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April 26, 2017 To all parties concerned

Company Name: Hitachi Kokusai Electric Inc. Representative: Kaichiro Sakuma, Chief Executive Officer (Securities Code 6756, First Section of the

Tokyo Stock Exchange) Contact: Shoji Okuyoshi, General Manager of the Legal &

CSR Division TEL: 03-6734-9401

Announcement of Opinion regarding the Tender Offer for the Shares of Hitachi Kokusai Electric Inc. by HKE Holdings G.K.

Hitachi Kokusai Electric Inc. (the “Company”) announces that, with respect to a tender offer by HKE Holdings G.K. (the “Offeror”) for the common shares of the Company (the “Company Shares”) (the “Tender Offer”), the Company resolved, at its Board of Directors meeting held on April 26, 2017, in its judgment based on present circumstances, if the Tender Offer were commenced, to express an opinion supporting the Tender Offer and to leave the decision of whether or not to tender their shares in the Tender Offer to the holders of the Company Shares, as stated below.

According to “Announcement Regarding the Tender Offer for the Shares of Hitachi Kokusai Electric Inc. (Securities

Code 6756)” issued by the Offeror today (the “Offeror Press Release”), the Offeror intends to commence the Tender Offer, subject to the fulfillment of the following conditions:

① Completion of the procedures and actions regarding approvals and authorizations, and the lapse of a waiting period therefor, required under domestic and overseas competition acts, and other laws and regulations;

② Submission by the third-party committee established by the Company of a report supporting the Matters of Inquiry (as defined in the section titled “④ The Company has established a third-party committee and has obtained an opinion” within “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer”; hereinafter the same), which has not been withdrawn;

③ (a) Adoption of a resolution at a meeting of the Board of Directors of the Company with the affirmative vote of all directors, except for directors who have or may have an interest in Hitachi, Ltd. (“Hitachi”) as the Company’s parent company, expressing an opinion in support of the Transaction (as defined below; hereinafter the same), including the Tender Offer; and (b) no adoption of a resolution withdrawing that resolution or stating contrary to that resolution; and

④ Fulfillment of certain other conditions (see below Note 1) (these items ① to ④, collectively, the “Conditions Precedent to the Tender Offer”) contained in the Basic Agreement (as defined in the section titled “(1)① Summary of the Tender Offer” within “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer”).

However, in the event that one or more of the aforementioned conditions is not satisfied, the Offeror may, in its discretion, elect to waive such Conditions Precedent to the Tender Offer, in whole or in part, and proceed with the Tender Offer.

The Offeror intends to commence the Tender Offer promptly upon the fulfillment (or waiver by the Offeror) of the Conditions Precedent to the Tender Offer, and as of the date hereof, expects to commence the Tender Offer in early August 2017. As it is difficult to estimate the time period required for the procedures of domestic and overseas competition authorities, the Company resolved at its Board of Directors meeting above to take the following measures to

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express its opinion. In other words, as stated in “④ The Company has established a third-party committee and has obtained an opinion” within “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below, with regard to the commencement of the Tender Offer, the Board of Directors of the Company has decided as follows: at such time, the Board of Directors of the Company will request that the third-party committee established by the Company consider whether there has been any change in its opinion expressed to the Company’s Board of Directors on the date hereof, and that, if there is no change, the committee will advise the Board of Directors to that effect, or if there is any change, then the committee will issue a revised opinion reflecting such change, and the Board of Directors will issue a new opinion regarding the Tender Offer for the Company, based on the third-party committee’s revised opinion.

(Note 1) According to the Offeror Press Release, under the Basic Agreement, the commencement of the Tender

Offer is subject to items (i) through (x) below, in addition to items ① through ③ above: (i) The representations and warranties of Hitachi and HVJ Holdings Inc. (“HVJ”), an entity invested in

by a fund managed, operated, provided with information or otherwise maintained by Japan Industrial Partners, Inc. (“JIP”, for a summary of JIP please refer to “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” within “② Purpose and background of the Transaction (as defined below), including the Tender Offer, and management policy following the Tender Offer” within “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below) are true and correct in all material aspects;

(ii) Each of Hitachi and HVJ has duly performed or complied with all of its obligations under the Basic Agreement in all material respects;

(iii) Confirmation by the Company that all material information (as defined in Article 166, Paragraph 2 of the Financial Instruments and Exchange Law (Law No. 25 of April 13, 1948, as amended; the “Law”) regarding the Company’s business has been disclosed (as defined in Article 166, Paragraph 4 of the Law);

(iv) There is no declaration, litigation or process involving a governmental or administrative agency seeking to limit or prevent the transaction, and there is no decision from a governmental or administrative agency seeking to limit or prevent the transaction, nor is there reasonable belief that any of the foregoing may exist;

(v) Agreements exist and are effectively executed to offer services relating to agreements regarding the Transaction (excluding the Tender Offer) during the Transaction and during the transitional period after the Transaction has been implemented;

(vi) The Offeror has received from the Company an agreement (the “Agreement”) concerning the Company’s obligations, representations and warranties regarding the Transaction and the Agreement has not been withdrawn by the commencement date of the Tender Offer;

(vii) The representations and warranties of the Agreement are true and correct in all material respects; (viii) The Company has duly performed or complied with in all material respects all of its obligations to be

performed or complied with under the Agreement; (ix) The Offeror has reached an agreement with Hitachi and HVJ regarding the articles of incorporation of

the Company following the Company Split (defined below; hereinafter the same); and (x) Hitachi has submitted a financing certificate reasonably detailing the payments in connection with the

Hitachi Investment (as defined in ① Summary of the Tender Offer” under “(2) Grounds and Reasons for Opinion” under “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below) and other explanatory documents, and HVJ has submitted a financing certificate reasonably detailing the payments in connection with the JIP Advance Payment

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(as defined in the section titled “(1) Summary of the Tender Offer” under “1. Purpose of the Tender Offer”) and other explanatory documents.

According to the Offeror Press Release, under the Basic Agreement, if any of the following conditions fails to be

satisfied on the business day immediately preceding the commencement date of the Tender Offer, Hitachi or HVJ may request the Offeror not to commence the Tender Offer (the “Motion against the Tender Offer”).:

① Completion of the procedures and actions regarding approvals and authorizations, and the lapse of a waiting period therefor, required under domestic and overseas competition acts, and other laws and regulations;

② Submission by the third-party committee established by the Company of a report approving the Matters of Inquiry , which has not been withdrawn;

③ (a) Adoption of a resolution at a meeting of the Board of Directors of the Company with the affirmative vote of all directors, except for directors who have or may have an interest in Hitachi, expressing an opinion in support of the Transaction, including the Tender Offer (including the opinion that the Tender Offer Price (as defined in “2. Price of the Tender Offer and Other Transactions” below) is appropriate.); and (b) No adoption of a resolution withdrawing that resolution or stating contrary to that resolution; and

④ Fulfillment of certain other conditions (see below Note 2) contained in the Basic Agreement.

(Note 2) According to the Offeror Press Release, under the Basic Agreement, in addition to ① through ③ above, the Offeror intends to file the Motion against the Tender Offer, upon the failure of any of the following conditions to be satisfied: (i) The representations and warranties of the Offeror are true and correct in all material aspects;

(ii) The Offeror has duly performed or complied with all of its obligations under the Basic Agreement in all material respects;

(iii) There is no declaration, litigation or process involving a governmental or administrative agency seeking to limit or prevent the Transaction, and there is no decision from a governmental or administrative agency seeking to limit or prevent the Transaction, nor is there reasonable belief that any of the foregoing may exist;

(iv) Each of Hitachi and HVJ has confirmed that the tender offer statement and other relevant documents have reasonable contents;

(v) Agreements exist and are effectively executed to offer services relating to agreements regarding the Transaction (excluding the Tender Offer) during the Transaction and during the transitional period after the Transaction has been implemented;

(vi) Each of Hitachi and HVJ has confirmed that terms and conditions of agreements of the Offeror concerning borrowing or other transactions are reasonable;

(vii) HVJ has received from the Company the Agreement and the Agreement has not been withdrawn by the commencement date of the Tender Offer; and

(viii) The Offeror has reached an agreement with Hitachi and HVJ regarding the articles of incorporation of the Company following the Company Split.

According to the Offeror Press Release, the Offeror will implement the Tender Offer on the premise that the Company

Shares will be delisted, contemplating to turn the Company into its wholly-owned subsidiary through the Tender Offer and the series of procedures scheduled thereafter described in “(5) Policy for organizational restructuring after the Tender Offer (matters relating to ‘Two-Step Acquisition’)” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below and “a. Capital Reduction and the Share Repurchase by the Company” within “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the

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Offeror” within “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” within “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below. In addition, according to the Offeror Press Release, Hitachi as the Company’s parent company has agreed with the Offeror not to tender its shares in the Tender Offer, and the Company intends to acquire all of the Company Shares held by Hitachi (the “Share Repurchase”) subject to successful completion of the Tender Offer and the Share Consolidation (as defined in “(5) Policy for organizational restructuring after the Tender Offer (matters relating to ‘Two-Step Acquisition’)” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below; hereinafter the same) taking effect thereafter. Based on the Offeror’s proposal, the Company intends to reduce the amount of capital, capital reserve, and profit reserve pursuant to Article 447, paragraph 1, and Article 448, paragraph 1 of the Companies Act (Act No. 86 of 2005, as amended; hereinafter the “Companies Act”), and to transfer all or part of the capital and capital reserve so reduced to “Other capital surplus”, and to transfer the full amount of the profit reserve so reduced to “Profit surplus carried forward,” subject to successful completion of the Tender Offer and the subsequent Share Consolidation taking effect, in order to secure the distributable funds required for the Share Repurchase. The Company intends to hold an extraordinary general shareholders meeting whose agenda includes a proposal for a reduction in the amount of capital, capital reserve and profit reserve (the “Capital Reduction”), and the Share Repurchase, by around December 2017 after the Offeror and Hitachi have become the sole shareholders of the Company through successful completion of the Tender Offer and effectuation of the Share Consolidation. According to the Offeror, in addition to the above, according to the Offeror Press Release, the Offeror intends to divest the Company’s thin-film process solutions business through an absorption-type company split whereby the Offeror will be the succeeding corporation after the Company becomes the Offeror’s wholly-owned subsidiary through the Share Repurchase (the “Company Split”) and a transfer of 20% of the Company Shares by the Offeror respectively to Hitachi and HVJ. Accordingly, the Offeror, Hitachi and HVJ will hold 60%, 20% and the remaining 20%, respectively, of the portion of the Company Shares after the completion of each of the above transfers.

For an outline of turning of the Company’s into a wholly-owned subsidiary through the Tender Offer and the Share Consolidation, as well as the Share Repurchase, the Company Split contemplated and to be implemented by the Offeror and the Company after the Company becomes a wholly-owned subsidiary; the transfer of 20% of the Company Shares by the Offeror each to Hitachi and HVJ following the Company Split; and other transactions and similar associated with or related to the foregoing (collectively, the “Transaction”), please refer to the “Exhibit 1: Scheme Diagram of the Transaction” attached as Exhibit 1 and for details regarding such transactions, please refer to “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” within “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” within “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” below.

The resolution of the Company’s Board of Directors meeting was adopted subject to these series of procedures and

other necessary procedures.

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1. Outline of the Offeror (1) Name HKE Holdings G.K. (Note) (2)

Address Meiji Yasuda Seimei Building 11th Floor, 1-1, Marunouchi 2-chome, Chiyoda-ku, Tokyo

(3) Name and Title of Representative Director

Representative Partner: KKR HKE Investment L.P. Function Manager: William Janetschek

(4) Businesses Commerce and any and all operations associated with or relating to commerce

(5) Capital ¥25,000 (6) Date of Foundation February 2, 2017 (7) Major Shareholders and

Ownership Percentage KKR HKE Investment L.P. (Ownership percentage: 100.00%)

(8) Relationships Between the Listed Company and the Offeror Capital Relationships Not applicable Personal Relationships Not applicable Business Relationships Not applicable Related Party

Relationships Not applicable

(Note) We have been informed that the Offeror expects that it will change its company form from a limited liability company (godo kaisha) to kabushiki kaisha sometime between the date immediately following the last date of the purchase period under the Tender Offer (the “Tender Offer Period”ender Offer Periodhe dathe Hitachi Investment.

2. Price of the Tender Offer and Other Transactions

Common shares: ¥2,503 per share (the “Tender Offer Price”) 3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer (1) Details of the Company’s Opinion

The Company resolved at its Board of Directors meeting held on April 26, 2017, in its judgment based on present circumstances, on the basis and reasons set out in section (2) “Grounds and Reasons for Opinion” below, that, if the Tender Offer were commenced, the Company would express its opinion supporting the Tender Offer and leave the decision of whether or not to tender their shares in the Tender Offer to the holders of the Company Shares.

As stated above, the Tender Offer will be implemented immediately if the Conditions Precedent to the Tender Offer are satisfied, and the Offeror has announced that, as of today, it aims to commence the Tender Offer in early August 2017. However, since it is difficult to estimate precisely the time required to complete procedures of domestic and international competition authorities, the Company resolved at the Board of Directors meeting above the process to express its opinion as below. The resolution establishes, as described in “④ The Company has established a third-party committee and has obtained an opinion” within “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” below, that, when the Tender Offer is commenced, the Company’s Board of Directors will consult the above-mentioned third-party committee and request that the third-party committee examine whether there is any change in the opinion it expressed to the Company’s Board of Directors today and, if there is no change, advise the Company’s Board of Directors to that effect and if there is any change, express its revised opinion, based on which the Company will express its opinion on the Tender Offer again at the time the Tender Offer is commenced.

The above-mentioned resolution of the Company’s Board of Directors was adopted by the method described in “⑤ The Transaction has received the unanimous approval of the directors with no interest in the Company” within “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to

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ensure the fairness of the Tender Offer” below.

(2) Grounds and Reasons for Opinion ① Summary of the Tender Offer

According to the Offeror Press Release, the Offeror is godo kaisha established on February 2, 2017, with the primary goal of controlling and managing the business activities of the Company following completion of the Tender Offer, through which the Offeror will acquire and hold the shares of the Company. All equity interests in the Offeror are currently owned by KKR HK Investment L.P. (“KKR Fund”), a limited partnership established under the laws of the Cayman Islands on February 2, 2017, which is indirectly held and operated by Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates and other related entities, “KKR”).

According to the Offeror Press Release, KKR’s investment philosophy is to invest from a long-term perspective in partnership with the management of the acquired company. KKR partners with companies and management teams with outstanding potential and business foundations, and leverages its management resources, expertise, and network with the aim of creating industry leaders. Based on this philosophy, KKR focuses on carve-outs (business divestitures) of subsidiaries and business units from large corporations and supports their development as independent enterprises by promoting their growth strategy, profitability, and improvements in business efficiency both organically (by leveraging existing management resources) and inorganically (such as through alliances with, or acquisitions of, other companies). Globally, KKR has a track record of more than 50 carve-outs and has proven results in supporting independent enterprises.

Founded in 1976, KKR is a comprehensive asset management firm, included among the world’s leading private equity funds, and is listed on the New York Stock Exchange. According to the Offeror Press Release, since the opening of its Tokyo office in 2006, KKR has been actively expanding its investment activities in the Japanese market, with investment professionals from diverse backgrounds that possess an understanding of Japanese trade practices. According to the Offeror Press Release, in 2010, KKR invested in Intelligence, Ltd., a provider of comprehensive HR services. According to the Offeror Press Release, in 2014, KKR supported the carve-out of Panasonic Healthcare Co., Ltd. (“PHC”) from Panasonic Corporation, and subsequently through KKR’s support PHC was able to acquire the diabetes care business of Bayer Aktiengesellschaft and affiliates of its subsidiary, Bayer HealthCare, in 2016, demonstrating KKR’s capability in helping its Japanese portfolio companies carry out follow-on acquisitions of overseas enterprises. In 2015, KKR invested in Pioneer DJ, then a business unit of Pioneer Corporation. According to the Offeror Press Release, in 2017, KKR implemented tender offers for Calsonic Kansei Corporation, a listed subsidiary of Nissan Motor Co., Ltd., and for Hitachi Koki Co., Ltd., a listed subsidiary of Hitachi. According to the Offeror Press Release, through these initiatives, KKR has built on its track record of supporting the stand-alone growth of subsidiaries and business units of major Japanese companies following PHC’s lead.

According to the Offeror Press Release, the Offeror intends to conduct the Tender Offer as part of the Transaction. According to the Offeror Press Release, as of today, the Offeror and Hitachi, the parent company of the Company,

and HVJ have executed a basic agreement (the “Basic Agreement”) which provides for matters including the following: under the Basic Agreement, (i) Hitachi will not tender any of its Company Shares (53,070,129 shares, representing an ownership percentage (see below Note) of 51.67% of the Company) (the “Hitachi Shares”) in the Tender Offer; and (ii) after the Share Consolidation takes effect, Hitachi will sell to the Company all of the Hitachi Shares in accordance with the Company’s planned repurchase of its own shares. For details regarding the Basic Agreement, please refer to “4. Material Agreement regarding the Tendering into the Tender Offer between the Offeror and the Company’s shareholders” and “9. Future outlook” below.

(Note) The ownership percentage, here and throughout this release, refers to the percentage (rounded to the

second decimal place) of the number of Company Shares held by the shareholder in question to the number of shares (102,703,392 shares; the “Number of Tendered Shares”) calculated by deducting (ii) the number of the Company’s own shares held by the Company as of March 31, 2017 (2,517,867

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shares) from (i) the total number of issued shares as of March 31, 2017, i.e., (105,221,259 shares), (as stated in the “Financial Statements for the Year Ended March 31, 2017 (IFRS) (consolidated)” released by the Company as of April 26, 2017).

According to the Offeror Press Release, if the total number of the shares tendered in the Tender Offer (the

“Tendered Shares”) is less than the minimum number of shares to be purchased in the Tender Offer, then the Offeror will not purchase any of the Tendered Shares. The Offeror has not set a limit on the maximum number of shares to be purchased in the Tender Offer, because the Offeror intends for the Company Shares to be delisted, and if the total number of Tendered Shares is equal to or exceeds the minimum number of shares to be purchased in the Tender Offer, the Offeror will purchase all of the Tendered Shares.

The minimum number of shares to be purchased in the Tender Offer (being a tentative figure contingent on the information as of the date hereof) must exceed 24,816,632 shares, the majority amount of 49,633,263 shares, the so-called majority of the minority, which total amount is calculated as the total number of presently issued shares (105,221,259 shares) as of March 31, 2017, as stated in the Company’s Summary Financial Report, minus the number of treasury shares (2,517,867 shares) as well as the number of the Hitachi Shares (53,070,129 shares).

According to the Offeror Press Release, if the Offeror is unable to acquire all of the Company Shares (other than

the Company’s own shares held by the Company and the Hitachi Shares) in the Tender Offer, then, following the successful completion of the Tender Offer, the Offeror intends to request that the Company undertake the Share Consolidation as part of the Transaction, as set forth in “(5) Policy for organizational restructuring after the Tender Offer (matters relating to ‘Two-Step Acquisition’)” below. (For details regarding the Share Consolidation, please refer to “(5) Policy for organizational restructuring after the Tender Offer (matters relating to ‘Two-Step Acquisition’)”).

According to the Offeror Press Release, the Offeror intends to provide part of the necessary funds for settlement of

the Tender Offer from a portion of the funds procured through borrowing from financial institutions (the “Debt Financing”), as well as receiving a capital investment from KKR Fund (the “KKR Investment”), an advance payment from HVJ of part of the proceeds of the Partial Share Transfer as defined in “b. Partial carve-out of the Company business (the thin-film process solutions business) to the Offeror, and partial transfer of the portion of the Company Shares (the video and communication solutions business) to Hitachi and the JIP fund” within “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” within “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” below; hereinafter the same(the “JIP Advance Payment”) (¥8,768 million) and part of funds raised through issuance of preferred shares by means of a third-party allocation by the Offeror to Hitachi (the “Hitachi Investment”) (¥10.5 billion). According to the Offeror Press Release, the Offeror intends to obtain the Debt Financing, the KKR Investment, the JIP Advance Payment and the Hitachi Investment by the business day prior to the first day of settlement for the Tender Offer, subject to conditions including the successful completion of the Tender Offer. Also, the Offeror expects that the preferred shares to be issued by the Offeror to Hitachi as a result of the Hitachi Investment will be non-voting shares and will not be accompanied by acquisition provisions or acquisition rights with respect to the common shares or other shares with voting rights of the Offeror. For the background of the Hitachi Investment, please refer to “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” within “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” below.

According to the Offeror Press Release, after the successful completion of the Tender Offer, as part of the Transaction, the Offeror also intends to request the implementation of the Share Consolidation, as stated in “(5) Policy for organizational restructuring after the Tender Offer (matters relating to the “Two-Step Acquisition”)” below. According to the Offeror Press Release, the acquisition price for the total number of fractional Company Shares accrued from the Share Consolidation will be covered by a part of the funds procured through the Debt Financing

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and a part of the Hitachi Investment (¥10.5 billion). In addition, according to the Offeror Press Release, taking into account the cash needed for the payment for the

Share Repurchase (which will be within the scope of the amount distributable by the Company), the reserves held by the Company and the levels of reserves needed to continue operating the business, the Offeror intends to lend funds to the Company and the Company will use such funds for the payment of a portion of the amount to be paid to Hitachi in the Share Repurchase. The Offeror intends to fund such loans with the funds to be procured through the Debt Financing, a prepayment of the remaining purchase and sales proceeds of the Partial Share Transfer by HVJ (¥8,768 million), and all or portion of the deposit by Hitachi of the amount equivalent to the purchase and sales proceeds of the Partial Share Transfer (¥8,768 million). According to the Offeror Press Release, in the Debt Financing, security will be created over all of the issued shares of the Offeror and over the Company Shares acquired by the Offeror in the Tender Offer; and, after the effective date of the Share Consolidation, security will be created over certain assets of the Company, and the Company will be a joint and several guarantor.

② Purpose and background of the Transaction, including the Tender Offer, and management policy following the

Tender Offer The background, purpose and decision-making process leading to the Offeror’s decision to conduct the Tender

Offer as well as the management policy following the Tender Offer are described below. The description of the Offeror included below is based on publicly available information disclosed by the Offeror, the Offeror Press Release, and explanations received from the Offeror.

(i) The Business environment and other situations of the Company

The Company was formed in October 2000 from the merger of three Hitachi Group companies engaged in businesses related to video, wireless communications, and semiconductor manufacturing equipment. As of today, the Company is listed on the First Section of Tokyo Stock Exchange, Inc. (the “TSE”). Since its formation, the Company has endeavored to build infrastructure for a safe and prosperous society in the spirit of its corporate statement (“Hitachi Kokusai Electric Group strives to realize a society of security, safety, and happiness; creates value by applying advanced technologies; and pushes the boundaries of tomorrow”) and the Hitachi Kokusai Electric Way (“1. Customers First; 2. Global Leader; 3. Human Assets; 4. Basics and Ethics; 5. Harmony, Sincerity, and Pioneering Spirit”), and has been creating new value in the areas of “Video and Communication Solutions” and “Thin-Film Process Solutions.” Video and communication solutions business

The Company has globally manufactured and sold, and deployed solution business related to a variety of system products (wireless communications and information systems, such as disaster-preventive administration radio systems, radio communication products for various operations, high-speed wireless repeaters (Note 1), infrastructure for mobile telecommunications and wireless packet communication units, broadcasting and video systems, such as UHD and HDTV camera systems and transmission, transmitter systems, video surveillance systems, and industrial video cameras) in the areas of communications, broadcasting and video. In addition, the Company has been engaged in a wide range of businesses, such as financial/stock exchange information solutions and wireless/radio systems for the Ministry of Defense.

Thin-film process solutions business

In addition to the vertical thin-film systems (Note 2) and single wafer systems (Note 3) as its flagship business, the Company has provided services, including single wafer processing systems, maintenance of systems, sales of parts, relocation or alteration of systems and sales of second-hand systems.

(Note 1) Low electric power data communication system utilizing frequency bands, such as 25GHz, that can be used without obtaining licenses and that are easy to build a communication system

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between bases. (Note 2) Processing systems to form thin-film with wafers in a batch (batch process for multiple wafers)

in a vertical direction. (Note 3) Systems to treat each wafer (single wafers). In the video and communication solutions business, centered on video and wireless technologies, the

Company is promoting its growth strategy by shifting from systems products to solutions businesses, expanding its global business and launching new businesses. In addition, in order to realize a globally-competitive cost structure, the Company is undergoing cost structure reform through reduction of its indirect business costs and other measures and changes to its business portfolio through selection and concentration. With regard to its segments concerning video security, IoT (Internet of Things) high-reliability wireless solutions (Note 4), and railway solutions (Note 5), the Company is pursuing further business expansion through collaboration and joint development with other companies in the Hitachi Group.

The Company considers that, with respect to the market environment for the video and communication solutions business, overall demand in the overseas market will grow in the medium- to long-term. However, as recent weakness in demand of emerging countries is expected to continue for a while, the Company is promoting structural reform such as the reorganization of its operational system. On the other hand, competition in the domestic market is becoming increasingly intense, as the supply-demand balance is relaxing due to factors such as receding demand for reconstruction in areas affected by the Great East Japan Earthquake. In the government and other public agencies on which the Company has traditionally focused, core customer needs have been shifting from sale of existing products and systems to solutions to issues, with a downturn in growth of demand. As such, the Company has a pressing need to expand its social infrastructure solutions business that is a component of the social innovation business promoted by entire Hitachi Group, by shifting focus to a business model centered on its high-growth solutions taking advantage of its core technologies, such as IoT high-reliability wireless solutions and video security.

In response to such changing trends in the video and communication solutions business, the Company is shifting and developing its human resources to and for the solutions business in its video and communication solutions business, as well as strongly promoting business- and cost-structure reform. More specifically, in addition to recognizing its overseas operational system, in Japan the Company has also promoted the optimization of its personnel structure through a special offering of an early retirement incentive plan, in order to establish a stable business foundation. For details of the special offering of the early retirement incentive plan, please refer to the Company’s press release dated January 26, 2017, “Implementation of Special Offering of Early Retirement Incentive Plan.”

In the thin-film process solutions business, the Company commenced the operation of a new production facility at its Toyama Technology and Manufacturing Center in January 2017, and is otherwise enthusiastically reinforcing its production and research and development capabilities. In its main business (i.e., the vertical thin-film systems business), the Company is, with the aim of advancing further research and development of thermal processes (Note 6) technology as its core technology and the sophistication of its product lifecycle businesses (Note 7), putting its efforts into increasing its share in the mass-production line for its customers’ advanced devices (Note 8) by leveraging its capability to develop new types of equipment and films. The Company has been focused on accelerating the following new businesses: (i) the development of single-wafer equipment for treatment to improve film quality after film formation (Note 9); and (ii) increasing the sales of secondhand equipment for the IoT market, where demand is increasing rapidly, and redesigned legacy equipment (Note 10). In its service businesses with sustainable growth potential, the Company is working to expand the scale of its parts and retrofitting businesses, as well as further advancing the businesses through expanding the range of services to support services for its customers’ operations, such as diagnosis services to help customers prevent incidents and improve their processes by utilizing IT technologies.

In the semiconductor manufacturing equipment industry in which the thin-film process solutions business operates, demand is expected to grow steadily, driven by a shift into 3D NAND flash memory (Note 11).

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Particularly, for the next few years the demand for equipment is expected to grow rapidly with active capital and research and development investment by leading memory manufacturers. In the vertical thin-film equipment market which is the core of the thin-film process solutions business, the thin-film and etching processes (Note 12) will become increasingly important with the migration of semiconductor devices to a 3D structure, and such devices are expected to gain a larger share of capital investment by semiconductor manufacturers. On the other hand, the Company believes it will become increasingly important for the Company to make research and development and capital investment to stay ahead of its competitors, as it is expected that competition will become increasingly intense as the semiconductor manufacturing equipment industry undergoes rapid technology innovation and industry reorganization. (Note 4) Solutions to build optimal communication networks even in poor conditions through combination and

utilization of various wireless communication methods, such as airwaves, communication carrier lines and microwaves.

(Note 5) Solutions to contribute to improvement of operational efficiency and operations relating to the transportation sector, such as railways.

(Note 6) Process of forming thin-films with heat. (Note 7) Total life cycle business that range from the business of selling systems to the business of providing

after service (including renovation of systems for long-term use, sale of parts, repair and remodeling of systems).

(Note 8) The mass-production line for semiconductors for cutting-edge devices, such as 3D NAND flash memory.

(Note 9) Systems to treat the improvement of film quality for each wafer by removing impure substances or stabilizing particles in films by adding plasma or heat or by other treatment.

(Note 10) A system using existing technology at the time when a 200 mm-wafer was standard. (Note 11) Non-volatility semiconductor memory with a device structure that changed from 2D (flat surface) to

piled-up 3D (steric) (contents are saved after turning the power off). (Note 12) Process in which multiple characteristic tuning, such as etching characteristics after formation of thin-

films, is complicated and extremely difficult in the manufacturing process of 3D structural semiconductor.

Given the circumstances described above, according to the Offeror Press Release, KKR considers that the corporate value of both the video and communication solutions business and the thin-film process solutions business described above may be further enhanced in their respective business environments as follows: (a) with regard to the video and communication solutions business, the Company can work towards business enhancement and optimization of management together with Hitachi and JIP (for specific measures, please refer to “② Partial carve-out of the Company business (the thin-film process solutions business) to the Offeror, and partial transfer of the portion of the Company Shares (the video and communication solutions business) to Hitachi and HVJ” within “b. Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” below), and (b) with regard to the thin-film process solutions business, the Company can utilize the global resources network, know-how, and rich investment experience in semiconductor-related fields provided by KKR.

(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the

Offeror Based on the foregoing and through internal discussions, the Company has concluded, from the viewpoint of

improving the enterprise value of the entire Company, that it will be in the interest of enhancing the enterprise value of each business to pursue management optimization of each business rather than to respond to recent changes in the business environment. In mid-July 2016, the Company discussed with Hitachi, its parent company, the strategies and future policies for each of its businesses. As a result, the Company confirmed Hitachi’s agreement for its policies and the direction that Hitachi would sell the Company Shares in its

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possession, as necessary. In the process of examining an implementation plan based on such policy, the Company had also considered

a choice to sell its video and communication solutions business and thin-film process solutions business that have distinct features, separately and individually. However, the Company decided that, in light of tax impact and from the viewpoints of business continuity and maximization of enterprise value as a listed company, selling the businesses separately would face various difficulties. Accordingly, the Company decided that the proposed tender offer would be subject to the Offeror acquiring all Company Shares, including those held by Hitachi, in order to reorganize the capital relationship and management system of the video and communication solutions business and the thin-film process solutions business after delisting the Company Shares (for details, please refer to “③ The decision-making process and reasons of the Company” below). Further, in light of distinct features of the video and communication solutions business and the thin-film process solutions business, the Company adopted the bidding process in which a joint bid by multiple potential purchasers who are only interested in one business would also be allowed on the premise that of the video and communication solutions business and the thin-film process solutions business would be separated after delisting of the Company. Under such framework, instead of a negotiated transaction with a sole potential purchaser, the Company decided to solicit bids from a large number of potential purchasers in order to provide its shareholders with an opportunity to sell their shareholding at a fair price. In late September 2016, the Company and Hitachi commenced inquiries with multiple potential purchasers regarding the acquisition of all Company Shares, including those held by Hitachi. As the video and communication solutions business is expected to have increasing opportunities to expand operations through collaboration with the social innovation business of Hitachi Group had a close business connection with Hitachi, the Company and Hitachi reached an agreement that it was highly significant that the video and communication solutions business maintained a certain capital relationship with Hitachi even after the Transaction. Therefore, the Company set, as a condition for the first tender, a transaction scheme in which, following the completion of the Transaction, Hitachi as a minority shareholder would reinvest in the Company (the video and communication solutions business) after the Offeror succeeded to the thin-film process solutions business that was carved out through an absorption-type company split, taking into account the business continuity.

From early October 2016 to mid-November 2016, KKR and other participants in the first bid conducted primary due diligence procedures on the Company’s business and finances and interviewed its management. The Company and Hitachi also reviewed the outlook and management policies for the business to be acquired as presented by the respective potential purchasers. The first bid proposals were submitted from multiple potential purchasers in mid-November 2016, the Company and Hitachi compared and examined the terms thereof.

From early December 2016, each potential purchaser that successfully passed the first bid proceeded with further analysis and examination of the acquisition of the Company Shares through full-scale due diligence on the Company’s business, finances, legal affairs and other factors, interview with its management, and other measures. The Company and Hitachi discussed the future business operating policies and other factors of KKR and other potential purchasers who proceeded on to the second bid in order to examine the suitability of new potential partners for the respective businesses. In the second bid proposal dated February 13, 2017, KKR proposed ¥195 billion as the assessed stock value of all of the issued and outstanding Company Shares (excluding the Company’s own shares held by the Company) and the following form of phased acquisition: ① KKR would acquire all Company Shares, excluding those held by Hitachi, through the Tender Offer and the subsequent Share Consolidation; and ② KKR would acquire the Company Shares held by Hitachi through the Share Repurchase, after it became delisted as a result of the Tender Offer and the Share Consolidation.

Regarding KKR’s relevant proposal, the Company and Hitachi had discussions and negotiations with KKR, based on the Company’s historical share price fluctuations and the advice of Nomura Securities Co., Ltd. (“Nomura Securities”) and Credit Suisse Securities (Japan) Limited (“Credit Suisse Securities”), the financial advisors to the Company and Hitachi, respectively. KKR was also requested by the Company and Hitachi to

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further consider the joint bid proposal with JIP (see below Note), who submitted the second bid proposal for the video and communication solutions business aiming to help to increase the value of the bid price. (Note) JIP, since its formation in November 2002, is a fund operating company in Japan that is specialized in

carve-outs (carving-out of businesses) and develops private equity funds that will contribute to restructuring or business reconstruction of Japanese companies. Up until now, JIP’s total number of investment projects is 20, covering a wide range of businesses, such as food, distribution and service, with a focus on manufacturing, and JIP has experience in various types of investment, such as a business carve-outs and MBOs.

Thereafter, through repeated negotiation on terms and conditions, KKR and JIP submitted a revised joint proposal in early April 2017 that the assessed value of the Company Shares would be increased to ¥215 billion and the video and communication solutions business following the Transaction would be reorganized as a joint venture among three parties, i.e., KKR, JIP and Hitachi, subject to the Offeror receiving the Hitachi Investment (¥10.5 billion) through a preferred equity investment (or preferred shares if the Offeror’s organization is changed to a stock company), and other conditions. In parallel with continuous discussion and negotiation on the proposed terms with KKR and JIP, the Company and Hitachi reviewed KKR’s and JIP’s revised joint proposal as a whole in light of the purpose of reinforcing the Company’s competitiveness and enhancing its enterprise value, and economic rationality of various conditions, such as tax impact and business continuity, the Company and Hitachi selected KKR and JIP as the final Tender Offer candidates in early April 2017. Further, the Company and Hitachi decided to proceed with negotiations with intent to accept the proposal of transactions from (i) the phase in which the Company is turned into a wholly-owned subsidiary by the Offeror, (ii) the phase of an absorption-type company split whereby the Offeror will be the succeeding corporation, and then (iii) a transfer of 20% of the Company Shares by the Offeror to each of Hitachi and JIP.

When the Tender Offer Price and the purchase price per share for the Share Repurchase are determined on the premise that an aggregate value of the Company’s shares of ¥215 billion proposed in the revised joint proposal, if there was an increase in either the Tender Offer Price or the Share Repurchase Price, the other price would decrease and create a conflict-of-interest relationship between the Company’s minority shareholders and Hitachi. Therefore, for the sake of fairness of price setting, after considering the opinions of the third-party committee, the Company discussed and negotiated with KKR and Hitachi as to the Tender Offer Price and the Share Repurchase Price (per share prior to the Share Consolidation) (as defined in “(i) Capital Reduction and the Share Repurchase by the Company” below; hereinafter the same) on several occasions from the middle of April 2017. As a result, as of April 26, 2017, the Company, Hitachi, and KKR agreed to fix the Tender Offer Price at ¥2,503, and the Share Repurchase Price (per share prior to the Share Consolidation) at ¥1,710.34 (rounding off to the second decimal place; hereinafter the same in descriptions regarding the Share Repurchase Price (per Share prior to the Share Consolidation)).

In order to confirm that substantial discussions and negotiations were conducted to raise the Tender Offer Price, Mr. Kenshiro Koto, a third-party committee member, attended the negotiations on the price and terms and conditions mentioned above between the Company, Hitachi, and KKR.

Regarding the relationship between the Tender Offer Price and the Share Repurchase Price (per share prior to the Share Consolidation), KKR explained to the Company that by setting the Share Repurchase Price (per share prior to the Share Consolidation) lower than the Tender Offer Price, the Tender Offer will be an advantageous sales opportunity for the Company’s minority shareholders. For Hitachi, on the other hand, it was explained that it is possible to realize proceeds from sales comparable to those that would be realized by responding to the Tender Offer in terms of after-tax amount because the tax rule of exclusion from gross revenue for deemed dividends would be applied to the sale of the Company Shares through the Share Repurchase. The Company confirmed the basis for the estimation of tax effect of Hitachi regarding the Share Repurchase Price (per share prior to the Share Consolidation), and, based on the Company’s independent trial calculations, and confirmed that the actual after-tax amount from the sale that include the tax effects regarding the deemed dividend per share for Hitachi through the Share Repurchase do not exceed the after-tax amount that would be realized by

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responding to the Tender Offer.

As stated above, since the Company, Hitachi and JIP agreed upon the assessed value of the Company Shares and the scheme and various terms and conditions of the Transaction, including implementation of the Share Repurchase and the amount therefor, the Offeror executed the Basic Agreement with Hitachi and HVJ on April 26, 2017, and determined that the Tender Offer would be implemented if the Conditions Precedent to the Tender Offer are satisfied (or if they are waived by the Offeror), as well as determined the Tender Offer Price to be ¥2,503. In addition, ¥2,503 as the Tender Offer Price and ¥1,710.34 as the Share Repurchase Price (per share prior to the Share Consolidation) were determined based on the proposal of KKR and JIP and discussions and negotiations between the Company and Hitachi and KKR and JIP.

In addition, the revised joint proposal of KKR and JIP is subject to the Offeror receiving the Hitachi Investment (¥10.5 billion) through a preferred equity investment (or preferred shares if the Offeror’s organization is changed to a stock company), and other conditions.

Under the Basic Agreement, the Offeror contemplates divesting the Company’s thin-film process solutions business through an absorption-type company split whereby the Offeror will be the succeeding corporation after the Company becomes the Offeror’s wholly-owned subsidiary and a partial transfer of the Company Shares by the Offeror to Hitachi and HVJ, and intends to perform the following procedures as part of the Transaction after the Share Consolidation scheduled after the successful completion of the Tender Offer took effect.

a. Capital Reduction and the Share Repurchase by the Company

Taking into account the proposal from the Offeror, the Company considered that the Transaction would be in the interest of enhancing its enterprise value based on KKR’s proposal. Accordingly, as part of the Transaction, the Company will implement the Share Repurchase, for which the total purchase price is the amount deducting the amount paid to Hitachi through the Share Consolidation after the Share Consolidation from ¥90,767,942,711 which is the total amount of the purchase price of the Hitachi Shares, and the Company will acquire all of the Company Shares held by Hitachi at that time.

The per share price of the Hitachi Shares of ¥1,710.34, which calculated by dividing ¥90,767,942,711 as the total amount of the purchase price of the Hitachi Shares, by the number of the Hitachi Shares (53,070,129 shares) (the “Share Repurchase Price (per Share prior to the Share Consolidation)”) is ¥792.66 lower than the Tender Offer Price of ¥2,503.

In addition, the Company intends to conduct the Capital Reduction. Specifically, based on the Offeror’s proposal, the Company intends to reduce the amount of capital, capital

reserve, and profit reserve pursuant to Article 447, paragraph 1, and Article 448, paragraph 1 of the Companies Act, and to transfer all or part of the capital and capital reserve so reduced to “Other capital surplus,” and to transfer the full amount of the profit reserve so reduced to “Profit surplus carried forward,” subject to successful completion of the Tender Offer and the subsequent Share Consolidation taking effect, in order to secure the distributable funds required for the Share Repurchase. The Company intends to hold an extraordinary general shareholders meeting whose agenda includes a proposal for a reduction in the amount of capital, capital reserve and profit reserve, and the Share Repurchase, by around December 2017 after the Offeror and Hitachi have become the sole shareholders of the Company through successful completion of the Tender Offer and effectuation of the Share Consolidation.

b. Partial carve-out of the Company business (the thin-film process solutions business) to the Offeror, and

partial transfer of the portion of the Company Shares (the video and communication solutions business) to Hitachi and HVJ

According to the Offeror Press Release, the Offeror intends to carve out the Company’s thin-film process solutions business through a summary form absorption-type company split as stipulated in paragraph (1) of Article 784 of the Companies Act by the Company and have it succeeded to by the Offeror on the business

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day following the date of the Share Repurchase after the completion thereof, in order to implement the optimal growth strategy and structural reform for each of the video and communication solutions business and the thin-film process solutions business. The Offeror has also agreed under the Basic Agreement to transfer, on the business day immediately following the Company Split, 20% of the portion of the Company Shares (the video and communication solutions business), or ¥8,768 million, it holds as of that date, to each of Hitachi and to HVJ (the “Partial Share Transfer”). Accordingly, the Offeror, Hitachi and HVJ will hold 60%, 20% and the remaining 20%, respectively, of the portion of the Company Shares (the video and communication solutions business) after the completion of each of the above transfers. In addition, the Transfer Price of 20% of the Company Shares (the video and communication solutions business), or ¥8,768 million, was determined based on the proposal of KKR and JIP, and discussions and negotiations with Hitachi, KKR and JIP.

(iii) Post-Tender Offer management policies

According to the Offeror Press Release, after the Company became the Offeror’s wholly-owned subsidiary, the Company’s thin-film process solutions business will be succeeded to by the Offeror through the Company Split, and the Offeror, Hitachi, and HVJ will hold the portion of the Company (the video and communication solutions business) Shares through the Partial Share Transfer, as stated in b. Partial carve-out of the Company business (the thin-film process solutions business) to the Offeror, and partial transfer of the portion of the Company Shares (the video and communication solutions business) to Hitachi and HVJ” within (ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” above and “4 Material Agreement regarding the Tendering into the Tender Offer between the Offeror and the Company’s shareholders” below. According to the Offeror Press Release, KKR aims to further improve the enterprise value of both the thin-film process solutions business and the video and communication solutions business. Specifically, KKR will leverage its global resources, know-how, and its wealth of investment experience in the semiconductor-related segments. In the video and communication solutions business, KKR will work toward business reinforcement and increased management efficiency, together with Hitachi and JIP.

Additionally, according to the Offeror Press Release, the Offeror intends to appoint one part-time director, HVJ intends to appoint two part-time directors (including one representative director) and Hitachi intends to appoint one part-time director after the Transaction, among a total of four directors, including three full-time directors and one part-time director, of the Company (the video and communication solutions business).

③ The decision-making process and reasons of the Company

The Company, with a view to increasing the Company’s competitiveness and enhancing its enterprise value as described in “② Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” above, discussed with Hitachi (its parent company) the strategies and future policies for its video and communication solutions business and thin-film process solutions business, and the Company confirmed that Hitachi would consider selling the Company Shares in its possession, as necessary. The Offeror has executed the Basic Agreement with Hitachi and HVJ and as part of the Transaction, (a) the Tender Offer would be effected subject to the Company acquiring the Company Shares held by Hitachi; and (b) after the Company has become the Offeror’s wholly-owned subsidiary and following the Company Split such that the Company would engage only in the video and communications solutions business, a portion of the shares of the Company would be transferred to Hitachi. In light of such phased transaction structure, the Company concluded that the Transaction, including the Tender Offer, would be equivalent to a transaction with its controlling shareholder. The Company then carefully examined the proposed terms and conditions of the Transaction from the perspective of enhancing enterprise value. In doing so, the Company (a) implemented the measures described in the section below titled “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer,” (b) took into account the share valuation report obtained from a third party financial advisor, Nomura Securities, and legal advice

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from the Company’s legal advisor, Torikai Law Office, and (c) took into full consideration the report (the “Report”) submitted by the third-party committee established by the Company to serve as an advisory body to the Company’s board of directors in examining the proposal concerning the Transaction. For details regarding the members of the third-party committee and the matters of inquiry, please refer to the section titled “④ The Company has established a third-party committee and has obtained an opinion” within “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer.”

In mid-November 2016, the Company received the first bid proposal from KKR, who had participated in the aforementioned bidding process, and the Company also received proposals and amended proposals several times thereafter, and examined such proposals each time. Specifically, the Company discussed and negotiated terms and conditions of the Transaction, including the Share Repurchase, with KKR and JIP as stated in “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” within “② Background, purpose and decision-making process of the Offeror leading to the decision to conduct the Tender Offer, and management policy following the Tender Offer” above. As a result, the Company has decided that, in response to changes in the current business environment surrounding each of its businesses, establishing a more flexible management system by utilizing KKR’s know-how and resources will contribute to further enhancement of the Company’s enterprise value, in order to carry out drastic structural reform in the video and communication solutions business, perform portfolio transformation, including business selection and concentration, and accelerate upfront investment that is essential for growth of the thin-film process solutions business.

As stated above, in the video and communication solutions business, there is the urgent task of strongly promoting a growth strategy through shifting from systems products to the solutions business and expanding its global businesses, as well as reform of business and cost structures. In order to continue to establish a stable business foundation even under severe circumstances, it is necessary to implement more drastic structural reform, such as portfolio transformation and proper allocation of human resources in both domestic and overseas operations, in addition to structural reform, such as ongoing structural reform of its overseas operations and the special offering of an early retirement incentive program for its domestic operations. If the Company remains listed, a considerable amount of costs incurred by drastic structural reform may adversely affect its share price and may prejudice its shareholders. Therefore, with the understanding that it is best for its video and communication solutions business to create a business operating system with a medium- to long-term outlook with the cooperation of its new partners, KKR and JIP, in order to promptly establish a capital structure and management system suitable to push through the above measures, accepting the business risk of a temporary slowdown in its performance and without being affected by the fluctuation in its performance in the short term, the Company has investigated the possibility of privatizing that business.

While the Company considers it important to make further upfront investments in the thin-film process solutions business in the future, which is in a business environment subject to a rapid technology innovation and intense development, it is difficult to operate its business only from the thin-film process solutions business perspective under the current management system that includes the video and communication solutions business with no business synergies. As such, in order to contribute to the enhancement of the enterprise value of the thin-film process solutions business, the Company has recognized the need to establish a stable organizational structure specialized in the thin-film process solutions business with new partners with which it will be able to operate its thin-film process solutions business solely from the perspective of that business, and to become independent as a new business entity and a “manufacturer dedicated to semiconductor manufacturing equipment” with a strong position in the thin-film and thermal processes businesses. The Company also considers that while it will be required to establish a system as an independent business entity, such as reconstructing its management system, in becoming independent as a new business entity it will need to work to develop such a system after implementing the privatization as it does not have a system to operate its businesses while remaining listed. The Company recognizes that it will be required to consider not only development

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investment in its thin-film and thermal process, but also business development including collaboration with other companies in the same industry that do not engage in thin-film processing, as the integration between semiconductor manufacturing processes is anticipated to become even more difficult in the medium- to long-term with each manufacturing process of semiconductors becoming complicated. The Company has thus decided to examine the possibility of privatizing that business, considering that it will be imperative to establish a more flexible decision-making system suitable for the current industry environment in order to pursue becoming one of the global leaders in the semiconductor manufacturing equipment industry.

Further, with respect to the Tender Offer Price, in light of the facts, including those stated below, the Company determined that the Tender Offer would provide its shareholders with a reasonable opportunity to sell their shares.

(i) Among the calculation results of the value of the Company Shares made by Nomura Securities described in “① The Company has procured a share valuation report from an independent third-party financial advisor” within “(3) Matters regarding the calculation” below, the Tender Offer Price exceeds the maximum amount of calculation results based on the average market price method (Reference Date 1), the average market price method (Reference Date 2) and the comparable peer company analysis, and is within the range of calculation results based on the discounted cash flow method (the “DCF Method”);

(ii) The Tender Offer Price is the amount calculated by adding 38.98% (rounding off to the second decimal place; hereinafter the same for the calculation of the premium rate) to the closing price (¥1,801) of the Company Shares on the First Section of the TSE as of October 3, 2016 before media speculations regarding Hitachi’s sale of its Company Shares were released (after the close of trading hours on October 3, 2016), 38.29% to the simple average closing price (¥1,810) (rounded off to the closest whole number; hereinafter the same for the calculation of the simple average closing price), 42.87% to the simple average closing price (¥1,752), and 59.12% premiums to the simple average closing price (¥1,573) for the one-month, three-month, and six-month periods up to October 3, 2016, 3.60% to ¥2,416, which was the closing price of the Company Shares at the TSE as of April 25, 2017, which was the business day immediately preceding the date on which the Tender Offer is announced, 2.92% to ¥2,432, which was the simple average closing price for the last one month, 0.04% to ¥2,502, which was the simple average closing price for the last three months and 4.07% premiums to the simple average closing price (¥2,405) for the last six months;

(iii) Measures to ensure the fairness of the Tender Offer have been taken as described in “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” below and it is recognized that the profits for the minority shareholders have been taken into consideration; and

(iv) The price was established after taking measures to ensure the fairness of the Tender Offer

(Note) This includes the fact that since the transfer price (¥8,768 million) for the transfer of 20% of the Company Shares from the Offeror to Hitachi following the Company Split as part of the Partial Share Transfer is the same as the transfer price for the transfer of the Company Shares from the Offeror to HVJ following the Company Split, it is believed that the price will be one that reflects the results of the negotiation between the Offeror and HVJ, which are independent parties, and therefore, the contents of the agreement is not considered to be such that Hitachi could obtain benefits that other minority shareholders could not obtain by repurchasing the shares at a lower price than a fair price.

Therefore, the Company believes that by implementing the Transaction, including the Tender Offer, the

Offeror will increase the enterprise value of the Company and that, based on factors, such as (i) through to (iv) above, the Tender Offer Price is appropriate. However, although it should be considered without taking into account effects on the share price of speculative media reports, since the level of premium is considered to be lower than that of the past tender offer transactions of shares or similar securities by non-issuer purchasers

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which have been provided by Nomura Securities and in light of the fact that, following the aforementioned media reports, the market share price of the Company on the First Section of the TSE has been greater than the Tender Offer Price for a certain period, and other factors, it was decided to take a neutral position regarding whether or not the Company would recommend the Company’s shareholders to tender into the Tender Offer, and finally to leave the decision to the Company’s shareholders.

Based on the above factors, at a meeting held today, the Company’s Board of Directors issued a resolution, in its judgment based on present circumstances, supporting the Tender Offer and leaving the decision of whether or not to tender into the Tender Offer once the Tender Offer has been commenced to the Company’s shareholders.

For additional details of the resolutions of the Company’s Board of Directors, please refer to the section below titled “⑤ The Transaction has received the unanimous approval of the directors with no interest in the Company” within “(6) Measures to ensure the fairness of the purchase price and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer.”

(3) Matters regarding the calculation

① The Company has procured a share valuation report from an independent third-party financial advisor In order to express an opinion regarding the Tender Offer, the Company had the share value of the Company

calculated by Nomura Securities Co., Ltd., a third-party financial advisor independent from the Company and the Offeror, and obtained a share valuation report (the “Share Valuation Report”) on April 25, 2017. Nomura Securities is not a related party of the Company or the Offeror and does not have any material interest in the Company or the Offeror with respect to the Transaction, including the Tender Offer. The Company has not obtained a fairness opinion regarding the Tender Offer Price.

In gathering and examining information necessary to calculate the share value of the Company, Nomura Securities has obtained information such as the current condition and future forecast of the business of the Company and received explanations from the Company’s management, and calculated the share value of the Company based on such information.

Nomura Securities calculated the value of the Company Shares by using (a) the average market share price method, as the Company shares are listed on the First Section of the TSE and therefore have a market price, (b) the comparable company method, as there are certain number of listed companies which are comparable with and similar to the Company and it is possible to draw analogies with the share prices of comparable companies, and (c) the DCF Method to reflect the condition of future business activities in the appraisal.

The value ranges per Company Share as calculated by using the aforementioned methods are as provided below. Average market share price method (Reference Date 1): ¥1,573 to ¥1,837 Average market share price method (Reference Date 2): ¥2,392 to ¥2,502 Comparable company method: ¥1,759 to ¥2,433 DCF Method: ¥2,296 to ¥2,627 Based on the average market share price method, (i) in order to exclude any impact on the share price from

speculative media reports regarding Hitachi’s sale of its shares of the Company (released after the close of trading hours on October 3, 2016), using October 3, 2016 (“Reference Date 1”), the last day on which trading was conducted before the speculative media reports were released, as the reference date, the per-share value of the Company Shares has been estimated to range from ¥1,573 to ¥1,837, based on (i) the closing price on Reference Date 1 (¥1,801), and (ii) the simple average closing prices (¥1,837, ¥1,810, ¥1,752, and ¥1,573), of the Company Shares on the First Section of the TSE for the one-week, one-month, three month, and six-month periods up to Reference Date 1, and (ii) using April 25, 2017 (the “Reference Date 2”), which is the business day immediately preceding the date on which the Tender Offer is announced, the per-share value of the Company Shares has been estimated to range from ¥2,392 to ¥2,502, based on (i) the closing price on Reference Date 2 (¥2,416), and (ii) the simple average closing prices (¥2,392, ¥2,432, ¥2,502, and ¥2,405), of the Company Shares on the First Section

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of the TSE for the one-week, one-month, three month, and six-month periods up to Reference Date 2. Based on the comparable company method, the per-share value of the Company has been estimated to range

from ¥1,759 to ¥2,433 based on the evaluation by comparing the market share prices, financial indices showing profitability of listed companies engaged in businesses that are relatively similar to the Company’s business.

Based on the DCF Method, the enterprise value of the Company and the value of the Company Shares have been calculated, and the per-share value of the Company Shares has been estimated to range from ¥2,296 to ¥2,627. This evaluation method considered the free cash flows that are expected to be generated by the Company based on the future earnings forecast of the Company which reflect various factors such as the Company’s business plans for the periods from the fiscal year ending March 31, 2018 through the fiscal year ending March 31, 2019 and publicly available information, and determining the present value of such free cash flows by discounting them by a certain discount rate.

The business plans that Nomura Securities used in the calculation include fiscal years in which a significant profit increase or decrease is expected. Specifically, in the fiscal year ended March 31, 2017, the one-time cost related to the special solicitation under an early retirement incentive plan and the one-time cost related to a violation of the Antimonopoly Act stated in the “Cease and Desist Order and the Surcharge Payment Orders to the Manufacturing Distributors Selling Equipment for Fire Rescue Digital Radio” issued by the Japan Fair Trade Commission on February 2, 2017 have been recorded. However, from the fiscal year ending March 31, 2018 to the fiscal year ending March 31, 2019, it is expected that the video and communication solutions business will see an earnings increase mainly in the high growth solution area, and the thin-film process solutions business will see growth of its new businesses, including the main business of vertical thin-film system and treatment single wafer system, as well as its service business. In addition, during the same period, it is expected that the Company’s profitability will improve in connection with the special solicitation under an early retirement incentive plan. Given the above factors and others, it is expected that in the fiscal year ending March 31, 2018, income before income taxes and net income are expected to increase significantly by 30% or more from the previous year, and in the fiscal year ending March 31, 2019, operating income, income before income taxes and net income are expected to increase significantly by approximately 30% or more from the previous year. For the fiscal year ending March 31, 2019, which is the final year of the new medium-term management plan period, it is expected that operating income will be at the same level as the numerical target set out in the new medium-term management plan. For details of the new medium-term management plan, please refer to the press release “Hitachi Kokusai Announces the New Medium-term Management Plan” issued by the Company on April 25, 2016. The business plans mentioned above do not assume the implementation of the Transaction.

② Calculation methodology by the Offeror According to the Offeror, in determining the Tender Offer Price, the Offeror conducted a comprehensive and

multifaceted analysis of the Company’s business and financial status based on the Company’s disclosed financial information and the results of the due diligence conducted with respect to the Company. In light of the fact that the Company Shares are traded on a financial instruments exchange, the Offeror also referred to (i) the closing price (¥1,801) of the Company Shares on the First Section of the TSE as of October 3, 2016, which is the result of the transaction before speculative media reports regarding Hitachi’s sale of its Company Shares were released (after the close of trading hours on October 3, 2016), and (ii) the simple average closing prices of the Company Shares for the one-month, three-month, and six-month periods up to October 3, 2016 (¥1,810, ¥1,752 and ¥1,573, respectively) (fractions less than ¥1 being rounded off; the same shall apply to calculations of the simple average of the closing price). By also comprehensively taking into consideration the likelihood of obtaining the Company’s endorsement of the Tender Offer and the prospects for successful completion of the Tender Offer, and in light of the consultation and negotiations with Hitachi and the Company, on April 26, 2017, the Offeror has determined the Tender Offer Price to be ¥2,503.

As the Offeror has determined the consideration for the Transaction by comprehensively taking into consideration various factors described above, as well as through its consultation and negotiations between

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Hitachi and the Company, and with the Offeror and JIP, the Offeror has not obtained a share valuation report or a fairness opinion concerning the fairness of the Tender Offer Price from any third-party financial advisor.

The Tender Offer Price (¥2,503 per Company Share) will be the result of adding a 3.60% premium to the closing price (¥2,416) of the Company Shares on the First Section of the TSE as of April 25, 2017, which is the business day immediately preceding the date on which the Tender Offer is announced (i.e., today), and 2.92%, 0.04%, and 4.07% premiums to the respective simple average closing prices (¥2,432, ¥2,502, and ¥2,405), of the Company Shares for the one-month, three-month, and six-month periods up to April 25, 2017.

As stated above, the Tender Offer Price (¥2,503 per Company Share) will be the result of a 3.60% premium on the closing price (¥2,416) of the Company Shares on the First Section of the TSE on April 25, 2017. The closing price of the Company Shares on the First Section of the TSE as of October 3, 2016, before speculative media reports were released (after the close of trading hours on October 3, 2016) regarding Hitachi’s transfer of the Company Shares, was ¥1,801; and on the immediately following business day, it increased rapidly to ¥1,913, and thereafter, has consistently maintained a high level. The Tender Offer Price (¥2,503 per Company Share) will be the result of adding a 38.98% premium to the closing price of ¥1,801 of the Company Shares on the First Section of the TSE as of October 3, 2016, before speculative media reports were released (after the close of trading hours on October 3, 2016) regarding Hitachi’s transfer of the Company Shares, and 38.29%, 42.87%, and 59.12% premiums to the respective simple average closing prices (¥1,810, ¥1,752, and ¥1,573), of the Company Shares for the one-month, three-month, and six-month periods up to October 3, 2016.

(4) Expected delisting and reasons therefor

The Company Shares are currently listed on the First Section of the TSE. However, since the Offeror has not set a maximum limit on the number of shares to be purchased in the Tender Offer, the Company Shares may be delisted through prescribed procedures in accordance with the delisting criteria of the TSE.

Additionally, if the Tender Offer is successfully completed, the Offeror plans to acquire all Company Shares (except for the Company’s own shares held by the Company) as stated in “(5) Policy for organizational restructuring after the Tender Offer (matters relating to the “Two-Step Acquisition”)” above. In such case, the Company Shares will be delisted through the prescribed procedures. After delisting, the Company Shares will no longer be traded on the TSE.

(5) Policy for organizational restructuring after the Tender Offer (matters relating to the “Two-Step Acquisition”)

The Company has received the following explanation from the Offeror regarding the Offeror’s policy for organizational restructuring after the Tender Offer (matters relating to the “Two-Step Acquisition”).

As stated in “① Outline of the Tender Offer” under “(2) Grounds and Reasons for Opinion,” the objective of the Tender Offer is for the Company to become a wholly-owned subsidiary of the Offeror, and, in the event that the Offeror is unable to obtain all of the Company Shares (excluding the Company’s own shares held by the Company and the Hitachi Shares) upon successful completion of the Tender Offer, then the Offeror plans to request that the Company implement the following procedures.

Specifically, after successful completion of the Tender Offer, the Offeror intends to request that the Company promptly hold an extraordinary shareholders’ meeting (the “Extraordinary Shareholders’ Meeting”), the agenda for which includes the following proposals: (i) a consolidation of the Company Shares (the “Share Consolidation”); and (ii) an amendment to the Company’s articles of incorporation to abolish the share unit number provisions, subject to the Share Consolidation taking effect. The Offeror and Hitachi intend to approve such proposals at the Extraordinary Shareholders’ Meeting.

If the proposal for the Share Consolidation is approved at the Extraordinary Shareholders’ Meeting, the shareholders of the Company will, on the effective date of the Share Consolidation, hold the number of Company Shares proportionate to the ratio of the Share Consolidation that is approved at the Extraordinary Shareholders’ Meeting. If, due to the Share Consolidation, the number is a fraction less than one, each shareholder of the Company holding such fractional shares will receive an amount of cash obtained by selling the Company Shares

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equivalent to the total number of such fractional shares (with such aggregate sum rounded down to the nearest whole number if there is any fraction less than one share; the same shall apply hereinafter) to the Company or the Offeror as per the procedures specified in Article 235 of the Companies Act and other applicable laws. Regarding the purchase price for the aggregate sum of such fractional shares in the Company, it is intended that the amount of cash received by each shareholder who did not tender its shares in the Tender Offer (excluding the Offeror, Hitachi, and the Company) would be equal to the price obtained by multiplying the Tender Offer Price by the number of Company Shares owned by each such shareholder. The Company will request permission from the court to authorize the purchase of such Company Shares on this basis.

Although the ratio of the Share Consolidation of the Company Shares has not been determined as of the date hereof, it is intended that shareholders (excluding the Offeror, Hitachi, and the Company) who did not tender in the Tender Offer would have their shares classified as fractional shares in order for the Offeror and Hitachi to become the sole owners of all of the Company Shares (excluding the Company’s own shares held by the Company).

According to the provisions of the Companies Act that aim to protect the rights of minority shareholders to which the Share Consolidation relates, if the Share Consolidation occurs and there are fractional shares as a result, each shareholder of the Company may request that the Company purchase all such fractional shares that it holds at a fair price, and each such shareholder may file a petition with the court to determine the price of the Company Shares in accordance with Articles 182-4 and 182-5 of the Companies Act, and other applicable laws and regulations. As stated above, any shareholders of the Company who do not tender their Company Shares in the Tender Offer (excluding the Offeror, Hitachi, and the Company) will hold fractional shares; accordingly, any shareholders of the Company who object to the Share Consolidation will be able to file a petition to determine the price of the Company Shares. In the event that such petition is filed, the acquisition price will be finally determined by the court.

With regard to the above procedure, it is possible that, depending on amendments to the relevant laws and regulations, the interpretation of the relevant laws and regulations by authorities, and the shareholding percentage of the Offeror and Hitachi after the Tender Offer and the ownership of Company Shares by shareholders of the Company other than the Offeror, more time may be required or alternative methods that have substantially the same effect may be utilized to implement the Transaction. However, even in such a case, we intend to use a method whereby the shareholders of the Company who do not tender their shares in the Tender Offer (excluding the Offeror and Hitachi) will ultimately receive cash consideration, in which case the amount to be delivered to each such shareholder will be calculated to equal the number of Company Shares held by each such shareholder multiplied by the Tender Offer Price. In such a case, the Company will announce specific details and expected timing promptly once determined.

We further note that shareholders of the Company will not be solicited to agree to the Tender Offer at the Extraordinary Shareholders’ Meeting. All shareholders of the Company are solely responsible for seeking their own specialist tax advice with regard to the tax consequences of tendering into the Tender Offer or participating in the procedures outlined above.

(6) Measures to ensure the fairness of the purchase prices and avoid conflicts of interest, and other measures to ensure

the fairness of the Tender Offer Due to the fact that (i) the Offeror has entered into the Basic Agreement with Hitachi, the controlling

shareholder (parent company) of the Company, and (ii) as part of the Transaction, (a) the Tender Offer would be effected subject to Offeror acquiring the Company Shares held by those other than the Company and Hitachi, (b) after the Company has become the Offeror’s wholly-owned subsidiary and following the Company Split such that the Company would engage only in the video and communication solutions business, Hitachi would acquire a portion of the shares of the Company, and (c) Hitachi would make the Hitachi Investment in the Offeror as part of the necessary funds for settlement of the Tender Offer and part of the acquisition price of the Company Shares

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equal to the total number of any fraction accruing from the Share Consolidation, the Offeror has implemented the following measures to ensure the fairness of the Tender Offer Price and avoid conflicts of interest.

① Implementation of the bidding procedures

The Company commenced inquiries with multiple potential purchasers, through Nomura Securities and Credit Suisse Securities, regarding the acquisition of all Company Shares in late September 2016, and the Company received proposals for acquisition of the Company Shares from multiple potential purchasers. However, there were no potential purchasers that proposed terms and conditions for the Tender Offer, including the Tender Offer Price and the certainty of implementation of the Transaction, more favorable to the Company’s shareholders than those presented by KKR.

② The Company has procured a share valuation report from an independent third-party financial advisor

In order to ensure the fairness of the decision-making process concerning the base price (¥2,503 per common share) for the Tender Offer Price presented by the Offeror, the Company obtained the Share Valuation Report from Nomura Securities, a third-party financial advisor independent from the Company, Hitachi, and the Offeror. For a summary of the Share Valuation Report, please refer to the section titled “① The Company has procured a share valuation report from an independent third-party financial advisor.” under “(3) Matters regarding the calculation.” Nomura Securities is not a party related to the Company or the Offeror and does not have any material interest in the Transaction, including the Tender Offer.

③ The Company has obtained the advice of an independent law firm

In order to take the utmost care in its decision-making concerning the Transaction, including the Tender Offer, and to ensure the fairness and propriety of the decision-making process of its Board of Directors, the Company has been receiving legal advice from Torikai Law Office, a legal advisor independent from the Company and the Offeror, concerning the method and process of decision-making regarding providing an opinion for the Tender Offer, and other matters in implementing the Transaction. Torikai Law Office is not a party related to the Company or the Offeror and does not have any material interest in the Transaction, including the Tender Offer.

④ The Company has established a third-party committee and has obtained an opinion

On January 26, 2017, the Company established a third-party committee after deciding that the Transaction, including the Tender Offer, is equivalent to important transactions with controlling shareholders and other similar transactions and for the purpose of taking the utmost care in the Company’s decision-making and ensuring fairness of the decision-making process of its Board of Directors by eliminating arbitrariness and the likelihood of a conflict of interest. The third-party committee is comprised of members, including outside intellectuals who are independent from the Company, Hitachi or the Offeror and have no interest in the controlling shareholder (the members of the third-party committee are: Mr. Tsuyoshi Nishimoto, a lawyer (Hibiya Park Law Offices), Mr. Shinsuke Hasegawa, a certified public accountant and certified public tax accountant (Representative of the Hasegawa CPA Office), and Mr. Kenshiro Koto (outside director and independent officer of the Company). The members of the third-party committee have not changed since the establishment of the committee.

As the basis for the Company to examine the specific content of its opinion to be expressed regarding the Tender Offer, the Company requested that the third-party committee advise the Company as to whether (i) the purpose of the Transaction is justifiable and reasonable; (ii) the fairness of the procedures for the Transaction has been ensured; (iii) the legitimacy and propriety of the terms of the Transaction have been ensured; and (iv) the implementation of the Transaction is not disadvantageous to the minority shareholders of the Company (collectively, the “Matters of Inquiry”).

It is indicated that the third-party committee has met 9 times in total since February 7, 2017 until April 24, 2017 and consulted with each other and considered the Matters of Inquiry. Specifically, the third-party

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committee has received explanations from the Company, Nomura Securities and other parties regarding (a) the purpose of the Transaction, (b) the details of the scheme and procedures of the Transaction, (c) the status of negotiations over the terms and conditions of the Transaction, (d) the details of the Share Valuation Report and the calculation method by Nomura Securities, a third-party financial advisor, and (e) legal advice from Torikai Law Office, and then has conducted a question-and-answer session. The third-party committee has also received (f) explanations from KKR about its view on the Tender Offer Price and other matters, and then has conducted a question-and-answer session.

Based on the content of the explanations and question-and-answer sessions mentioned above, the third-party committee consulted with each other and considered the Matters of Inquiry carefully. As a result, on April 26, 2017, the third-party committee, upon its unanimous resolution, submitted the Report to the Board of Directors of the Company. The outline of the Report is as stated in (i) to (iv) below.

(i) Whether the Transaction is justifiable and reasonable (Matter of Inquiry 1)

The purpose of the Transaction is to reinforce the Company’s competitiveness and enhance its enterprise value by (a) separating the video and communication solutions business and the thin-film process solutions business from each other since there is no synergies between the two businesses and they have different operating policies and (b) establishing a system where it is possible for each of such businesses to tie up with best partners in terms of both capital and business. It is obvious that such purpose of the Transaction is not for Hitachi to seek to benefit itself or a third party at the expense of the minority shareholders of the Company by using Hitachi’s status as the parent company of the Company. Therefore, it can be said that the purpose of the Transaction is justifiable and reasonable. (ii) Whether the fairness of the procedures for the Transaction has been ensured (Matter of Inquiry 2)

Due to the facts that (A) the reason for implementing transactions comprising the Transaction is reasonable, and when the overall scheme is examined, there are no circumstances that are detrimental to the fairness of the procedures for selecting such scheme, (B) legality of the transactions comprising the Transaction has been ensured, (C) the purchaser selection process for the Transaction and the negotiation process of the transaction terms such as prices have been properly conducted, (D) as measures to avoid a structural conflict of interest relationship in the Transaction, (a) bidding procedures (market check) has been conducted, (b) a Share Valuation Report has been obtained from an independent third-party financial advisor, (c) legal advice has been obtained from an independent law firm, (d) a third-party committee has been established and negotiations have been conducted based on such committee’s comments, (e) a director who is a related party of Hitachi has been excluded from the deliberation and resolution at the relevant Board of Directors meeting of the Company, (f) in addition to the measures to respect the will of the minority shareholders, the number of the majority of minority has been set as the minimum amount of purchase, which can also be considered to be one of the important measures to ensure the fairness and propriety of the Tender Offer Price, (g) measures have been taken to ensure tender opportunities from other offerors, it can be said that the fairness of the procedures for the Transaction has been ensured. (iii) Terms of the Transaction (Matter of Inquiry 3) (A) If it is recognized in the Transaction that (i) measures have been taken to avoid the decision-making process for transactions, including the Share Repurchase, from being arbitrary, (ii) procedures that are generally considered to be fair have been effectively taken, (iii) interest between Hitachi and minority shareholders have been appropriately adjusted, and (iv) the purchase price of the shares have been determined fairly, it can be said that in principle the price is also fair. Given that, the fairness of the terms of the Transaction has been examined with the focus on overall procedures with respect to the measures to ensure fairness. As a result, the following specific circumstances have been recognized. In other words, (a) the Company has selected a purchaser after the bidding procedures of more than six months and negotiated the price, and further negotiated

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the Share Repurchase price with Hitachi, and it is possible to consider that through such process, the Company has obtained conditions that are realistically most favorable to the minority shareholders of the Company or similar conditions. Given such background, when the overall Transaction is examined, an agreement has been entered into based on the procedures equal to ordinary M&A transactions between independent third parties, and there is no circumstances where Hitachi forced the Company the conditions that are unilaterally beneficial to Hitachi by using its status as the parent company, or has the Company obediently followed Hitachi. Moreover, (b) the Company and Hitachi have implemented measures in (ii)(D) above as measures to ensure the fairness of the Transaction and avoid a conflict of interest.

Nothing unreasonable is recognized in Nomura Securities’ share value calculation method and its results, and the Tender Offer Price (¥2,503) exceeds either the maximum value or median value of each calculation result set out in the Share Valuation Report.

The Share Valuation Report is based on the average market share price method using (i) October 3, 2016, the last day on which trading was conducted before the speculative media reports regarding Hitachi’s sale of its shares of the Company, were released, as Reference Date 1, in order to exclude any impact on the share price from such speculative media reports, and (ii) April 25, 2017, which is the business day immediately preceding the date on which the Tender Offer is announced, as Reference Date 2. According to the Share Valuation Report, the Tender Offer Price will be the result of adding (a) a 3.60% premium to the closing price (¥2,416) of the Company Shares on the First Section of the TSE on Reference Date 2, and 2.92%, 0.04%, and 4.07% premiums to the respective simple average closing prices (¥2,432, ¥2,502, and ¥2,405) of the Company Shares for the one-month, three-month, and six-month periods up to Reference Date 2, but (b) on the basis of Reference Date 1, it will be the result of adding a 38.98% premium to the closing price (¥1,801) of the Company Shares on the First Section of the TSE as of Reference Date 1, and 38.29%, 42.87%, and 59.12% premiums to the respective simple average closing prices (¥1,810, ¥1,752, and ¥1,573) of the Company Shares for the one-month, three-month, and six-month periods up to Reference Date 1.

In light of above-mentioned circumstances such as the background to the negotiation over the Tender Price, the details of the measures to avoid a conflict of interest, and Nomura Securities’ share valuation method and its results, it is considered that, in conducting the Transaction, measures have been taken to avoid the decision-making process for transactions from being arbitrary due to a conflict of interest between Hitachi and the minority shareholders of the Company and that the Transaction is conducted through procedures that are generally considered to be fair. Accordingly, the Tender Offer Price and the value of the Share Repurchase determined through such process should be respected and should not be easily intervened. In this sense, it is considered that the legitimacy and propriety of these prices have been ensured. (B) After executing the Company Split, KKR intends to have Offeror transfer 20% of the Company Shares to each of Hitachi and HVJ, because the transfer price for the transfer to Hitachi is the same as the transfer price for the transfer to HVJ, it is believed that the price will be one that reflects the results of the negotiation between the Offeror and HVJ, which are independent parties. Therefore, the contents of the agreement is not considered to be such that Hitachi could obtain benefits that other minority shareholders could not obtain, by repurchasing the shares at a lower price than fair price.

(C) With respect to the terms of the Transaction other than price, including the number of the majority of minority set as the minimum amount of purchase, it cannot be recognized that Hitachi has obtained benefit unfairly at the expense of the minority shareholders of the Company, and no circumstances that are detrimental to the legitimacy or propriety of such transaction conditions can be found. (iv) Whether the implementation of the Transaction is not disadvantageous to the minority shareholders of the

Company (Matter of Inquiry 4) In the sense as described in (i) to (iii) above, it can be said that the Transaction is justifiable and reasonable,

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the fairness of the procedures for the Transaction has been ensured, and the legitimacy and propriety of the terms of the Transaction have been ensured. Therefore, in the sense that it cannot be recognized that Hitachi has unfairly obtained benefit at the expense of the minority shareholders of the Company by using its status as the parent company, it can be said that the implementation of the Transaction is not disadvantageous to the minority shareholders of the Company.

It is also indicated that Hitachi will, in the course of the Transaction, make an investment of ¥10.5 billion by subscribing to the preferred shares of the Offeror. Through this investment, Hitachi will have a common interest with HKE Holdings, the Offeror. However, considering that this investment will not accompany voting rights and that this investment was decided in the course of negotiating the acquisition price applicable in the Transaction in order to increase the total acquisition price, it is believed that the degree of conflict of interest with the minority shareholders will be low and will not have a particular impact on the decisions described in (i) to (iii) above.

⑤ The Transaction has received the unanimous approval of the directors with no interest in the Company

The Company has carefully discussed and examined the terms and conditions of the Transaction from the perspective of the enhancement of enterprise value, taking into consideration the details of the Share Valuation Report and the legal advice from Torikai Law Office, as well as giving utmost respect to the content of the Report by the third-party committee.

As a result, as set forth in the above section entitled “③ The decision-making process and reasons of the

Company” under “(2) Grounds and Reasons for Opinion,” the Company believes that the Tender Offer Price is appropriate, the scheme is equal to all shareholders and therefore there is no unreasonableness. However, although the examination should be conducted after excluding any impact on the share price from speculative media reports, taking into account factors such as that the level of premium is considered to be lower than that of the past tender offer transactions of shares or similar securities by non-issuer purchasers which have been provided by Nomura Securities, and that there are certain periods following the speculative media reports when the market share prices of the Company on the First Section of the TSE were higher than the Tender Offer Price, at the Board of Directors meeting held on April 26, 2017, by the unanimous approval of the directors present at the meeting (i.e., among a total of five directors, four directors excluding Mr. Yutaka Saito, who may have a special interest as set forth below), the Company’s Board of Directors, in its judgment based on present circumstances, has issued a resolution, if the Tender Offer was commenced, to express an opinion supporting the Tender Offer and to leave the decision of whether or not to tender their shares in the Tender Offer to the shareholders of the Company.

From among the Company’s directors, Mr. Yutaka Saito, who concurrently serves as Hitachi’s Representative

Executive Officer, in his capacity as the Company’s director, has not attended any Board of Directors meeting of the Company held to examine and discuss the Transaction, nor has he been involved in any examination of this Transaction or any negotiation or discussion with the Offeror and Hitachi regarding the Transaction, in order to avoid any suspected conflicts of interest and ensure the fairness of the Transaction.

⑥ The Offeror has set a minimum number of shares to be purchased equal to the majority of the minority

The Offeror intends for the successful completion of the Tender Offer to be subject to a condition that the total number of the Tendered Shares is not less than the minimum number of shares to be purchased (24,816,632 shares). The minimum number of shares to be purchased (24,816,632 shares) in the Tender Offer is the majority amount of 49,633,263 shares, the so-called majority of the minority, which is the total amount calculated as the Number of Tendered Shares, minus the number of all shares of the Company held by Hitachi (53,070,129 shares). In this way, in valuing the will of the minority shareholders of the Company, if the Offeror fails to obtain the support of a majority of shareholders other than those who have an interest in the

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Offeror, then the Offeror will not conduct the Transaction, including the Tender Offer.

⑦ Measures to ensure tender opportunities from other offerors The Company and the Offeror have not executed any agreement that obligates the Company to support the

Tender Offer and recommend the Company’s shareholders to tender their shares in the Tender Offer, nor have the Company and the Offeror executed any agreement that contains a so-called deal protection provision that limits the opportunity for the Company to contact a competing offeror other than the Offeror or that obligates the Company to pay a break-up fee to the Offeror where the Company supports a competing offeror.

According to the Offeror’s press release, the Offeror intends for the Tender Offer Period to be set at 20 business days. Although this is comparatively short, according to the Offeror, the Offeror believes that because the Offeror aims to commence the Tender Offer in early August 2017 and accordingly there is a long period before the Tender Offer commences, the Company shareholders will have an appropriate opportunity to consider whether to tender in the Tender Offer, and an opportunity for a potential purchaser other than the Offeror to make a competing tender offer of the Company Shares is also ensured.

Further, as set forth in the above section titled “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” under “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” within “(2) Grounds and Reasons for Opinion,” the Company and Hitachi implemented the bidding process by inquiring with multiple potential purchasers regarding the acquisition of all of the Company Shares, whereupon KKR and JIP were selected as the final Tender Offer candidates by the Company and Hitachi through comparison with the other multiple potential purchasers in a competitive situation. Therefore, according to the Offeror, a sufficient opportunity has already been provided for persons other than the Offeror to acquire the Company Shares.

4. Material agreement regarding the Tendering into the Tender Offer between the Offeror and the Company’s shareholders

According to the Offeror, the Offeror has executed the Basic Agreement with Hitachi and HVJ as of the date hereof in connection with the Tender Offer, and Hitachi has agreed not to tender in the Tender Offer the Hitachi Shares.

According to the Offeror, under the Basic Agreement, the Offeror, Hitachi and HVJ have agreed as follows: ① as part of the necessary funds for settlement of the Tender Offer, HVJ will make the JIP Advance Payment and Hitachi will make the Hitachi Investment (¥10.5 billion) (Note), ② if the Tender Offer is successfully completed but the Offeror is unable to acquire all of the Company Shares (excluding the Company’s own shares held by the Company and the Hitachi Shares), the Offeror will request that the Company implement the Share Consolidation; ③ Hitachi will make the Hitachi Investment as part of the acquisition price of the Company Shares equal to the total number of any fractional shares resulting from the Share Consolidation; ④ at the amount as the total considerations obtained by deducting the amount delivered to Hitachi as a result of the Share Consolidation from ¥90,767,942,711, which is the total amount of consideration for Hitachi Shares, Hitachi will transfer all of the Hitachi Shares it holds at that time to the Company as the Share Repurchase by the Company, subject to the condition that the Offeror and Hitachi become the sole holders of all of the Company Shares (excluding the Company’s own shares held by the Company) as a result of the Tender Offer and the Share Consolidation (the “Squeeze-Out”); ⑤ the Offeror, Hitachi, and HVJ will request that the Company conduct the Capital Reduction, subject to the Squeeze-out, in order to secure the distributable funds required to implement the Share Repurchase; ⑥ the Company’s thin-film process solutions business will be succeeded to by the Offeror through the Company Split, subject to the implementation of the Share Repurchase; ⑦ the Offeror will transfer 20% of the Company Shares (the video and communication solutions business) to each of Hitachi and HVJ through the Partial Share Transfer after the Company Split takes effect; and ⑧ the relevant parties will be jointly involved in operating the Company (the video and communication solutions business) after the Partial Share Transfer. According to the Offeror, the agreements providing for the details regarding the Hitachi Investment, the Share Repurchase, the

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Capital Reduction, the Company Split, the Partial Share Transfer, and the operation of the Company (the video and communication solutions business) after the Partial Share Transfer, respectively, will be separately executed between the relevant parties by the commencement of the Tender Offer. Further, according to the Offeror, in order to ensure the smooth continuation of the video communication solutions business and the thin-film process solutions business after the Transaction, an agreement will be separately executed among the relevant parties before the commencement of the Tender Offer, addressing the provision of transitional services by Hitachi and the continued use of the Hitachi brand.

Under the Basic Agreement, according to the Offeror, Hitachi is not to tender in the Tender Offer the Hitachi Shares. However, if any person other than the Offeror commences a tender offer for the Company Shares by the last date of the Tender Offer Period at a purchase price exceeding 5% of the Share Purchase Price without setting a limit on the maximum number of shares to be purchased, or in any similar event, then Hitachi may tender in that tender offer.

Note: As stated in “① Outline of the Tender Offer” under “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer,” the Offeror expects that the preferred shares to be issued by the Offeror to Hitachi as a result of the Hitachi Investment (¥10.5 billion) will be non-voting shares and will not be accompanied by acquisition provisions or acquisition rights with respect to the common shares or other shares with voting rights of the Offeror. For the background of the Hitachi Investment, please refer to “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” within “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” under “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above.

5. Details on the provision of profit by the Offeror or parties holding a special interest

Not applicable 6. Measures to be taken in relation to the basic policy on control of the Company

Not applicable 7. Questions for the Offeror

Not applicable 8. Requests for an extension of the Tender Offer Period

Not applicable 9. Future outlook

Please refer to “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” under “(2) Grounds and Reasons for Opinion,” “(4) Expected delisting and reasons therefor” and “(5) Policy for organizational restructuring after the Tender Offer (matters relating to the “Two-Step Acquisition”),” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above.

As stated in “a. Capital Reduction and the Share Repurchase by the Company” under “(ii) Discussions between

27

the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” under “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” under “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer,” based on the Offeror’s proposal, as part of the Transaction, the Company intends to conduct the Share Repurchase in which the Company will acquire all of the Company Shares held by Hitachi through a negotiated transaction, subject to the successful completion of the Tender Offer and the subsequent Share Consolidation taking effect, and the Company also intends to reduce the amount of capital, capital reserve, and profit reserve of the Company pursuant to Article 447, paragraph 1, and Article 448, paragraph 1 of the Companies Act, and to transfer all or part of the capital and capital reserve so reduced to “Other capital surplus”, and to transfer the full amount of the profit reserve so reduced to “Profit surplus carried forward,” subject to the successful completion of the Tender Offer and the subsequent Share Consolidation taking effect, in order to secure the distributable funds required for the Share Repurchase. The Company intends to hold the Extraordinary Shareholders’ Meeting, the agenda for which includes the reduction of the amount of capital, capital reserve, and profit reserve, and the Share Repurchase, by around December 2017 after the Offeror and Hitachi have become the sole shareholders of the Company after the successful completion of the Tender Offer and the subsequent Share Consolidation taking effect.

As stated in “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” under “②Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” under “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above, regarding the relationship between the Tender Offer Price and the Share Repurchase Price (per share prior to the Share Consolidation), KKR explained to the Company that by setting the Share Repurchase Price (per share prior to the Share Consolidation) lower than the Tender Offer Price, the Tender Offer will be an advantageous sales opportunity for the Company’s minority shareholders. For Hitachi, on the other hand, it was explained that it is possible to realize proceeds from sales comparable to those that would be realized by responding to the Tender Offer in terms of after-tax amount because the tax rule of exclusion from gross revenue for deemed dividends would be applied to the sale of the Company Shares through the Share Repurchase. The Company confirmed the basis for the estimation of tax effect of Hitachi regarding the Share Repurchase Price (per share prior to the Share Consolidation), and, based on the Company’s independent trial calculations, confirmed that the actual after-tax amount from the sale that include the tax effects regarding the deemed dividend per share for Hitachi through the Share Repurchase would not exceed the after-tax amount that would be realized by responding to the Tender Offer.

As stated in “b. Partial carve-out of the Company business (the thin-film process solutions business) to the Offeror, and partial transfer of the portion of the Company Shares (the video and communication solutions business) to Hitachi and HVJ” under “(ii) Discussions between the Offeror, the Company and Hitachi, and JIP, and the decision-making process of the Offeror” under “② Purpose and background of the Transaction, including the Tender Offer, and management policy following the Tender Offer” under “(2) Grounds and Reasons for Opinion” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above, according to the Offeror, after the Offeror turning the Company into its wholly-owned subsidiary, the Offeror intends to carve out the Company’s thin-film process solutions business through an absorption-type company split whereby the Offeror will be the succeeding corporation. The Offeror has also indicated that Hitachi and HVJ will acquire from the Offeror a portion of the shares of the Company following the Company Split, which will engage only in the video and communication solutions business. For an outline of the Transaction, please refer to the “Scheme Diagram of the Transaction” attached as Exhibit 1.

10. Matters related to transactions with controlling shareholders (1) Applicability of transactions with controlling shareholders and the suitability of guidelines concerning measures to

protect minority shareholders As (i) the Offeror has executed the Basic Agreement with Hitachi, the Company’s controlling shareholder

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(parent company), (ii) as part of the Transaction, the Offeror will conduct the Tender Offer on the assumption that the Offeror will acquire the Company Shares held by Hitachi through the Company’s repurchase of its own shares after the successful completion of the Tender Offer and the subsequent Share Consolidation taking effect, and (iii) Hitachi plans to acquire from the Offeror a portion of the shares of the Company that would engage only in the video and communication solutions business after it has become the Offeror’s wholly-owned subsidiary, the Company believes that the Board of Director’s expression of its opinion regarding the Tender Offer is consistent with the transactions and other dealings with the controlling shareholder. Moreover, the “Guidelines Concerning Measures to Protect Minority Shareholders in Transactions with Controlling Shareholders” set forth in the Company’s Corporate Governance Report published on June 30, 2016 are as follows.

The “Guidelines Concerning Measures to Protect Minority Shareholders in Transactions with Controlling

Shareholders” set forth in the Corporate Governance Report published on June 30, 2016 state “If the Company conducts a transaction or other arrangement in which the interest of Hitachi, Ltd. (“Hitachi”), the parent company of the Company, and the interest of a minority shareholder other than Hitachi may effectively conflict with each other, the Company shall have its Board of Directors seek opinions from outside experts and have broad-ranging deliberation before determining a policy. Furthermore, with respect to individual transactions with Hitachi, the Company shall conduct them fairly based on market value in accordance with its internal policies regarding general transactions.” As stated in “(6) Measures to ensure the fairness of the purchase prices and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” under “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above, the Company took certain measures to ensure the fairness of the Tender Offer and avoid conflicts of interest by, for instance, obtaining a Report from a third-party committee indicating that the Transaction is not disadvantageous to the minority shareholders of the Company in the sense that it cannot be viewed that Hitachi has unfairly obtained benefit at the expense of the minority shareholders of the Company by using its status as the parent company, a Share Valuation Report from Nomura Securities, an independent third-party financial advisor, and legal advice from Torikai Law Office. Therefore, the Company has put in place a system that are stricter than its guidelines to protect minority shareholders in the Transaction.

(2) Matters regarding measures to ensure fairness and avoid conflicts of interest

Please refer to “(6) Measures to ensure the fairness of the purchase prices and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” under “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above.

(3) Summary of the opinion obtained from a person who has no conflict of interest with the controlling shareholder that

the Transaction is not disadvantageous to minority shareholders The Company has obtained an opinion as of the date hereof from a third-party committee comprised of

members who have no interest in the controlling shareholder, indicating that the Transaction is not disadvantageous to the minority shareholders of the Company in the sense that it cannot be viewed that Hitachi has unfairly obtained benefit at the expense of the minority shareholders of the Company by using its status as the parent company. For details, please refer to “④The Company has established a third-party committee and has obtained an opinion” under “(6) Measures to ensure the fairness of the purchase prices and avoid conflicts of interest, and other measures to ensure the fairness of the Tender Offer” within “3. Details on the Content, Grounds and Reasons for the Company’s Opinion on the Tender Offer” above.

End (Reference) Outline of the Tender Offer

Please refer to the attached material “Announcement Regarding the Tender Offer for the Shares of Hitachi

29

Kokusai Electric Inc. (Securities Code 6756)” published today by the Offeror.

30

Exhibit 1: Scheme Diagram of the Transaction

Current Status

Arrangement of loan

by the Offeror

A tender offer by the

Offeror (for all of the

Company Shares

except for those held

by Hitachi)

Squeeze-out by the

Offeror through share

consolidation

Capital reduction by

the Company in order

to increase the

distributable funds

A special purpose company (the “Offeror”), which is incorporated for the Transaction through a 100% investment by a fund managed by KKR, will arrange the loan for the Transaction.

HVJ will make an advance payment of part of the proceeds of the Partial Share Transfer, and Hitachi will make the Hitachi Investment in the Offeror.

The Offeror will implement the Tender Offer to purchase all (excluding those held by the Company) of the Company Shares, except for those held by Hitachi.

As of this point in time, it is expected that the Tender Offer will be commenced in early August 2017, in light of the clearance procedures necessary for permissions, approvals and the like pursuant to the domestic and foreign competition acts and other applicable laws and regulations.

If, after successful completion of the Tender Offer, the

Offeror could not acquire all of the Company Shares

(excluding those held by Hitachi and the Company),

the Share Consolidation will be conducted so that the

Offeror and Hitachi will be the only shareholders of

the Company. The Share Consolidation is expected

to be effectuated sometime between mid-November

and early December 2017 with approval at an

extraordinary shareholders’ meeting after successful

completion of the Tender Offer.

In order for the Company to maximize the amount for

the acquisition of its own shares from Hitachi, it is

anticipated that the Company’s capital and statutory

capital reserve will be reduced (Capital Reduction) so

that the distributable funds of the Company will be

increased. The reduction is expected to be resolved

at a shareholders’ meeting after the completion of the

Share Consolidation and after Hitachi and the Offeror

become the only shareholders of the Company.

As of December 31, 2016, Hitachi held 51.67% of the

total number of issued shares (excluding the Company’s

own shares) of the Company, and non-controlling

shareholders held the remaining 48.33%.

Company

Video and communication

solutions Thin-film process solutions

Non- controlling

shareholders Hitachi

51.67% 48.33%

KKR

Offeror

Company Video and

communication solutions

Thin-film process

solutions

Hitachi

Tender offer

Loan

51.67% 48.33%

Non-controlling shareholders

HVJ

JIP Advance Payment

Hitachi Investment

KKR

Offeror

CompanyVideo and

communicationsolutions

Thin-film process solutions

Non-controllingshareholders Hitachi

Capital reductionMajority

Minority

31

The Company’s

acquisition of its own

shares from Hitachi

through a negotiated

transaction

Provision of a bridge

loan by the Offeror to

the Company

Absorption-type split

of the thin-film

process solutions

business of the

Company with the

Offeror (which is the

parent entity) being

the succeeding entity

The Offeror’s partial

transfer of the

Company Shares to

Hitachi and HVJ

An absorption-type split of the thin-film process

solutions business of the Company will be

implemented, with the Offeror (which is the parent

entity) being the succeeding entity.

After the completion of the Tender Offer, the Share

Consolidation and the Capital Reduction, the Company

will acquire all of the Company Shares held by Hitachi

through a negotiated transaction.

Immediately after the Company’s acquisition of its own

shares, the Offeror will provide a bridge loan to the

Company, and the Company will pay the transfer price

for the Company’s own shares to Hitachi.

Through the Offeror’s partial transfer of the Company

Shares to Hitachi, Hitachi will continue to have a capital

relationship with the Company, which is to operate the

video and communication solutions business only.

A series of transactions in the present case, including the

Offeror’s partial transfer of the Company Shares to

Hitachi and HVJ, is expected to be completed by mid-

or late January 2018.

KKR

Company

Video and communication

solutions

Thin-film process solutions

100%Bridge loan

Offeror

Hitachi

Company’s own shares

KKR

Company Video and

communicationsolutions

100%

Absorption- type split from subsidiary to the parent

Thin-film process solutions

Offeror

KKR

CompanyVideo and

communication solutions

60%

Hitachi

20%

Thin-film process solutions

HVJ

20%

Offeror