Letter to Shareholders

Tadashi Ishikawa

Tetsuro Toyoda

ChairmanPresident

Dear Shareholders:
We are pleased to report that Toyota Industries achieved
excellent results for the six months ended September 30,2005 (the “term”), as highlighted by all-time-high interim
consolidated net sales and profits. In addition to this brisk
performance, we also instituted medium- and long-term
measures to lay the foundation for sustaining our growthwell into the future.

Record-High Business Results
During the term, the Japanese economy maintained
a modest recovery driven by expansion in exportsand private-sector capital investment. Overseas, theU.S. economy was robust and the European economy
achieved mild growth.
Despite the effects of rising raw materials prices,
Toyota Industries continued to record excellent results,
by capitalizing on the supportive economic climate,continuing the steady execution of optimal businessstrategies that seek to maximize the competitive strengthsof each business and implementing company-wide costcutting activities. Toyota Industries recorded consolidated
net sales of ¥699.0 billion during the term, an increase

2TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2006of 15.1% over the six months ended September 30, 2004
(the “previous term”). Despite higher raw materials prices
and a rise in depreciation and personnel expenses,
consolidated operating income increased 6.5% to ¥32.1billion. Consolidated ordinary income increased 6.9% to¥41.6 billion and consolidated net income increased 4.4%
to ¥25.0 billion. All of these amounts represent all-timehighs for Toyota Industries.
As an especially notable accomplishment, we haveattained record-high net sales, operating income andordinary income for six consecutive years despite lessthan-ideal economic conditions in Japan. Additionally,consolidated net income has reached a record high forthree straight years. We believe that these solid results
offer substantial proof that our management strategies
are clearly on target.

All Segments Maintain Strong
Performances
All segments continued to achieve strong results, asevidenced by across-the-board sales increases overthe previous term. Excellent results in terms of operating

income were also achieved despite decreases recordedin the Automobile and Others segments. A summary ofoperating results by business segment follows. It should be
noted that from the current fiscal year (ending March 31,2006), logistics-related businesses, previously included in
the Others Segment, have been reclassified separately as
the Logistics Segment.
Note: While segment net sales figures do not include intersegment
transactions, segment operating income figures include operating
income arising from intersegment transactions.

Automobile Segment
The Automobile Segment, comprising vehicles(automobile assembly), engines, car air-conditioning
compressors and other businesses (including foundry partsand electronic components for automobiles), is Toyota
Industries’ largest business segment and generates 48.3%
of consolidated net sales.
Net sales increased 9.4% over the previous term to¥337.8 billion, buoyed by higher sales of vehicles, engines
and car air-conditioning compressors. Operating income
decreased 24.8% to ¥11.4 billion. A summary of eachof the principal businesses making up the Automobile
Segment follows.

Vehicle Business
The Vehicle Business produces the Vitz (Yaris in Europe)and the RAV4 (for Europe and North America) underconsignment from Toyota Motor Corporation (TMC).
The Vehicle Business posted a 10,000-unit increase inproduction over the previous term to 125,600 vehicles,
reflecting increased production of the mainstay modelVitz (for Japan), which underwent a model change inFebruary 2005, along with higher production volume of
the Vitz (Yaris) and RAV4 for overseas markets.
Net sales of the Vehicle Business increased 11.0% overthe previous term to ¥154.7 billion.

Engine Business
The Engine Business primarily produces diesel engines andgasoline engines for TMC vehicles and lift trucks. Enginesfor lift trucks are supplied to TOYOTA Material Handling
Company (TMHC), our in-house company, and arerecorded as internal sales (intersegment transactions).
Overall production of engines, excluding those for lift
trucks, increased 13,000 units over the previous term to172,000 units, due mainly to higher production of diesel
engines, including the AD diesel engine fitted on theAvensis for the European market and the KD diesel engine.
Internal sales (intersegment transactions) of gasoline
engines and diesel engines to TMHC increased 2,000 units

from the previous term to 32,000 units.
Net sales of the Engine Business, excludingintersegment transactions, amounted to ¥65.4 billion, anincrease of 15.8% over the previous term.

Car Air-Conditioning Compressor Business
The car air-conditioning compressors developed andproduced by Toyota Industries are sold to the world’s
major auto manufacturers through DENSO Corporation.
In Japan, sales of car air-conditioning compressors were
2.6 million units, the same level as in the previous term.
Overseas sales of car air-conditioning compressors
increased 132,000 units to 6.7 million units, resulting in
an increase in total sales volume of car air-conditioning
compressors by 133,000 units to 9.3 million units.
Net sales of the Car Air-Conditioning Compressor
Business increased 3.7% over the previous term to ¥105.0
billion.

Materials Handling Equipment Segment
The Materials Handling Equipment Segment manufacturesand sells various types of logistics-use equipment
centering on lift trucks, automated storage and retrieval
systems and automatic guided vehicle systems, inaddition to such special-purpose vehicles as aerial work
platforms.
Net sales by the Materials Handling Equipment
Segment increased 17.4% over the previous term to ¥281.6
billion. Operating income amounted to ¥18.3 billion, anincrease of 52.1% over the previous term.
TMHC and the BT Industries Group both achievedlarge increases in sales volumes over the previous term,mirroring favorable market environments worldwide.
Sales by Aichi Corporation, which manufactures and sells
aerial work platforms, increased 17.3% to ¥20.7 billion.
The increase in net sales, coupled with the elimination ofwaste and the enhancement of operational efficiency,
allowed Aichi to record operating income of ¥2.2 billion,
a 61.2% increase; ordinary income of ¥2.3 billion, a 58.0%
increase; and net income of ¥2.6 billion, a 50.4% increaseover the previous term.

Logistics Segment
The Logistics Segment was newly established in thecurrent fiscal year (ending March 31, 2006), integrating thelogistics-related businesses (logistics solutions and logistics
transportation businesses) that were previously includedin the Others Segment. Because this is a new segment, netcomparisons with the previous term’s results cannot bemade. During the term, the Logistics Segment posted net
sales of ¥30.6 billion, attributable in part to Asahi Security

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 20063Letter to Shareholders

Co., Ltd., which was acquired in March 2005. Asahi
Security provides comprehensive cash management
outsourcing, including cash collection and delivery, cash
proceeds management and equipment security. Otherfactors underlying the increase in sales were higher
sales of the logistics solutions business, which handles allphases of customers’ logistics and enhances their entire
supply chain management, as well as improved resultsof the Taikoh Transportation Group, which is involved intransportation and other logistics businesses. Operating
income of the Logistics Segment as a whole amounted to¥0.5 billion.

and is accounted for by the equity method in Toyota
Industries’ consolidated financial results. Therefore, its sales
and operating income (or loss) are not included in theresults for this segment.

Noteworthy Initiatives Undertaken
during the Term
Toyota Industries implemented a host of forward-looking
strategic initiatives during the term. The following are afew that warrant special mention.

Contributing to TMC’s Global Strategy
Textile Machinery Segment
The Textile Machinery Segment manufactures and sells
spinning-related machinery centering on ring spinningframes and weaving-related machinery such as airjet looms. Toyota Industries is one of the world’s leading
manufacturers of air-jet looms and spinning machinery.
Net sales of the Textile Machinery Segment increased
8.2% over the previous term to ¥24.1 billion. Operating
income amounted to ¥0.2 billion, an improvementcompared with the operating loss of ¥0.1 billion in theprevious term, due mainly to an increase in sales ofspinning machinery.
Sales of air-jet looms increased slightly over theprevious term to 4,000 units. Higher sales in Indiacompensated for a decrease in sales in China, ourprimary market. The sales volume for ring spinning frames
increased by approximately 63,000 spindles over theprevious term to 323,000 spindles, owing largely to anincrease in sales of our Indian subsidiary.

Others Segment
The Others Segment is made up primarily of newbusinesses that Toyota Industries has entered in recentyears. This segment is still comparatively small in scale, but
it includes strategic businesses that we believe will drive
our future growth. One core business is TIBC Corporation,
established in 1998 as a joint venture with Ibiden Co., Ltd.
to manufacture semiconductor package substrates.
Because we separated our logistics-related businesses
from the Others Segment into the Logistics Segment,
net comparisons with the previous term’s results cannot
be made. During the term, net sales amounted to ¥25.0
billion, and operating income totaled ¥2.1 billion.
ST Liquid Crystal Display Corp. (STLCD), which wasestablished in 1997 as a 50-50 joint venture with Sony
Corporation to manufacture low-temperature polysilicon
TFT-LCD panels, also represents a main pillar of ourElectronics Business. STLCD is not a consolidated subsidiary

4

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2006

In March 2005, Toyota Industries initiated productionof 2.2-liter direct-injection AD diesel engines for theEuropean market at the Hekinan Plant in Japan and at
Toyota Motor Industries Poland Sp.zo.o. (TMIP)*, a joint
venture in Europe with TMC. This engine is fitted in theAvensis that TMC produces in the United Kingdom. Further,
the engine is slated to be installed in the Corolla thatTMC plans to assemble in Europe. The proportion of diesel
engine vehicles in Europe is increasing in line with theidea that diesel engines are considered more ecological.
In addressing this trend, it is essential that TMC strengthen
its lineup of diesel engine vehicles as it strives to raise its
presence in the European market. Toyota Industries will
work to contribute to TMC’s European strategy throughthe joint development of diesel engines with TMC as wellas the production of these engines.
In June 2005, the Higashichita Plant started producing
2.5-liter and 3.0-liter direct-injection KD diesel engines for
TMC’s Innovative International Multi-Purpose Vehicle (IMV)Project. This project aims to establish a globally optimal
production and supply structure by reciprocally supplying
assembled vehicles as well as main components of pickup
trucks and multi-purpose vehicles among manufacturingbases in Asia, Argentina and South Africa. Whilecontributing to TMC’s overseas strategy, Toyota Industries
continues to undertake initiatives for further expanding its
own business.
* Toyota Industries’ stake in TMIP is 40%. Toyota Industries is chiefly
responsible for production operations at TMIP.

Establishment ofCar Air-Conditioning Compressor
Production Base in ChinaIn May 2005, Toyota Industries established TD AutomotiveCompressor Kunshan, Co. Ltd. (TACK) in Kunshan, China,a joint venture with DENSO, Toyota Tsusho Corporation
and Toyota Industry Automotive Parts (Kunshan) Co., Ltd.
Serving as our second car air-conditioning compressor

production base in China, TACK is scheduled to begin
producing variable-displacement compressors, which
offer outstanding fuel efficiency, in April 2006. Yantai
Shougang DENSO Co., Ltd. (YSD, in which Toyota Industries
holds a 15% stake), a joint venture established in 1994 withDENSO, Toyota Tsusho and China’s Shougang Corporation,
will also begin producing variable-displacement
compressors in April 2006, in addition to its current fixeddisplacement compressors. YSD will supply compressors tousers in northern China while TACK will supply compressors
to car makers in the southern part of the country.

accordingly, carries out group-wide quality-improvement
activities. Besides comprehensive employee quality
education, these activities include the establishment ofambitious quality targets in each division. The director
overseeing product quality and division managers (oran in-house company president), as well as President
Tetsuro Toyoda and other top executives, make on-site
inspections to check the quality-improvement activities
and confirm progress in reaching quality targets.

Establishment of
Toyota Material Handling Group

Although we expect the global economic recovery tosustain its momentum during the second half of fiscal
2006, concerns about exchange rate fluctuations andrising global prices for raw materials persist. Within thisclimate, Toyota Industries will continue to channel its
efforts toward developing new products that accurately
match customer needs, promoting sales expansion
activities centered on our core businesses and carryingout active initiatives to improve quality. Additionally, we willcontinue with our cost-reduction activities, proceed with
global business development, and attempt to enhance
management efficiency and bolster our managementfoundation while simultaneously securing profitability.
For fiscal 2006, we anticipate that an increase in net
sales and a decrease in costs will absorb the effects ofsuch cost-push factors as increases in raw materials prices
and depreciation expenses. We forecast consolidated
net sales of ¥1.5 trillion (initial forecast of ¥1.45 trillion),
an increase of 20.8% over the previous fiscal year;
consolidated ordinary income of ¥77.0 billion (initialforecast of ¥75.0 billion), an increase of 8.6% over theprevious fiscal year; and consolidated net income of¥45.0 billion (same as initial forecast), an increase of 3.8%
over the previous fiscal year. Our forecast assumes anexchange rate of ¥110 = US$1.

In July 2005, Toyota Material Handling Group (TMHG)
was established to realize our goal of becoming the“undisputed No. 1” in the global lift truck market bysolidifying the Materials Handling Equipment Segment’s
current global No. 1 share. The new organization is tasked
with facilitating the further integration of the operationsof TMHC and the BT Industries Group and maximizing
synergies. In the past, TMHC and the BT Industries Groupmade steady progress by mutually supplying each other’sbrand products, sharing sales and production know-how,exchanging personnel and jointly procuring parts. Throughthe strategic reorganization, TMHC and the BT Industries
Group aim to create further synergies.

Quality-Control andCost-Reduction ActivitiesToyota Industries is aware that lowering costs while raising
its ability to provide products and services of superb
quality are extremely crucial for attaining competitive
superiority. Driven by this recognition, each division
undertakes cost-reduction projects and promotes
organized and well-planned cost-reduction initiatives.
Our cost-reduction activities not only include bolstering
our ongoing value engineering (VE) and value analysis(VA) activities, but also extend to a diverse range ofother spheres such as optimized global procurementof materials. At our head office, we are promoting
comprehensive activities to cut fixed costs through better
operational efficiency and other such measures.
Our initiatives for constantly elevating quality are
indispensable for providing products and services thatsatisfy our customers. We realize that in a worst-casescenario any serious quality-related problem could
threaten a company’s future existence. Acting on thisawareness, Toyota Industries has designated “thoroughquality assurance” and “maintenance and improvementof quality” as priority management policies, andBusiness Outlook for Fiscal 2006

Note: The financial projections set forth above are based upon anumber of assumptions and estimates that, while presented withnumerical specificity and considered reasonable by us when taken
as a whole, are inherently subject to significant economic, business,competitive, regulatory and operational uncertainties, contingencies
and risks, many of which are beyond our control. Financial projections
are necessarily speculative in nature, and it can be expected that
one or more of the assumptions underlying the projections will prove
not to be valid, and unanticipated events and circumstances arelikely to occur. Actual results will vary from the financial projections
and those variations may be material. Consequently, this report should
not be regarded as a representation by us or any other person thatthe financial projections will be achieved. Current rapidly changing
market trends in the global economy make it particularly difficult at
present to predict product demand and other related matters.

TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2006

5

Letter to Shareholders

Medium-Term Growth Scenario¥140 billion

Over ¥2 trillion
77.0

Consolidated Ordinary IncomeElectronics

70.9(¥ Billion)

Logistics
58.947.8

Consolidated
Net Sales

980.2

Materials Handling Equipment

51.3
1,069.2

1,500.0
1,164.4

1,241.5¥1 trillion in Materials
Handling Equipmentand Logistics
businesses

Car Air-Conditioning Compressor
Car Electronics(¥ Billion)¥1 trillion in
automobile-related
businesses

Vehicle/Engine
Textile Machinery, etc.
FY

02

03

04

05

06

Forecast

08

Formulation of New Medium-Term
Management Plan
In October 2005, Toyota Industries formulated a new
five-year medium-term management plan to be
implemented from April 1, 2006 through March 31, 2011.
The plan’s overriding goal is to achieve consolidated net
sales exceeding ¥2.0 trillion and annual consolidated
ordinary income of ¥140.0 billion in fiscal 2011, ending
March 31, 2011. To reach these targets, Toyota Industries
will augment the capabilities of workplaces through thecultivation of its human resources, pursue the highest
levels of quality, develop cutting-edge technologies,
strengthen its value chain and develop into a company
with overwhelmingly dominant businesses. In executing
this plan, we intend to make capital investments ofaround ¥500.0 billion over the five-year period ending
March 31, 2011.

Increasing Corporate Value

11

Targetfor successfully developing our overseas operations.
Concurrently, we will build more-efficient management
systems and fortify competitiveness by undertaking
strategic businesse operations.
Seeking to earn the trust of society as a good
corporate citizen, Toyota Industries remains committed
to actively promoting environmental protection andsocial contribution activities and will continue to takea proactive approach to compliance and corporate
governance.
In closing, we ask our shareholders for their continued
support and guidance.

December 2005

Tadashi Ishikawa
ChairmanThe management team of Toyota Industries—yourcompany—regards its most important mission as
expanding corporate value, which we believe hinges onenhancing our medium- to long-term earnings power.
As we strive to fulfill our mission, we will actively promote
initiatives to nurture personnel who are well honed in
the Toyota Production System—the wellspring of ourcompetitiveness—as well as global-minded staff essential

6TOYOTA INDUSTRIES CORPORATIONSEMIANNUAL REPORT 2006

Tetsuro ToyodaPresident