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Message from the President and CEO

Acting in accordance with the basic policies of “strengthen governance at the global level” and “establish a high-profit base,“ Hitachi Chemical will improve the quality of its management and its business to heighten 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 2018, the United States enjoyed a strong economy while economic slowdown was experienced in Europe as well as in China and other emerging countries. The Japanese economy also stagnated amid sluggish exports.

In this environment, the Group moved forward with the 2018 Medium-term Management Plan, which ended with fiscal 2018, with an eye to building solid operating foundations for supporting sustainable growth. Under this plan, we put forth the policies of “cultivate top share business by changing method of competition” and “accelerate commercialization through Open Innovation.” We acted in accordance with these policies as we implemented measures for drawing out the benefits of Niche and Cluster Strategies and launching new products and businesses that take advantage of open innovation. The goal of these efforts was to create new value.

Specifically, we bolstered our production capacity for slurry for chemical mechanical planarization. This move was aimed at expanding operations dealing in semiconductor materials anticipated to see future growth in demand stimulated by social trends, such as the transition to 5G communications, the shift toward electric vehicles, and the advent of self-driving cars. In addition, we began acting as a member of Jisso Open Innovation Network of Tops (JOINT), a consortium established by semiconductor mounting material and equipment manufacturers with the aim of providing customers with comprehensive solutions regarding the materials and mounting processes necessary for realizing practical application of next-generation semiconductor packages. Our activities in this regard are based out of the Open Laboratory for Semiconductor Packaging Materials. We also commenced mass production of quantum dot film, a new product that contributes to greater levels of resolution in high-definition displays. In the regenerative medicine business, we took steps to reinforce our operations in Japan by establishing a regenerative medicine production facility in Yokohama City, Kanagawa, and deliveries of regenerative medicine products were commenced. To develop global operating foundations, it was decided that Hitachi Chemical would acquire apceth Biopharma GmbH, a company that performs contract manufacturing of regenerative medicine products in Germany. This company was converted into a consolidated subsidiary on April 2, 2019.

Consolidated revenue in fiscal 2018 increased 2% year on year, to ¥681.0 billion. In addition to the measures I just mentioned, revenue was also buoyed by higher demand for slurry for chemical mechanical planarization and carbon anode materials for lithium ion batteries as well as the benefits of new mergers and acquisitions. Conversely, operating income decreased 21%, to ¥36.4 billion, and net income attributable to owners of the parent was also down 21%, to ¥28.7 billion. Factors behind the lower income included the deterioration of our sales mix stemming from sluggish growth for products for smartphone applications, higher fixed costs due to the launch of our regenerative medicine business, and expenses associated with the inappropriate testing of Company products, an issue that came to light in 2018. These factors offset the income-boosting benefits of higher sales volumes and ongoing cost reductions.

As for the year-end dividend for fiscal 2018, we chose to issue a year-end dividend of ¥30 per share, the same level as in the previous fiscal year. Combined with the interim dividend, this will make for annual dividends of ¥60 per share, through which we hope to repay shareholders for their support.

The outlook for the economy going forward is opaque due to the uncertainty regarding the potential impact on the global economy of factors such as the trade policies of the United States and the issues surrounding the United Kingdom’s withdrawal from the European Union.

It was against this backdrop that we established the 2021 Medium-term Management Plan, which is slated to conclude with fiscal 2021. This plan was based on the lessons learned from the inappropriate product testing issue as well as on a review of the 2018 Medium-term Management Plan and its results. The three-year period ending with fiscal 2021 has been positioned as a “stage to improve quality of management and business,” and we will thus be acting in accordance with the basic policies of “strengthen governance at the global level” and “establish a high-profit base.”

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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