- Oasis calls for fellow shareholders of Kumagai Gumi to vote for an independent review of strategy and to hold President Sakurano accountable for the failed alliance with Sumitomo Forestry and declining corporate value that has resulted in ROE below 5% and PBR remaining well below 1x.

- ISS and Glass Lewis support Oasis’s view that Kumagai Gumi’s partnership with Sumitomo Forestry has failed and warrants further scrutiny by shareholders and both have therefore recommended shareholders mandate an independent Strategic Review Committee, which will also serve to review Kumagai Gumi’s capital policy, and Glass Lewis have also recommended shareholders remove President Sakurano.

- Oasis’s shareholder proposals are in the interests of all stakeholders, and it urges fellow shareholders to signal their dissatisfaction for the long list of strategy and oversight failures through their votes.

Oasis Management Company Ltd. (“Oasis”) is the manager to funds that beneficially own over 7% of Kumagai Gumi Co., Ltd. (1861 JT) (“Kumagai Gumi”, “Kumagai” or the “Company”). Oasis has recently submitted several proposals to the Company for shareholders to vote on at the 2023 Annual General Meeting (“AGM”) to be held on June 29, 2023.

Oasis’s proposals seek accountability for the multitude of failures in strategy and oversight which have led to declining performance in the business. Ultimately, Oasis believes that the Company’s obsessive focus on squeezing-out synergies from the capital alliance with Sumitomo Forestry and poor investments for the sake of growth has been and continues to be detrimental to its core business and is destructive to corporate value in the long-term.

ISS and Glass Lewis Support Independent Strategic Review

Kumagai Gumi’s management, under the leadership of President Sakurano, has failed stakeholders by overseeing a steepening decline in corporate value resulting in the Company’s Return On Equity (“ROE”) sinking to below 5%, and Price-to-book Ratio (“PBR”) remaining well below 1x. Dropping below these thresholds indicates a critical problem of capital allocation that for Kumagai Gumi centers around a failing capital alliance with Sumitomo Forestry and poor investment planning.

Sumitomo Forestry have held c.21% of shares of Kumagai since a 2017 capital raise that promised strategic benefits to outweigh the dilution to shareholders and granted a seat on the board. President Sakurano (whose tenure began in early 2018) has failed to realise this value, thus failing to offset the dilution incumbent on minority shareholders, while maintaining Sumitomo Forestry’s influence on the Board, misaligning management priorities from those of minority shareholders.

Oasis believes that the relationship has failed stakeholders, and this view is supported by both leading proxy advisory firms: Institutional Shareholder Services, Inc. (“ISS”), and Glass, Lewis & Co. LLC (“Glass Lewis”). In their AGM report and recommendations, ISS concluded that:

“[Oasis] has presented sufficient and compelling evidence of the failed partnership with Sumitomo Forestry. In this context, the significant increase in planned investments going forward call for further scrutiny of the company's investment plans.”

In accordance with this analysis, both ISS and Glass Lewis have recommended that Kumagai Gumi shareholders support Oasis’ proposal to establish a Strategic Review Committee. Further to this, Glass Lewis recommend the removal of President Sakurano, both recognise the opportunity for the Committee to go further and represent shareholder interests in the review of Kumagai Gumi’s capital policy approach and other strategic actions:

All Oasis Shareholder Proposals are in the Interests of Minority Shareholders

Like other long-suffering shareholders of Kumagai Gumi, Oasis has waited patiently through a series of false dawns for Kumagai to finally make good on its promises. These have not occurred, and as such, the dilution caused by the introduction of Sumitomo Forestry has persisted. Our proposals look to address this issue as part of a longer list of problems at Kumagai Gumi:

• Strategy
  • Failure to focus on the core business
  • Failure to allocate capital efficiently
  • Failure to generate meaningful benefits from the capital alliance with Sumitomo Forestry, which significantly diluted all other shareholders
  • Failure to make returns on investments
• Performance
  • Operational failures and declining performance metrics
  • Failure to trade above book value, despite recent TSE developments
  • Failure to improve ROE to 5%
  • Failure to meet mid-term plan targets
  • Failure to achieve earnings guidance
• Oversight
  • Failure to separate the roles of CEO and Chair
  • Failure to appoint a diversified majority independent Board with Outside Directors who have relevant industry experience
  • Failure to establish appropriate ESG Oversight at the board-level
  • Failure to prevent scandals related to testing

Oasis urges fellow shareholders of Kumagai Gumi to:

- Vote AGAINST the Nomination of President Yasunori Sakurano (Agenda 2-1); and,

- Vote AGAINST the Nomination of Sumitomo Forestry Representative Director Tatsuru Sato (Agenda 2-7)

Furthermore, alongside the recommendation from ISS and Glass Lewis, recognising the immediate need for Kumagai Gumi to evaluate its investment plan and the alliance with Sumitomo Forestry from the perspective of all Kumagai stakeholders, Oasis also urges fellow shareholders of Kumagai Gumi to:

- Vote FOR the Oasis Shareholder Proposal calling for the Company to establish a Strategic Review Committee to address the capital alliance with Sumitomo Forestry and failed investment plan (Agenda 7).

To refocus management on improving their core business and address their history of poor allocation, Oasis recommends that shareholders also:

- Vote FOR two (2) Oasis Shareholder Proposals calling for the Company to:

• Initiate a 20% share buyback (Agenda 5); and,
• Distribute a dividend of JPY188/share (Agenda 6).

To learn more about Oasis’s proposals, please visit www.kumagaicorpgov.com. We welcome all stakeholders to contact Oasis at info@kumagaicorpgov.com to help strengthen Kumagai Gumi’s corporate governance, which critically includes how capital is allocated, by holding those responsible for failures to account and signalling steps to the Board that need to be taken in order to create long-term stakeholder value.

About Oasis

Oasis Management Company Ltd. manages private investment funds focused on opportunities in a wide array of asset classes across countries and sectors. Oasis was founded in 2002 by Seth H. Fischer, who leads the firm as its Chief Investment Officer. More information about Oasis is available at https://oasiscm.com. Oasis has adopted the Japan FSA’s “Principles for Responsible Institutional Investors” (a/k/a Japan Stewardship Code) and in line with those principles, Oasis monitors and engages with our investee companies.

Important Disclaimer

The information contained in this press release (referred to as the "Document") is an information resource for shareholders in Kumagai Gumi offered by Oasis, the investment manager to private funds that are shareholders of Kumagai Gumi (the "Oasis Funds").

This material is not intended to solicit voting in favor of Oasis’ proposals, to which rules concerning solicitation of proxies applies.

Oasis is not in any way soliciting or requesting shareholders to jointly exercise their voting rights together with Oasis. Shareholders that have an agreement to jointly exercise their voting rights are regarded as “Joint Holders” under the Japanese large shareholding disclosure rules, and they must file notification of their aggregate share ownership with the relevant Japanese authority for public disclosure.

Oasis disclaims its intention to be treated as a Joint Holder with other shareholders under the Japanese Financial Instruments and Exchange Act (“FIEA) by virtue of its act to express its view or opinion or other activities to engage in dialogue with other shareholders in or through this Document or any website.

This statement and related materials exclusively represent the opinions, interpretations, and estimates of Oasis in relation to the upcoming AGM. Oasis is expressing those opinions solely in its capacity as an investment advisor to the Oasis Funds.

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