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King Street urges Toshiba to take full advantage of this historic opportunity and realize the extraordinary returns that would be generated by an accelerated and increased ¥1.1 trillion share buyback and the successful execution of the Toshiba Next Plan.

Increase the Share Buyback

While accelerating the timing of the share buyback is most critical, it is also essential to increase its size. We have clearly expressed to Toshiba in numerous meetings and correspondence over the past few months that the ¥700 billion announced commitment is grossly insufficient given the magnitude of Toshiba’s excess capital and how severely undervalued the Company currently is.

Toshiba has total cash of ¥1.8 trillion and net cash of approximately ¥1.2 trillion (see slide 21), equal to ¥1,833/share. No investment alternatives come close to the exceptional returns achievable from the buyback. Accordingly, as much excess capital as possible should be deployed to this end. We strongly believe there are no real obstacles to increasing the share buyback program to at least ¥1.1 trillion. Such an increase would optimize Toshiba’s capital allocation, reduce Toshiba’s shares outstanding and, when coupled with a properly executed Toshiba Next Plan, greatly increase its long-term share price.

After a ¥1.1 trillion buyback, Toshiba would still maintain unusually sound financial metrics (see slides 11 and 23). It would have ¥700 billion of cash, remain under-levered relative to peers and have ample capacity for future buybacks and dividends. While we appreciate the importance of achieving an appropriate credit rating, R&I has publicly confirmed that profitability and earnings stability are the key to higher credit ratings for Toshiba, rather than retaining additional excess cash. Nor is additional excess cash needed to cover restructuring expenses or any losses on Toshiba’s LNG contracts. Moreover, non-operating assets (e.g., cross-shareholdings and real estate) can and should be monetized to materially increase net cash and dividend capacity even further (see slides 49 - 53).