Toshiba Tec : Notice Regarding Purchase of Treasury Shares and Tender Offer for Treasury Shares

	August 7, 2023
Company name:	Toshiba Tec Corporation
Representative:	Hironobu Nishikori
	Representative Director
	President and Chief Executive Officer
	(Securities code: 6588,
	Tokyo Stock Exchange Prime Market)
Contact:	Akira Abe
	General Manager of Corporate
	Communications Division
	(Tel. [phone])

Notice Regarding Purchase of Treasury Shares and Tender Offer for Treasury Shares

The Company resolved at the board of directors meeting held on August 7, 2023 to conduct a purchase of treasury shares by a tender offer for treasury shares (the "Tender Offer"), pursuant to the articles of incorporation of the Company, under Article 459, paragraph 1 of the Companies Act (Act No. 86 of 2005, as amended; the "Companies Act").

1. Purpose of the Purchase, etc.

The Company aims to continuously increase dividends with a target consolidated dividend payout ratio of around 30%, while taking into account strategic investments and the like for medium- to long-term growth. The Company issues interim and year-end dividends, and issued an interim dividend of 20 yen per share and a year-end dividend of 20 yen per share, making an annual dividend of 40 yen per share in the fiscal year ended March 2023, as a result of comprehensive consideration of the business performance, business environment, and stable issuance of dividends with reference to the above basic policy.

The Company has provided in its articles of incorporation that the board of directors may make resolutions to determine dividends of surplus, purchases of treasury shares, and other matters provided for in the items of Article 459, paragraph 1 of the Companies Act without a resolution of the shareholder meeting, unless otherwise provided for by laws and ordinances. The purpose of this provision is to enable the dividend policy and equity strategy to be flexibly adapted to changes in the business environment by giving the board of directors authority with respect to dividends of surplus, purchases of treasury shares, and the like.

In the past, the Company has made purchases of treasury shares in order to maintain a flexible equity policy, specifically, as stated in the press releases issued with respect to those purchases of treasury shares at the time: (i) the purchase, pursuant to a resolution of the ordinary general meeting of shareholders held on June 27, 2002, of (a) 310,000 shares (ownership ratio as of 2002 (see Note 1): 0.11%; cumulative purchase amount: 87,983,000 yen) through market price transactions on the Tokyo Stock Exchange ("TSE") executed between September 10 and September 18 of that year, pursuant to a resolution of the board of directors meeting held on September 9 of that year, (b) 2,499,000 shares (ownership ratio as of

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2002: 0.87%; cumulative purchase amount: 747,201,000 yen) through a closing price transaction on the TSE (ToSTNeT-2) dated September 20 of that year, pursuant to a resolution of the board of directors meeting held on September 19 of that year, (c) 922,000 shares (ownership ratio as of 2002: 0.32%; cumulative purchase amount: 252,077,000 yen) through market price transactions on the TSE executed between November 1 and November 28 of that year, pursuant to a resolution of the board of directors meeting held on October 31 of that year, and (d) 1,020,000 shares (ownership ratio as of 2002: 0.35%; cumulative purchase amount: 275,400,000 yen) through a closing price transaction on the TSE (ToSTNeT-2) dated December 4 of that year, pursuant to a resolution of the board of directors meeting held on December 3 of that year; (ii) the purchase, pursuant to a resolution of the ordinary general meeting of shareholders held on June 27, 2003, of (a) 834,000 shares (ownership ratio as of 2003 (see Note 2): 0.29%; cumulative purchase amount: 396,984,000 yen) through a closing price transaction on the TSE (ToSTNeT-2) dated September 18 of that year, pursuant to a resolution of the board of directors meeting held on September 17 of that year, (b) 485,000 shares (ownership ratio as of 2003: 0.17%; cumulative purchase amount: 219,705,000 yen) through a closing price transaction on the TSE (ToSTNeT-2) dated November 6 of that year, pursuant to a resolution of the board of directors meeting held on November 5 of that year, and (c) 1,200,000 shares (ownership ratio as of 2003: 0.42%; cumulative purchase amount: 517,833,000 yen) through market price transactions on the TSE executed between December 1 and December 19 of that year, pursuant to a resolution of the board of directors meeting held on November 27 of that year; (iii) the purchase of 1,217,000 shares (ownership ratio at the time of purchase (see Note 3): 0.43%; cumulative purchase amount: 557,386,000 yen) through a closing price transaction on the TSE (ToSTNeT-2) dated November 30, 2004, pursuant to a resolution of the board of directors meeting held on November 29 of that year; (iv) the purchase of 1,240,000 shares (ownership ratio at the time of purchase (see Note 4): 0.44%; cumulative purchase amount: 678,280,000 yen) through a closing price transaction on the TSE (ToSTNeT-2) dated May 31, 2006, pursuant to a resolution of the board of directors meeting held on May 30 of that year; (v) the purchase of 2,266,000 shares (ownership ratio at the time of purchase (see Note 5): 0.81%; cumulative purchase amount: 1,189,650,000 yen) through a closing price transaction on the TSE (ToSTNeT-3) dated August 29, 2008, pursuant to a resolution of the board of directors meeting held on August 28 of that year; and (vi) the purchase of 844,000 shares (ownership ratio at the time of purchase (see Note 6): 0.31%; cumulative purchase amount: 254,044,000 yen) through a closing price transaction on the TSE (ToSTNeT-3) dated September 1, 2010, pursuant to a resolution of the board of directors meeting held on August 31 of that year 2010.

Note 1: The percentage (rounded to the second decimal place) of the difference (288,118,517 shares) of the total number of issued shares of the Company as of March 31, 2002 (288,145,704 shares) less the number of treasury shares held by the Company as of that date (27,187 shares).

Note 2: The percentage (rounded to the second decimal place) of the difference (283,103,781 shares) of the total number of issued shares of the Company as of March 31, 2003 (288,145,704 shares) less the number of treasury shares held by the Company as of that date (5,041,923 shares).

Note 3: The percentage (rounded to the second decimal place) of the difference (280,875,704 shares) of the total number of issued shares of the Company as of November 29, 2004 (288,145,704 shares) less the number of treasury shares held by the Company as of that date (7,270,000 shares).

Note 4: The percentage (rounded to the second decimal place) of the difference (279,658,704 shares) of the total number of issued shares of the Company as of May 30, 2006 (288,145,704 shares) less the number of treasury shares held by the Company as of that date (8,487,000 shares).

Note 5: The percentage (rounded to the second decimal place) of the difference (278,418,704 shares) of the total number of issued shares of the Company as of August 28, 2008 (288,145,704 shares) less the number of treasury shares held by the Company as of that date (9,727,000 shares).

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Note 6: The percentage (rounded to the second decimal place) of the difference (275,049,731 shares) of the total number of issued shares of the Company as of August 31, 2010 (288,145,704 shares) less the number of treasury shares held by the Company as of that date (13,095,973 shares).

As described above, the Company has deliberated purchases of treasury shares for the purpose of flexible equity policy as necessary, with reference to share price movements, its financial situation, and other factors, and has been deliberating measures to improve its capital efficiency, including a purchase of treasury shares, since early September 2022 based on the Company's current capital efficiency, the opinions expressed by shareholders and investors in dialogue with them regarding the improvement of capital efficiency, and other factors. In that context, the Company received an oral request from its largest shareholder and parent company, Toshiba Corporation ("Toshiba"; number of shares held as of March 31, 2023: 28,827,501 shares; Ownership ratio as of March 31, 2023 (see Note 7): 52.08%) on May 23, 2023, to the effect that Toshiba wished to sell part of the common stock of the Company held by Toshiba and wanted the Company to consider buying those shares. On June 16, 2023, Toshiba made a written request to the Company to the effect that Toshiba was deliberating the sale of part of the common stock of the Company held by Toshiba, to the extent that Toshiba would be able to maintain its ownership of more than 50% of the voting rights of the Company, as a measure to increase efficiency of assets and improve financial strength, and that Toshiba wished for the Company to consider the option of conducting a tender offer to acquire those as treasury shares. The Company confirmed on July 13, 2023 that the number of shares that Toshiba was considering for sale was 2,222,000 shares of the common stock of the Company (Ownership ratio as of March 31, 2023: 4.01%; the "Pre-TenderedShares").

Note 7: "Ownership ratio as of March 31, 2023" means the percentage (rounded to the second decimal place) of the difference (55,347,472 shares) of the total number of issued shares of the Company as of March 31, 2023 (57,629,140 shares), as stated in the Annual Securities Report for the 98th Fiscal Year submitted on June 30, 2023 (the "Annual Securities Report"), less the number of treasury shares held by the Company as of that date (2,281,668 shares); the same applies hereinafter.

Having received the above request from Toshiba, the management of the Company began specific deliberations on May 23, 2023 regarding the purchase of the Pre-Tendered Shares as treasury shares, upon comprehensive consideration of the fact that the request from Toshiba is in line with the Company's own intentions since the Company has already been independently deliberating measures to improve capital efficiency including the purchase of treasury shares as described above, the effect that a one-off release of a significant number of shares - such as that of the Pre-Tendered Shares, which can be calculated as equal to 34.1 times the average daily trading volume of the Company's common stock on the basis that the average daily trading volume of the Company's common stock during the fiscal year ended March 2023 was 65,249 shares - into the market would have impact on the liquidity and market price of the Company's common stock, and the Company's financial situation. Given that Toshiba is the parent company of the Company holding 28,827,501 shares of the Company's common stock (Ownership ratio as of March 31, 2023: 52.08%), making the acquisition of treasury shares from Toshiba as part of the Tender Offer constitutes a significant transaction, etc. with the controlling shareholder as defined in the Securities Listing Regulations of the TSE, and that the Company has had a special committee (the "Special Committee") comprising four outside directors as independent officers of the Company (Michio Kuwahara, Shin Nagase, Hirotaka Morishita, and Miho Aoki) as a body for discussing and deliberating material transactions where there is a conflict of interest between Toshiba and the minority shareholders, the Company explained the content of Toshiba's request to the Special Committee and requested that the Special Committee begin specific deliberations with respect to the merits of acquiring the Pre-Tendered Shares as treasury shares on June 28, 2023, and the Special Committee agreed to begin deliberations.

Subsequently, based on the discussions and opinions of the Special Committee regarding the purpose

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and meaning of the Tender Offer, the Company concluded in mid-July 2023 that its acquisition of the Pre-Tendered Shares as treasury shares would help to improve the Company's capital efficiency, such as earnings per share (EPS) and rate of return on equity (ROE), and would be conducive to shareholder return. With respect to the specific method of acquiring the treasury shares, the Company has determined, from the perspective of equality between shareholders and transparency of transactions, that the method of a tender offer would be appropriate given that it ensures that shareholders other than Toshiba have the opportunity to tender their shares based on market movements after providing a certain period for consideration, and that the acquisition of treasury shares through a market purchase as the Company has done in the past, as described above, would be expected to take time to acquire a significant number of shares in light of the liquidity of the Company's stock (note that the average daily trading volume of the Company's common stock during the fiscal year ended March 2023 was 65,249 shares as stated above, on which basis the number of the Pre-Tendered Shares can be calculated as equal to 34.1 times the average daily trading volume of the Company's common stock), and the purchase price would need to be the market price, whereas a tender offer allows a large number of shares to be acquired in a relatively short time and can be conducted at a price representing a certain discount to the market price.

In addition, in mid-July 2023, when determining the price of purchase, etc. of the Tender Offer (the "Tender Offer Price"), the Company considered that it should use the market price of the common stock of the Company as a basis in order to emphasize the clarity and objectivity of the price that is the basis for the purchase, in light of the facts that the common stock of the Company is listed on a financial instruments exchange and that most purchases are market share purchases due to the fact that a purchase of treasury shares by a listed company can be a flexible purchase according to the share price formed by the market based on supply and demand. On that basis, the Company determined that it would be preferable to conduct the purchase at a price that represents a discount to the market price of the common stock of the Company in order to prevent the flow of assets outside the Company as far as possible, in order to respect the interests of shareholders that continue to hold the common stock of the Company without tendering in the Tender Offer.

Based on the Company's decision, on July 12, 2023, the Special Committee made decisions with respect to matters including (i) that, given that upon confirmation of the discount rate (rounded to the nearest whole number) in the 31 past transactions conducted by other companies between January 1, 2021 and May 31, 2023 which were taken as recent examples of tender offers for treasury shares by other companies (the "Recent Transactions"; see Note 8), the range of discount rates applied was 6% to 15%, it would be appropriate for the first proposal of the Tender Offer Price to Toshiba to be at the highest discount rate in that range (15%) in consideration of the prevention of outflow of assets from the Company to the extent possible and the volatility of the price of the Company's common stock, and that using, as the price of the common stock of the Company that is the basis for the discount, an average value that is the average price over a certain period, rather than the price at any one point in time, would eliminate the influence of temporary changes in share price and ensure that the basis of the calculation is objective and reasonable, and (ii) that, given that in all of the 18 Recent Transactions in which the simple average closing price over a certain period ending on the last business day prior to the date of the resolution to conduct the tender offer was used as the base share price (see Note 9), either a one-month or a three-month period was set as the period for calculation of that average value, and that it was believed that using the simple average closing price of the common stock of the Company over the past six months as the basis for the discount rate would not appropriately reflect the Company's recent business outlook and financial condition, the price of the common stock of the Company that is the basis for the discount that is proposed to Toshiba should be the lower of the simple average closing price of the common stock of the Company over the one-month period ending on August 4, 2023, which is the last business day prior to the date of the board of directors meeting at which the decision to conduct the Tender Offer was made (August 7, 2023), or the simple average closing price of the common stock of the Company over the three-month period ending on that date (the "Basis Price"), bearing in mind the need to prevent the outflow of assets from the Company.

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Note 8: Of the 45 tender offers for treasury shares with respect to which resolutions were passed between January 1, 2021 and May 31, 2023, the Company excluded the transactions where a premium was set or where a share valuation report was used to determine the purchase price (14 transactions in total), and took into account the 31 transactions where the market share price was used as the basis for calculating the tender offer price (one with a discount of 15%, two with a discount of 13%, one with a discount of 11%, 22 with a discount of 10%, two with a discount of 9%, two with a discount of 7%, and one with a discount of 6%).

Note 9: Of the 45 tender offers for treasury shares with respect to which resolutions were passed between January 1, 2021 and May 31, 2023, the Company excluded the transactions where a premium was set or where a share valuation report was used to determine the purchase price (14 transactions in total), and took into account the 18 transactions in which the simple average closing price over a certain period ending on the last business day prior to the date of the resolution to conduct the tender offer was used as the base share price (10 transactions with a period of one month and eight transactions with a period of three months; there were no transactions in which the period was six months or any other period).

Based on that decision of the Special Committee, on July 13, 2023, the Company, with the approval of the Special Committee, made a proposal to Toshiba to make the Tender Offer Price the price calculated upon application of a 15% discount rate to the Basis Price. Toshiba responded on July 19 with a proposal to the effect that it would agree to set the price of the common stock of the Company that is the basis for the discount at the Basis Price, but this agreement was on the basis that (i) the discount rate should be 7.5% and (ii) if the price calculated by applying the discount rate to the Basis Price represents a premium or a discount of 20% or more to the share price as of the last business day prior to the announcement, the Tender Offer Price should be set at the price calculated by applying the above discount rate to the share price as of the last business day prior to the announcement, from the perspective of Toshiba's accountability to its shareholders given that the 15% discount rate is high in comparison to similar transactions and the perspective of ensuring that the Tender Offer is conducted even in the event of a significant change in the market price of the Company's shares.

The Company made a report to the Special Committee on the same day regarding the proposal from Toshiba, and the Special Committee determined that it would be appropriate to conduct the Tender Offer at a higher discount rate based on the perspective of saving the outflow of assets from the Company and the discount rate in the Recent Transactions, and decided on July 21, 2023 that a request should be made to Toshiba to set the discount rate at 12%. Based on that decision of the Special Committee, the Company, with the approval of the Special Committee, made a new proposal to Toshiba on the same day to set the discount rate at 12% for the reasons stated above.

Toshiba replied on July 27 to the effect that it considered the discount rate of 12% to be high in comparison to similar transactions, and proposed a discount rate of 9% based on its discussions with the Company. The Company made a report to the Special Committee on the same day regarding the proposal from Toshiba, and the Special Committee determined on July 28, 2023 that it would be appropriate to conduct the Tender Offer at a higher discount rate in consideration of the interests of the Company's minority shareholders, the perspective of saving the outflow of assets from the Company, and the discount rate in the Recent Transactions, and decided that a request should be made to Toshiba to set the discount rate at 10%. With respect to Toshiba's proposal to the effect that if the price calculated by applying the discount rate to the Basis Price represents a premium or a discount of 20% or more to the share price as of the last business day prior to the announcement, the Tender Offer Price should be set at the price calculated by applying an agreed discount rate to the share price as of the last business day prior to the announcement, the Special Committee determined that (A) using the share price as of a specific day (the business day prior to the announcement) as the basis for the discount is inconsistent with the Company's belief that it would be more objective and reasonable to use the average share price over a certain period as the basis for the discount in light of the volatility of the price of the common stock of the Company, and (B) Toshiba's proposed handling of the case where the price

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