HONG KONG--(BUSINESS WIRE)-- Oasis Management Company Ltd. (“Oasis”) is the manager to funds that beneficially own approximately 11.5% of Japan ink and chemical products manufacturer DIC Corporation (3641 JT) (“DIC” or the “Company”). Oasis has adopted the Japan FSA’s “Principles of Responsible Institutional Investors” (a/k/a the Japan Stewardship Code) and, in line with those principles, Oasis monitors and engages with its investee companies.

Oasis, a long-term shareholder of DIC, urges its fellow shareholders to exercise their voting rights to improve corporate governance at DIC at the upcoming Annual General Meeting of Shareholders to be held in March 2025 (“2025 AGM”). DIC has a long history of underperformance and lack of minority shareholder protection. Oasis urges all shareholders to:

• Vote AGAINST the re-election of Mr. Ino, who not only lacks important management skills and has a track record of underperformance, but also failed to properly supervise related-party transactions with Mr. Kawamura and his family-related entities. Furthermore, Mr. Ino is responsible for Mr. Kawamura’s appointment as an Executive Advisor.
• Vote FOR the Oasis shareholder proposal to amend the Articles of Incorporation to strengthen monitoring of related-party transactions.

Long-term failure and Oasis’s concerns about governance

DIC has suffered from years of under-management characterized by failure to achieve plan targets for five consecutive mid-term plans, underperformance in TSR against TOPIX, a share price PBR below 1.0x for more than five years, job cuts, and lack of wage increases.

We are especially concerned with the following issues, which underscore the state of DIC’s poor corporate governance:

• Poor management capabilities: During the tenures of Mr. Ino and Mr. Kawamura, the Company has suffered from repeated under-delivery on their mid-term plans, significant losses and impairments, and shares priced at PBR below 1.0x, inviting questions about their leadership and management capabilities.
• Inappropriate related-party transactions: DIC engages in related-party transactions with entities related to the Kawamura family at a scale unseen at other listed companies. Some of the transactions and acts call into question Mr. Kawamura’s integrity as a director. In the Saitama Land case, land worth approximately JPY 2 Bn was first sold to the Kawamura family and then sold to a third party just two months later.
• Scant monitoring of related-party transactions: DIC claims that board meeting minutes for related-party transactions worth approximately JPY 120 Bn “do not exist”, raising concerns over if and how related-party transactions are monitored.
• Unmerited nominations: There are questions about the past nomination of Mr. Kawamura not being based on merit, as well as his appointment as an Executive Advisor. There are also concerns about Mr. Ino’s responsibility in leading the appointment as a member of the Nomination Committee.
• Other governance concerns: There are concerns about the Kawamura family engaging in other acts taking advantage of DIC for their own gain.

Therefore, as written above, Oasis aims to improve DIC’s corporate governance and asks shareholders to:

• Vote AGAINST the re-election of Mr. Ino, who not only lacks important management skills and has a track record of underperformance, but also failed to properly supervise related-party transactions with Mr. Kawamura and his family-related entities. Furthermore, Mr. Ino is responsible for Mr. Kawamura’s appointment as an Executive Advisor.
• Vote FOR the Oasis shareholder proposal to amend the Articles of Incorporation to strengthen monitoring of related-party transactions.

Oasis’s proposals on the decision-making process for the Museum

In addition to the issues stated above, Oasis is also concerned about DIC’s opaque decision-making process on the future of the Kawamura Memorial DIC Museum of Art (the “Museum”). It is reported that DIC’s art collection constitutes a significant portion, if not most, of DIC’s market capitalization. Thus, the handling of the artworks is a major decision that will have a decisive and irreversible impact on both DIC’s corporate value and equity value. Oasis is specifically concerned about:

• Absent quantitative analysis: It is unclear how the Board has concluded the announced policy will improve corporate value when no quantitative analysis was conducted and when it remains undecided which artworks will be retained and which will be sold. Is the Board acting in the best interest of enhancing corporate value with the stated future of the Museum?
• Absent reasoning for the scale of downsizing: DIC does not provide any reasoning as to why DIC considers a reduction to one quarter the size of the current collection is optimal from the “social value”, economic value, and corporate value perspectives. Furthermore, a decision to reduce the art collection to one quarter of its size without defining which artworks will constitute that one quarter does not make sense. It again begs the question, is the Board acting in the best interest of enhancing corporate value with the stated future of the Museum?
• Divesture process that is corporate value destructive: DIC’s announced method of a sale “in stages” would significantly damage DIC’s corporate value.
• Insufficient and/or misleading disclosure: In announcing the Museum policy, DIC provided insufficient or misleading disclosure regarding the value of the artworks and other related matters.

Considering what is in the best interest of all stakeholders, including shareholders, and what would enhance corporate value at DIC, Oasis requests the following actions be taken before determining the future of the Museum:

• Logical explanation for decision-making: DIC should define and publicly share the definition of the term “social value” and its relationship to corporate value as this term is used with respect to the consideration of the future of the Museum. Further, especially taking into account the underperformance of DIC’s business and shares, DIC should create guidelines for its actions when social value is in a tradeoff relationship with economic value and corporate value.
• Quantitative analysis: DIC should quantitatively compare the economic value gained from the sale of the artworks and the social value gained from continued operation of the Museum. DIC should also quantitatively analyze the appropriate scale of any social contribution in line with DIC’s corporate scale and profitability from a financial perspective.
• Ensure transparency to stakeholders, including shareholders: DIC should provide appropriate disclosure of discussions about the Museum, including quantitative analysis and results.
• Thoughtful and prudent sale of the art collection (if a sale is to be conducted): DIC should, if a sales is to be conducted, sell the artworks with a strategy that maximizes corporate value, which will most likely be selling the artworks collectively, in a collection sale. DIC should not conduct the divesture “in stages”, which would likely significantly decrease the value of the divesture, and significantly damage DIC’s corporate value.

Open letter questionnaire

To allow shareholders to make informed decisions at the upcoming AGM, Oasis asks that DIC publicly answer the following questions by March 10, 2025:

1. Why has Mr. Ino been re-nominated as director and Kaicho despite his poor track record?
2. How has Mr. Kawamura contributed to the improvement of DIC’s corporate value as an internal director despite the fact that he has not been responsible for any particular department?
3. Why has DIC created the new position of “Executive Advisor” to maintain its relationship with Mr. Kawamura even though, historically, no directors have been appointed to this position after their retirement?
4. During the period when Mr. Kawamura was a director, DIC’s business performance and share price were sub-par. Please explain what evaluation the DIC board of directors performed of Mr. Kawamura’s qualities as a management member.
5. Please explain why related-party transactions of this scale with DIC’s large shareholders employing former senior managements of DIC are appropriate and necessary in general.
6. DIC did not consider the option of moving to another location when discussions began regarding the rebuilding of the HQ building due to the building becoming old. Please explain why DIC did not consider any other location for the relocation of the head office other than the land and buildings owned by the Kawamura family.
7. DIC has stated that the rebuilding of the head office “allowed an increase of the unit price per unit area” during a court procedure. Why does DIC think that an increase in the rent it pays to a company controlled by the Kawamura family is beneficial to DIC?
8. Regarding the sale of the Saitama Land executed in 2021, please explain why the land was not sold directly to the developer, but rather was sold through an organization related to the Kawamura family.
9. Regarding the transactions with Nisshin Trading and Dainichi Can, does DIC not think it is inappropriate that the transactions, which have amounted to more than JPY 120 Bn over the past 10 years, have never been discussed at a board meeting?
10. Please explain DIC’s guidelines for actions, in general, when “social value” is in a trade off relationship with economic value or corporate value.
11. Please explain how it was possible for “the Company [to determine] that only by […] operating the museum […] will it be able to further contribute to society through its support for fine art and the arts in general, and that the social value thus generated would be comparable and justifiable to the economic value that could potentially be obtained by discontinuing operations”, when it had not yet decided which artworks to retain and which to sell?
12. Similarly, please explain whether DIC considers itself to have conducted sufficient analysis from a quantitative perspective on enhancing DIC’s corporate value in connection with the statement, “[it] is difficult to forecast in monetary terms the intangible value to be gained through the operation of a new museum in a new location, however the board has determined that the potential social value and brand value are highly significant.”
13. Similar to question 11, please respond as to why DIC thought it appropriate to reduce the number of artworks to around a quarter the current number even though DIC has not yet decided which works of art to retain and which to sell.

Summary

DIC’s poor governance has brought undesirable results for all stakeholders, except the Kawamura family, for too long. The time for change at DIC is now. Oasis strongly urges DIC shareholders to vote AGAINST the re-election of Mr. Ino and vote FOR the amendment of the Articles of Incorporation proposed by Oasis.

Seth Fischer, Founder and Chief Investment Officer of Oasis, said:

“DIC’s sub-par corporate governance has brought sub-par results to all of DIC’s stakeholder. At this AGM, I believe shareholders should demonstrate their concerns to DIC as a means to show that these kinds of governance practices are no longer tolerable.”

For more information, please visit DICcorpgov.com. We welcome all stakeholders to contact Oasis at info@DICcorpgov.com to help improve DIC’s corporate governance.

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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 the Japan Stewardship Code) and, in line with those principles, Oasis monitors and engages with our investee companies.

The information and opinions contained in this press release (referred to as the "Document") are provided by Oasis Management Company (“Oasis”) for informational or reference purposes only. The Document is not intended to solicit or seek shareholders to, jointly with Oasis, acquire or transfer, or exercise any voting rights or other shareholder’s rights with respect to any shares or other securities of a specific company which are subject to the disclosure requirements under the large shareholding disclosure rules under the Financial Instrument and Exchange Act. 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 shareholding with the relevant Japanese authority for public disclosure under the Financial Instruments and Exchange Act. Except in the event that Oasis expressly enters into the agreement as a joint holder requiring such disclosure, Oasis does not intend to take any action triggering reporting obligations as a Joint Holder. The Document exclusively represents the opinions, interpretations, and estimates of Oasis.

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