Letter to Shareholders

Tadashi Ishikawa

Tetsuro Toyoda

ChairmanPresident

Celebrating Our 80th Anniversary
On November 18, 2006, Toyota Industries marked a momentous milestone when the Company celebrated the 80thanniversary of its founding. Our achievements have been made thanks to the loyal patronage of customers, devotionof employees, understanding of local communities and the support of our shareholders, all of whom we wish toexpress our deepest appreciation.
Looking back over the past 80 years, there have been numerous turning points. However, throughout thepast eight decades, Toyota Industries has successfully attained business diversification and achieved steady growthby continuously inheriting the “Venture Spirit” and the spirit of the Toyota Production System (TPS) across allgenerations of employees.
In realizing our 2010 Vision, “Undisputed No.1 — United We Grow,” which we announced in 2005, as well asachieving the targets of the Medium-Term Management Plan, our legacy of superior competitiveness on which ouroperations are built is unwavering. Further, all employees are committed to maintaining an awareness of “fundamentalsfor further growth” as well as executing each business strategically.

SEMIANNUAL REPORT 2007

1Letter to Shareholders

Measures toward Fundamentals for
Further Growth
Looking to the future, we will maintain our utmost efforts
to attain further growth. To realize this objective, we must
firmly focus on the fundamentals for further growth and raise
corporate value. Specifically, the following five fundamentals
are frequently emphasized inside the Company.

reducing CO2 emissions by 5% compared with fiscal 1991
levels and total emission volumes of targeted PRTR (pollutant
release and transfer register) substances by 50% compared withfiscal 1999 levels.
In accordance with the newly announced Fourth
Environmental Action Plan, we will continue to introduce
ecological products into the market and reduce theenvironmental load at every stage of operations fromdevelopment to production, sales and service.

1. Fair and Sincere Corporate Culture
Regarding the first fundamental, a fair and sincere corporate
culture, it goes without saying that thorough enforcement ofcompliance is essential. Toyota Industries regards complianceas more than mere legal compliance. We believe that this alsoencompasses sincere respect for cultures and local customs inaccordance with changes in the times. Using every means andopportunity, the importance of compliance and strengtheningof corporate governance structures is emphasized repeatedly toall employees. Additionally, we have created and issued code ofconduct guidelines and have implemented these throughout
the Group.
Under such guidelines, we have set up the Corporate
Code of Conduct Committee and are employing PDCA
(Plan-Do-Check-Action) processes. With this committee
serving as a main pillar, we are concentrating on furtherimproving our compliance mechanisms. Through responsiblesubcommittees, we undertake compliance audits andinspections for business operations, including domestic andoverseas subsidiaries. This enables us to further raise the levelof our compliance.
We will continue to firmly maintain our fair and sincere
corporate culture.

2. Environmental Management
Today, undertaking environmental initiatives has become a toppriority for corporate management. At Toyota Industries, wehave been building environmental management systems since
1996.
Our Global Environmental Commitment, which istargeted at all consolidated subsidiaries worldwide, is currently
shared by every employee, as we work to attain the goals of ourpublicly announced Environmental Action Plan.
As a prime example of such efforts, we attained all
numerical targets in the seven categories of our five-year Third
Environmental Action Plan in fiscal 2006. This included

2TOYOTA INDUSTRIES CORPORATION

3. Safety First
Safety is also a very important keyword for us. Regarding
safety first, the Toyota Group adheres to the watchwords “safeoperations is the first step of all operations.” Thoroughly
reinforcing this fundamental is contingent on implementing
on-site safety
inspections ofactual products
by everyone,
includingsenior and topmanagement,
throughout theToyota Industries
On-site inspections by top management
Group.

4. Unwavering Pursuit of Quality and Cost
Reduction
Quality and costs represent the lifeline for monozukuri (literally
meaning “creating things” but it implies a philosophy thatrecognizes the value of the innovative creation of quality
products). All employees must strive to keep quality and cost
foremost in their minds every day. In particular, we are making
our utmost efforts to strengthen initiatives for quality.
There tends to be numerous instances of major quality
problems occurring at the design stage. While the growing
use of 3D CAD has
enhanced convenience,a drawback is that thiswill also result in atendency to forget thefundamentals if we force
young employees todesign using 3D CAD
Drafting training
from the beginningof their careers. As an example of how we go back to thefundamentals, we provide engineers with drafting training,which represents the starting point of design.
Based on TPS and Total Quality Control, we will makehonest, steady and relentless efforts to improve quality, reduce
costs and eliminate waste. Additionally, top management will
make even greater efforts in leading on-site quality and costinspections of actual products.

5. Human Resource Development andEnhancement of Team Strengths
In addition, these four fundamentals are supported by a fifth
pillar, namely people, or in other words, human resources
development and enhancement of team strengths. Toyota
Industries believes the essence of monozukuri is humanresources development. This means that excellent products are
not possible without excellent people.
Human resources
development requiresthat we take measuresin a variety of areas,such as improving
specialized techniquesand management
skills. In addition to
drafting training, weTechnical Training Center
are also implementing
a program that provides on-site workers with thoroughtraining of basic operations at the Technical Training Center.
On the other hand, close communication is crucial forstrengthening our organizational strengths and bringing out
these strengths to the fullest. We are also devoting efforts tofostering a culture in which employees can easily get together
to candidly discuss matters.
At the same time, cultivating personnel to lead thenext generation and augmenting team strengths under astrong leadership are vital themes that will determine thecompetitiveness of the Toyota Industries Group 10 and 20years down the road.

Aiming to Attain the Medium-Term
Management Plan
In the latter half of 2005, Toyota Industries formulated thenew Medium-Term Management Plan and set our targets ofconsolidated net sales exceeding ¥2,000 billion and ordinary
income of ¥140 billion by fiscal 2011, the fiscal year ending
March 31, 2011.
To attain our targets, we strive to execute strategic
management strongly premised on these five fundamentals
for further growth. In other words, with these fundamentals,
we are confident Toyota Industries can realize medium-term
growth and its targets. Furthermore, we will perpetuate astrong and successive management team by fortifying ourfoundations and passing on our spirit to the next generation,in addition to resolutely adhering to monozukuri and soundbusiness operations.

Record-High Business Results
Fiscal 2007 is the first year of the new Medium-Term
Management Plan. We are pleased to report that Toyota
Industries achieved excellent results for the first half offiscal 2007 (the six months ended September 30, 2006), as
highlighted by all-time-high interim consolidated net sales
and profits as well as increases in net sales, operating income
and ordinary income for the seventh consecutive year. These
financial results have put us firmly on track toward attaining
our medium-term targets.
During the first half of fiscal 2007, the Japanese economy
continued on a steady path to recovery as private-sector capital
investment increased on the back of solid corporate earnings.
Consumer spending gradually improved as well. Overseas, theoverall economic outlook remained positive, with the U.S. andEuropean economies expanding and the Chinese economy
sustaining a high level of growth.
In this operating environment, Toyota Industries posted
total consolidated net sales of ¥913.1 billion, an increaseof 31%, compared with the first half of fiscal 2006 (the six
months ended September 30, 2005). Consolidated operating
income increased 25% to ¥40.1 billion. Consolidated ordinary
income increased 29% to ¥53.5 billion, and consolidated net
income increased 21% to ¥30.3 billion. Despite the effects ofa rise in raw materials costs and increases in depreciation andpersonnel expenses, this increase was achieved due largely to anincrease in net sales, cost-reduction activities and an increasein non-operating income. A summary of operating results bybusiness segment follows.
Note: Segment net sales figures do not include intersegment transactions.

SEMIANNUAL REPORT 20073

Letter to Shareholders

Automobile Segment
Net sales of the Automobile Segment totaled ¥431.0 billion,an increase of ¥93.3 billion, or 28%, over the first half of fiscal
2006.
Within this segment, net
sales of the Vehicle Businesstotaled ¥222.3 billion,
an increase of ¥67.6billion, or 44%, overthe first half of fiscal
RAV4
2006. Sales of the RAV4,
which underwent a full model change in November 2005,
were strong in both the U.S. and European markets. Overseas,
sales of the Vitz (Yaris overseas) also increased.
Net sales of the Engine Business totaled ¥80.1 billion, anincrease of ¥14.7 billion, or 23%, over the first half of fiscal
2006. This increase was due largely to increases in sales ofKD diesel engines for Toyota Motor Corporation’s (TMC)
Innovative International Multi-Purpose Vehicle (IMV) Project,
as well as AD diesel engines fitted in the RAV4 for Europe.
Net sales of the Car Air-Conditioning Compressor Businesstotaled ¥113.1 billion, an increase of ¥8.1 billion, or 8%, overthe first half of fiscal 2006. Although sales in Japan and North
America were approximately the same level as for the first halfof fiscal 2006, sales in the European and Chinese markets
increased. In April 2006, TD Automotive Compressor Kunshan,Co., Ltd., which was established as a joint venture to meet
expanding demand in China, started production of fuel-efficientvariable-displacement car air-conditioning compressors.

Materials Handling Equipment Segment
Net sales of the Materials Handling Equipment Segment
totaled ¥388.3 billion, an increase of ¥106.7 billion, or38%, over the first half of fiscal 2006. This increase was a
result of robust sales overall on the back of a strong global
economy. During the period, Toyota Industries strove toenhance its global sales network and implemented vigorous
sales promotion activities. The effect of a change in the fiscal
year-end of the BT Industries Group comprising Toyota
Industries subsidiaries, along with strong sales of Aichi
Corporation, also contributed to the increase. In September
2006, Toyota Industries commenced sales of the new GENEO(8-Series overseas), its mainstay model 1- to 3.5-ton internal
combustion lift trucks, which underwent a full model change.
In an effort to provide even greater product value, Toyota

4TOYOTA INDUSTRIES CORPORATION

Industries developed the new lift truck featuring higher levelsof performance in the areas of safety, environmental attributesand ease of operation.

Logistics Segment
Net sales of the Logistics Segment totaled ¥39.9 billion, anincrease of ¥9.2 billion, or 30%, over the first half of fiscal
2006. Toyota Industries focused on expanding the Logistics
Solutions Business to reduce customers’ logistics costs.

Textile Machinery Segment
Net sales of the Textile Machinery Segment totaled ¥27.5billion, an increase of ¥3.4 billion, or 14%, from the first halfof fiscal 2006. This increase was attributable mainly to strong
sales of air-jet looms, our flagship product. Sales of spinningmachinery were approximately the same level as for the firsthalf of fiscal 2006.

Forecast for the Fiscal Year Ending
March 31, 2007
Toyota Industries expects the global economy to continue
expanding. Uncertainties persist, however, regarding
fluctuations in oil prices and the direction of the U.S.
economy. In this operating environment, we will solidify thefundamentals for further growth and take our utmost efforts toachieve our targets for fiscal 2011.
For fiscal 2007, Toyota Industries forecasts consolidated
net sales of ¥1,800.0 billion, operating income of ¥76.0
billion, ordinary income of ¥95.0 billion and net income of¥53.0 billion. Our projections are based on an exchange rate of¥115.0=US$1.
In closing, we ask our shareholders for your continued
understanding and support.
December 2006

Tadashi Ishikawa
Chairman

Tetsuro Toyoda
President