On April 27, 2026, Hibiki Path Advisors (from January 2026, Hibiki Path Advisors SPC; hereinafter collectively referred to as “we” or “our”) reviewed the announcement by Tomoe Corporation (the “Company”) entitled “Introduction of Response Policy to Large-Scale Share Acquisitions (Takeover Response Policy) (Japanese only)” (the “Plan”). We hereby express serious concerns to the Company’s Board of Directors from the perspective of the common interests of all shareholders.
We have consistently engaged in constructive dialogue with the Company, requesting a review of its medium-term management plan, improvements in capital efficiency, and a reduction in cross-shareholdings, all with the objective of enhancing corporate value. In this context, we have also acknowledged certain positive steps recently taken by the Company, including its efforts to unwind policy shareholdings and the implementation of share repurchases (approximately 9% of outstanding shares excluding Treasury shares), as disclosed in our March 6 announcement.
We are hugely disappointed with the announcement of the Plan as it sends a severely contradictory message with the positive trajectory that had begun to emerge. It in fact gives the impression to shareholders that prior actions were undertaken merely to the minimum extent necessary to respond to shareholder pressure, and that the Company’s true intent is to avoid further structural reform. At a time when the Company should be deepening its capital policy reforms and accelerating improvements in capital efficiency, the decision to shift toward insulating management from external discipline through takeover response policy lacks any convincing rationale from the standpoint of long-term corporate value creation.
First, we view the introduction of the Plan as a clear signal that the Company is effectively stepping back from meaningful engagement with the capital markets. ALL publicly listed companies are expected to drive transformation through ongoing, constructive dialogue with shareholders and by earning—and maintaining—their trust. This principle is particularly relevant given the Company’s current capital structure and profitability metrics: policy shareholdings equivalent to 58%¹ of net assets, a revised PBR of approximately 0.6x² after adjusting for unrealized real estate gains after tax, and an underlying ROE of 6.2%³ excluding extraordinary gains. In this context, it is entirely rational for shareholders to demand further improvements in capital efficiency. Such requests should be addressed through dialogue and concrete action, not through mechanisms designed to deter engagement. Framing “investor interest in capital policy improvement” as a justification for defensive measures is, in effect, a wholesale rejection of dialogue aimed at building investor trust—and it sends a deeply misleading signal to the market.
Second, it is utterly unacceptable that the Plan was adopted by board resolution alone, prior to obtaining shareholder approval. Given that such a policy can materially reduce shareholder rights, its legitimacy should be determined by shareholders themselves. Proceeding first and seeking approval after the fact creates a façade of respect for shareholders, while in reality diminishing their role in decision-making and revealing management’s true intent to sidestep meaningful oversight. This process undermines confidence in the Company’s governance and cannot be overlooked.
Third, we have serious concerns about both the timing of the Plan and the fundamental idea behind it. While the Plan is formally subject to shareholder approval, in substance it delegates a wide range of critical judgments and operational discretion to the Board (with Independent Committee). In other words, it is structured to grant management broad latitude under the guise of shareholder oversight. Compounding this concern, the Plan has been introduced in the absence of any concrete or imminent takeover threat, in a situation where stable shareholders are already in place and there is no realistic risk to control in the near term. Introducing a defense mechanism pre-emptively under these circumstances, solely by board resolution, is inconsistent with the stated objective of “enhancing corporate value.” It is far more reasonably interpreted as an attempt to pre-install a safeguard to preserve the current management structure.
This is particularly problematic given that, while the Company has taken initial steps to improve its capital policy, those efforts remain incomplete, and there is still a clear and legitimate case for further enhancement of capital efficiency. Against that backdrop, if the underlying logic is that “by putting a defense in place now, management can avoid external discipline for the foreseeable future,” then that premise is fundamentally flawed.
Management should be accelerating reform on the assumption that such discipline exists—not engineering structures to evade it. Moving in the opposite direction risks diluting managerial accountability and, ultimately, undermining the Company’s credibility in the capital markets.
We do not deny the Company’s potential for value creation. On the contrary, through our ongoing engagement, we recognize that such potential is significant. Precisely for that reason, the Company’s priority should be reform—not short-lived defenses; openness—not entrenchment; and dialogue—not insulation. The introduction of the Plan runs counter to that direction and risks impairing the Company’s valuation in the capital markets.
Accordingly, we will boldly oppose the adoption of the Plan. In particular, ensuring that the interests of minority shareholders—whose voices are often diluted under cross-shareholding structures and management-aligned voting blocs including the founding family—are properly protected is a core responsibility we take seriously.
We will continue to act as a committed shareholder focused on genuine value creation, grounded in the principle of maximizing shareholder value as a whole.
We strongly urge the Board of Directors to carefully reconsider the Plan, fully taking into account the risk of losing confidence in the capital markets. We also ask all shareholders to recognize that this matter is central to the Company’s future governance and value trajectory, and to exercise their judgment accordingly in the shareholder meeting.
EOD
¹ Based on the FY3/26 3Q earnings report, calculated after considering the JPY 3.0 bn gain on partial sale of investment securities announced on Feb 25, 2026, divided by the JPY 20.4 bn net unrealized gain on other securities, as well as the JPY 6.7 bn share repurchase on Feb 26, 2026.
² Real estate is based on the appraisal values in the FY3/25 Annual Securities Report, equity is calculated based on the FY3/26 3Q earnings report, reflecting the share repurchase executed on Feb 26, 2026.
³ “Revised 3rd Medium-Term Management Plan: TOMOE BUILD up 5” (Japanese only)
(Our History of Engagement with Tomoe)
6/Mar/2026 － Tomoe Corporation: Share Buyback and Sale of Cross-Shareholdings
23/Jan/2026 － Tomoe Corporation: Follow-Up on Our Request for a Complete Overhaul of the Medium-Term Management Plan and the Establishment of a Special Committee
17/Nov/2025 ー Tomoe Corporation 2Q FY3/26 Results
3/Oct/2025 – Letter to Tomoe CORPORATION
2/Jul/2025 – Results of Tomoe’s 93rd Annual General Meeting of Shareholders (comment on voting results)
13/Jun/2025 – ISS Endorses Hibiki’s Shareholder Proposals to Tomoe Corporation
5/June/2025 ー Comments on the Revision of the Medium-Term Management Plan
29/May/2025 ー Shareholder proposal for Tomoe Corporation
This post does not constitute, and shall not be construed as, any proposal, solicitation, marketing, advertisement, inducement, or representation with respect to any service or product, nor does it constitute advice regarding the purchase or sale of any investment product or any type of investment, the making of any investment, the entering into of any transaction, or the refraining from any action (whether or not any terms or conditions are stated herein), and does not express any opinion regarding the merits of any particular investment or investment strategy. Any examples of strategies or transactions are provided solely for explanatory purposes and do not represent past or future strategies or performance, nor do they indicate the likelihood of success of any particular strategy.
Furthermore, this post does not constitute investment, financial, legal, tax, or any other professional advice. This post has been prepared based on publicly available information (which we have not independently verified) and does not purport to be complete, timely, or comprehensive. We do not intend, either directly or indirectly, including through other shareholders, to propose at any shareholders’ meeting of Tomoe Corporation the transfer or disposal of the business or assets of Tomoe Corporation or any of its group companies. In addition, we do not have any intention to engage in any conduct that would make the continuous and stable operation of the business of Tomoe Corporation or its group companies difficult.