Chiyoda : Notice Concerning the Introduction of Performance-Based Stock Compensation Plan

<< Translation for Reference>>

May 7, 2021

Company Name: Chiyoda Corporation

President & COO: Masaji Santo

Stock Code: 6366

Stock Listing: Second Section of the Tokyo Stock Exchange

Inquiries: Shuichi Wada, Manager, Corporate Services Dept.

Telephone: [phone]

Notice Concerning the Introduction of Performance-Based Stock Compensation Plan

The Chiyoda Corporation (hereinafter referred to as "Chiyoda," "we," or "us") Board of Directors has reviewed the compensation plan for our directors and officers, and on May 7, 2021 approved a "Performance-Based Stock Compensation Plan" (hereinafter referred to as the "Plan") for our directors and executive officers (excluding non- executive directors and non-residents of Japan; hereinafter collectively referred to as the "Directors & Officers").

In conjunction with the introduction of the Plan, we reviewed the compensation plan for the Directors & Officers, as described below.

We intend to submit the proposal for the Plan at our 93rd Ordinary General Meeting of Shareholders scheduled to be held on June 23, 2021 (hereinafter referred to as the "Shareholders Meeting").

1. New Compensation Plan

Currently our compensation plan comprises "base compensation" (linked to job duties), "performance-based compensation" (linked to each fiscal year's business results), and "compensation for acquiring treasury shares"

(linked to the long-term improvement of our business performance). In conjunction with the review of the proposed compensation plan, we decided to abolish the "compensation for acquiring treasury shares" upon introduction of the Plan and to change the concept behind "base compensation" so that it reflects not only an individual's job responsibilities but also the individual performance of Directors & Officers.

If the Plan is approved by the resolution of the Shareholders Meeting, the compensation for the Directors &

Officers will comprise "base compensation," "performance-based compensation," and "performance-based stock compensation."

(Reference) New Compensation Plan

* Changes from current compensation plan underlined.

Category (Title)		Viewpoint			Amount
Base compensation		Linked to job duties and linked to	Up to 290 million yen per year
		individual performance evaluation	(with sub-limit of 30 million yen per
		each year	year for outside director)
Performance-based		Tied to the year's business results,
compensation		taking into consideration certain
		quantitative factors such as the level
		of the current net profit and
		dividends attributable to the parent's
		shareholders
Performance-based stock		Linked to medium-to-long term	・The maximum cash we contribute is
compensation		business performance improvement		70 million yen per year.
				・The maximum number of shares to
					be delivered to directors and the
					shares the proceeds of which will be
					paid to directors will be 240,000 per
					year.
				* The initial eligible period is three
					fiscal years from the year that ends
					on March 31, 2022 to the year that
					ends on March 31, 2024.

* Only base compensation linked to job duties will be paid to outside directors.

2. Introduction of the Plan

1. We are introducing the Plan to improve medium-to-long term business performance and to heighten the mindset of contributing to the enhancement of corporate value.
2. The introduction of the plan is subject to the approval of the resolution concerning officer compensation at the Shareholders Meeting.
3. The Plan uses the scheme commonly referred to as a Board Incentive Plan (BIP). The Plan is designed to deliver or pay (hereinafter referred to as "Deliver") to the Directors & Officers Chiyoda shares and cash equivalent to the proceeds of the sales of Chiyoda shares (hereinafter referred to as "Chiyoda Shares & Benefits").

1. It is our plan that, when the trust period for the officers compensation BIP trust created for the implementation of the Plan (hereinafter referred to as the "Trust") expires, we will extend the Plan by creating a new Trust, or by extending the trust period of the existing Trust, or by creating an additional trust.

3. Structure of the Trust

⑧Continue to use residual stocks

or free transfer or retirement of stocks

• Deliver residual property

• Approved by the Shareholders Meeting

[Settlor] Chiyoda

④Pay share price	③Trust created

		⑤Dividend		④Chiyoda shares		②Establish rules for
									stock compensation
			[Trustee (Joint trustee)] (planned)
			Mitsubishi UFJ Trust and Banking
	④Buy Chiyoda stock			Corporation	⑦Deliver Chiyoda shares
	The Master Trust Bank of Japan, Ltd
			and pay cash
Stock market					Trust	[Beneficiary]
	④Pay share price
			Chiyoda stocks, cash				Directors &
					⑥Instruct not to exercise voting rights	Officers
					Trust administrator

• We will obtain the approval at the Shareholders Meeting for the introduction of the Plan.

• The Board of Directors will establish the rules for the delivery of the shares for the Plan.

• We will create a trust (Trust) to which we entrust cash to the extent approved at the Shareholders Meeting described in ① above, and Directors & Officers who satisfy certain beneficiary requirements will be the

beneficiaries.

• The Trust will acquire Chiyoda shares either on the market or from Chiyoda (disposition of treasury shares) using the cash entrusted as described in ③ above as instructed by the trust administrator.
  The number of shares to be acquired by the Trust will be subject to the limit approved by the Shareholders Meeting described in ① above.

• Dividends will accrue on Chiyoda shares held by the Trust as on any other Chiyoda shares.

• No voting rights will be exercised for the Chiyoda shares held by the Trust throughout the trust period.

• During the trust period, certain points will be granted to the Directors & Officers each year at a certain timing depending on, among others, their positions and actual achievement of given performance goals in accordance with our stock compensation plan. In addition, if the Directors & Officers satisfy certain

requirements for beneficiaries, they will receive Chiyoda shares corresponding to a certain percentage of the granted points, and, if any points remain unused, such points will be converted into cash pursuant to the applicable provision of the trust agreement, and they will receive money in the amount equivalent to the proceeds of the conversion.

• If any shares remain unclaimed upon expiration of the trust period due to reasons including the failure to achieve goals, we will extend the Trust under the Plan or under a new compensation plan similar to the Plan by changing the trust agreement or creating an additional trust, or such remaining shares will be assigned by the Trust to us free of charge, and, after acquiring the same free of charge, we will retire them by a resolution of the Board of Directors.

• Upon termination of the Trust, the residual property that remains after distribution to the beneficiaries will be vested in us within the limit of the trust expense reserve that consists of the trust money less the stock acquisition fund. In addition, we intend to donate any money in excess of the trust expense reserve to organizations in which neither we nor the Directors & Officers have any interests.

(note) If it becomes possible, during the trust period, that (i) the number of shares held by the Trust that correspond to the points allocated to the Directors & Officers (defined in Section 4.(5) below; hereinafter the same) may not be sufficient, or (ii) the cash money in the trust property may not be sufficient for the payment of the trust fees and/or trust expenses, we may add cash money to the Trust to the extent of the upper limit of the trust money described in Section 4.(6) below.

4. Description of the Plan

1. Overview of the Plan
   Under this Plan, among other actions, we will grant to the Directors & Officers for three fiscal years (starting with the fiscal year ending on March 31, 2022 and ending with the fiscal year ending on March 31, 2024)(hereinafter referred to as the "Eligible Period") certain points that are predetermined depending on their positions and goal achievement, and will Deliver to them Chiyoda Shares & Benefits corresponding to such points.
   If the Trust is extended as described in Section (4)(b), the fiscal years covered by the subsequent medium- term management plan will be regarded as the Eligible Period, respectively.
2. Resolution of the Shareholders Meeting for the Introduction of the Plan
   Important matters including, but not limited to, the maximum trust money to be contributed to the Trust, and the total number of shares and other benefits that will be Delivered to the Directors & Officers will be decided at the Shareholders Meeting.
   If we elect to extent the Trust as described in Section (4) (b) below, we will determine the modification of

the trust agreement or additional contribution to the Trust by the resolution of the Board of Directors to the extent approved at the Shareholders Meeting.

(3) Persons Eligible under the Plan (Beneficiary Requirements)

When a director or officer retires, the Trust will Deliver to them Chiyoda Shares & Benefits corresponding to the cumulative points after they complete the prescribed procedure intended to determine whether they qualify as beneficiaries provided that they satisfy the following beneficiary requirements:

• They must be serving as a director or officer on or after the starting date of the Plan (including persons who are newly elected or appointed as a director or officer on or after the day of the start of the Plan);

• They must be a resident of Japan;

• They must have retired from their position as a director or officer;

• They must not have retired for their own convenience (except for retirement for their own convenience due to unavoidable events such as injury or disease), have committed certain improper acts while they are in their position, or have resigned or been dismissed because of, among others, material violation of job duties, internal rules and other requirements; and

1. • They must fulfill other requirements that are deemed necessary to achieve the purpose of this stock compensation plan, and are provided for in the trust agreement or stock delivery rules.
2. Trust Period

1. Initial Trust Period

Three years from September 2021 (planned) to September 2024 (planned)

(b) Continuation of the Trust

Upon expiration of the trust period, we may extend the Trust as a stock compensation plan similar to the Plan by modifying the trust agreement or creating additional trusts. In such case, the number of years covered by the medium-term management plan then in effect will become the new Eligible Period. The trust period will be extended coterminous with such new Eligible Period. For each trust period so extended, we will provide additional contributions to the extent of the maximum amount of funds to be contributed to the Trust during such new Eligible Period that is approved by the applicable resolution of the Shareholders Meeting. We will then continue to grant points to the eligible Directors & Officers during the trust period so extended. However, in making such additional contribution, if there still remains within the trust property any Chiyoda stock (excluding any Chiyoda stock corresponding to the points granted to the eligible Directors & Officers that is not fully Delivered yet) and cash money as of the last day of the trust period that precedes the extended period (hereinafter referred to as the "Residual Shares & Benefits"), the sum of the amount of the Residual Shares & Benefits and the trust money to be