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1 40 TOYOTA Annual Report 2017 Message from the PresidentLong-term StrategyAt a Glance HistoryInitiatives for Sustainable GrowthFinancial InformationNon-Automotive Business/Corporate Information and Stock InformationTable of ContentsDeveloping a Strong Financial FoundationWe believe that by striving to make ever-better cars that provide value to cus-tomers and Enriching Lives of communities we can sus-tainably increase our corpo-rate value and enjoy stable, ongoing development with our stakeholders. To realize this goal, we are implementing a fi nancial strategy based on the three pillars of growth, effi cien-cy, and stability, striving to maintain balance between said pillars over the medium and long-terms.

2 1. Growth: Continuous Investments for Sustainable Growth in the FutureThe auto industry is on the verge of a once-in-a-century turning point. We believe that artifi cial intelligence (AI), automated driving, robotics, and other new fi elds are especially important to the mobility of the future. Given these circumstances, we must nurture both the strengths that will enable us to survive today and the strengths that will enable us to survive tomorrow. If the strengths for surviving today are essentially defense-oriented, then I think those for surviving tomorrow are offense-oriented. We have always sought to promote both, but I think we may have been shifting more toward the defensive.

3 Going for-ward, we will seek to focus more on our offense. We have already begun initiatives to this end through such measures as shifting resources to R&D in key fi elds and investing through Toyota AI Ventures and the Mirai Creation Investment Limited Partnership in order to secure technical prowess. Moreover, we have spent around 1 trillion yen on R&D investment, capital expenditure, and sharehold-er returns each to date. However, this will not be enough to provide new value going forward; we will also need to work with partners in different industries and new fi elds. We will consider all available options, including M&A, as we work to develop the strengths that will enable us survive tomorrow.

4 2. Effi ciency: Enhancing Profi tability and Effi ciency of the Balance SheetWe continue to work to strengthen our profi t structure. Through the Toyota New Global Architecture, we are working not only to dramatically enhance the basic performance and product appeal of our cars, but also to enhance development effi ciency by standardizing parts and components through grouping develop-ment. Furthermore, we will continue efforts to reduce expenses and appropriately manage fi xed costs. In terms of capital expenditure, we are working to thoroughly revise our expenditure priorities and plans, make equipment more compact, shorten pro-cesses, enable multi-model production, facilitate faster response to changes in production quantities, and make effective use of existing equipment in order to improve productivity and reduce the need for investment.

5 We aim to make smart and effi cient use of man-agement resources, including people, things and money, and by doing so maintain and enhance our asset effi ciency. 3. Stability: Maintenance of LiquidityHaving experienced the global fi nancial crisis and the Great East Japan Earthquakes, we believe it is important to maintain a suffi cient level of net cash to cover both the fi xed costs for the automotive busi-ness for half a year and the refi nance requirement for the fi nancial services for half a year. This represents a fi nancial foundation which enables Toyota to grow sustainably in any business environment.

6 The above level of net cash is not only necessary for creation of further corporate value but also essen-tial for Toyota s management in order to maintain a full line-up in each region while responding to all options and opportunities, including next-generation technologies and M&A. Through our full line-up and all-embracing approach, we are able to hedge risks and continue operations timely in an adequate scale no matter how and unexpectedly our business environment changes. In summary, it is our aim to establish a strong fi nan-cial foundation which will support Toyota s sustainable growth by pursuing growth and effi ciency in the medi-um to long-term while maintaining suffi cient stability.

7 Financial Information Financial Strategy Financial Results and Position Financial SummaryFinancial StrategyOsamu NagataChief Financial Offi cer, Executive Vice President, Member of the Board of DirectorsEver-BetettererCarssEnriching Lives EEEnrEEnrEnricCommunitiesof Cof CCCofCToyota ValuesToyota Valuesoyota ValueToToyota a ValueStable Base of Business41 TOYOTA Annual Report 2017 Message from the PresidentLong-term StrategyAt a Glance HistoryInitiatives for Sustainable GrowthFinancial InformationNon-Automotive Business/Corporate Information and Stock InformationTable of ContentsModel AA Class SharesToyota issued the Model AA class shares to develop a new relationship with shareholders.

8 The purpose of the issuance was to 1) raise funds for medium to long-term R&D activities, 2) enhance the base of long-term shareholders, and 3) diversify the means of fund raising. The raised funds will be utilized for R&D in the areas of advanced and cutting-edge technolo-gies such as fuel cells, infrastructure, information technology and highly intelligent mobility. We appreciate opinions of our shareholders who support Toyota from a long-term stand point. By refl ecting them in Toyota s management, we intend to increase our corporate value further. Shareholder ReturnShareholder return is an important part of our man-agement policies.

9 In principle, it is determined on the basis of net income. With regard to dividends, we strive for a stable and sustainable payment benchmarked at 30% of con-solidated dividend payout ratio while considering fac-tors such as our fi nancial results, investment plans and liquidity. For the fi scal year to March 2017, we paid an annual dividend of 210 yen per share. Since the interim period ended September 30, 2015, we have pursued a better balance between interim and year-end dividends. As for repurchase of shares, we intend to exercise fl exibly in consideration of long-term capital effi ciency and in response to changes in our business environ-ment.

10 For the fi scal year to March 2017, we repur-chased billion yen, equivalent to 69 million shares as shareholder return. Going forward, we intend to build a strong fi nancial foundation while further improving profi tability. At the same time, we would like to enhance long-term rela-tionships of trust with our shareholders through con-structive dialogues and stable shareholder return. On the basis of this, we aim to realize both sustainable growth and increased corporate Interim dividend Year-end dividend Net income (right axis) Dividend per Share and Net Income8004006001,0001,2001,4001,600 Total amount of dividends (common shares) Total amount of dividends (First Series Model AA Class Shares) Share repurchase for shareholder returns Share repurchase to avoid dilution of common sharesTotal Shareholder Return and Total Return Ratio200(Billions of yen)001,0005001,5002,0002,500(Yen)