MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis ofFinancial Condition and Results of Operations is based oninformation known to management as of November 30,
2002. It includes forward-looking statements concerning
the expected future performance of Toyota Industries
Corporation. Please refer to “Cautionary Statement withRespect to Forward-Looking Statements” at the beginningof this semiannual report, which pertains to the report as awhole.

Selling, general and administrative expenses totaled ¥58.5billion for the term, an increase of ¥6.5 billion (12.6%) overthe previous term. This increase was due to an increase in
selling expenses of the Materials Handling Equipment
Segment.
Research and development expenses, included in SGA andmanufacturing costs, totaled ¥14.6 billion for the term. By
principal segment, research and development expenses were
¥9.2 billion for the Automobile Segment and ¥4.6 billion for
the Materials Handling Equipment Segment.

Results of Operations

Non-Operating Income and Expenses

Net SalesInterest and dividend income was ¥9.1 billion for the term, anincrease of ¥0.6 billion (7.5%) over the previous term. Interest
expenses were ¥5.3 billion for the term, a decrease of ¥0.2
billion (4.1%).
Non-operating income and expenses, net decreased ¥0.5
billion for the term, reflecting mainly a decrease in equity inearnings of affiliates.

During the six months ended September 30, 2002 (the“term”), it was anticipated that falling stock prices worldwide
would affect the economy. In Japan, private sector capital
investment continued to be stagnant. Overseas, prospects forthe future remained uncertain.
Against this background, total consolidated net sales ofToyota Industries amounted to ¥520.5 billion for the term, anincrease of ¥41.5 billion (8.7%) compared with the sixmonths ended September 30, 2001 (the “previous term”).
The increase was due mainly to increased sales of ourproducts in the Automobile and Textile Machinery segments.
Below are Toyota Industries’ sales for the term by geographicsegment, before elimination of intersegment transactions.

Extraordinary Losses
During the first half of fiscal 2003, an extraordinary loss of¥1.5 billion was posted as a result of loss on disposal ofproperty, plant and equipment that accompanied therelocation of a foundry plant.

Income Taxes■ JapanCurrent and deferred income taxes, net for the term totaled¥11.1 billion, an increase of ¥0.3 billion (3.0%) over theprevious term. The effective income tax rate increased from
40.5% to 43.8%.
Minority interest in consolidated subsidiaries decreased¥0.7 billion to ¥0.6 billion.

Sales totaled ¥395.7 billion for the term, an increase of ¥41.8billion (11.8%) over the previous term. This increase was due
mainly to increased sales of our products in the Automobileand Textile Machinery segments.

■ North America
Sales totaled ¥95.5 billion for the term, an increase of ¥0.2billion (0.2%) over the previous term. Though sales of theAutomobile Segment increased, those of the Materials
Handling Equipment Segment decreased.

Net IncomeNet income for the term was ¥13.6 billion, a decrease of ¥1.5billion (10.0%) from the previous term. Net income per sharewas ¥43.57, compared with ¥48.35 for the previous term, anddiluted net income per share was ¥39.05, compared with¥43.55 for the previous term.

■ EuropeSales totaled ¥69.9 billion for the term, an increase of ¥9.3billion (15.3%) over the previous term. This increase reflected
an increase in sales of our products in the Materials Handling
Equipment Segment.

Financial Position
Total assets at the end of the term stood at ¥1,692.3 billion, adecrease of ¥78.1 billion (4.4%) from the total as of March 31,
2002 (end of the previous fiscal year). This decrease was due
largely to a decrease of ¥110.0 billion (11.2%) in the carrying
amount of investment securities.
Current assets were ¥312.8 billion at the end of the term,
an increase of ¥17.5 billion (5.9%) over the previous fiscal
year. This increase was due largely to increases in trade notes
and accounts receivable in an amount of ¥11.7 billion (10.9%)
as a result of a sales increase by the Textile Machinery
Segment and the consolidation of Taikoh Transportation
Group.
Net property, plant and equipment was ¥352.2 billion at■ Others
Sales totaled ¥2.0 billion for the term, an increase of ¥0.1billion (5.9%) over the previous term.
* Please refer to “To Our Shareholders” for results by business segment.

Cost of Sales and Selling, General andAdministrative Expenses
Cost of sales for the term totaled ¥436.8 billion, an increase of¥34.2 billion (8.5%) over the previous term. This was due
mainly to a sales increase by the Automobile and Textile
Machinery segments.

8equivalents for the term increased ¥6.2 billion, compared witha decrease of ¥17.0 billion for the previous term. As a result,cash and cash equivalents as of September 30, 2002 stood at¥77.3 billion.

the end of the term, an increase of ¥14.6 billion (4.3%) overthe previous fiscal year. This increase was due to theconstruction of Higashiura Plant and “e-Lab,” our information
technology research laboratory, as well as the consolidation ofTaikoh Transportation Group.
Intangible assets stood at ¥94.0 billion at the end of theterm, a decrease of ¥0.9 billion (0.9%) from the previous fiscalyear. This decrease was because a decrease in goodwill
outweighed an increase in software.
Investments and other assets stood at ¥933.2 billion at theend of the term, a decrease of ¥109.3 billion (10.5%) from theprevious fiscal year. This reflected an 11.2% decrease in the
carrying amount of investment securities of Toyota Motor
Corporation (“TMC”), Toyota Group companies and others in a
total amount of ¥110.0 billion.
Current liabilities stood at ¥377.2 billion at the end of theterm, an increase of ¥140.6 billion (59.4%) over the previous
fiscal year. Short-term loans increased ¥133.1 billion sincecertain long-term loans, corporate bonds and convertible
bonds became due to mature within one year.
Long-term liabilities were ¥469.4 billion at the end of theterm, a decrease of ¥166.7 billion (26.2%) from the previous
fiscal year. ¥133.1 billion of certain long-term loans, corporate
bonds and convertible bonds was reclassified to the category ofshort-term loans. Deferred tax liabilities also decreased by¥44.9 billion (14.2%), because the carrying amount ofinvestment securities decreased.
Minority interest in consolidated subsidiaries increased ¥3.8billion (20.4%) to ¥22.7 billion at the end of the term, due
mainly to the consolidation of Taikoh Transportation Group.
Shareholders’ equity was ¥823.0 billion at the end of theterm, a decrease of ¥55.8 billion (6.3%) from the previous
fiscal year. Net unrealized gains on other securities decreased¥63.8 billion (14.0%), outweighing an increase in retained
earnings of ¥10.2 billion (4.0%). The ratio of shareholders’equity to total assets decreased from 49.6% to 48.6%.

Basic Policy on the Distribution of Profits
Toyota Industries Corporation’s dividend policy is based on
maintaining stable dividends while giving proper consideration
to business performance, the dividend payout ratio and otherfactors as it makes every effort to meet the expectations ofshareholders.
Toyota Industries Corporation will use retained earnings toaggressively pursue business expansion and strengthen its
corporate constitution in order to secure future profits for its
shareholders. It will also use retained earnings to purchasetreasury stock.
On October 28, 2002, the Board of Directors of Toyota
Industries Corporation voted to distribute an interim cash
dividend of ¥10.0 per common share, an increase of ¥1.0 overthe previous term. The interim cash dividend was payable on
November 26, 2002.

Stock Repurchase Program
On June 27, 2002, the Ordinary General Meeting ofShareholders resolved to authorize the Board of Directors of
Toyota Industries Corporation to repurchase up to 20 millionof the Company’s common shares at a total purchase price notexceeding ¥50 billion. This allows the Company to implement
flexible capital policies in accordance with the current businessenvironment.
Accordingly, Toyota Industries Corporation purchased 1
million of its common shares at a total purchase cost of ¥1.9
billion during the term.

Stock Option Incentive Plan

Cash FlowsIn June 2002, the Ordinary General Meeting of Shareholders of
Toyota Industries Corporation approved a grant of shareacquisition rights as a stock option incentive plan to board
members and designated key employees.
The purpose of this plan is to further motivate senior
management in enhancing shareholder value.
In accordance with the resolution of the shareholders’meeting, a total of 728,000 shares at a predetermined price
was granted in August 2002 to 145 people (30 directors and115 associate directors and general managers). The number ofshares granted per person varies from 2,000 to 20,000 inaccordance with the degree of contribution to the Company.
The grant price is the higher of the closing price on theTokyo Stock Exchange on the date of grant and 1.05 times theaverage closing price in the full calendar month prior to themonth of the grant date. Recipients may not exercise theoption within the first two years. Subsequent to the initialperiod, the option must be exercised or waived within thenext four years.

Net cash provided by operating activities was ¥42.4 billion for
the term, an increase of ¥10.8 billion (34.2%) over theprevious term. An increase in receivables was offset by adecrease in inventories, income tax payments and an increasein other liabilities.
Net cash used in investing activities was ¥42.8 billion forthe term, a decrease of ¥14.5 billion (25.3%) from the previousterm. This decrease was due mainly to the expenditure arisingfrom the acquisition of TMC’s Industrial Equipment Sales
Division during the previous term.
Net cash provided by financing activities was ¥7.7 billion
for the term, a decrease of ¥0.9 billion (10.5%) from theprevious term. Payments for purchase of treasury stocks were¥1.9 billion, an increase of ¥0.5 billion. During the term,
Toyota Industries paid ¥3.1 billion in cash dividends, anincrease of ¥0.3 billion over the previous term.
Including translation adjustments, cash and cash

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