Yamauchi No.10 Family Office
Hirowaka Murakami, Chief Investment Officer

March 15, 2023
To the Shareholders of Toyo Construction Co., Ltd.

Provision of Information to the Special Committee of Toyo Construction Co., Ltd. (“Toyo”) (Securities Code: 1890) Assumptions for the Provision of Additional Information and YFO’s Policy for Transparency in the Process

1. Questions from the special committee and answers from YFO

Toyo’s special committee sent a questionnaire to Yamauchi-No.10 Family Office and KITE Co., Ltd. (together, “YFO”, “we”, “us” or “our”) on March 6, 2023.

We responded to the questions in the March 6 questionnaire on March 15, 2023 as shown in the appendix, which contains our response form and an attachment (questionnaire responses).

Toyo’s Board had separately also requested additional information prior to the questionnaire on March 6, 2023. However, we responded by asking Toyo’s Board to provide background and reasons for the requests for additional information (an overview of these questions is provided below and in the attached appendix) because we have serious concerns about the appropriateness of Toyo’s processes. 

2. Questions from the special committee and problems with Toyo’s processes

As described in the appendix, many of the questions the special committee asked on March 6 overlap with those that Toyo has already asked in the course of discussions with us. Further, one could easily discern the answers to these questions from a cursory review of the responses and materials we have already shared with Toyo. The rudimentary questions from the special committee are posed as if 10 months of discussions had not already taken place since we proposed our acquisition proposal as a concrete and feasible alternative to Infroneer’s tender offer. The special committee’s questions are posed as if we had returned to the very beginning of the process. Regrettably, this reinforces our understanding that throughout the extremely inappropriate process led by Toyo’s Board over the past 10 months, the Board has not even considered our acquisition proposal at all. 

The fact that the outside directors – who make up the majority of the members of the special committee and who are responsible for supervising the Board’s deliberation process for reviewing our acquisition proposal on behalf of Toyo and its shareholders – are now repeating rudimentary requests for information already provided all over again is a clear manifestation of their complete dereliction of their duties. We cannot help but doubt the effectiveness of the special committee both as a potential acquirer of Toyo and as a shareholder. 

Further, in the process of discussions with certain members of the current Board (centered around the President and CEO), the Board members suggested that they would fabricate “other reasons” for opposing our acquisition proposal. We are thus naturally concerned that the special committee’s requests for information are merely intended to provide an excuse to be used to try to rationalize opposing our acquisition proposal and that this will prevent the realization of an appropriate process and fair decision-making that would maximize corporate and shareholder value. We cannot assist any process that could damage the interests of the Company and its shareholders, and accordingly, based on the current state of affairs, we will not be able to respond to any further information requests. On the other hand, if a special committee were to function effectively and carry out its examination through an appropriate and fair process, then we would intend to provide additional information and cooperate with such a special committee’s review.

For the above reasons, we request Toyo’s board and the special committee to respond sincerely to our questions and confirmatory matters (outlined below) in order to address the concerns we have discussed above. 

(Overview of the questions to be asked to the Board (see Appendix for details)

  1. Why did you request additional information in January 2023, despite making no requests for information disclosure in the course of our long-term discussions thus far?

  2. Was your request for additional information in January 2023 solely for the purpose of fabricating a false pretext for opposing our acquisition proposal? (consistency with previous statements, etc.)

  3. Is the “foundation collapse theory” that Toyo asserts legitimate? Is it not possible to resolve it?

(Outline of confirmatory matters for the Board and special committee (see Appendix for details)

  1. What are the roles of Toyo’s Board and Special Committee?

  2. What do you think is the significance of the discussions between us and Toyo for more than six months prior to the establishment of the special committee in contrast to the review of the special committee?

  3. How will the special committee function fairly? (The special committee members are the same as the Board members who introduced a poison pill in the past and failed to supervise manage

If we remain unconvinced that the special committee has been established purely for fabricating a false pretext for opposing our acquisition proposal, then there is no reason for us to provide additional information. Instead, our policy will be to provide information directly to shareholders.

We believe that it is important that exchanges between the Companies and the special committee are transparent so that shareholders can make appropriate decisions. Therefore, our policy is to disclose such information to shareholders.

Appendix: "Response to the Special Committee (Responses) March 15 2023"