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Message to Investors

Takashi Nishijima President and Chief Executive Officer

President Nishijima

In the fiscal year ended March 31, 2017 (fiscal year 2016), market conditions in the energy and materials-related sectors remained challenging, with a broad range of companies continuing to postpone or cancel investments in resource development projects. In countries such as Japan that are major importers of natural resources, investments by companies that benefit from lower costs for raw materials and fuels were comparatively firm; however, a cautious investment stance has been observed in other industries due to the uncertain business outlook. Overall, the market lacked vigor.

Under these circumstances, the Yokogawa Group is actively pursuing business activities that create new value, as set out in our Transformation 2017 ("TF2017") mid-term business plan. One focus has been on completing the integration of organizations following the April 2016 acquisition of the UK-based KBC Advanced Technologies plc. The Group is also striving to accelerate its transformation into a highly efficient global company through the reduction of costs and other initiatives; however, operating results for fiscal year 2016 were impacted by the appreciation of the yen and reduced investments in resource development projects, mainly outside Japan, with net sales, operating income, ordinary income, and profit attributable to owners of parent all declining from the previous year.

The Group's long-term business framework states specific goals that are to be achieved within the next 10 years. Based on the TF2017 plan, which covers fiscal years 2015 to 2017, we have been preparing the way for growth that will lead to the achievement of these goals by making a proactive effort to improve profitability. The present business environment has turned out to be considerably different from the assumptions that we made when drawing up the TF2017 plan. Although we expect to see a year-on-year increase with both revenues and profits in fiscal year 2017, the final year of the TF2017 plan, it now looks like it will be difficult to achieve all the TF2017 targets.

Our net sales and operating income targets for fiscal year 2017 have been revised downward from the initial targets. With a return on equity (ROE) of 10.1%, our management goals include achieving earnings per share (EPS) of ¥101.

Aiming for sound and sustainable growth, we will expand our business and add to our corporate value, and thereby fulfill the expectations of all our shareholders. In these endeavors, we request your continued support and understanding.

Takashi Nishijima

June 2017

Takashi Nishijima
President and Chief Executive Officer