<<Note: This English translation is provided for reference purposes only and does not contain all
information as described in the Japanese original. If there is any inconsistency or ambiguity between
the English version and the Japanese original, the Japanese original shall prevail. >>May 9, 2019
Company Name: Chiyoda Corporation
President& CEO: Masaji Santo
Stock Code: 6366
Stock Listing: First Section of the Tokyo Stock Exchange
Inquiries: Kaoru Nakamura, General Manager, Corporate Services Department
Tel. 045-225-7740
Notice Regarding Issuance of Preferred Shares by Third-Party Allotment,
Borrowing of Funds and Partial Amendment to Articles of Incorporation
On May 9, 2019, Chiyoda Corporation (the "Company"), at its meeting of the Board of Directors,
approved the actions set out in items (i) through (iv) as follows:(i)

The Company enters into a share subscription agreement with Mitsubishi Corporation("Mitsubishi Corporation" or the "Planned Allottee"), and Class A Preferred Shares (the "Class A
Preferred Shares") with a total issue price of 70 billion yen shall be issued by way of a third-party
allotment (the "Third-Party Allotment").

(ii) The Company borrows funds from Mitsubishi Corporation Financial & Management Services(Japan) Ltd. ("MCFJ"), a wholly owned subsidiary of Mitsubishi Corporation, and MUFG Bank,
Ltd. ("MUFG Bank") (the "Borrowing"). The Borrowing, together with the Third-Party
Allotment, are collectively referred to as the "Financing Plan".
(iii) The Company partially amends its articles of incorporation to create a new class of shares known
as Class A Preferred Shares (the "Partial Amendment to the Articles of Incorporation") (Forfurther details, please refer to "II. Partial Amendment to the Articles of Incorporation" below.).
(iv) The Company submits proposals for approval of the Third-Party Allotment and Partial
Amendment to the Articles of Incorporation to the 91st ordinary general meeting of shareholders(the "Ordinary General Meeting of Shareholders") to be held on June 25, 2019.
An outline summarizing each of the foregoing actions is set out below.
I. Financing Plan
1. Summary of Financing Plan
(1) Outline of Planned Third-Party Allotment

1(1) Payment Date:

July 1, 2019(2) Number of Newly Issued

Class A Preferred Shares

Shares:175,000,000 shares(3) Issue Price:

400 yen per share(4) Total Issue Price:

70 billion yen
For the estimated amount, after deducting the estimated expenses to be
incurred in relation to the Third-Party Allotment, please see "3.
Amounts, Usage and Planned Schedule for Expenditure."(5) Method of Offering or

All Class A Preferred Shares shall be allotted to Mitsubishi

Allocation

Corporation by way of third-party allotment.

(Planned Allottee):(6) Others:

Please see Appendix 1 "Terms and Conditions of Class A Preferred
Shares" for further details.
The issuance of Class A Preferred Shares shall be subject to theeffectuation of the securities registration statements required under the
Financial Instruments and Exchange Act of Japan, and approval of the
proposals regarding the Third-Party Allotment and the Partial
Amendment to the Articles of Incorporation at the Ordinary General
Meeting of Shareholders.

(2) Outline of the Borrowing(1) Lender:

MCFJ for both (i) and (ii) below(2) Amount of Borrowing:(i) 30 billion yen; (ii)60 billion yen(3)Interest

Rate

Borrowing:on(i) The Company and MCFJ have agreed on the loan terms applicableuntil July 2019. Terms applicable after July 2019 are underdiscussion. ; (ii) The level of 1.50% (including the guarantee fees)(4) Drawdown Date:(i) May 16, 2019; (ii) Planned to be executed by March 2021

(5) Borrowing Period:(i) Up to 5 years; (ii) Up to 5 years(6) Collateral:(i) Applicable; (ii) Not Applicable(7) Subordination:(i) Not applicable; (ii) Not applicable(1) Lender:

MUFG Bank(2) Amount of Borrowing:

20 billion yen(3) Interest Rate:

2.50%(4) Drawdown Date:

July 1, 2019(5) Borrowing Period:

5 years2

(6) Collateral:

Not applicable(7) Subordination:

Applicable

2. Purpose and Rationale behind the Financing Plan
(1) Background of the Financing Plan
a. The Company's Financial Status and the Necessity for Large-scale Funding
The Company announced in its "Notice of Revisions to the Forecast of Consolidated Results andDividend", dated October 31, 2018, that due to significant increase of the construction costs of 85
billion yen for the Cameron LNG Project in Louisiana in the U.S. (the "Cameron LNG Project"), it
revised downwards its full-year consolidated financial forecast for the fiscal year ended March 31,
2019 as follows: operating loss revised to 87 billion yen (a decrease of 98 billion yen from thepreviously announced forecast); ordinary loss revised to 87 billion yen (a decrease of 99 billion yen);and loss attributable to owners of parent revised to 105 billion yen (a decrease of 112 billion yen). In
addition, as the Company announced in its "Consolidated Financial Results for the Six Months ended
September 30, 2018" dated November 9, 2018, the Company recognized an operating loss of 96 billion
yen, an ordinary loss of 96 billion yen, and a quarterly loss attributable to owners of parent of 109
billion yen during the six-month period ended September 30, 2018. It was noted in the "Notes on
Consolidated Quarterly Financial Statements" in the consolidated quarterly financial statements for thesecond quarter that substantial doubts arose regarding the Company's ability to continue as a going
concern.
As announced in the "Consolidated Financial Results for the Nine Months Ended December 31,
2018" dated February 13, 2019, the Company reported that due to additional loss caused by additionalcosts to comply with the schedule for the Tangguh LNG project in Indonesia (the "Tangguh LNG
Project") and increased costs for the Cameron LNG Project, as described above, the Company
accounted an operating loss of 108 billion yen, an ordinary loss of 107 billion yen, and a quarterly loss
attributable to owners of parent of 128 billion yen.
Furthermore, as announced in the "Consolidated Financial Results for the Fiscal Year Ended March
31, 2019" dated today, the fiscal year ended March 2019 resulted in an ordinary loss of 193 billion yen,an operating loss of 200 billion yen and a loss attributable to owners of parent of 215 billion yen due tothe various reasons including: (i) unexpected increased costs arising out of multiple reworks in the
Cameron LNG Project which is in the final stage for the construction of the first liquefaction train; (ii)increased costs of the Cameron LNG Project, after the review of the Company with the help from an
outside advisor, in relation to the construction of the second and the third liquefaction trains on the
Company's assumption that the same additional costs incurred in the construction of the firstliquefaction train will arise since the Company has not found that the productivity at the site improved
due to the turnover rate which has continued to be higher than the Company expected even after
February 2019; (iii) increased costs of the Tangguh LNG Project that were recorded after the3Company's review in order to minimize delays in progress caused by multiple factors; and (iv) the
increased costs after the Company's review of the risks related to litigations and arbitrations as well as
the risks related to small- or medium-sized projects in Japan and overseas. Cash flows from operating
activities were 38 billion yen (negative) due to the record of profit loss before income taxes of 194
billion yen, and the increase of accounts receivable by 23 billion yen which was offset by the increaseof provision for loss on construction contracts by 64 billion yen, the decrease of income andexpenditure of working capital (sum of the accounts receivable, cost on uncompleted construction
contracts, notes and accounts payable for construction contracts and advances received on uncompleted
construction contracts) of 90 billion yen and the decrease of jointly controlled assets of the joint
venture by 20 billion yen, resulting in a net free cash flow of 37 billion yen (negative), which is theamount deducting cash flow from investing activities from cash flow from operating activities.
Consequently, the Company fell into a capital deficit as of March 31, 2019 and, because of suchcapital deficit, the common shares of the Company are expected to enter into the grace period
pertaining to delisting from Tokyo Stock Exchange in accordance with the criteria for the delisting. As
a result, recovering from such capital deficit is urgently required for the Company.
The Company considers its top priority is to complete ongoing projects, such as the Cameron LNG
Project and the Tangguh LNG Project. In order to address this priority, the Company strengthened
company wide support for such projects by establishing task forces, as well as, allocating necessary
human resources, including site workers, and financial support, which are necessary to comply with the
project schedule. The Company has been working on reducing costs, optimizing project cash flow, andnegotiating additional contract price adjustments for ongoing projects. The Company has also worked
to improve cash flow by implementing cost-cutting measures on General and Administrative expenses
as well as by selling unprioritized assets.
However, notwithstanding the Company's best efforts, it became unavoidable to obtain large-scalefunding, in order to avoid a cash shortfall and recover from the capital deficit. Thus, as described in "3.
(2) Usage of Funds and Expenditure Plan" and "4. Rationale behind the Expenditure Plan”, theCompany decided to implement the Financing Plan and to cover its expenditures for: (i) working
capital for ongoing projects and future projects (174 billion yen); (ii) restructuring of company
structure for the expense reduction (3 billion yen); and (iii) reinforcement of performance of theconstruction and investment in facilities for IT management (3 billion yen). For those reasons, theCompany concluded that implementing the Financing Plan is required as early as possible.
(Notes) 1 Cameron LNG Project:Engineering, procurement and construction of three liquefaction trains with aprojected export of 13.5 million tons per annum of LNG and the export facility
located at Hackberry, Louisiana USA, performed by a joint venture named CCJV
consisting of Chiyoda International Corporation, a U.S. based wholly owned
subsidiary of the Company, and McDermott, and awarded by Cameron LNG LLC.

4

2 Tangguh LNG Project:Engineering, procurement and construction of third train of Tangguh LNG located atWest Papua, Indonesia performed by a joint venture constituting of Company, PT.
Chiyoda International Indonesia, an Indonesian based wholly owned subsidiary ofCompany, PT. Tripatra Engineers and Constructions, PT. Tripatra Engineering, PT.
Saipem Indonesia and PT. Suluh Ardhi Engineering awarded by BP Berau Ltd.

b. Background to Selection of Sponsors
As the Company announced previously, the Company held discussions, for financial support withmultiple sponsors. For reference see the Company's "Revisiting the Medium-Term Management Plan
(2017-2020) ~Vision for Revival~" dated November 9, 2018. This included discussions with theCompany's largest shareholder, Mitsubishi Corporation, in order to secure funds to improve theCompany's financial status as well as funds necessary for operating our business.
The Company engaged JP Morgan Securities Japan Co., Ltd. as its financial adviser, and, from the
middle of November 2018, made contacts with multiple potential sponsors. Numerous potential
sponsors showed preliminary interest as the global market of Company's core business of performing
engineering, procurement and construction services for liquefied natural gas ("LNG") facilities has
strong potential for growth. The Company held intensive discussions with potential sponsors on thepossibility for support while responding to their due diligence requests. After the initial due diligenceand discussions concluded, the Company received multiple initial proposals. However, following theinitial proposals further due diligence went on, which included the examination of project related risks,
including the possibility of the additional costs in the Cameron LNG Project and the Tangguh LNG
Project, and potential sponsors determined that it would be difficult to manage the risks associated withprojects in which Company is involved without their having sufficient experience in the execution ofsuch projects and prominent knowledge on risk management in relation to the Company's ongoingprojects. As a result, potential sponsors started to withdraw or revise the proposals as they thought thatin light of the nature of the Company's business it would be difficult to offer alone the funds which arenecessary for the Company. From the middle of April 2019, Mitsubishi Corporation became the only
potential sponsor that could undertake the size of our funding we needed whether alone or combinationof some sponsors.
While negotiation with Mitsubishi Corporation proceeded, the Company attempted to reengage withother potential sponsors to see if they could reconsider their past positions based on terms that relaxed
the Company's initial requirements and were comparable to terms under discussion between the
Company and Mitsubishi Corporation. However, other potential sponsors did not submit revised
proposals. As a result, there were no potential sponsors other than Mitsubishi Corporation which
offered to provide funding by way of equity financing which would enable the Company to end its

5

capital deficit and recover from its financial difficulties by improving its cash flow.
In addition, as Mitsubishi Corporation is a business alliance partner, the Company believes
Mitsubishi Corporation has a deep understanding of the Company's business. The Company also
considers that Mitsubishi Corporation is well positioned to support the Company by dispatching highly
skilled human resources to the Company; especially for risk management and sales. The Company may
also be able to take advantage of Mitsubishi Corporation's business network to expand its business inthe environmental area, where the Company is aiming to grow. Thus, the Company concluded that
Mitsubishi Corporation is the best sponsor for improving the Company's corporate value.

c. Background of Proposal from Mitsubishi Corporation and MUFG Bank
As described in "b. Background to Selection of Sponsors", from the middle of November 2018,
similar to other potential sponsors, the Company continued to discuss financial support proposals
with Mitsubishi Corporation, and, concurrently proceeded with due diligence conducted by
Mitsubishi Corporation.
From the Company's point of view, it would be preferable to secure the necessary funds by theequity financing as much as possible since the equity financing improves capital adequacy ratio toan adequate level. However, the Company, in its discussions with Mitsubishi Corporation,
carefully considered how to reduce the impact of dilution arising from a third-party allotment on
the existing shareholders. In particular, the Company negotiated with Mitsubishi Corporation for
financial support with the condition that the dilution ratio does not exceed 300%, considering thata dilution ratio exceeding 300% could subject the Company to the delisting criteria of Tokyo
Stock Exchange Inc. (the "TSE"). The Company notes that there is an exception to the delisting
criteria but that is subject to the TSE recognizing that there is a small likelihood of infringementon the interests of shareholders and approving application of the exception to the transaction. As
part of that process the TSE would have to conduct a comprehensive review of the Third-Party
Allotment including the purpose of a third-party allotment, the identity of allottee and theimplementing procedures pertaining to changes in the total number of shares authorized to beissued. Taking this into consideration, the Company negotiated with Mitsubishi Corporation sothat: (i) the financial support should be a combination of third-party allotment and borrowing; and(ii) the transaction amount of third-party allotment should be around 70 billion yen which isnecessary for ending the capital deficit of the Company.
The Company also carefully discussed with Mitsubishi Corporation how to design equity
instruments that would reduce the impact of dilution on the existing shareholders as much as
possible. The Company and Mitsubishi Corporation agreed on: (i) having put options, inexchange for cash consideration, which are exercisable by an allotee; and (ii) creating call options,in exchange for cash consideration, which are exercisable by the Company. By utilizing such

6

equity instruments, the possibility of large dilution due to the exercise of put options theconsideration for which is common shares might be reduced. In addition, the Company also
held discussions with MUFG Bank regarding the borrowing of subordinated loans on thecondition that payment for the Class A Preferred Shares would be simultaneously executed.
As a result of the above, based on the result of the due diligence and discussions with theCompany, Mitsubishi Corporation and MUFG Bank made the proposal outlined below to theCompany in the beginning of May 2019.
(i)

Mitsubishi Corporation will contribute 70 billion yen by way of the third-party allotment
to purchase Class A Preferred Shares from the Company which is necessary to recoverfrom the Company's capital deficit.

(ii)

MUFG Bank will provide 20 billion yen in total pursuant to a subordinated loan
agreement with the Company.

(iii)

Mitsubishi Corporation will cause MCFJ to provide 90 billion yen in total pursuant to aloan agreement with the Company. Among 90 billion yen, a loan of 30 billion yen will be
executed prior to the transactions (i) and (ii) above.

(iv)(i), (ii) and a part of (iii) above shall be conducted as a series of transactions and (i) above
shall be approved by the shareholders meeting of the Company.

d. Reasons why the Financing Plan was Considered to be the Best Method for the Company and its
Shareholders
The proposal from Mitsubishi Corporation and MUFG Bank mentioned in "c. Background of
Proposal from Mitsubishi Corporation and MUFG Bank" included a combination of loans and capital
contribution and the issuance of Class A Preferred Shares. The Class A Preffered shares have no voting
rights at the general meeting of shareholders. As the Class A Preferred Shares might lead to significant
dilution of the existing shareholders due to the exercise of put options the consideration for which iscommon shares, the Company carefully examined such final proposal.
First, prior to the final proposal from Mitsubishi Corporation, the Company relaxed the initialconditions which the Company had notified to potential sponsors in light of the discussions with
Mitsubishi Corporation over the equity instruments and attempted to reengage with other potential
sponsors to see if they could reconsider their past positions. However, there was no proposal other thanthat from Mitsubishi Corporation which satisfies the size of amount required by the Company in orderto end the capital deficit of the Company as well as improve the liquidity of the Company. As result,
the Company decided to seek support from Mitsubishi Corporation and MUFG Bank.
Second, as described in "b. Background to Selection of Sponsors", Mitsubishi Corporation has a
deep understanding on the Company's business and has proposed to provide support in the form of
human resources and the Company expects that will further enhance the corporate value of theCompany.

7Based on the above, the Company believes that further strengthening of the business relationshipwith Mitsubishi Corporation will further stabilize the business foundation of the Company andcontribute to the improvement of its corporate value and shareholder value.
The Company considers that the combination of equity financing from Mitsubishi Corporation andassociated borrowings with Mitsubishi Corporation and MUFG Bank is the best option as this willquickly resolve the notes regarding the ongoing concern assumption and resolve the business andfinancial issues faced by the Company for not only short term but for medium-term.

e. Management System After the Financing Plan
The Company is changing its management system simultaneously with approval the Financing Plan.
The objective of the change is to have clearer separation between corporate management and project
execution and thereby enhance governance.
The changes shall include (1) the number of board members will be reduced from fourteen to ten and(2) the execution of overall project management will be carried out solely by the President & CEO andthe CFO; and (3) remaining eight directors, including three Audit and Supervisory Committee
Members, will concentrate on management and supervision activities. As four directors among theeight directors are outside and independent directors, the Company believes that this reform will
enhance the transparency of the Company's management system. Among the ten directors, three
directors worked for Mitsubishi Corporation before and one director is dispatched from Mitsubishi
Corporation.
(2) Reason for Selecting the Financing Plan
Before deciding to pursue the Third-Party Allotment, the Company compared and examined various
funding approaches as described below. The Company considered that the most important factor is toraise equity funds certainly and promptly in the desired time frame. This is for eliminating the capital
deficit of the Company and to improve the cash flow.
At the same time, the Company carefully considered how to keep the dilution as low as possible andto secure the necessary amount of funds to end its capital deficit. From this perspective, thecombination of third-party allotment and borrowing is the best methods for addressing this situation.
It should be noted that the Company also considered a public offering to raise capital. However, theCompany determined it could not adopt this approach given the notes on the Company's financial
statement concerning its ability to continue as a going concern. With regard to a rights offering and ashareholder allotment, since all share options may not be exercised considering the Company's
financial status, the Company reached the conclusion this is not an appropriate option for solving theCompany's financial problems as the amount of funding that can be raised is uncertain.
On the other hand, the Company believes that a third-party allotment, which has the highest degreeof certainty in procuring the required amount, will be the most effective option for the Company if we8can select an appropriate sponsor. The Company sought funding under conditions that are morefavorable for the Company, and has been negotiating with potential sponsors about the possibility of
support including funding through capital contribution since the middle of November 2018. As a result,it turned out that there is no sponsor other than Mitsubishi Corporation who can undertake the required
amount of funding by itself or even in a combination with other sponsors. Accordingly, the Company
decided to issue Class A Preffered Shares to Mitsubishi Corporation to procure 70 billion yen which isthe necessary amount to end the capital deficit. In making this decision the Company also took into
consideration the potential impact on stable business operations and the stock price of the Company
that could be caused by an immediate change in its shareholder composition. Then the remaining
necessary funds of 110 billion yen are to be procured by Borrowing to cover the total required fund 180
billion yen.
In case all of the Class A Preferred Shares are converted to ordinary shares, the number of voting
rights that Mitsubishi Corporation will own is 7,869,312 (Assuming there are no Class A Accumulatedand Unpaid Dividends and Class A Accrued and Unpaid Dividends) (Please see "c. Put Options andCall Options - (i) Put Options the Consideration for which is Common Shares" of "(3) Overview ofClass A Preferred Shares"). The total number of the shares with voting rights will be 9,589,050, whichis the sum of the total number of voting rights in the Company as of March 31, 2019 (i.e., 2,589,050
voting rights) and such number of voting rights to be issued upon the exercise of the put options (i.e.,
7,000,000 voting rights). As a result, Mitsubishi Corporation will own 82.06% of the shares withvoting rights. Accordingly Mitsubishi Corporation falls within the definition of the SpecificUnderwriter under Article 206-2, Paragraph 1 of the Companies Act. Regarding this point, in the Boardof Directors meeting held on May 9, 2019, the Company's Audit and Supervisory Committee expressed
the opinion that the Third-Party Allotment, which is amounting to 70 billion yen as equity funds, isrequired and reasonable considering following points: A) the Third-Party Allotment is the best option
considering the Company's situation comparing to other typical methods; B) the usage of the funds isreasonable; C) Mitsubishi Corporation is showing a strong intention to work with the Company on
improving management of the Company for long term growth.
(3) Overview of Class A Preferred Sharesa. Dividends
The preferred dividend rate (annual) for the Class A Preferred Shares is set at 3 %. If there is a
shortfall in dividend on the shareholders of Class A Preferred Shares during a fiscal year, such shortfall
will be carried over into the following fiscal year or into subsequent fiscal years. The shareholders ofClass A Preferred Shares may not receive dividends from surplus in excess of the amount of suchpreferred dividends.
The order of preference on payment of dividends from surplus between the Class A Preferred Sharesand common shares is as follows: the amount equal to the unpaid dividends carried over on the Class A

9Preferred Shares is paid first; preferred dividends on the Class A Preferred Shares are paid next; anddividends on common shares are paid last.

b. Voting Rights and Restrictions on Assignment
The Class A Preferred Shares do not have voting rights at general meetings of shareholders. Any
acquisition of the Class A Preferred Shares by transfer requires the approval of the Company's Board of
Directors.

c. Put Options and Call Options
The put options the consideration for which is common shares, put options the consideration forwhich is cash, and call options the consideration for which is cash are all attached to the Class A
Preferred Shares.
(i) Put Options the Consideration for which is Common Shares
The put options the consideration for which is common shares are attached to theClass A Preferred Shares. The put options the consideration for which is common sharesattached to the Class A Preferred Shares can be exercised on and after July 1, 2019. The
initial conversion price of the put options the consideration for which is common shares is
100 yen (hereinafter referred to as the "Initial Conversion Price").
(ii) Put options the Consideration for which is Cash
The put options the consideration for which is cash are attached to the Class A
Preferred Shares. The put options the consideration for which is cash attached to the Class
A Preferred Shares can be exercised on and after July 1, 2021, with the limit not more thanthe distributable amount, and to the extent permissible by law.
The price to be paid upon the exercise of the put option the consideration for whichis cash will be the higher of (a) or (b) below:(a)

The amount calculated by multiplying the amount equivalent to the average of thevolume weighted average prices (the "VWAPs") in regular trade of the Company's
common shares announced by the Tokyo Stock Exchange, Inc. for thirty (30)consecutive Trading Days counting from the forty-fifth (45th) Trading Day prior to
the redemption request date (If, during the abovementioned period, any of the events
provided in Section 14, Item (3) of Terms and Conditions of Class A Preferred
Shares ( the "Terms and Conditions") occurs, the average of the VWAPs mentioned
above will be adjusted to a value that the Company deems appropriate in accordancewith Section 14, Item (3) of Terms and Conditions) by the Base Number of Sharesdefined below.

10

(b)

The amount calculated by adding the amount equivalent to the accumulated andunpaid dividends and the amount equivalent to the accrued and unpaid dividends to
400 yen.

For the purpose of this (a), "Base Number of Shares" means the value calculated by first adding
the amount equivalent to the accumulated and unpaid dividends and the amount equivalent to theaccrued and unpaid dividends to 400 yen and then dividing the sum by the conversion price calculated
in accordance with Section 14, Items (2) and (3) of Terms and Conditions.
(iii) Call Options the Consideration for which is Cash
The call options the consideration for which is cash are attached to the Class A
Preferred Shares. For such call options, at any time on and after July 1, 2021, Mitsubishi
Corporation, by giving notice to shareholders of Class A Preferred Shares at least 2 weeks
in advance of the Mandatory Redemption Date (defined below), can acquire all or a part of
the Class A Preferred Shares in exchange for cash to the extent permissible under law andregulation on the arrival date separately determined by the Company's Board of Directors
meeting ("Mandatory Redemption Date").
The price per share of the Class A Preferred Shares to be paid upon the exercise of
the call option the consideration for which is cash will be the higher of (a) or (b) below:(a)

The amount calculated by multiplying the amount equivalent to the average of the
VWAPs for thirty (30) consecutive Trading Days counting from the forty-fifth (45th)
Trading Day prior to the mandatory redemption date (If, during the abovementioned
period, any of the events provided in Section 14, Item (3) of Terms and Conditions
occurs, the average of the VWAPs mentioned above will be adjusted to a value that
the Company deems appropriate in accordance with Section 14, Item (3) of Terms
and Conditions) by the Base Number of Shares defined below.

(b) The amount calculated by adding the amount equivalent to the accumulated andunpaid dividends and the amount equivalent to the accrued and unpaid dividends to
400 yen.
For the purpose of this (a), "Base Number of Shares" means the value calculated byfirst adding the amount equivalent to the accumulated and unpaid dividends and the amountequivalent to the accrued and unpaid dividends to 400 yen and then dividing the sum by theconversion price calculated in accordance with Section 14, Items (2) and (3) of Terms andConditions.
For more details of the Class A Preferred Shares, please see Appendix 1, "Terms and11Conditions of Class A Preferred Shares."(4) Measures Assumed in connection with the Financing Plan
Mitsubishi Corporation is underwriting the Third-Party Allotment and a wholly owning parent
company of the one of the lenders for the Borrowing, is not the Company's controlling shareholder.
However, taking into account the fact that Mitsubishi Corporation holds 86,931,220 common shares of
the Company (33.57% of the total voting rights), and that it dispatches one of its directors to theCompany, the Company assumed the following measures in the interest of the shareholders, to ensure
fairness of the Third-Party Allotment, and to avoid conflicts of interest.
(i) A share value calculation report was obtained from a third-party evaluation organization
independent from Mitsubishi Corporation
Please see "(1) Calculation Ground for the amount of Third-Party Allotment - B. The
Company Has Obtained a Share Valuation Report from a Third-Party Valuation Institution" of"5. Reasonableness of Issuing Conditions" below.
(ii) Opinions were obtained from independent directors who have no conflicts of interest
Please see "9. Matters Regarding the Procedures of Ethical Actions of a Corporate"
below.
(iii) Advice was obtained from a law firm independent from Mitsubishi Corporation
The Company has retained Anderson Mori & Tomotsune, a Japanese law firm
independent from Mitsubishi Corporation, as the Company's legal adviser, and obtainednecessary legal advice on the methods and processes of decision-making at the meeting ofBoard of Directors and on other matters, in order to ensure fairness and transparency of the
Financing Plan.
(iv) Approval from all directors (including the members of Audit and Supervisory Committee)
who have no conflicts of interest.
At the Board of Directors meeting held May 9, 2019 regarding the Third-Party
Allotment, the above resolution was unanimously made by all eight directors (including themembers of Audit and Supervisory Committee) out of fourteen directors of the Company,
where Mr. Hiroshi Sakuma who concurrently serves as an adviser for Mitsubishi Corporation,
Mr. Masaji Santo, Masahiko Kojima, Takahiro Kitamoto, and Tetsuya Aiba who previously
12served as an employee of Mitsubishi Corporation, and Mr. Hirotsugu Hayashi who served as
an employee of Mitsubishi Tokyo UFJ Bank (MUFG Bank at present), abstained, in order toenhance fairness, transparency and objectivity, and to avoid conflict of interest in thedecision-making.
3. Amounts, Usage and Planned Schedule for Expenditure(1) Amounts of Financing Plan
The Company expects to procure 180,000,000,000 yen in total by the Financing Plan as detailed
below.
(i) Amount of Funds to be procured from the planned Third-Party Allotment
Total Amount to be paid in (yen)

Estimated issuance expenses

Estimated retained balance

(yen)

(yen)

70,000,000,000(Notes) 1

977,750,000

69,022,250,000"Estimated issuance expenses" does not include consumption taxes.

2

The breakdown of estimated issuance expenses is costs for due diligence, registration
costs, fees for share value calculation, attorneys' fees, and financial advisers' fees. Suchprofessional advisors' fees include advice on the terms and conditions of the Third-Party
Allotment.

(ii) Amount of Funds to be procured from the Borrowing
The amount of funds to be procured from the Borrowing is 110,000,000,000 yen in total.
(2) Specific Usage of Funds to be Procured and Planned Schedule for ExpenditureSpecific usage

Amounts(i) Procurement of working capital for ongoingprojects and future projects:(ii) Implementation of restructuring for cost
reduction:(iii) Investment in IT for improving construction
efficiency:

174,000 million
yen
3,000 million
yen
3,000 million
yen(Notes)Planned time of
expenditure
July 2019 to March 2022
By December 2020
By December 2020

1

Funds will be firmly managed in a bank account until disbursement.

2

70,000,000,000 yen out of the 180,000,000,000 yen to be procured from the Financing
Plan will be fully used for "(i) Procurement of working capital for ongoing projects andfuture projects" in light of the urgent need of working capital.

(i)

Procurement of Working Capital for Ongoing Projects and Future Projects
As described in "(1) Background of the Financing Plan - a. The Company's Financial Status13

and the Necessity for Financing Plan" of "2. Purpose and Rationale behind the Financing Plan", in the
consolidated results for the fiscal year ended March 2019, the Company recorded a net loss of 215
billion yen attributable to shareholders of the parent company and a free cash flow of 37 billion yen(negative) due to: (i) significantly increased labor related costs for the Cameron LNG Project arisingout of the shortage of site workers, especially skilled craftsman because of the restart of developmentof shale gas in the U.S. as a result of increase in oil price, and the commencement of full-scalereconstruction work after Hurricane Harvey hit the Gulf of Mexico in the summer of 2017; (ii)significantly increased costs resulting from low productivity at the site due to the remote site location
which resulted in the high turnover rate; (iii) unexpected increased costs arising out of multiple
reworks in the Cameron LNG Project which is in the final stage for the construction of the firstliquefaction train; (iv) increased costs of the Cameron LNG Project in relation to the constructions of
the second and third liquefaction trains on the Company's assumption that the same additional costs as
the construction of the first liquefaction train will arise since the Company cannot expect the
productivity in the site to increase due to the turnover rate which is higher than the Company expected:
and (v) increased costs of the Tangguh LNG Project that were recorded after the Company's review inorder to minimize delays in progress caused by multiple factors. The Company will allocate funds fromthe Third-Party Allotment to these projects. In the meantime, the Company will continue negotiations
with the clients of these Projects to recover additional costs.
With regard to the Cameron LNG Project, after recording a significant loss in October 2018, theCompany has made efforts to improve the productivity of construction sites while concurrently
conducting reviews to ensure proper actual budget. Although the Company has recorded further losses,
we will continue to exert our efforts to save costs by further negotiations with the client andimprovement of construction productivity so that we can minimize the funds to be used for this projectin the future.
With regard to Tangguh LNG Project, its progress is significantly affected by multiple factors.
While we are currently continuing to negotiate with clients concerning collection of costs that are
required to minimize the effects therefrom, the procured funds will be used to cover the required
additional costs.
In addition, in the consolidated financial results for the fiscal year ended March 2019, we haverecorded 1,016 billion yen as consolidated backlog of contracts. Although we have generally madesteady progress in projects awarded in 2018 and onwards and there is no issue in their profitability,
fund requirements such as advance payment on behalf of the clients exists for certain projects due totemporary differences in cash inflow and the cash outflow.
With regard to new contracts from this year onward, strong demand for LNG is expected tocontinue, and requests for proposals from clients remain active. Under such circumstances, we expect
to receive orders of large LNG projects as planned. However, since we perform large LNG projects
through joint ventures and similar forms, in general, margins are retained at joint ventures accounts
until the late stage of the project and accordingly, expenses are expected to temporarily exceed profits14

in light of the Company's cash flow. We, therefore, expect demand for funds from this perspective too.
In carrying out these ongoing projects and future projects, we will make utmost efforts tominimize such negative cash flow cases as much as possible. However, considering the above
mentioned potential demand for funds, the Company believes that it is necessary to secure a substantial
amount of liquidity for smooth project execution. Thus, the procured funds will also be allotted for thispurpose.
(ii)

Implementation of Restructuring for Cost Reduction

The Company plans to further reduce its General and Administrative Expense, and shrink 50%
of its oversea operation and optimize domestic group companies by carve out or closure of part ofbusinesses. The Company will spend the funds from Financing Plan for any temporary expenses
arising from execution of these actions.
(iii)

Investment in IT for Improving Construction Efficiency
As described in the "Notice of the Start of Digital Technology for Enhancement of the

Efficiency in Promoting Construction" dated March 25, 2019, which the Company announced on its
website, the Company has developed digital technology to improve efficient management of materials,
mobilization of workers and operations at construction sites. The Company intends to enhance this new
project management program (AWP) to strengthen its competitiveness against competitors and enhance
the Company's profitability as well as risk management capability. The Company will spend the funds
for this purpose.
(Note) 1. AWP (Advanced Work Packaging) is an approach for project management that wasissued by Construction Industry Institute in the U.S. as its best practice led byconstruction companies and plant owners.
4. Reasonableness of Use of Proceeds
As indicated above in "2. Purpose and Rationale behind the Financing Plan", the Company considers
that the use of the funds from the Financing Plan is reasonable, as the Financing Plan is indispensable
to end the Company’s capital deficit and resolve substantial doubts concerning the Company's ability
to continue as a going concern. At the same time, the use of the proceeds will also help improve theCompany's earnings structure.
5. Reasonableness of Issuing Conditions(1) Calculation Ground for the amount of Third-Party Allotment
A. Specific Contents of the Amount to Be Paid in
The Company held good faith discussions with each of the potential sponsors regarding the method
and related terms and conditions for financial assistance in the Company. During such discussions, the15results of due diligence, financial condition of the Company, demands on funds, and stock price ofcommon share of the Company had been considered. The Company put priorities on required amountof funds as well as timeline for closing the financing as the Company's financial condition wasdesperately critical. Under such situation, Mitsubishi Corporation's, proposal was the most in line with
the Company's request and the only viable option given the Company's severe financial conditions andrequired timeline, and the amount to be paid in for the Class A Preferred Shares was determined to be
400 yen per share. The amount to be paid in for the Class A Preferred Shares was finally agreed upon
as a result of faithful discussions and negotiations with Mitsubishi Corporation based also on the
results of discussions with several potential sponsors. Given the Company's circumstance in which
equity financing in a scale of 70 billion yen is necessary in order to resolve the capital deficit, we havedetermined the amount to be paid in for the Class A Preferred Shares to be the most favorable condition
for the Company at this point in time.
In addition, the Company considers it is a reasonable price even considering the Share Valuation
Report obtained from the third-party valuation institution as stated in "B. The Company Has Obtained
a Share Valuation Report from a Third-Party Valuation Institution" and "C. Determination of the boardof directors of the Company regarding the amount to be paid in based on the Share Valuation Report"
below. However, there might be a various thoughts as to the valuation of the Class A Preferred Shares
since the Class A Preferred Shares do not have a market value and the valuation of class shares is verymuch complex, which leaves the possibility that different views exist regarding valuation of classshares. Considering these, since the Company cannot completely deny the possibility that the amountto be paid in for the Class A Preferred Shares will be considered as an amount especially favorable to
Mitsubishi Corporation under the Companies Act, the Company considers it appropriate to confirm theintention of the shareholders, and decided that the issue of the Class A Preferred Shares through theThird-Party Allotment will be subject to the approval of the Ordinary General Meeting of Shareholders
by special resolution.
B. The Company Has Obtained a Share Valuation Report from a Third-Party Valuation
Institution
In determining the amount to be paid in for the Class A Preferred Shares based on the results ofdiscussions and negotiations with Mitsubishi Corporation, and for reference in shareholders' exercising
their voting rights at the Ordinary General Meeting of Shareholders, the Company requested PLUTUS
CONSULTING Co., Ltd. ("PLUTUS"), a third-party appraiser, to evaluate the share value of the Class
A Preferred Shares and to submit to the Company a report. The Company obtained a valuation report(the "Share Valuation Report") on May 8, 2019. PLUTUS, a third-party appraiser, does not fall under
any related party of the Company or Mitsubishi Corporation and has no material interest to be noted inconnection with the Third-Party Allotment. After considering the valuation method for the share valueof the Class A Preferred Shares, PLUTUS adopted the evaluation approach of Monte Carlo simulation,
16

which is a common valuation method used for the evaluation. PLUTUS evaluated the fair value of theClass A Preferred Shares by setting certain assumption regarding, among others, the Initial Conversion
Price, timing of the exercise of the put options the consideration for which is common shares of theCompany or cash, the price of the common shares of the Company, volatilities of the common shares,
the dividend yield, the risk free rate and the discount rate. According to the Share Valuation Report, theprice of the Class A Preferred Shares per share, which was calculated based on stock price (closing
price) of the common shares of the Company as of May 8, 2019, is 1,210 yen. The per share price for
the Class A Preferred Shares (i.e., 400 yen) represents a 66.94% discount against the valuation price of
the Class A Preferred Shares.
Since there might be a various thoughts as to the valuation of the Class A Preferred Shares since theClass A Preferred Shares do not have the market value and the valuation is very much complex, theCompany also received the valuation for the common share of the Company for the reference purposes
ranging from 100 yen to 399 yen. Based on these reference numbers, the valuation of the Class A
Preferred Shares are from 500 yen to 1,630 yen.
C. Decision of the Board of Directors on Financing Plan
Based on the Share Valuation Report, the amount to be paid in might be considered as a favorable
price to Mitsubishi Corporation. However, also according to the Share Valuation Report, assuming thatthe stock price of the common shares of the Company will become lower than the stock price as of
May 8, 2019 (i.e., the record date of the Share Valuation Report), the value of the Class A Preferred
Shares is expected to be further lowered.
As described in "(1) Background of the Financing Plan - a. The Company's Financial Status and theNecessity for Large-scale Funding" of "2. Purpose and Rationale behind the Financing Plan", theCompany admits that there are some factors including below which were not considered in the Share
Valuation Report and the Company also admits that Mitsubishi Corporation considers these factors inconsidering the amount to be paid in the Class A Preferred Shares:
A) It is possible that the stock price of the common shares of the Company as of May 8, 2019 does
not fully reflect the impact arising out of Company's press release reporting the capital deficit of theCompany as it is possible that the stock price of the common shares of the Company as of May 8, 2019is based on the substantial expectations for contribution by Mitsubishi Corporation. As the Company
announced on May 6, 2019, which is the immediately preceding day that the downward adjustments to
the results to reflect the Company's deficit was officially announced, it has been reported that
Mitsubishi Corporation and MUFG Bank have decided to jointly make an investment of over 150
billion yen in the Company. Thus, the stock price of the common shares of the Company may not fullyreflect the capital deficit of the Company;B) It is highly likely that the Company will proceed to the statutory liquidation procedure if theCompany does not accept the terms and conditions of the Class A Preferred Shares;17C) The proposal was a reasonable method to revitalize the Company as the interest rate of theborrowing proposed along with the Class A Preferred Shares is at a reasonable level in light of the factthat the Company is in capital deficit; andD) the total amounts to be paid in provides the sufficient liquidity with the Company for its business
operation.
As described in "(1) Background to the Financing Plan" and "(2) Reason for Selecting the
Financing Plan" of "2. Purpose and Reason for the Financing Plan", given that the Company needs to
conduct the financing in order to end the capital deficit of the Company, resolve the notes on going
concern assumption and improve its financial status at an early stage by improving the liquidity, theCompany considers that the Third-Party Allotment Method is the best option based on its current
situation compared to other common funding options. In addition, the proposal of a third-party
allotment from Mitsubishi Corporation was the only one proposal which the Company considers after
the negotiation with multiple potential sponsors. In light of above, the Company believes that theamount to be paid in for the Class A Preferred Shares through the Third-Party Allotment will increase
the corporate value and shareholder value and will not be disadvantageous to minority shareholders of
the Company.
As described in "(1) Background to the Financing Plan" and "(4) Measures Assumed in connection
with the Financing Plan" of "2. Purpose and Reason for the Financing Plan", "A. Specific Contents of
the Amount to Be Paid In" and "(2) Grounds on which the Company Determined that the Numbers to
Be Issued and the Size of the Share Dilution is Reasonable", while the Company admits theThird-Party Allotment might cause substantial dilution, given the Share Valuation Report and theCompany's thought that the number of shares to be issued in the Third-Party Allotment and the scale ofdilution is reasonable, the Company considers that the Third-Party Allotment will not be unprofitable
for minority shareholders of the Company. As such, the Company concluded that the term of theamount to be paid in is reasonable.
(2) Rationale for Determining that the Size of the Potential Share Dilution is Reasonable.
The Class A Preferred Shares to be allotted to Mitsubishi Corporation do not have voting rights at
the Company's general meeting of shareholders. However, dilution might occur for existing
shareholders if Mitsubishi Corporation exercises the put option attached to the Class A Preferred
Shares to convert them to common shares of the Company. If such put option is assumed to be
exercised regarding the entire the Class A Preferred Shares where the accumulated unpaid dividends
and the accrued unpaid dividends of the Class A Preferred Shares do not exist, the number of theCompany's common shares with voting rights would be 700,000,000. As the Company's existing
common shares are 260,324,529, accordingly, 269% dilution could potentially occur. The exercise of
the put options attached to Class A Preferred Shares, the consideration for which is the common sharesof the Company, large dilution is expected to occur.
The purpose of the Third-Party Allotment, is to recover from the Company's capital deficits and18

remove notes about the Company's ability to continue as an ongoing concern. The Company considers
this will lead to the achievement of a solid business and financial base for the entire Company that canrealize medium- and long-term growth, and eventually contribute to improving the Company's
medium- and long-term corporate value and shareholder value. In addition, the Company believes that
establishing a strong transactional relationship with, Mitsubishi Corporation will further stabilize its
business base, and contribute to the improvement of the Company's corporate value and shareholder
value.
In addition, (i) while the Third-Party Allotment will issue equities at a large scale, such issuance is at
a scale that the Company considers necessary to end the Company's capital deficit, (ii) the Third-Party
Allotment to Mitsubishi Corporation is considered to be the most appropriate financing method
compared to other financing methods, and (iii) the amount to be paid in is considered to be the mostfavorable terms and conditions for the Company and the existing shareholders at this point in time inlight of the severe financial conditions of the Company, discussions with several potential sponsors
over the possibility of support and the result of the discussions and negotiations with Mitsubishi
Corporation. Based on these factors, the Third-Party Allotment is the best terms for the Company atthis point in time, and, even considering the possible large dilution resulting from the Third-Party
Allotment, the Company determines that the scale of dilution and the number of shares of theThird-Party Allotment is rational.

19

6. Reasons for Selecting Planned Allottee, etc.
(1) Outline of Planned Allottee
(1)

Name:

Mitsubishi Corporation(2)

Address:

3-1, Marunouchi 2-Chome, Chiyoda-ku, Tokyo(3)

Title and Name ofRepresentative:

President and CEO: Takehiko Kakiuchi
Sale and production of various products including energy, metals,(4)

Business:machinery, chemicals and living essentials products, development of
natural resources, infrastructure related business, and finance andlogistics business(5)

Paid in Capital:

204,446,667,326 yen (As of September 30, 2018)(6)

Date of Registration:

April 1, 1950 (Date of Establishment: July 1, 1954)(7)

Number of Issued Shares:

1,590,076,851shares (As of September 30, 2018)(8)

Fiscal Year End:

March

(9)

Number of Employees:

77,476 (Consolidated) (As of March 31, 2018)(10)

Major Customers:

Corporations within and outside Japan(11)

Main Banks:

MUFG Bank, Ltd. and Mizuho Bank, Ltd.
Japan Trustee Services Bank, Ltd.: 8.89%(12)Major Shareholders and

The Master Trust Bank of Japan, Ltd.: 5.97%

Percentage of Shares:

Tokio Marine & Nichido Fire Insurance Co., Ltd.: 4.50%(As of September 30, 2018)

Relationships between the(13)

Company and Planned
Allottee:
Capital relationship:

Mitsubishi Corporation directly owns 86,931,220 common shares(33.57% of total voting rights) of the Company.
Mr. Hiroshi Sakuma, who was an executive officer of Mitsubishi

Personnel relationship:

Corporation until March 31, 2019 and is an adviser of Mitsubishi
Corporation from April 1, 2019 also serves as a director of theCompany.

Business relationship:

Status as a related party:

The Company has transactions with Mitsubishi Corporation withrespect to the industrial plant and infrastructure area etc.

The Company is an equity-method affiliate of the Planned Allottee.

20(14) Operating Results and Financial Status for the Last Three Fiscal Years(Based on IFRS) (Consolidated) (in millions yen, except for special notes):
Fiscal Year Ended:

March 2016

March 2017

March 2018

Total Equity:

5,017,522

5,789,011

6,265,211

Total Assets:

14,916,256

15,753,557

16,036,989

2,898.23

3,101.43

3,362.34

Revenues:

6,925,582

6,425,761

7,567,394

Profit (loss) before Tax:

(92,823)

601,440

812,722

Profit (loss) for the Year:(132,664)

480,074

610,416(149,395)

440,293

560,173(93.68)277.79353.27

50.00

80.00

110.00Equity per Share Attributable to
Owners of the Parent (yen):

Profit (loss) for the Year
Attributable to Owners of the
Parent:Profit (loss) for the Year
Attributable to Owners of the
Parent per Share (yen):
Cash Dividends per Share (yen):(Notes) 1. The information in the column "Relationships between the Company and Planned Allottee" isas of March 31, 2019.
2. Mitsubishi Corporation is a listed company on the First Section of the TSE. Based on thecorporate governance report submitted by Mitsubishi Corporation to the TSE dated
December 21, 2018, the Company confirmed that Mitsubishi Corporation has established abasic policy against anti-social forces in which Mitsubishi Corporation is committed totaking a firm stance against anti-social forces and not giving any profits to them (the"Policy"), that Mitsubishi Corporation has ensured, by obtaining a written commitment, that
all officers and employees are familiarized with the " Mitsubishi Corporation Code of
Conduct," which stipulates the Policy, and that Mitsubishi Corporation has established asystem to promptly respond to unexpected situations related to anti-social forces throughsetting up a special department to maintain the close cooperation with external specialized
agencies on a regular basis and promoting the adoption of a clause to combat anti-social
forces in contracts and other related documents. Accordingly, the Company considers that
Mitsubishi Corporation and its directors and major shareholders are not anti-social forces,
nor do they have any relationships with anti-social forces.
3.

Mitsubishi Corporation will announce its consolidated operating results and consolidated
financial status for the fiscal year ended March 2019 today.

21(2) Reasons for Selecting Mitsubishi Corporation
Please see "2. Purpose and Rationale behind the Financing Plan" for an explanation of why theCompany decided to select Mitsubishi Corporation.
(3) Mitsubishi Corporation's Policy for Share Holding
While there is no limitation on the exercise period for the put options attached to the Class A
Preferred Shares for conversion into common shares of the Company, the Company understands that,at the present moment, Mitsubishi Corporation does not have an intention to exercise the put options
immediately and sell the common shares issued to Mitsubishi Corporation through the exercise of theput options. Also, the Company understands that Mitsubishi Corporation intends to assist the Company
in achieving its growth and increasing its corporate value with a medium- to long-term perspective.
The Company will obtain a confirmation letter from Mitsubishi Corporation in which Mitsubishi
Corporation agrees that: (i) when Mitsubishi Corporation transfers all or part of the Class A Preferred
Shares issued by the Company by way of Third-Party Allotment within two years from the payment
date, Mitsubishi Corporation will immediately inform the Company of the name and address of thetransferee, the number of the Class A Preferred Shares so transferred, the transfer price, the reasons forthe transfer and the transaction scheme for the transfer; (ii) the Company will report them to the TSE,and (iii) the reported information will be disclosed to the public. The Company will then submit theconfirmation letter to the TSE.
(4) Contents Confirmed with respect to the Funds Required for the Payment by Mitsubishi Corporation
Based on the amount of the consolidated revenue, total assets, total paid in capital, cash and cash
equivalents, and term deposits as stated in the Third Quarterly Securities Report for the third quarter offiscal year 2018 dated February 14, 2019 (i.e., revenue of 12,188,279 million yen, total assets of
16,807,092 million yen, total capital of 6,480,975 million yen, cash and cash equivalents plus term
deposits of 1,522,722 million yen), which is the most recent quarterly report submitted by Mitsubishi
Corporation to the Director General of Kanto Local Financial Bureau, the Company considers that
there will be no hindrance to the payment of the amount to be paid in for the Third-Party Allotment by
Mitsubishi Corporation.
(5) Contracts Regarding the Lending and Borrowing of Shares
Not applicable.
7. Major Shareholders and Percentages of Shares Held after the Third-Party Allotment(1) Common Shares
Prior to the Third-Party Allotment

After the Third-Party Allotment(As of March 31, 2019)22

Mitsubishi Corporation

33.39%The Master Trust Bank of Japan, Ltd.

3.95%

Same as on the left

(Trust Account)
MUFG Bank, Ltd

3.47%

Northern Trust Co. (AVFC) Re

3.21%

Silchester International Investers
International Value Equity Trust
Japan Trustee Services Bank, Ltd.

1.84%

(Trust Account)Northern Trust Co, (AVFC) Re U.S.

1.72%

Tax Exempted Pension Funds
Mitsubishi UFJ Trust and Banking

1.64%

Corporation
BNY GCM Client Account JPRD AC

1.35%

ISG (FE-AC)
Japan Trustee Services Bank, Ltd.

1.21%

(Trust Account 5)
Credit Suisse AG, Dublin Branch

1.15%

Main Equity Account(2) Class A Preferred Shares
Prior to the Third-Party Allotment

After the Third-Party Allotment(As of March 31, 2019)
Not applicable

Mitsubishi Corporation

100.00%8. Future Outlook
The impact of the Financing Plan on the Company's financial results for the fiscal year ending
March 31, 2020 has been incorporated into the consolidated financial forecasts for the fiscal year
ending March 31, 2020 in the "Consolidated Financial Results for the Fiscal Year Ended March 31,
2019 (Japanese GAAP)" announced May 9, 2019.
9. Matters Regarding the Procedures of Ethical Actions of a Corporate
Because the Third-Party Allotment will cause dilution at a rate of 25% or more and the conversion ofClass A Preferred Shares to common shares in the Company will cause a change in the Company's
controlling shareholder, it would be needed to obtain an opinion from an independent third-party or
confirm the intent of shareholders in compliance with Rule 432 of the Securities Listing Regulations
established by the TSE. Therefore, the Company plans to obtain a shareholders' approval about the23

Third-Party Allotment by a special resolution at the Ordinary General Meeting of Shareholders.
In addition, in light of the magnitude of the impact on the existing shareholders, the Company
appointed Mr. Nobuo Tanaka, a director of the Company, and Mr. Mikio Kobayashi, Mr. Hiroshi
Yamaguch and Ms. Mika Narahashi (There four directors are outside directors who have been notified
to the TSE as independent officers of the Company and are members of Audit and Supervisory
Committee and directors of the Company who are to a certain extent independent from the manager of
the Company), in order to ensure fairness, transparency and objectivity in the decision-making processof the Company. The Company consulted them on the Third-Party Allotment, and received thefollowing opinions as of today.
(1) Conclusion
The Third-Party Allotment is deemed necessary and appropriate, and the Third-Party Allotment shallnot necessarily be deemed disadvantageous to minority shareholders of the Company.
(2) Reasons(i) Necessity of the Third Party Allotmenta. Financing needs
It is difficult to resolve the Company's financial difficulties and fundamentally improve its
earnings structure without the prompt large-scale financing. The Company is in a situation where,
if it were not able to implement fundamental reform including the improvement of cash flow, it
would be difficult to continue its business activities, its financial condition would be in an evenmore difficult position, and its stock price might be significantly impaired. Therefore, there arehigh financing needs at the Company. In addition, financing through the Third-Party Allotment isalso necessary for resolving the capital deficit and the substantial uncertainties with respect to thegoing concern assumption, and at the same time contributes to the improvement of the earnings
structure. Accordingly, it is determined that the use of funds raised by the Financing Plan isreasonable.
b. Necessity of using the Third-Party Allotment
As stated above, the most important factor is to raise equity funds certainly and promptly inthe desired time frame in order to eliminate the capital deficit of the Company and improve thefinancial condition by improving cash flow, given the Company's business performance condition
and financial condition.
An equity finance by way of a third-party allotment is the most reliable means for procuring
the required amount and might be the most effective option for the Company if an appropriate
sponsor can be selected. While the Company has had intensive discussions with a number ofpotential sponsors on the possibility for support including financial support such as contribution,
there is no potential sponsor, except for Mitsubishi Corporation, which is capable of undertaking

24the same scale of supply of funds as Mitsubishi Corporation, whether solely or jointly by multiple
sponsors. It is found that there is no better practical financing means other than the combinationof the Third-Party Allotment and Borrowing. Therefore, at this point in time, it would be the best
option for the Company to raise funds totaling 180 billion yen of which 70 billion yen which isnecessary to eliminate the capital deficit will be raised by way of third-party allotment by issuing
Class A Preferred Shares to Mitsubishi Corporation and the remaining amount will be raised by
way of borrowing.
c. Summary
As stated above, since there is a need for financing at the Company, and such financing isneeded to be made by way of third-party allotment, we believe that the Third-Party Allotment isnecessary.
(ii) Reasonableness of the Third-Party Allotmenta. Amount to be paid in and its decision making process
The amount to be paid in for the Class A Preferred Shares was finally agreed upon as aresult of faithful discussions and negotiations with Mitsubishi Corporation based also on the
results of discussions with several potential sponsors. Given the Company's circumstance inwhich equity financing in a scale of 70 billion yen is necessary in order to resolve the capital
deficit, the Company has determined the amount to be paid in for the Class A Preferred Shares tobe the most favorable condition for the Company at this point in time.
There might be a various thoughts as to the valuation of the Class A Preferred Shares since
the Class A Preferred Shares do not have a market value and the valuation of class shares is verymuch complex. The Share Valuation Report, which the Company obtained from a third-party
appraiser, points out that, based on the closing price of the common shares of the Company as of
May 8, 2019 (i.e., record date of the Share Valuation Report), the Third-Party Allotment is
considered substantially beneficial to Mitsubishi Corporation. Meanwhile, it is possible that thestock price of the common shares of the Company as of May 8, 2019 is based on the substantial
expectations for contribution by Mitsubishi Corporation, as it has been reported before May 8,
2019 that Mitsubishi Corporation and MUFG Bank have decided to jointly make an investment ofover 150 billion yen in the Company. According to the Share Valuation Report, if the stock price
had reflected the real corporate value of the Company that is in deficit, it would have become
even lower and the value of the Class A Preferred Share would have become lower.
In light of above, we believe that in order to examine the reasonableness of the issue priceof the Class A Preferred Shares, decisions must be made based on comprehensive consideration of
the following factors: (i) while the stock price of the common shares of the Company as of May 8,
2019 may be based on the substantial expectations for contribution by Mitsubishi Corporation, it
may not fully reflect the capital deficit of the Company, since the downward adjustments to the25results to reflect the Company's deficit was officially announced on the day following the reportthat Mitsubishi Corporation and MUFG Bank have decided to jointly make an investment of over
150 billion yen in the Company, (ii) it is highly likely that the Company will proceed to thestatutory liquidation procedure and the value of the common shares of the Company becomeszero if the Company does not accept the terms and conditions of the Class A Preferred Shares,(iii) the proposal was a reasonable method to revitalize the Company as the interest rate of theborrowing proposed along with the Class A Preferred Shares is at a reasonable level in light of thecapital deficit of the Company, and (iv) the total amounts to be paid in provides the sufficientliquidity with the Company for its business operation.
Furthermore, as the expected dilution ratio resulting from the conversion of the Class A
Preferred Shares into common shares of the Company does not exceed 300 percent, and does notconstitute the delisting criteria set forth by TSE, the interests of the existing shareholders havebeen protected to some degrees by maintaining the listing.
Nevertheless, since the Company cannot completely deny the possibility that the amount tobe paid in for the Class A Preferred Shares will be considered as an amount especially favorable
to Mitsubishi Corporation under the Companies Act, the Company considers it appropriate toconfirm the intention of the shareholders, and decided that the issue of the Class A Preferred
Shares through the Third-Party Allotment will be subject to the approval of the Ordinary General
Meeting of Shareholders by special resolution.
After the comprehensive consideration of terms and situations above, even though the
per-share amount to be paid in is significantly lower than the price per Class A Preferred Sharedescribed in the Share Valuation Report, the amount to be paid in for the Class A Preferred Shareis deemed reasonable and rationale.
b. Dilution
Through the exercise of the put options attached to Class A Preferred Shares, theconsideration for which is the common shares of the Company, large dilution is expected to occur.
On the other hand, (i) while the Third-Party Allotment will issue equities at a large scale,such issuance is at a scale that the Company considers necessary to realize the financing, (ii) the
Third-Party Allotment to the Planned Allottee is considered to be the most appropriate financing
method compared to other financing methods, (iii) the amount to be paid in is considered to be themost favorable terms and conditions for the Company and the existing shareholders at this point
in time in light of the severe financial conditions of the Company, discussions with several
potential sponsors over the possibility of support and the result of the discussions and negotiations
with Mitsubishi Corporation, and is appropriate even in light of the valuation of the share price of
the Company provided in the Share Valuation Report. Based on these factors, the Third-Party
Allotment is reasonable even considering the possible large dilution resulting from theThird-Party Allotment.

26

c. Whether sufficient attention has been paid to the interests of the existing shareholders throughfair procedures
While Mitsubishi Corporation, the allottee of the Third-Party Allotment, is not a controllingshareholder of the Company, considering that Mitsubishi Corporation is the Company's largest
shareholder which holds 86,931,220 common shares (33.57% of the total number of voting rightsof the Company), and that the Company accepts the secondment of one director from Mitsubishi
Corporation, the Company has, by taking the following measures for avoiding conflicts ofinterests and for ensuring fairness of the Third-Party Allotment, made a decision on the
Third-Party Allotment for the benefit of its shareholders.
(a)Obtaining the Share Valuation Report from a third-party appraiser independent from
Mitsubishi Corporation(b)

Obtaining advice from Anderson Mori & Tomotsune, a Japanese law firm
independent from Mitsubishi Corporation(c)Finally obtaining approval from all the directors (including the members of Audit
and Supervisory Committee) having no interest

In light of the above measures, we believe that the Third-Party Allotment is based on fair
procedures, and sufficient attention has been paid to the interests of the existing shareholders.
d. Summary
As stated above, considering that the conditions of the Third-Party Allotment are rational,
and sufficient attention has been paid to the interests of the existing shareholders through fair
procedures, the Third-Party Allotment is reasonable.
(iii) Whether the Third-Party Allotment is disadvantageous to minority shareholders
As stated in "(i) Necessity of the Third-Party Allotment" above, considering that the Company
needs to raise funds through the Third-Party Allotment, we believe that the Third-Party Allotment
will enhance the corporate value of the Company.
In addition, as stated in "(ii) Reasonableness of the Third-Party Allotment", the conditions of
the Third-Party Allotment including the amount to be paid in are rationale, and sufficient attention
has been paid to the interests of the existing shareholders through fair procedures.
In conclusion, the Third-Party Allotment is not particularly disadvantageous to the shareholders
other than Mitsubishi Corporation.
10. Business Results for and Status of Equity Finance Executed in Previous Three Fiscal Years(1) Business Results for Previous Three Years (on a consolidated basis) (in millions yen, except for
special notes)

27

Ended March,

Ended March,

Ended March,

2017

2018

2019

Net Sales

603,745

510,873

341,952

Operating Income (loss)

15,68012,330)199,795)

Ordinary Income (loss)

3,080)

10,100)

192,998)

Net Income (loss)

41,116)

6,445

214,948)

Net Income (loss) per Share (yen)158.76)24.89

830.02)

6.00

7.50

0.00

599.83608.41

232.13)

Dividend per Share (yen)Consolidated Net Assets per Share(yen)(2) Current Number of Issued Shares and Number of Dilutive Shares (as of March 31, 2019)Type

Ratio to Total Number of

Number of Shares

Number of Issued Shares

Issued Shares

260,324,529

100.00%700,000,000

268.89%

－

－

－

－

Number of Potential Shares at
Current Conversion Price (exercise
price)
Number of Potential Shares at
Minimum Conversion Price (exercise
price)
Number of Potential Shares at
Maximum Conversion Price (exercise
price)(3) Recent Stock Prices(i) Stock Prices for Recent Three Years
Ended March, 2017

Ended March, 2018

Ended March, 2019

Opening (yen)

830

726

1,007

High (yen)

933

1,110

1,150

Low (yen)

611

537

250

Closing (yen)

718

1,004

264

(ii) Stock Prices for Recent Six Months

Opening(yen)

November

DecemberJanuary

February

March

April

462

321

302

328

315

271

28

High (yen)

462

342

363

393

323

388

Low (yen)

306

250

286

290

263

270

322

310

330

309

264

352

Closing(yen)(iii) Stock Price on the Business Day Immediately Preceding the Date of Resolution Authorizing theIssuance
May 8, 2019
Opening (yen)305High (yen)306

Low (yen)

292

Closing (yen)299(4) Equity Finance for Recent Three Years
N/A
11. Terms and Conditions of Issuance
Please see Appendix 1 "Terms and Conditions of Class A Preferred Shares".

29

II. Partial Amendment to the Articles of Incorporation
1. Purpose of the Partial Amendment to the Articles of Incorporation
The Company proposes to amend the Articles of Incorporation in order to issue Class A
Preferred Shares as an additional equity security available to the Company and to add corresponding
articles to address the Class A Preferred Shares (the "Partial Amendment 1").
Also, the company proposes to amend the Articles of Incorporation which has reflected thePartial Amendment 1 in order to further increase the total number of common shares and class A sharesauthorized to be issued under Article 6 of the Articles of Incorporation which enables the Company toissue the common shares upon the exercise of the put options (the "Partial Amendment 2"). The Partial
Amendment 2 is subject to the approvals of the Ordinary General Meeting of Shareholders of theThird-Party Allotment and Partial Amendment 1, and issuance of the Class A Preferred Shares pursuant
to the Third-Party Allotment.
2. Contents of the Partial Amendments to the Articles of Incorporation.
Please see the Appendix 2 and Appendix 3 of the Japanese press releases announced today forthe details of the Partial Amendment 1 and Partial Amendment 2.
3. Schedule of the Partial Amendment to the Articles of Incorporation

Board of Directors' resolution submit the proposed Partial Amendment 1
and Partial Amendment 2 to the Articles of Incorporation to the Ordinary

May 9, 2019

General Meeting of Shareholders
Resolution of the Ordinary General Meeting of Shareholders

June 25, 2019

Effective date of the Partial Amendment 1 (scheduled)

June 25, 2019

Issuance of Class A Preferred Shares (scheduled)

July 1, 2019

Effective date of the Partial Amendment 2 (scheduled)

July 1, 2019

End

30

(Appendix 1)

Terms and Conditions for Issuance of Class A Preferred Shares
1.

Name of Shares
Chiyoda Corporation Class A Preferred Shares (the “Class A Preferred Shares”)

2.

Number of Shares Offered for Subscription
175,000,000 shares

3.

Amount to be Paid in for Shares Offered for Subscription
400 yen per share

4.

Total Amount to be Paid in for Shares Offered for Subscription
70,000,000,000 yen

5.

Stated Capital and Capital Reserve to be Increased
Stated capital:
35,000,000,000 yen (200 yen per share)
Capital reserve:

35,000,000,000 yen (200 yen per share)

6.

Payment Date
July 1, 20197.

Subscription Period
July 1, 20198.

Method of Issuance
All Class A Preferred Shares will be allotted to Mitsubishi Corporation by a third party
allotment.

9.

Dividends from Surplus(1) Preferred Dividends
If the Company is to pay dividends from surplus, it shall pay the dividends in cash toshareholders who hold the Class A Preferred Shares (the “Class A Preferred Shareholders”)
or registered pledgees of the Class A Preferred Shares (the “Registered Class A Preferred
Share Pledgees”) entered or recorded in the final shareholders register as at the record date
for such dividends (the “Record Date for Dividends”), in preference to shareholders who
hold common shares (the “Common Shareholders”) and registered pledgees of commonshares (the “Registered Common Share Pledgees”) entered or recorded in the final
shareholders register as at the Record Date for Dividends, in the amount provided in Item(2) below for each Class A Preferred Share (the amount to be paid as such dividend will behereinafter referred to as the “Class A Preferred Dividend”).
(2) Amount of Preferred Dividends
The amount of the Class A Preferred Dividend per Class A Preferred Share will be theamount calculated by using the following formula on a daily prorated basis assuming a31

year to be 365 days (or 366 days, if the business year contains a leap day) for the actual
number of days elapsed in the period from and including the first day of the business year
(or the payment date, if the Record Date for Dividends belongs to a business year endingon the last day of March 2020) up to and including the Record Date for Dividends. If,
however, dividends from surplus are paid to the Class A Shareholders or the Registered
Class A Preferred Share Pledgees using a record date prior to the Record Date for
Dividends during a business year to which the Record Date for Dividends belongs, theamount to be paid as the Class A Preferred Dividend for each Class A Preferred Share will
be reduced by the total amount of the Class A Preferred Dividends per Class A Preferred
Share paid at each of such dividends (The Class A Preferred Dividend will be calculated totwo (2) decimal places and then rounded off to one (1) decimal place).
<Formula>Class A Preferred Dividend = JPY 400 × 3.0%
(3) Accumulation Clause
If the total amount of dividends from surplus per share paid to the Class A Preferred
Shareholders or the Registered Class A Preferred Share Pledgees in any particular businessyear does not reach the amount of the Class A Preferred Dividend that would be paid if thelast day of such business year were the only record date, the amount of such shortfall will
be accumulated to the subsequent business years, and the accumulated shortfall amount(the “Class A Accumulated and Unpaid Dividends”) will be paid as dividend in the said
subsequent business years to the Class A Preferred Shareholders or the Registered Class A
Preferred Share Pledgees in preference to the payment of the Class A Preferred Dividend
and the dividends from surplus to the Common Shareholders and the Registered Common
Share Pledgees.
(4) Non-participation ClauseNo dividends from surplus in excess of the Class A Preferred Dividend will be paid to theClass A Preferred Shareholders or the Registered Class A Preferred Share Pledgees.
10. Distribution of Residual Assets(1) Preferred Distribution
If the Company is to distribute residual assets, it shall distribute to the Class A Preferred
Shareholders or the Registered Class A Preferred Share Pledgees, in preference to the
Common Shareholders and the Registered Common Share Pledgees, the amount in cashfor each Class A Preferred Share calculated by adding the amount equivalent to the Class A
Accumulated and Unpaid Dividends and the Amount Equivalent to the Class A Accruedand Unpaid Dividends to JPY 400.
“Amount Equivalent to the Class A Accrued and Unpaid Dividends” is the amount of thepreferred dividends obtained, assuming the residual asset distribution date to be the Record
32Date for Dividends, by applying the number of days elapsed in the period from andincluding the first day of the business year (or the payment date, if the residual asset
distribution date belongs to a business year ending on the last day of March 2020) up to
and including the residual asset distribution date to the formula set forth in Item (2) of
Section 9 above.
(2) Non-participation ClauseNo distribution of residual assets in excess of the amount provided in Item (1) above will
be made to the Class A Preferred Shareholders or the Registered Class A Preferred Share
Pledgees.
11. Voting Rights
Class A Preferred Shareholders do not have voting rights at general meetings of shareholders.
12. Put Option the Consideration for which is Cash (Redemption Request)(1) Details of Redemption Request
Each Class A Preferred Shareholder is entitled to request the Company at any time on orafter July 1, 2021 to acquire all or part of the Class A Preferred Shares held by such Class
A Preferred Shareholder in consideration for cash (the “Redemption Request”). In suchcase, on the date when such Redemption Request takes effect, the Company shall deliverto the requesting Class A Preferred Shareholder, in exchange for the acquisition by theCompany of one (1) Class A Preferred Share, cash consideration in the amount set forth in
Item (2) below not exceeding the Distributable Amount within the meaning of Article 461,
Paragraph 2 of the Companies Act as of the date of such Redemption Request (the“Redemption Request Date”) to the extent permissible under laws and regulations. If a
Redemption Request is made in excess of the Distributable Amount as of the Redemption
Request Date, the Class A Preferred Shares to be acquired will be determined in proportion
to the number of the Class A Preferred Shares for which the Redemption Request is made.
(2) Redemption Price
The redemption price per share of the Class A Preferred Shares will be the higher of (a) or(b) below:(a) The amount calculated by multiplying the amount equivalent to the average of thevolume weighted average prices (the “VWAPs”) in regular trade of the Company’scommon shares announced by the Tokyo Stock Exchange, Inc. (the “TSE”) for thirty(30) consecutive Trading Days counting from the forty-fifth (45th) Trading Day prior
to the Redemption Request Date (The price will be calculated to two (2) decimal
places and then rounded off to one (1) decimal place. If, during the abovementioned
period, any of the events provided in Section 14, Item (3) occurs, the average of the
VWAPs mentioned above will be adjusted to a value that the Company deems
appropriate in accordance with Section 14, Item (3).) by the Base Number of Shares33

defined below.
For the purpose of this (a), “Base Number of Shares” means the value calculated byfirst adding the amount equivalent to the Class A Accumulated and Unpaid Dividends
and the Amount Equivalent to the Class A Accrued and Unpaid Dividends to JPY 400
and then dividing the sum by the conversion price calculated in accordance with
Section 14, Items (2) and (3).
“Trading Day” means the day on which regular trade in the Company’s commonshares is conducted on the TSE, excluding the days on which no VWAP is announced
by the TSE (the same applies hereafter).
(b) The amount calculated by adding the amount equivalent to the Class A Accumulatedand Unpaid Dividends and the Amount Equivalent to the Class A Accrued andUnpaid Dividends to JPY 400.
In this Item, the Amount Equivalent to the Class A Accrued and Unpaid Dividends is
calculated by replacing the term “residual asset distribution date” in the calculation of
the Amount Equivalent to the Class A Accrued and Unpaid Dividends provided in
Section 10, Item (1) with the term Redemption Request Date.”(3) The Place at which Redemption Requests are Accepted
Stock Transfer Agency Department of Mitsubishi UFJ Trust and Banking Corporation(4) Effectuation of Redemption Requests
A Redemption Request takes effect when the document necessary for the Redemption
Request reaches the place at which Redemption Requests are accepted set out in Item (3)above or on the desired date indicated on that document, whichever is later.
13. Call Option the Consideration for which is Cash (Mandatory Redemption)(1) Details of Mandatory Redemption
Regardless of the intention of the Class A Preferred Shareholders or the Registered Class A
Preferred Share Pledgees, the Company may, on or after July 1, 2021 upon the occurrenceof the date separately determined by the Board of Directors of the Company (the“Mandatory Redemption Date”), deliver to the Class A Preferred Shareholders or theRegistered Class A Preferred Share Pledgees, in exchange for the acquisition by theCompany of all or part of the Class A Preferred Shares, cash consideration in the amountset forth in Item (2) below not exceeding the Distributable Amount within the meaning of
Article 461, Paragraph 2 of the Companies Act as of the Mandatory Redemption Date of
the Class A Preferred Shares after giving notice to such Class A Preferred Shareholders or
the Registered Class A Preferred Share Pledgees no later than two (2) weeks prior to the
Mandatory Redemption Date. When acquiring part of the Class A Preferred Shares, theClass A Preferred Shares to be acquired will be determined in proportion to the number of
the Class A Preferred Shares to be acquired.
34

(2) Mandatory Redemption Price
The mandatory redemption price per share of the Class A Preferred Shares will be thehigher of (a) or (b) below:(a) The amount calculated by multiplying the amount equivalent to the average of the
VWAPs for thirty (30) consecutive Trading Days counting from the forty-fifth (45th)
Trading Day prior to the Mandatory Redemption Date (The price will be calculated totwo (2) decimal places and then rounded off to one (1) decimal place. If, during theabovementioned period, any of the events provided in Section 14, Item (3) occurs, theaverage of the VWAPs mentioned above will be adjusted to a value that the Company
deems appropriate in accordance with Section 14, Item (3).) by the Base Number of
Shares defined below.
For the purpose of this (a), “Base Number of Shares” means the value calculated byfirst adding the amount equivalent to the Class A Accumulated and Unpaid Dividends
and the Amount Equivalent to the Class A Accrued and Unpaid Dividends to JPY 400
and then dividing the sum by the conversion price calculated in accordance with
Section 14, Items (2) and (3).
(b) The amount calculated by adding the amount equivalent to the Class A Accumulatedand Unpaid Dividends and the Amount Equivalent to the Class A Accrued andUnpaid Dividends to JPY 400.
In this Item, the Amount Equivalent to the Class A Accrued and Unpaid Dividends is
calculated by replacing the term “residual asset distribution date” in the calculation of
the Amount Equivalent to the Class A Accrued and Unpaid Dividends provided in
Section 10, Item (1) with the term “Mandatory Redemption Date.”
14. Put Option the Consideration for which is Common Shares (Conversion Request)(1) Details of Conversion Request
Each Class A Preferred Shareholder is entitled to request the Company at any time on orafter July 1, 2019 to acquire all or part of the Class A Preferred Shares held by such Class
A Preferred Shareholder in exchange for the delivery of common shares in such number as
provided in Item (4) below (the “Conversion Request”), and the Company shall deliver thecommon shares in such number as provided in Item (4) to the extent permissible underlaws and regulations in exchange for the acquisition by the Company of the Class A
Preferred Shares for which the Conversion Request is made. However, for making a
Conversion Request, the Class A Preferred Shareholders must have duly and effectively
completed all necessary procedures under domestic and foreign competition laws foracquiring common shares before making a Conversion Request (as regards procedures that
require a waiting period, such waiting period has to have expired as well). The date on
which the Conversion Request takes effect pursuant to Item (6) below will be hereinafter
35referred to as the “Conversion Request Effective Date.”(2) Initial Conversion Price
The initial conversion price is JPY 100.
(3) Adjustment of Conversion Price(a) If any of the following events occurs, the conversion price will be adjusted as set out
below:(i)

If the common shares of the Company are subject to a share split or gratis
allotment of shares, the conversion price will be adjusted in accordance with theformula set out below. In the case of a gratis allotment of shares, the terms“number of issued common shares before split” and “number of issued commonshares after split” in the following formula are deemed to be replaced with“number of issued common shares before gratis allotment (excluding commonshares held by the Company at that time)” and “number of issued commonshares after gratis allotment (excluding common shares held by the Company atthat time),” respectively.

Conversion price
Conversion price
Number of issued common shares before split
after adjustment = before adjustment x Number of issued common shares after split

The conversion price after adjustment will apply from the day following therecord date for the share split or the day on which the gratis allotment takes
effect (or, if a record date for the gratis allotment is determined, from the day
following such record date).
(ii) If the common shares of the Company are subject to a share consolidation, theconversion price will be adjusted in accordance with the following formula:
Conversion
after

price
adjustment=

Conversion
price
beforeadjustmentx

Number of issued common shares before consolidation
Number of issued common shares after consolidation

The conversion price after adjustment will apply from day on which the shareconsolidation takes effect.
(iii) If the Company issues common shares, or disposes of common shares held by
the Company, at a paid-in amount below the market price per common shareprovided in (d) below (excluding the case of a gratis allotment, the case of an36

acquisition of shares or stock acquisition rights (shinkabu yoyakuken) (including
those attached to bonds with stock acquisition rights; hereinafter the same in thisItem) in exchange for delivery of common shares, the case of an exercise ofstock acquisition rights to acquire common shares or the case of a delivery ofcommon shares by amalgamation, stock swap or company split), the conversion
price will be adjusted in accordance with formula set out below (the“Conversion Price Adjustment Formula”). If any property other than money isthe subject of contribution, “Amount to be paid in per share” in the Conversion
Price Adjustment Formula will be the fair value of such property. The
conversion price after adjustment will apply from the day following the payment
date (or following the last day of a payment period if such payment period isdetermined) or, if a record date for the allotment of shares to shareholders isdetermined, from the day following such record date (the “Shareholder
Allotment Date”). If the Company disposes of common shares held by it, theterms “number of newly issued shares” and “number of treasury shares” in thefollowing formula are deemed to be replaced with “number of shares disposedof” and “number of treasury shares before disposal," respectively.

Conversion priceafter adjustment

Conversion price= before adjustment x

Amount to be
Number of newlyx
Number of issued common
paid in per share
shares - Number of+ issued shares
Market pricetreasury shares
Number of issued shares - Number of+Number of newly issued shares
treasury shares(iv) If the Company issues or disposes of shares that entitle their holders to receive
delivery of common shares at a conversion price per common share below themarket price per common share provided in (d) below by causing the Company
to acquire such shares or being acquired by the Company (this includes the caseof a gratis allotment of shares), then, as of the payment date for such shares (oron the last day of a payment period if such payment period is determined;hereinafter the same in this (iv)), as of the day on which a gratis allotment ofshares takes effect, if applicable (or, if a record date for the gratis allotment ofshares is determined, such record date; hereinafter the same in this (iv)), or as of
the Shareholder Allotment Date, if there is such date, all of the shares to beissued or disposed of will be deemed to have been acquired by the Company andrelevant common shares will be deemed to have been delivered on the initial
terms, and the amount to be calculated as the “amount to be paid in per share” inthe Conversion Price Adjustment Formula using that amount will be theconversion price after adjustment. The conversion price after adjustment will37

apply from the day following the payment date, or in the case of a gratis
allotment of shares, from the day following the day on which such allotment
takes effect, or if there is a Shareholder Allotment Date, from the day followingthat date. Notwithstanding the foregoing, if the consideration for the commonshares to be delivered upon acquisition has not been determined as at the point
in time mentioned above, the conversion price after adjustment will becalculated assuming that all shares to be issued or disposed of at the time ofdetermination of such consideration have been acquired and relevant commonshares have been delivered on the terms as at the point in time when theconsideration is determined, and this will apply from the day following the dayon which such consideration is determined.
(v) If the Company issues stock acquisition rights that, by being exercised or being
acquired by the Company, entitle their holders to receive delivery of commonshares at a price whereby the aggregate of the amount to be paid in for the stockacquisition rights per common share and the property to be contributed on
exercise of the stock acquisition rights (if any property other than money is the
subject of contribution, the fair value of such property; hereinafter the same inthis (v)) falls below the market price per common share provided in (d) below(this includes the case of a gratis allotment of stock acquisition rights), then, asof the date of allotment of such stock acquisition rights, as of the day on which a
gratis allotment of stock acquisition rights takes effect, if applicable (or, if arecord date for the gratis allotment of stock acquisition rights is determined,
such record date; hereinafter the same in this (v)), or as of the Shareholder
Allotment Date, if there is such date, all of the stock acquisition rights to beissued will be deemed to have been exercised or acquired and relevant commonshares will be deemed to have been delivered on the initial terms, and theamount to be calculated as the “amount to be paid in per share” in theConversion Price Adjustment Formula using the aggregate of the amount to be
paid in for the stock acquisition rights per common share and the property to becontributed on exercise of the stock acquisition rights per common share will be
the conversion price after adjustment. The conversion price after adjustment will
apply from the day following the allotment date of such stock acquisition rights,
or in the case of a gratis allotment of stock acquisition rights, from the day
following the day on which such allotment takes effect, or if there is a
Shareholder Allotment Date, from the day following that date. Notwithstanding
the foregoing, if the consideration for the common shares to be issued uponacquisition or exercise has not been determined as at the point in time mentioned38

above, the conversion price after adjustment will be calculated assuming that all
stock acquisition rights to be issued at the time of determination of suchconsideration have been exercised or acquired and relevant common shares havebeen delivered on the terms as at the point in time when the consideration isdetermined, and this will apply from the day following the day on which suchconsideration is determined.
(b) In addition to the events provided in (a) above, if any of the events provided in (i)through (iii) below occurs, the Company will adjust the conversion price in an
appropriate manner after giving prior written notice to the Class A Preferred
Shareholders and the Registered Class A Preferred Share Pledgees to that effect andalso stating the reasons for such adjustment, the conversion price after adjustment,
the day on which such adjusted conversion price becomes effective and any othernecessary matters:(i)

If it is necessary to adjust the conversion price because of: a merger; shareexchange; acquisition of all issued shares of other joint-stock company throughshare exchange; share transfer; absorption-type split; succession to all or part of
the rights and obligations held by other company in relation to its own businessthrough absorption-type split; or incorporation-type split;(ii) If two or more events necessitating an adjustment to the conversion price occur
consecutively, and in calculating the adjusted conversion price due to one ofsuch events, it is necessary to consider the effect of the other event on themarket price that ought to be used in that calculation; or(iii) If the adjustment of the conversion price is otherwise necessary due to theoccurrence of any event that changes or may change the number of issued
common shares (excluding the number of common shares held by theCompany).
(c) Any calculation necessary in adjusting the conversion price will be made to two (2)decimal places and then rounded off to one (1) decimal place.
(d) The market price per common share to be used in the Conversion Price Adjustment
Formula is the average of the VWAPs for thirty (30) consecutive Trading Days
counting from the forty-fifth (45th) Trading Day prior to the day to which theadjusted conversion price is applied.
(e) If, as a result of a calculation made in adjusting the conversion price, the difference
between the adjusted conversion price and the pre-adjustment conversion price is lessthan 0.1 yen, no adjustment will be made to the conversion price. However, any
adjustment determined to be unnecessary in this (e) will be carried forward to beconsidered for the calculation of the subsequent adjustments.
39

(4) Number of Common Shares to be Delivered in Exchange for Acquisition
400 yen
Number of Class A Preferred
Number of common
Sharessubject to Conversion
shares to be
Requestdelivered in＝
exchange for theacquisition＋ Amount equivalent to the Class A×

Accumulated and Unpaid Dividends＋ Amount Equivalent to the Class A
Accrued and Unpaid Dividends）

Conversion priceIn this Item, the Amount Equivalent to the Class A Accrued and Unpaid Dividends is
calculated by replacing the term “residual asset distribution date” in the calculation of theAmount Equivalent to the Class A Accrued and Unpaid Dividends provided in Section 10,
Item (1) with the term “Conversion Request Effective Date.”(5) Place at which Conversion Requests are Accepted
Stock Transfer Agency Department, Mitsubishi UFJ Trust and Banking Corporation(6) Effectuation of Conversion Requests
A Conversion Request takes effect when the document necessary for the Conversion
Request reaches the place at which Conversion Requests are accepted set out in Item (5)above or on the desired date indicated on that document, whichever is later.
15. Restrictions on Transfer
Any acquisition of the Class A Preferred Shares by transfer will be subject to the approval of
the Company’s Board of Directors.
16. Share Consolidation or Split and Gratis Allotment of Shares
Except as otherwise provided by laws and regulations, the Company will not implement shareconsolidation or split in relation to the Class A Preferred Shares. The Company will not grant to
the Class A Preferred Shareholders any right to receive the allotment of shares offered forsubscription or stock acquisition rights offered for subscription, nor will it implement a gratis
allotment of shares or gratis allotment of stock acquisition rights to the Class A Preferred
Shareholders.

40