The basic management policy of the Hitachi Koki Group is to serve its customers and the community by developing excellent original technology and products. Hitachi Koki is working globally to provide products that bring ease of use and safe operation to three fields -- power tools, printing systems and scientific instruments. The group strives to quickly introduce attractive products to a responsive sales and service network guided by the principle of "Customer First." Furthering these goals, Hitachi Koki is pursuing cost reductions and organizational streamlining, while accelerating the improvement of our consolidated management setup, based on reinforcement of tie-ups among group enterprises.

Despite progress achieved, and due in part to changes in the economic and business environment, we posted a net loss in the previous two terms -- in fiscal 1998 and 1999. To accelerate emerge from this crisis, the Group launched the following extraordinary management reform steps on April 1, 2000, and we are now going all out to improve performance in fiscal 2000.

(1) Introduction of a business group system
On April 1, 2000, we introduced a business group system under which power tool, printing system and scientific instrument operations are conducted as virtually independent companies on a consolidated basis.

(2) Introduction of a new executive officer system
We appointed executive officers for each business group to accelerate the speed of decision making and streamline operational responsibilities.

(3) Division of business functions
In order to strengthen the competitiveness of the Power Tools group and bring about its early business recovery, we established Hitachi Koki Sawa Co., Ltd., a subsidiary specializing in the manufacturing of power tools, on April 1, 2000.

(4) Transfer of responsibilities to specialized subsidiaries
Also on April 1, 2000, we transferred our information system department to Hitachi Koki Information Technology Co., Ltd., a subsidiary, and part of our general affairs department to Nikko Sangyo Co., Ltd., another subsidiary. Through further concentration on our core business, we will upgrade our operational efficiency and expand sales to customers outside our group.

(5) Strengthening of domestic sales channels
We founded Hitachi Koki Sales Co., Ltd., a subsidiary for sales of power tools, in the Tokyo-Yokohama area on February 21, 2000, and launched operations on April 1, 2000. Through this step, we replaced indirect sales through agents with direct sales. This will enable us to dramatically raise our sales efficiency in the largest market of Japan.

As we resolutely carry out these management reform measures to strengthen our financial foundation and sales competitiveness, we will also implement the following operational developments:

(1) Power Tools Group
a. We will concentrate our management resources on priority areas, through accelerated phasing in of new products at production bases in China as part of a review of our production strategy, as well as through aggressive expansion of home-center channels in North America.
b. We will also work to strengthen our consolidated management.

(2) Printing Systems Group
a. The production of the DDP70 high-speed cut-sheet laser printer will be put into high gear.
b. Speed and visual quality of high-speed continuous form printers will be further increased.
c. As a new business undertaking, the development of high-end color printers will be accelerated.

Non-recurring charges associated with management reorganization and company restructuring contributed to a final net loss of more than ¥10 billion in fiscal 1999 at Hitachi Koki Imaging Solutions, Inc., a manufacturing and sales subsidiary in the United States. Management is building a return to profitability in fiscal 2001 through improved competitiveness in the POD (print on demand) market from sales of the DDP70 and other products.

By carrying out management reform and other operational efficiencies, the Hitachi Koki group expects to increase sales by about 5% from the previous fiscal year on a consolidated and non-consolidated basis, putting bottom-line figures in the black in the year ending March 2001.