares, including indirect holdings of 0.20%, whereas the Company does not hold any shares of the Tender Offeror (As of June 30, 2009).
Personnel Relationships
One of the Directors of the Company concurrently serves as Executive Officer and another as Advisor of the Tender Offeror. The Tender Offeror currently has nine employees on loan to the Company (As of June 30, 2009).
(8)
Relationships between the Tender Offeror and the Company
Transaction Relationships
The Company and the Tender Offeror mutually have transactions concerning business sales and purchases. The Company deposits funds with the Tender Offeror under the Hitachi Group’s cash pooling system.

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Status as a Related Party
The Tender Offeror is the parent company of the Company, and therefore a Related Party of the Company.

2. Opinion concerning the Tender Offer and Reason and the Background for the Opinion (1) Outline of the Opinion concerning the Tender Offer The Board of Directors of the Company, at its meeting held today, resolved to approve the Tender Offer and to recommend that the shareholders of the Company subscribe to the Tender Offer.

(2) Reason and Background to the Opinion concerning the Tender Offer

(a) Outline of the Tender Offer The Tender Offeror currently holds 51.55% of the Company’s issued shares, including indirect shareholdings of 0.20%, and thus accounts for the Company as a consolidated subsidiary. The Tender Offeror intends to acquire all the issued shares of the Company (exclusive of the Shares of the Company already held by the Tender Offeror and its treasury stock) in order to make the Company a wholly owned subsidiary through the Tender Offer. The Tender Offer does not set maximum and minimum limits to the number of shares to be purchased.
Concurrently with the commencement of the Tender Offer, the Tender Offeror has initiated tender
offers for issued shares of Hitachi Information Systems, Ltd. and Hitachi Systems & Services, Ltd., both of which are currently the Tender Offeror’s consolidated subsidiaries, with the aim of making them wholly owned subsidiaries.

(b) Decision-Making Process of the Tender Offer The Company was established in 1970 and currently engages in software service businesses, including systems development, services and products & packages, and the information processing equipment businesses. The systems development business mainly handles the development of large-scale systems for major financial and public institutions—the Tender Offeror’s principle clients. The services business conducts an Internet banking service “FINEMAX,” and SaaS (Software as a Service) businesses utilizing “Salesforce,” a product of Salesforce.com, Inc. of the U.S. The products & packages business offers package software solutions including “HIBUN,” which is used in security fields, and “KATSUBUN,” which contributes to promoting the paperless office. The information processing equipment business offers electronic blackboard systems “StarBoard,” which enjoy a high market share at home and abroad.

The Hitachi Group, which consists of the Tender Offeror, its subsidiaries and affiliated companies, conducts a wide range of business activities from the development, production and sales of offerings to the provision of relevant services in seven business segments: Information & Telecommunication Systems; Electronic Devices; Power & Industrial Systems; Digital Media & Consumer Products; High Functional Materials & Components; Logistics, Services & Others; and Financial Services.
In the information & telecommunication systems business, the Hitachi Group was quick in
initiating, as part of its effort to meet users’ diverse needs, the development of various information and telecommunication systems that correspond to various types and lines of business (system integration). The Hitachi Group has also expanded its outsourcing business and has been a pioneer in the SaaS business, which grants customers the use of software for their needs. These initiatives have progressed well.

However, the domestic information service market is currently at a critical turning point. In the conventional information service market, users’ demand for hardware and software to
establish, operate and maintain their own information and telecommunication systems led to the

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expansion and growth of the market. However, interest in system investments has been shifting recently from the maintenance of information systems (system integration) to the more efficient use and operation of information and telecommunication systems (e.g., outsourcing and SaaS). Consequently, it is expected that users’ demand for these new services, including the use of packaged software products and systems for shared use, will become a driving force in the market. In order to secure earnings and achieve further growth by responding to the changing market needs at this period of transition in the information service market, the Hitachi Group believes it necessary to enlarge the global businesses that have been led solely by the Company, as well as to further enhance the Group’s advanced and large-scale system-building capability and high-quality software development abilities.
As for the information and telecommunication systems market, in countries and regions that have
already built a certain degree of social infrastructure, including power systems, transportation systems, roads and water and other public systems, information and telecommunication systems are expected to grow further as part of these social infrastructures and to be increasingly fused with existing social infrastructures. Therefore, the demand for the “social innovation business” that fuses the social infrastructure business with the information and telecommunication systems business is expected to significantly increase. For the Tender Offeror, with its extensive track record in the conventional fields of both the social infrastructure business and the information and telecommunication systems business, in order to utilize its experience, expertise and technological capacity to concentrate on the social innovation business, the urgent tasks are the development of products and packages commensurate with the business, and the swift establishment of a service business foundation. Thus the Tender Offeror considers it necessary that the Hitachi Group invests its management resources in the information and telecommunication systems business. Meanwhile, the Company believes that proactive promotion of the business will contribute to its future development.

Under these circumstances, since early April 2009, the Tender Offeror and the Company have worked together and continued to discuss and consider various measures for business structural reform with the goal of raising their respective corporate values. As a result, the Tender Offeror and the Company have determined that strengthening the collaboration between the Company and the Hitachi Group and promoting the integration of the information telecommunication systems businesses in the Hitachi Group could be reinforced by establishing a closer capital relationship between both corporations, and thereby, 1) The Company, as a core company in the Hitachi Group, will be able to further reinforce its
response capabilities to big accounts, expansion of businesses for leading medium-sized enterprises, and development of products & packages or service business foundation in market demands as well as high-quality basic software and embedded software;
2) The Company will be able to strengthen its earning power by utilizing the Hitachi Group’s human
resources, sales and marketing and technological capabilities more than before;
3) The Company will be able to further expand its global businesses through the active utilization of
the Hitachi Group’s overseas sales and marketing strengths; and
4) The social innovation business on which the Hitachi Group including the Tender Offeror and the
Company, focus its efforts will create and expand new business opportunities of the Company by swiftly conducting various developments required for the business expansion.
The Tender Offeror and the Company have reached a conclusion that these effects will enhance the
enterprise value of both companies and the Hitachi Group and to achieve the intended effects, it is essential to make the Company a wholly owned subsidiary of the Tender Offeror.

As a specific method to establish a new unified business structure, establishment of an information and telecommunication company as a virtual entity within the Hitachi Group is been considered. Five

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major existing companies―the Tender Offeror (Information and Telecommunication Group), the Company, Hitachi Systems & Services, Hitachi Information Systems and Hitachi Electronics Services Co., Ltd., a wholly owned subsidiary of the Tender Offeror—would be equal partners in this virtual company. The most appropriate strategies and business structure for the future information and telecommunication company as a whole, as well as the strategies to reinforce the social innovation business will be decided and implemented. Under such a business structure, the Hitachi Group intends to improve and expand the structure to flexibly cope with customer needs while taking into account the industry, scale and the type of business of each customer with the aim of providing valuable one-stop services throughout the whole IT life cycle to customers in the global market as follows.
1) Development of the data center operation business optimizing green IT technologies; 2) Offer of highly reliable cloud-computing environment; 3) Expansion of global businesses utilizing collaborations with local business partners and
localized operations;
4) Strengthen our readiness for projects of large-scale accounts, such as backbone systems for
financial institutions including megabanks and optimization systems in the public sector;
5) Unify the information system businesses for the SMB (small to medium business) markets,
mainly in the industrial and distribution fields;
6) Expand the development system for middleware and embedded software for products; and 7) Strengthen and expand the network service business and the outsourcing business.

Although the optimal solution for the basic strategies and future orientation of the Hitachi Group’s information and telecommunication company after making the Company a wholly owned subsidiary will be determined in consultation with each company in the aforementioned information and telecommunication company, the Tender Offeror intends to reinforce the Company’s business, even after making the Company a wholly owned subsidiary, by not only respecting its self-initiatives and independence but also paying attention to the business features and the management which fully utilizes operation and structural strengths. As a result, while receiving the benefit of the effective unification and distribution of overall management resources within the information and telecommunication systems businesses of the Hitachi Group, the Company will be able to conduct business operations taking advantage of its originality and own corporate culture.

(c) Reason and Background to the Opinion concerning the Tender Offer

The Tender Offer Price per share of ¥2,650 represents a premium of 54.8% (rounded to the first decimal place) on the closing price of ¥1,712 of the Shares of the Company on the First Section of the Tokyo Stock Exchange on July 24, 2009. It also represents a premium of 56.9% (rounded to the first decimal place) on the simple average of ¥1,689 (rounded to the nearest yen) of the closing share prices of the Shares of the Company for the past month (from June 25 to July 24, 2009) as well as a premium of 72.4% (rounded to the first decimal place) on the simple average of ¥1,537 (rounded to the nearest yen) of the closing share prices of the Shares of the Company for the past three months (from April 27 to July 24, 2009) and a premium of 94.3% (rounded to the first decimal place) on the simple average of ¥1,364 (rounded to the nearest yen) of the closing share prices of the Shares of the Company for the past six months (from January 26 to July 24, 2009). The stock price of the Company rose following a news report regarding the business restructuring of the Hitachi Group on July 27, 2009, which is the day before the day when the Tender Offer was announced. Considering this rise in the stock price, the premium was calculated using the stock price on July 24, 2009, a business day before July 27, 2009. The calculations of the respective premiums on the simple average of the

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closing share prices of common stock for the past one month, for the past three months and for the past six months were made in the same manner. In determining the opinion concerning the Tender Offer, the Company had Mizuho Securities Co., Ltd. calculate its equity value. Mizuho Securities is a financial adviser as a third party appraiser independent of the Company and the Tender Offeror, and also does not hold the status as a Related Party. On this basis, Mizuho Securities calculated the equity value of the Company and the Company received a valuation report on its equity value as of July 27,2009 from Mizuho Securities. Mizuho Securities used the market share price method, the comparable company analysis method and the discounted cash flow (the “DCF”) method. Valuation results on the value per share of common stock of the Company computed using each method was as follows. The Company inspected the Tender Offer Price based on these valuation results and judged the Tender Offer Price to be appropriate level and reasonable.
1) Market Share Price method: ¥1,364 to ¥1,712
The average market price method is a method to compute the equity value of the Company based on the share prices of the Company in the stock market. The share prices are determined through the principle of market competition with many entrants, widely disclosed and objective. They are taken into account in the valuation of share prices of listed companies. For these reasons, this method was employed. With the average market price method, based on July 24, 2009, the record date, of the common stock of the Company on the First Section of the Tokyo Stock Exchange for the past six months until the record date, the per share price of the Company was calculated to be ¥1,364 to ¥1,712.

2) Comparable Company Analysis method: ¥1,813 to ¥2,502
The comparable company analysis method is a method to calculate the Company’s share price using multipliers of financial indicators relative to aggregate stock price of listed companies operating in the same business as that of the Company. Taking into account the situation of major markets and business scale, this method would produce probable results and employed this method. Using the Comparable Company Analysis method, the per share price of the Company was calculated to be ¥1,813 to ¥2,502.
3) DCF method: ¥2,107 to ¥3,081
The DCF method is a method to calculate the value of the Company’s business and share price by estimating and discounting future free cash flows that the Company will produce through business activities by a certain discount rate to give their present values. Adding value of non-operating assets to the resulting the Company’s business value and deducting net liabilities, the share price is derived. Regarding this method as effective and general financial theory, this method was employed. Using the DCF method, the per share price of the shares of the Company was calculated to be ¥2,107 to ¥3,081.
In view of the above recognition and discussions, as well as the analyses of the appropriateness of the Tender Offer Price and other matters, the Company has concluded that the Tender Offer will contribute to reinforce the Company’s operating base, accelerating business strategies and future development, and that conditions of the Tender Offer are reasonable, providing the Company’s shareholders with an opportunity to sell their shares at a reasonable price. Therefore, the Company has agreed that the Tender Offeror would conduct the Tender Offer with aim of making the Company its wholly owned subsidiary and further decided to recommend that the shareholders of the Company

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