Proxy Voting Advisory Firm ISS Recommends Voting in Favor of YFO’s Shareholder Proposals for Toyo’s Board

- ISS recommends that YFO’s proposed candidates should make up the majority of Toyo’s Board due to Toyo’s serious governance problems -

YFO has confirmed that well-known American proxy voting advisory firm Institutional Shareholder Services (“ISS”) issued a recommendation report in relation to YFO’s shareholder proposals and Toyo’s proposals to be presented at Toyo’s Annual Shareholder Meeting to be held on June 27, 2023. ISS has stated that, after hearing and considering both YFO’s and Toyo’s arguments, it largely agrees with YFO’s claims that Toyo’s board of directors has serious governance problems. ISS also concluded that YFO’s recommended directors should make up the majority of Toyo’s Board.

ISS Recommendation Report Key Quotes and Summary

• Toyo’s Board’s actions in response to Infroneer HD’s tender offer were not trustworthy: "The key question for unaffiliated shareholders is whether they trust the current board and management in their assessment that a stand-alone future will provide a higher value than the current offer on the table.  The board’s conduct since the official launch of Infroneer’s bid does not provide much comfort to shareholders.  Less than two months after recommending shareholders tender their shares into Infroneer’s offer, the board suddenly decided that a 30 percent higher bid was not worth even looking at.”

• Toyo’s Board used every method at their disposal to hinder YFO’s acquisition proposal including attempting to implement a poison pill, dragging out negotiations, and making an unnecessary number of requests for information. Toyo’s Board also took nine (9) months to set up a special committee to review YFO’s acquisition proposal.

• “In rejecting YFO’s offer, the board asserted only that the offer undervalued the company.  This assessment is largely based on management’s ambitious, though arguably unsubstantiated, new mid-term plan, which implies unrealistic growth (when compared to historical norms) and does not account for execution risk”

•  In particular, when the situation is already “in play” and a sincere counterbid has been presented, Toyo’s Board was under an obligation to advance negotiations with the aim of maximizing shareholder value.

• However, “the fact pattern in this case strongly implies that Toyo’s Board simply ignored shareholders’ interests for a prolonged period without providing a compelling justification for the delay.”

• “In any event, one could question the logic of a new five-year plan prepared by directors who are leaving and will not be involved in the execution and oversight of the plan. More troubling still is the fact that those same outgoing directors have selected successors to continue their legacy.”

• Toyo’s Board’s response fell fall short of providing reassurance to shareholders that it had their best interests in mind.

• ISS concluded that YFO’s proposed candidates must make up over half of the board to restore shareholder trust and improve Toyo’s governance.

ISS recommended six of the nine (9) director candidates (Proposal No. 7) and one (1) statutory auditor candidate (Proposal No. 8) proposed by YFO. ISS considers that the optimal board composition would have 11 directors and six (6) of these directors would be YFO’s proposed candidates (the majority). However, YFO’s three (3) director candidates that were not recommended by ISS would also provide tremendous value to Toyo’s Board.

Therefore, YFO asks that you please vote in favor of all nine (9) director candidates we proposed in Proposal No. 7. Please also vote in favor of the revision of compensation for directors in Proposal No. 9 (and against the opposing Proposal No. 5 which is not compatible) in accordance with the increase in the number of outside directors.

Further, ISS recommended to vote against Tatsuyoshi Nakamura, who YFO had publicly announced we would vote in favor of. While Tatsuyoshi Nakamura’s experience and capabilities in Toyo’s existing business areas would be useful for Toyo’s Board, YFO believes he would also continue to contribute in his current executive role as the supervisor of business execution. Thus, YFO will now be following ISS’s recommendation and voting against Tatsuyoshi Nakamura and asks all Toyo shareholders to do the same, as well as against the other Toyo board candidates we have urged you to vote against.

For further information, please contact:
Public Relations Department 
PR Agent: Vox Global Japan Co., Ltd. 
Tel: +81-3-6204-4337 Tanabe/Kuhara
Email: yfo.inquiry@voxglobalasia.com 

Shareholder Contact: Innisfree M&A Incorporated 
Tel: +1-412-232-3651 (Shareholder Contact - English)
Tel: +44-7506-004-047, +1-212-750-5833  (Financial Institutions and Institutional Investor Contact - English)