About our Shareholder Proposal to Chori | Increase both Chori’s and Toray’s shareholders’ value
What we hope Tosho to improve the shareholders’ value as a shareholder are
1) Increase the value of the overall Toray Group by increasing shareholder value of Chori and
2) Improve corporate governance

About our Shareholder Proposal to Chori

The shareholder proposals are as follows. Refer to the linked pages for details.

Proposal 1. Revision of the provisions of articles with regard to the appointment of outside directors

Proposal 2. Revision of the provisions of articles with regard to the evaluation of the effectiveness of the Board

Proposal 3. Revision of the provisions of articles with regard to the appropriation of surplus

Proposal 4. Appropriation of surplus on the condition that Proposal 3 above is approved

Proposal 5. Revision of the provisions of articles with regard to disclosure of cost of capital

Proposal 6. Revision of the provisions of articles with regard to the to the Dissolution of Cross-Shareholdings

For more details please refer here.

“Proposal to make majority of board independent outside directors and evaluate board using a third party

 Strategic Capital has been consistent in its opposition to any parent-child listing. Thus, proposing the majority of the board consist of independent outside directors and evaluation of board effectiveness using a third party, we do not intend for the parent-child listing relationship to continue. Instead, we look for the proposals to trigger an end to the parent-child listing status.

 We believe that the parent company leaves its subsidiary listed on the stock exchange because the subsidiary will “obey the parent.” Hence, once the majority of Chori’s directors consists of independent outside directors, Chori will no longer “obey” Toray, and Toray will decide to end the parent-child listing.

Estimation of stock price assuming proposal for 100% dividend payout is approved

 Assuming a dividend per share of 248 yen (the same amount as earnings per share for FY ending March 31, 2020), and a dividend yield of 5%, the stock price will be 4,960 yen.

 Based on a stock price of 1,723 yen as of May 20 2020, 4,960 yen would equal a gain of 188%.

Our view on cost of equity

Assumptions: g= 3.0%, ROE = 8%, PBR = 0.74(*)
Result: 9.8%
Comment: Cost of Equity calculated based on the average stock price from January 6 to May 20 is 9.5%
(*) ROE is calculated by dividing the forecasted net income by equity capital of Mar 2020. PBR is as of May 20, 2020.

Supplement to our proposal for appropriation of surplus

 Our proposal is not intended to seek excessive dividends from Chori or short-term gains. It is the proposal for a return of profits to shareholders that does not exceed those earned during the year.

(Source: Strategic Capital)

 As described above, we are proposing a dividend payout ratio of 100%, independent of Chori’s profit level every year, in order to prevent further capital accumulation and to prevent future ROE decline.


The ratio of favour votes to our proposals

The ratio of favour votes to our proposals is below.
Please see here for details.

(Source: Strategic Capital based on extraordinary report and proxy statement)

TOPIC:Third-party evaluation of board effectiveness drawing attention

Increased attention is drawn to the know-how of third-parties to evaluate board effectiveness given concerns that an in-house survey, making inquiries to directors and auditors every year, is losing substance.

(Source:Sumitomo Mitsui Trust Bank 「The number of evaluation of board effectiveness by 3rd party evaluators has doubled」)

 When we reviewed Chori’s board evaluation statements for the last two years, the contents were almost identical with the exception of highlighted part in yellow as below. Based on this, Chori’s evaluation may have already lost substance.

(Source :Chori – Corporate Governance Report 6/18/2019)

(Source:Chori – Corporate Governance Report 11/27/2018)


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