Our New Policy on Toyo Construction Co., Ltd. (“Toyo”)

1. Our Proposed Acquisition of Toyo and How We Got Here

On March 22, 2022, Infroneer made a 770 JPY per share tender offer for Toyo shares. During the tender offer period, we made a counter-proposal to acquire Toyo for 1,000 JPY per share.
We made our counter-proposal public on May 18, 2022, during the Infroneer tender offer period. We specifically made our proposal public during this time because Toyo publicly disclosed that the tender offer period provided an opportunity for counter-proposals to ensure fairness with respect to Infroneer Holdings Inc.’s 770 JPY per share tender offer in lieu of a ‘market-check’.

In the 250+ days that have elapsed since making our proposal public on May 18, 2022, we have repeatedly and respectfully explained to Toyo’s board and management about our 1,000 JPY proposal and our strategic vision for Toyo that addressed Toyo’s various stakeholders, our commitment to continuing the employment of Toyo’s employees, our specific short-term management plan and long-term value enhancement measures, and otherwise patiently answered questions and assisted Toyo’s management team in their consideration of our proposal. We have done so in sincere and serious dialogue with Toyo’s executive team – Representative Director and President Kyoji Takezawa, Representative Director Takahiro Yabushita and Director Mamoru Sato – in over 20 meetings lasting over 40 hours in total.

2. Toyo’s Response to Our Proposal

Throughout these 250+ days, we have seen first-hand Toyo’s problematic governance structure in which Toyo’s board has abdicated its responsibilities to shareholders to oversee management. In addition to the corporate governance failings described below, Toyo’s board and executive team failed to seriously consider our proposal during this unusually long 250-day period. (Please refer to the attachment “Significant Problems in Corporate Governance and the Process of Considering Our Proposal.”)
In the course of our discussions, Toyo’s executive team repeatedly exhibited a lack of drive and no strategy to increase value for Toyo’s shareholders over the short-, medium- and long-term. Toyo’s board fails to fulfill the bare minimum requirements for a public company board in that it has no strategic plan to maximize shareholder value. As a result, we concluded that it is both urgent and unavoidable to refresh Toyo’s board with independent directors that will effectively oversee management and put forth a strategic plan to increase profitability and enhance corporate value.

3. Our New Policy and Next Steps

Therefore, we will nominate directors with the independence and ability to properly oversee management, and enhance shareholder value. If elected, our board nominees will consider all avenues to maximize shareholder and stakeholder value, evaluating all specific and achievable strategic alternatives—not limited to our acquisition proposal. Our director nominees will be up for election at Toyo’s next annual meeting of shareholders, scheduled to be held in June 2023.
- We will announce the names of our nominees in advance of the next annual meeting. At present, our thoughts are as follows.
  - The following members of the current board of directors of Toyo have failed to fulfill their responsibilities and managerial duties entrusted to them by the shareholders, and we believe they also are one of the sources of Toyo’s serious corporate governance failings. Accordingly, we will not approve any proposal to re-elect them.
    - President and Representative Director Kyoji Takezawa
    - President Takahiro Yabushita
    - Director Mamoru Sato
  - We will support the re-election of certain internal (management) directors who are well-versed in the maritime civil engineering business, both for management continuity and because they have experience in Toyo’s most important business.
  - We believe that Toyo’s current outside directors and statutory auditors failed to adequately supervise Toyo’s executive officers. Not only did they approve the implementation of a poison pill that was ultimately rejected by shareholders, they neglected to establish an organized process to consider our acquisition proposal over 250+ days. Moreover, they were unable to correct or properly supervise Toyo’s executive team’s problematic and entrenched behavior. Their inaction, and their lack of an appropriate response to our written letters, is symptomatic of governance weaknesses that they supervise throughout Toyo.
  - We will also consider interviewing management personnel from outside Toyo who have the skills, experience and capabilities to grow Toyo and make it more competitive in its current business areas as well as in new business ventures.
- Going forward, we plan to engage in dialogue with a wide range of Toyo shareholders to help shareholders understand our concerns about the current Toyo board and our proposed solutions. We will continue to publish further details.

Attachment:

Significant Problems in Toyo’s Corporate Governance and its Failure to Seriously Consider Our Proposal

In our proposal, we offer to take Toyo private at JPY 1,000 per share. This price exceeds the JPY 770 per share tender offer from Infroneer, which Toyo’s board approved and recommended shareholders accept.

In addition to our proposal’s superior price, our proposal is superior to the Infroneer Tender Offer in other ways, including our thoughtful approach to Toyo’s stakeholders, our promise to retain employees, and our specific management plan and value-maximizing strategic initiatives, all of which were absent from the Infroneer Tender Offer. Our value-maximizing strategic initiatives included more than more than 100 pages of detailed plans to improve Toyo’s corporate value. We subsequently added further value-maximizing steps beyond that initial 100+ page document to address Toyo’s unique issues even more individually and specifically. However, to this day, Toyo has not seriously considered our proposal, and its board has not even made a determinationwith respect to our offer.

Toyo’s executive team – specifically, Representative Director and President Kyoji Takezawa, Representative Director Takahiro Yabushita, Director Mamoru Sato and executive officer Manabu Tokita – have not seriously considered our proposal. Toyo’s board has also failed to consider our proposal.

Since our proposed offer, we have seen first-hand Toyo’s significant governance failures , including, among others:

1. Toyo management’s sole reason for rejecting our proposal was that “Toyo’s business will disappear as a result of becoming unable to win public works projects if we are privatized by a company that is not a maritime construction company” and failed to consider our acquisition proposal for at least 250 days. Toyo conducted a flawed and inappropriate decision-making process, by having Representative Director and President Kyoji Takezawa deliver to YFO’s representative by hand a letter that states that Toyo cannot agree to a privatization proposal (the “Rejection Letter”), which decision was made absent any special committee process or even a formal board decision-making process.

Toyo’s executive team has explained to us that it would not be realistically achievable to achieve a share price that exceeds the 770 JPY per share, or even 1.0x book value (approximately 725 JPY per share), were Toyo’s current management to continue to operate the business as a listed company. However, Toyo’s sole explanation for why they cannot support YFO’s 1,000 JPY offer, which greatly exceeds their own stand-alone projected share price and Infroneer’s board-endorsed take-private price, was the irrational and unsubstantiated claim that Toyo’s privatization by a company that is not in the maritime construction business and has no maritime construction track record would destroy the foundation of Toyo’s business, and jeopardize Toyo’s continued existence as a company (the “Business Destruction Risk”).
President and Representative Director Kyoji Takezawa personally hand-delivered a “letter of disapproval” to YFO representative Banjo Yamauchi, without the approval of Toyo’s board. The letter stated that discussions cannot proceed so long as we do not agree on the most important point, continued listing or delisting. In other words, Toyo’s CEO told a YFO representative that, so long as our proposal included a take-private element, they would not continue discussions with us. The delivery of this letter represents the Toyo board’s abandonment of even the semblance of considering our proposal in a fair, independent special committee or board-led process. This demonstrates the Toyo board’s abdication of its responsibilities and duties to Toyo shareholders.
We independently researched and gathered information to evaluate the Business Destruction Risk, and we were unable to identify any specific facts or risks to corporate value such as an inability to win public works projects as a result of privatization. It is clear that this ‘risk’ is a ‘fact’ that nobody other than Toyo is asserting.

2. Toyo told us that they would have to ‘make up’ another (false) reason to explain its rejection of our proposal to the market, effectively lying to Toyo shareholders. It is clear that even Toyo understands that its shareholders will see the Business Destruction Risk for what it is – nonsense.

During our discussions with them, Toyo’s executive team told us words to the effect of the following:

“We cannot publicly disclose this kind of reason [Business Destruction Risk] as the reason for our opposition to the offer, so we will have to make up some other reason.”
“We will have to work on various kinds of reasons, but anyway we will have no choice but to write up some kind of reason that is of a nature that it can be disclosed to the public.”

In other words, Toyo’s executive team understands that their sole reason for opposing our proposal, the Business Destruction Risk, would not be accepted by ordinary shareholders. Accordingly they plan to falsify a pretext for rejecting our proposal. This is unacceptable behavior for executives of a listed company.

3. Toyo’s executive team is not even considering proposals from other potential acquirers, not limited to us.

Toyo’s executive team divulged to us in our discussions that they rejected, without consideration by the board, proposals from other private equity funds for privatizations that they received, on account of the Business Destruction Risk. We thus understand that Toyo’s board has no intention to seriously consider any privatization proposals by third parties – except, of course, for the Infroneer Proposal, which they approved – without regard to whether or to what extent these proposals might contribute to corporate value or shareholder value.

4. Toyo’s executive team is treating our proposal with extreme prejudice in comparison to the Infroneer Offer.

The Toyo board recommended that its shareholders accept the Infroneer Tender Offer of JPY 770 per share on the basis that other parties would have the ability to make counter-proposals during the tender offer period. However, when we made a superior counter-proposal during Infroneer’s tender offer period, Toyo’s board failed to seriously consider our superior counter-proposal of JPY 1,000 per share.
Infroneer itself is not a maritime construction company. To recommend the Infroneer Offer, while asserting that Toyo cannot approve any privatization offer by a third party that is not a maritime construction company because of the Business Destruction Risk, is not logical or acceptable.
Toyo established a special committee on February 24, 2022, in advance of Toyo’s receipt of the formal written Infroneer Offer on March 2, 2022. Toyo took only 13 business days – less than three weeks – to approve of Infroneer’s proposed take-private. In contrast, 250 days after we submitted our proposal, Toyo still has not established a special committee with respect to our proposal. Toyo’s treatment of our proposal is clearly discriminatory, and therefore, we understand that Toyo’s board has no intention of seriously considering our proposal.

5. Toyo’s board allowed Toyo’s executive team to run amok, without intervention, despite our repeated requests directly to the Toyo board to address the situation.

President and Representative Director Kyoji Takezawa personally hand-delivered a “letter of disapproval” to YFO representative Banjo Yamauchi, without the approval of Toyo’s board. We wrote directly to Toyo’s board and statutory auditors to inform them of these events and ask them to take action as a board to seriously consider our proposal, in response to this inappropriate conduct by Mr. Takezawa and Toyo’s executive team which faithfully and unquestioningly follows his direction. We offered to discuss our proposal with the board as a group, or individually with any directors and auditors. However, none of Toyo’s directors or auditors have taken any action to intervene in, or oversee, Toyo executive team’s inappropriate conduct.

6. Failures to disclose material information to, and attempts to conceal material information from, shareholders

Toyo failed disclose President Kyoji Takezawa’s delivery of a “letter of disapproval” to Banjo Yamauchi. Toyo has also failed to disclose other important information and events surrounding our proposal.
Instead, Toyo’s executive team actively sought to conceal facts from Toyo shareholders. When we sent our proposed draft press release to Toyo announcing material updates to our tender offer proposal, Toyo responded by threatening legal action against us if we were to publish ‘even one word’ of disclosure about their rejection letter, or their rationale for rejection. These letters were entitled “Warning and Demand from Toyo regarding the Draft Press Release that You Shared with Us” and “Objection and Demand”. Toyo threatened they would “take all legal measures” if we failed to comply with their demand for silence, demonstrating Toyo’s continued attempts to conceal material information from shareholders.
Toyo’s executive team’s specific insistence that we delete the delivery of the “letter of disapproval” and important background information represents not only Toyo management’s failure to fulfill its own disclosure obligations as a publicly listed company, but its determination to prevent third parties from disclosing relevant and material facts.

7. Inappropriate Pressure that the Toyo executive team sought to exert on us.

In advance of a meeting between Toyo’s top executives and YFO representatives, Toyo’s executive team sought to force us to withdraw our acquisition proposal using veiled threats, including saying they don’t want to harm the reputation of the Yamauchi family or our philanthropic business activities. We have no intent to withdraw our proposal, even if Toyo’s executive team and their PR advisors continue to engage in negative PR campaigns to slander us.

Note: This document is not intended to solicit shareholders of Toyo to provide a power of attorney for exercise of shareholder rights. This document is purely for the purpose of providing information regarding our proposal.

For further information, please contact

Public Relations Secretariat

(PR Agent: Vox Global Japan Co., Ltd.)

Tel: +81-3-6204-4337 Tanabe or Kuhara

Email: yfo.inquiry@voxglobalasia.com

Shareholder contact: Innisfree M&A Incorporated

Tel (English): +1-412-232-3651

Tel (English): +44-7506-004-047

+1-212-750-5833

1 - We refer to Yamauchi-No.10 Family Office LLC as “YFO,” and YFO together with its affiliate KITE K.K. as “we.” We refer to Infroneer Holdings Inc. as “Infroneer” and its tender offer as the “Infroneer TOB,” and to our own proposed acquisition as “our proposal.”