Hibiki Path Special Opportunity (together with Hibiki Path Advisors SPC and Hibiki Path Advisors prior to January 2026, “we,” “us,” or “our”) has submitted a shareholder proposal to Tomoe Corporation (“Tomoe” or the “Company”) , and our shareholder proposal regarding the appropriation of surplus will be submitted for approval at the Company’s 94th Annual General Meeting of Shareholders scheduled to be held on June 26, 2026. The Company has published our proposal together with the Board of Directors’ opposing opinion (Japanese Only). Accordingly, we attach our proposal to this post and set out below the background to our submission, as well as our views on the Board’s opposition statement.
Tomoe is a niche leader in the construction industry, with a particular strength in spatial structure architecture. It has a phenomenal presence in various fields such as steel towers, bridges, and steel frames. In particular, its three-dimensional “Diamond Truss” structure, developed in 1932, has created expansive, breathtaking spaces and has been widely adopted in gymnasiums, expos, and large exhibition halls.
Last year, we submitted shareholder proposals calling for (i) the introduction of a restricted stock compensation scheme to align management incentives with shareholders, and (ii) the dividends payout equivalent to a 10% DOE. This was based on our concern that, despite the Company’s strong underlying business foundation, management incentives to enhance corporate value have been insufficient. As a result, the Company has long deferred addressing policy shareholdings, non-core real estate, and other non-operating assets, as well as excess capital, and its P/B has remained below 1.0x for an extended period. Notably, Institutional Shareholder Services, a leading proxy advisory firm, recommended support for our proposal relating to the appropriation of surplus.
Since last year’s proposal, we have continued broad-based engagement with the Company aimed at unlocking its intrinsic value. Specifically, as set out in our “request for the establishment of a special committee and follow-up of progress” we have called for (i) a fundamental revision of the medium-term management plan, (ii) the establishment of an independent special committee to objectively evaluate all strategic options including continued listing versus privatization, and (iii) —if remaining listed—a decisive response to non-core assets and excess capital, including the prompt disposal of cross-shareholdings and non-core real estate. However, regrettably, the Company has provided no formal response to these requests, and our repeated requests for meetings with both internal and external directors have been consistently declined. While we remain committed to constructive engagement to enhance corporate value, this response gives us no choice but to conclude that the Board is not genuinely open to meaningful shareholder dialogue, which raises serious concerns for us.
In light of the above, we have again put forward the following shareholder proposal this year to improve capital efficiency:
・Distribution of surplus equivalent to a 10% DOE, and maintenance, from the following fiscal year onward, of a dividend at least 10% DOE and no less than the per-share dividend for this year.
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[Our Views on the Company’s Opposition Statement]
In its opposition statement, the Company argues, in broad and largely abstract terms, that it has already provided sufficient shareholder returns to date, and that continuing such dividend payments could ultimately deprive the Company of opportunities to enhance medium- to long-term corporate value and the common interests of shareholders.
However, we are not arguing that capital required for the Company’s core business operations should be returned to shareholders. Rather, the Company has accumulated excessive policy shareholdings, non-core real estate, other non-operating assets, and excess capital over many years, which have materially weakened capital efficiency and weighed on the Company’s valuation. Addressing these issues appropriately and reducing excess net assets through shareholder returns is precisely what would enhance medium- to long-term corporate value.
The Company originally targeted a 10% ROE under its medium-term management plan, but revised this target down to 5% in May last year¹. Our estimates suggest that FY3/26 normalized ROE, excluding gains and losses from investment securities sales, is approximately 4.8%², broadly in line with the revised target. At the same time, the Company’s implied “real” P/B—after adjusting for after-tax unrealized gains on non-core real estate—remains at approximately 0.5x³, an extremely depressed level. In this situation, what is required is not the maintenance of a substantially lowered 5% ROE target without a concrete roadmap to improve capital efficiency, but rather decisive capital policy execution aimed at achieving the original 10% ROE target. This should include a substantial reduction of investment securities, which account for approximately 60%² of net assets, as well as the sale of non-core real estate. Furthermore, in April this year, the Company introduced a takeover response policy that could be interpreted as rejecting engagement with the capital markets. Instead of directly addressing the capital efficiency issues, the Company appears to be shifting toward insulating itself from external discipline. From the perspective of shareholder interests, this is a development that cannot be overlooked.
The share buyback and cancellation conducted in February this year was certainly a positive first step. However, it remains only a first step. Significant non-core assets and excess capital still remain on the Company’s balance sheet. If the Company believes that its current balance sheet structure is optimal from the perspective of enhancing corporate value, then it should quantitatively explain that position and obtain the understanding of the capital markets. To date, however, the Company has provided no such explanation. It is difficult to argue that the Company’s intermittent and limited share buybacks have resolved its capital allocation issues. Rather, the Company should now adopt a clear shareholder return policy centered on a DOE of at least 10% and pursue continuous and disciplined improvements in capital efficiency going forward.
While the Board states that it is considering enhanced shareholder returns and a reduction in policy shareholdings, what matters is not intent, but execution—specific plans with clear timelines and scale. The Company should re-anchor itself to the 10% ROE level it once set as its own target, and pursue capital efficiency improvements through the reduction of non-core assets, alongside a sustained shareholder return policy including a 10% or above DOE and progressive dividends.
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We have strong conviction in the Company’s fundamental business value. Precisely for that reason, the Company should not remain burdened with excess capital and non-core assets while continuing to trade at a valuation disconnected from its intrinsic value. This persistent undervaluation is not in the interests of any stakeholder, including shareholders, employees, business partners, and even the wider community.
We are seeking a framework where management operates on the same footing as shareholders and is fully focused on enhancing corporate value. By improving capital efficiency through stronger shareholder returns, we aim to advance the common interests of all shareholders. With this in mind, we are putting forward this proposal and inviting shareholders to ask for their judgment.
EOD
¹ “Revised 3rd Medium-Term Management Plan: TOMOE BUILD up 5” (Japanese only)
² FY3/26 Q4 earnings summary
³ Real estate is based on appraisal values disclosed in the FY3/25 securities report. Capital is based on FY3/26 Q4 earnings summary. The share price is the closing price of JPY 1,766 as of May 19, 2026
(Our History of Engagement with Tomoe)
29/April/2026 — Tomoe Corporation: Our Views on the Takeover Response Policy
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.