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Summary of President's New Year Message to Associates

I would like to say Happy New Year to you all.

Firstly, I would like to talk about the prospect of achieving the goals set out in the 2015 Mid-Term Plan. During this period, there were unexpected and unprecedented natural disasters such as the Great East Japan Earthquake and floods in the Kingdom of Thailand, which had a great impact on our business. Despite that, we expect to achieve about 80 to 90 percent of our targeted operating profit margin ratio. This is the result of each and every employee's efforts to transform the company into an entity that can survive and prosper, and I would like to thank all our staff for their hard work and dedication.

Secondly, I will touch upon the current business environment and our business performance.

The Japanese economy has been in a mild recovery trend, and many companies are improving their earnings thanks to such factors as a weaker yen. Additionally, the Japanese economy is expected to be driven by participation in the TPP pact and the Tokyo Olympic Games, among other factors. Overseas, meanwhile, the economies of Europe and the United States are strong, while there is concern over the slowdown of the Chinese economy.

In light of these circumstances, sales and profit of the Fujikura Group were higher than the figures set out in our business plan for the first half of FY2015 as a whole, because our telecommunication and electronics businesses compensated for the difficult situation of the automotive product business in China.

Looking back on each segment in the first half, in the telecoms-related business, demand for optical fibers remained high. Also, owing to healthy sales of optical components and optical fusion splicers-thanks to the expansion of data centers and the FTTH market in North America and other areas-sales significantly exceeded our projections. Also, our electronics-related business marked an increase in sales and profit owing to strong uptake of smartphone-related products. The automotive product business was robust in the U.S. and European markets, though sales and profit were lower than our projections due to the rapid slowdown of the Chinese market. Currently, we are promoting efforts to cut costs and our efforts are gradually making differences. Concerning the energy business, there are signs of changes in the electricity market. However, the trend in which the domestic market has been maturing and shrinking remains unchanged, so we are working on efforts to improve earnings through the promotion of structural reforms.

In the second half, sales and profit are expected to decline from the first half due to seasonal fluctuations in the electronics-related business and intensified competition over optical-related products. However, I believe this year's plan can be realized.

FY2016 will be the first year of the 2020 Mid-Term Business Plan. The new plan will be expected to be released in May, but I would like to introduce some initiatives of each segment. The Energy segment will promote structural reforms further in order to improve the profitability of the business ahead of a shrinking market and intensified competition following the Olympic Games. Furthermore, the segment will target the EPC business, which was launched in Myanmar and other countries as part of efforts to boost new activities, with an eye on further growing its operations. The Telecommunication segment will grow its business by targeting FTTx markets and data-center markets. The Automotive Products will expand its business centering on the wire harness business, and will aim to commercialize other automobile platform-based products, too. Our Electronics Business will deepen co-creation with customers and aim to establish a portfolio of new products and technologies following FPC and connectors to help nurture the seeds of our business expansion. Four new businesses-fiber laser, optical interconnection, superconductors and medical devices-will accelerate launching to create metabolism. Corporate R&D unit will establish a system to boost development of new R&D themes and promote efforts to create a global R&D network that facilitates close cooperation with clients all over the world.

The five-year period covered by the 2020 mid-term plan will be key in determining whether Fujikura can truly change. Let's change ourselves by being keenly aware of changes in the "business location", and by creating new customer value and making Fujikura a high profit company that can pave the way to the future.

"Change ourselves, and bridge to the future! 2020 Mid-term"

Let's work hard and cheerfully this year, while staying healthy!