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Message from the President and CEO

Hitachi Chemical will continue to change how we compete while relentlessly creating innovation to increase corporate value.

President and Chief Executive Officer Hisashi Maruyama

I would like to thank all of our shareholders for their continued support of the Company.

In fiscal 2016, the U.S. economy continued to experience economic recovery driven by consumer spending. The European economy similarly displayed ongoing, albeit modest, growth stimulated by consumer spending. China sustained a stable growth trend, despite a lower growth rate. Conditions in the economies of other emerging countries were initially poor, but they recovered later on in the fiscal year. Meanwhile, economic recovery in Japan was supported by external demand.

In this environment, with an eye to building solid operating foundations for supporting sustainable growth, the Group put forth its policy of changing how it competes in the Medium-term Management Plan that was kicked off in fiscal 2016. With this policy in place, we endeavored to capture demand in growth areas and expand our operations through mergers and acquisitions. At the same time, we advanced initiatives for reforming R&D systems, optimizing management resource allocation through the reorganization of unprofitable businesses and products, and reducing costs on a global scale. As one specific example, we deployed Niche and Cluster Strategies aimed at cultivating top-share businesses. These strategies entail identifying niche products, which are high-margin products with significant strategic meaning, such as slurry for chemical mechanical planarization and circuit-connecting films for displays, and cluster products, which are products for which we can share strategies for global success through grouping, such as semiconductor packaging materials and highly functional resins. Management resources are to be allocated based on these identifications. We also decided to relocate and upgrade our Open Laboratory for Semiconductor Material Innovation in order to promote open innovation for semiconductor packaging materials and processes. Furthermore, we launched our new Innovation Center in January 2017 to provide a place at which Hitachi Chemical can work with its stakeholders to create new technologies and businesses. This move strengthened our systems for fostering open innovation.

The Company also moved ahead with mergers and acquisitions. In February 2017, FIAMM Energy Technology S.p.A., an Italian company that manufactures and sells automotive and industrial lead-acid batteries, was converted into a consolidated subsidiary. This company brought with it the Groupís first product development and production bases in Europe as well as a global sales network centered on this region. Furthermore, in March 2017, it was decided that PCT, LLC, a Caladrius Company, would be converted into a wholly owned subsidiary. This U.S. company is a manufacturing contractor of cells for regenerative medicine applications, and the acquisition is aimed at facilitating Hitachi Chemicalís entry into the regenerative medicine sector of the life science field, which has been positioned as a key business.

Consolidated revenue in fiscal 2016 was relatively unchanged year on year, at ¥554.1 billion, as a result of these measures coupled with the benefits of increased demand, which offset the negative impacts of foreign exchange influences. Operating income was similarly in line with the previous fiscal year, at ¥53.2 billion, due to the higher demand as well as the effects of ongoing cost reduction measures. Net income attributable to owners of the parent rose 4% year on year, to ¥40.2 billion, following a decline in income taxes.

In consideration of this performance, we chose to issue a year-end division of •30 per share for fiscal 2016, up •5 from the previous fiscal year. Combined with the interim dividend, this will make for annual dividends of •55 per share, through which we hope to repay shareholders for their support.

Looking ahead, conditions are expected to remain generally firm in the global economy and in the domestic economy. However, political risks are materializing in the United States and Europe, and there is concern regarding the impacts of these risks on economic conditions in various countries and regions. In addition, geopolitical risks are growing in the Middle East and in East Asia. As such, our outlook is not optimistic.

Even amid these conditions, the Group is committed to achieving the goals set forth in the three-year Medium-term Management Plan that started with fiscal 2016. To this end, Hitachi Chemical will continue to change how it competes while relentlessly creating innovation. We thereby aim to achieve substantial growth that exceeds the growth rate of the market.

I am deeply grateful that you, our shareholders, continue to offer us your support and understanding.

President and Chief Executive Officer Hisashi Maruyama

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