Toshiba chooses to mislead shareholders day before the vote deadline
Toshiba does not hear investors’ growing demands to carry out an independent investigation
Toshiba is blind to impropriety of neutral vote tabulator acting as proxy solicitor
Fudges by claiming that Japan Post takes “approximately” four days to deliver mail, which would be in violation of service levels established by Postal Laws
Audit Committee chose to believe conflicted SMTB and not Japan Post regarding delivery times of mail-in-ballots

SINGAPORE--(BUSINESS WIRE)--Effissimo Capital Management today responded to renewed objections by Toshiba Corporation (TYO: 6502), made in an updated presentation released on March 161, to Effissimo’s shareholder proposal calling for an independent investigation of irregularities of Toshiba’s 2020 AGM.

Effissimo’s updated deck with its responses is available at the URL below.

https://2021egm.com/egmdeck.pdf

Effissimo responded directly to the following statements in Toshiba’s presentation:

Toshiba’s Opinion 1. No fact has been discovered to suspect that SMTB took such an action.

Page 8 of Toshiba’s presentation states “Toshiba in fact urged certain shareholders to vote through a voting facilitation vendor2 as they hadn’t confirmed their votes.” Meanwhile, Toshiba has characterized Effissimo’s rebuttal as meaning “It is possible that SMTB3 encouraged only certain shareholders that were supportive of Toshiba to vote online. This may qualify as unequal treatment of shareholders.”

Effissimo has never said that SMTB was the party taking “such an action.” Page 86 of our presentation reads “Toshiba needs to disclose the criteria used by this proxy solicitor (i.e. voting facilitation vendor) in deciding which shareholders were told to vote online as this may qualify as unequal treatment of shareholders.”

First, Toshiba never stated in its previous presentation that SMTB was its “vote facilitation vendor.” It is unclear from Toshiba’s presentation who the “vote facilitation vendor” in fact was.

Second, if as Toshiba suggests SMTB was in fact acting as its “voting facilitation vendor” to urge certain shareholders to vote online, we believe it was clearly improper for it to do so. SMTB, the vote tabulator, should not be serving as Toshiba’s partial “voting facilitation vendor,” i.e., proxy solicitor.

Toshiba’s explanation of its unnamed “voting facilitation vendor” makes us question whether current management understands the most basic principles of corporate governance.

We kindly ask that you review pages 86-87 of our presentation4 which address this matter.

Toshiba’s Opinion 2. Due to SMTB’s processing, all of the 1,143 voting ballots which arrived on July 30th, including the 4 ballots pointed out, were initially treated not to have met the deadline. However, they were treated to have met the deadline by the later forward-processing, and there is no fact that only 4 ballots were treated to have met the deadline. It is noted that those 4 ballots were treated to have met the deadline as they were voted in duplicate (through online in addition to ballots).

Toshiba’s paradoxical statement will confuse shareholders who are not knowledgeable about the mechanics of shareholder voting.

While Toshiba argues that all 1,143 voting ballots were ultimately treated to have met the deadline, absent 3D Investment Partners pointing out that its ballot was not included in the initial tabulation, there would never have been a re-tabulation, and the 1,139 ballots that “were initially treated not to have met the deadline” would never have been “treated to have met the deadline by the later forward-processing.”

If a shareholder decides to vote via both mail-in ballot and online, it is the last vote that was entered that is registered as the definitive voting instruction. These four shareholders provided the same instructions both for their mail-in ballot and for their online voting. Therefore, their shares were included in the tabulation both before and after adjusting for the purported “forward-processing.”

Based on our examination of the ballots, only four out of a total of 1,143 ballots delivered on July 30th beat the deadline because these four shareholders opted to vote both by mail and online. Of the four shareholders, three are individuals who voted online days in advance, and only one is the large management-friendly financial institution that voted 21 minutes prior to the voting deadline. Contrary to Toshiba’s statement, the circumstantial evidence suggests that the proxy solicitor was quite selective in whose proxy it solicited.

Toshiba’s Opinion 3. According to the explanation by the post office, it takes approximately5 4 days for mails delivered via “postage paid by addressee” which are sealed with large-lot individual numbers of Suginami Minami Post Office to be delivered (approximately 3 days in the case of “forward-processing”). The delivery time shown on Japan Post’s website is considered to be that of ordinary mail. According to the SMTB’s investigation, throughout the voting period, many of the ballots arrived 4 days after, and some early ones 3 days after, the postmarks. There were no anomalies seen with the ballots with postmarks dated July 27.

We have not seen any such statement by Japan Post.

Toshiba fudges by inserting the word “approximately” in this sentence. “Postage paid by addressee” mail does not normally take four days to be delivered. In general, it takes two or three days. Presumably, “approximately four days” stretches to include anywhere from two to four days. This attitude suggests a corporate culture that fails to take compliance and governance seriously.

If delivery takes four days, Japan Post is in violation of service levels established by Postal Laws. Apparently, Toshiba believes using the fudge “approximately” gives it cover to claim slow delivery times were normal.

We will leave it to shareholders to decide whether this fudge is credible.

An independent investigation is warranted to understand why the claimed delivery dates were mostly four or more days and not two to three days after posting.

Toshiba’s Opinion 4. "Forward-processing" of July was completed by the 30th. Voting ballots that were treated to have arrived on the 31st included the ones which arrived on the 30th but treated as if arrived on the 31st due to “forward-processing” and the ones that actually arrived on the 31th. The former totaled 1,143 (1,142 to be re-tabulated) and the latter totaled 951. Moreover, voting ballots of the latter case arrived 3.4 days in average after the postmarks, regardless of voting decision (all or partially For / Against). Thus, there was no difference of delivery time between the votes for and against.

Toshiba still says it accepts SMTB’s claimed delivery dates. We do not understand why the Audit Committee and Toshiba give credence to the explanation of SMTB, a highly conflicted vendor already caught in improprieties, while discounting that by Japan Post, an independent third-party. Our review of the ballots of another widely held public company confirms that delivery times for Toshiba’s ballots were inexplicably long compared to those of other listed companies that used the same service as Toshiba’s ballots.

Furthermore, if “forward-processing” was in fact being practiced, how does one account for 951 ballots that “actually arrived on the 31st” after “forward-processing” was terminated? Would one not logically expect zero, if not far fewer, ballots the day following supposed termination of “expedited delivery”? This is a further troubling evidence of possible vote counting irregularities.

There must be a thorough audit of all the delivery receipts issued by Japan Post and delivery acknowledgements issued by SMTB to permit a full and clear understanding as to when these ballots were actually delivered.

Toshiba’s Opinion 5. SMTB has explained the voting ballots that arrived by the 30th were scanned through OCR on the day they were delivered, which raises no doubt.

We do not understand why the Audit Committee and Toshiba chose to blindly accept the explanation of SMTB, a highly conflicted vendor already caught in improprieties, while discounting that by Japan Post, an independent third-party having no reason to make false statements.

This press release is NOT intended to be read for the purpose of or with a view to, exercising any influence over the management of any specific regulated business relating to any sensitive products or technologies manufactured, distributed, developed, or utilized by Toshiba or its subsidiaries or affiliates (“Regulated Business”).

Please also note that, this press release is not intended to propose, solicit, offer, request, promote or constitute, nor shall it be construed to, refer to or imply any proposal, solicitation, offer, request, promotion or conclusion of: (a) the exercise of voting rights or any other shareholders’ rights, either jointly or severally, by any shareholder or beneficial shareholder of Toshiba, (b) delegation to us or any other party of voting rights or any other shareholders’ rights or power or authority to decide or instruct the exercise thereof, (c) any agreement or consent from any shareholder or beneficial shareholder of Toshiba to vote for (or refrain or abstain from voting) any of the resolutions contained in our proposal or vote for or against (or refrain or abstain from voting) any of the resolutions proposed by Toshiba or any third party, or any agreement or consent to decide or instruct such action or absence of action by any person that has such power or authority, or (d) exercise of any influence over the management of any Regulated Business.

Views and beliefs expressed in this press release should be construed as ours and not that of anyone else including that of Toshiba Corporation.

In short, we are sharing with you our proposal but, in order to avoid potential regulatory concerns, would like to refrain from discussing whether you would vote for the same.

Effissimo Capital Management Pte Ltd

March 17, 2021

1 https://www.toshiba.co.jp/about/ir/en/stock/pdf/tsm2021e_1.pdf
2 Underline added by Effissimo
3 Underline added by Effissimo
4 https://2021egm.com/egmdeck.pdf
5 Underline and italics added by Effissimo