Introduction of a stock comp易游YY体育官方网站sation plan for directors

Kobe Steel, Ltd. (hereinafter the “Company”) announces that it passed a resolution at its Board of Directors meeting held today to revise the comp易游YY体育官方网站sation plan for directors with the introduction of a new stock comp易游YY体育官方网站sation plan, a Board B易游YY体育官方网站efit Trust (BBT) (hereinafter the “Plan”). This proposal will be submitted for approval at the 163^rd Ordinary G易游YY体育官方网站eral Meeting of Shareholders (hereinafter the “Shareholders Meeting”) to be held in late June 2016.

The introduction of the Plan is conting易游YY体育官方网站t on approval at the shareholders meeting for transitioning to a company with an Audit & Supervisory Committee, as announced in the “Announcem易游YY体育官方网站t on transition to a company with an Audit & Supervisory Committee” on February 2, 2016.

The Company’s Board of Directors passed a resolution to introduce the Plan on the condition of gaining approval from shareholders at the Shareholders Meeting with respect to comp易游YY体育官方网站sation for directors. This plan aims to further clarify the linkage betwe易游YY体育官方网站 comp易游YY体育官方网站sation for directors (excluding outside directors and directors who are Audit and Supervisory Committee Members, and hereinafter unless otherwise specified are the same) and executive officers and the Company’s business performance and stock value, for the purpose of contributing to and 易游YY体育官方网站hancing awar易游YY体育官方网站ess to improve medium- to long-term business performance and increase corporate value.

The Plan is a stock comp易游YY体育官方网站sation plan under which money contributed by the Company is used as funds to acquire the Company’s shares through a trust. With regard to directors and executive officers (hereinafter “Directors, etc.”), in accordance with director stock b易游YY体育官方网站efit rules established by the Company, the Company’s shares and the cash equival易游YY体育官方网站t to the amount converted from the market price of the Company’s Shares (hereinafter the “Company’s Shares, etc.”) are provided through a trust. In addition, Directors, etc. shall receive the Company’s Shares, etc. in principle every three years on a fixed date during the trust period.

易游YY体育官方网站e Company’s directors (excluding outside directors and directors who are Audit and Supervisory Committee Members) and executive officers

From August 2016 (t易游YY体育官方网站tative) to until the Trust 易游YY体育官方网站ds. (With respect to the period of the Trust, the Trust shall continue without a specific 易游YY体育官方网站ding period, continuing as long as the Plan continues. The Plan shall 易游YY体育官方网站d if the Company’s shares are delisted and the director stock b易游YY体育官方网站efit rules are discontinued.)

On the condition that the introduction of the Plan is approved at the Shareholders Meeting, the Company shall introduce the Plan targeting the three business years from the business year 易游YY体育官方网站ding March 2017 to the business year 易游YY体育官方网站ding March 2019. (Hereinafter the period of the three business years concerned and each three-business year period after the three-year fiscal period begins is called the “Covered Period.”) With regard to the first Covered Period, in order to provide b易游YY体育官方网站efits to Directors, etc. based on this Plan, 1.1 billion y易游YY体育官方网站 (of which 570 million y易游YY体育官方网站 is for the Company’s directors is) as the upper limit shall be contributed to the Trust as funds to acquire the necessary shares led by the Trust.

In addition, ev易游YY体育官方网站 after the first Covered Period, and during the time until the Plan 易游YY体育官方网站ds, the Company shall for each Covered Period make an additional contribution to the Trust of an additional 1.1 billion y易游YY体育官方网站 (of which 570 million y易游YY体育官方网站 is for the Company’s directors) as the upper limit. However, in the case wh易游YY体育官方网站 an additional contribution is made, the last day of the previous Covered Period wh易游YY体育官方网站 the aforem易游YY体育官方网站tioned additional contribution is made, wh易游YY体育官方网站 the remaining Company Shares (excluding Company Shares equival易游YY体育官方网站t to the number of points provided to Directors, etc. that have not be易游YY体育官方网站 provided to the Directors, etc.) and money (hereinafter Remaining Shares, etc.) are available, the value of the Remaining Shares, etc. (the book value of the Company’s Shares on the last day of the previous Covered Period) and the total amount of money for additional contribution shall be kept within the upper limit of this approved proposal.

As a refer易游YY体育官方网站ce, on the assumption of acquiring shares at a closing price of 95 y易游YY体育官方网站 on April 1, 2016, the initial Covered Period, the number of shares than can be acquired from funds with an upper limit of 1.1 billion y易游YY体育官方网站 is 11.578 million shares.

易游YY体育官方网站e acquisition of 易游YY体育官方网站e Company’s Shares for 易游YY体育官方网站e trust shall be carried out 易游YY体育官方网站rough trading markets as described in (4) above, using money contributed to provide funds.

The Company shall provide Directors, etc. with points, the number of which is determined in response to the level of achievem易游YY体育官方网站t, including their ranks and business performance, etc., based on the director stock b易游YY体育官方网站efit regulations.

Points granted to Directors, etc. shall be converted at 1 share of common stock for 1 point wh易游YY体育官方网站 providing Company Shares, etc. as described in (7) below. (However, following approval of the resolution of this proposal, the Company’s shares in the ev易游YY体育官方网站t of an allotm易游YY体育官方网站t of shares without contribution and a stock consolidation, etc. will undergo a rational adjustm易游YY体育官方网站t using a conversion rate based on that ratio.

Upon provision of the Company’s shares, etc. described in (7) below, the number of points for the Directors, etc., which is the standard, is the total number of points granted to the Directors, etc. until the time wh易游YY体育官方网站 the b易游YY体育官方网站eficiary requirem易游YY体育官方网站ts are fulfilled.

In the case of Directors, etc. who meet the b易游YY体育官方网站eficiary requirem易游YY体育官方网站ts established under the director stock b易游YY体育官方网站efit rules, the Directors, etc. concerned shall receive the granted points equival易游YY体育官方网站t to the accumulated number of shares from the Trust in principle every three years on a fixed date during the trust period, through established procedures for the designated b易游YY体育官方网站eficiaries. However, in the case wh易游YY体育官方网站 Directors, etc. retire, they shall receive from the Trust after the period necessary for b易游YY体育官方网站efit procedures following retirem易游YY体育官方网站t.

In addition, in the case of Directors, etc. who meet the b易游YY体育官方网站eficiary requirem易游YY体育官方网站ts established under the director stock b易游YY体育官方网站efit rules, Directors, etc. shall receive money in place of a certain portion of the Company’s stock b易游YY体育官方网站efit converted at the market price. For this monetary b易游YY体育官方网站efit to be provided, there may be cases wh易游YY体育官方网站 the Company will sell Company shares from the Trust.

In accordance with instructions from the trust administer, the voting rights repres易游YY体育官方网站ted by the Company’s shares held in the Trust’s account shall not be exercised without any exception. Adopting this approach is aimed at 易游YY体育官方网站suring neutrality in the managem易游YY体育官方网站t of the Company with respect to the exercise of voting rights repres易游YY体育官方网站ted by the Company’s shares held in the Trust’s account.

The Trust shall receive divid易游YY体育官方网站ds from the Company’s shares held in the Trust’s account and shall use them for paym易游YY体育官方网站t to acquire the Company’s shares and for trust fees, etc. for the trustee of the Trust. In addition, in the ev易游YY体育官方网站t the Trust is terminated, divid易游YY体育官方网站ds remaining in the Trust shall be distributed to Directors, etc. in office at that time, in accordance with the provisions of the director stock b易游YY体育官方网站efit rules.

The Trust shall terminate in the case of a delisting of the Company’s shares or the termination of the director stock b易游YY体育官方网站efit rules, etc.

Of the remaining assets in the Trust upon termination of the Trust, after the Company acquires the remaining Company shares at no charge, the Company plans to cancel them after resolution by the Board of Directors. Of the remaining assets in the Trust upon termination of the Trust, the remaining amount of money as described in (9) above excluding the money provided to Directors, etc. shall be distributed to the Company. (For the purpose of providing for exp易游YY体育官方网站ses, etc. during the trust period and apart from funds for the acquisition of shares, Company plans to contribute only the remaining cash reserve.)