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April 8, 2020

Proxy Advisors Report on Sekisui House for AGM 2020

Both Glass Lewis and Institutional Shareholder Services (“ISS”), prominent international proxy advisory firms, issued voting recommendations for the April 23, 2020 Sekisui House, Ltd. (“SHL”) annual meeting of shareholders.  Noting that the meeting involves a contested election of directors, Glass Lewis recommends shareholders to vote against the top four incumbent directors Toshinori Abe, Shiro Inagaki, Yoshihiro Nakai, and Takashi Uchida and vote to elect Isami Wada, Fumiyasu Suguro, Christopher Douglas Brady, and Hitomi Kato, key directors of our dissident slate.  Respecting ISS, the proxy advisor “concludes that the dissident[s] presents a compelling case, pointing out the company’s problems concerning governance and disclosure practices....”  ISS recommends “[b]ased on the above-mentioned arguments, the appointment of dissident nominees Jiro Iwaski...and Christopher Douglas warranted.”  Coincidentally, ISS advises that because “there are concerns about the above-mentioned governance and disclosure practices for which Chairman Toshinori Abe and Vice Chairman Shiro Inagaki should be held most responsible.  Accordingly, votes against Abe and Inagaki are warranted.”


Both Glass Lewis and ISS view certain incumbent directors participation and continuing coverup of a fraudulent land transaction require governance changes at SHL.  Glass Lewis best describes this need for current governance change:


We believe the provision of more robust disclosure around SHL’s fraudulent transaction suggests certain members of the SHL executive team have continually relied on fractional disclosure and targeted attrition among rank-and-file managers to mask a more deep-seated intransigence around the application of direct culpability for substantial failures in fundamental risk management and oversight. In this regard, while we acknowledge certain   limitations in the Dissidents’ presently disclosed platform, we are ultimately inclined to conclude unaffiliated investors has been provided a uniquely strong opportunity to hold key individuals responsible not only for their prior failings, but also for their efforts to blunt disclosure around those failings and mute voices of dissent.


Glass Lewis further endorsed key members of dissidents’ slate by observing that “investors are concurrently well positioned to install new, credible directors capable of favorably contributing not only to SHL’s core domestic and international operations, but also to the implementation of a more robust and transparent corporate governance framework supported by a substantially more independent board.”  In so doing, Glass Lewis provided rationale for supporting the following dissident directors:


 Isami Wada:  He is vital to establish a corporate governance framework for the Company.


Fumiyasu Suguro:  He is best positioned to maintain all the business operational know how on the board of directors, and is also well versed in how the board of directors has been run. Further, he has abundant experience in the Company’s international business which is one of the core growth segments for the Company.


Christopher Douglas Brady: His finance background will contribute to the   promotion by the board of directors of such things as share buybacks and unwinding of cross-shareholdings. His experience in risk management and anti-money laundering should be helpful since the Company has issues in these areas as pointed out by the investigation report on the land fraud.


Hitomi Kato: She will be core to more stringent internal controls and enhanced     transparency. Also she is to become Chair of the board of directors.


ISS stressed dissident directors Jiro Iwasaki and Christopher Douglas Brady backgrounds as key to being superlative independent directors for SHL’s board:


Iwasaki is a former long-time executive director of TDK Corp., who later served as an outside director or statutory auditor at several listed companies. He currently holds outside director posts at SBS Holdings, GCA Corp. and Renesas Electronics Corp. His background will all meet Sekisui House’s standard to appoint outsiders to the board who have experience in business. His sufficient experience at public boards should add value to the board of Sekisui House.


As for Christopher Douglas Brady, he is expected to inject shareholder views into the board. Brady has a long experience in the financial industry, and currently serves as the chairman and CEO of Chart Group, L.P., and Chart National, L.P. a private equity firm. Before that, he spent fourteen years in the corporate finance and capital markets departments of Lehman Brothers and Dillon Read. He was     also a board member of Templeton Emerging Markets Investment Trust, listed on the London Stock Exchange (this information is not included in his bio provided in the circular, but this can be confirmed with the investment trust’s website). His background as an investor, and as a director of a public board, as well as his perspective as a non-Japanese national would help the company improve its governance practices and increase diversity.


Finally, ISS provided a link to the dissidents’ website “Save Sekisui House” and also a link to the Investigation Report about the fraudulent land scandal while stating “[a]s to information disclosure, the company still fails to disclose the investigation report in question....Separately from the discussion of who should be blamed, it is difficult to understand why the company has consistently resisted disclosure of that report, only creating opaqueness, if the company was serious to regain public trust by improving disclosure.”


We appreciate both proxy advisors’ keen recognition of our dissident slate’s mission to restore governance at SHL.  However, our slate includes 11 highly qualified directors who collectively and without qualification have pledged to attain this objective, among many other goals that can be viewed on  Therefore, we respectfully ask our shareholders to vote by sending in their proxies to elect each and every director on our dissident slate at the April 23, 2020 annual meeting.

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