Notice Concerning the Opinion of the Board of Directors on the Shareholder Proposal

[Translation]

Toyota Industries Corporation (President: Koichi Ito; the "Company") announces that, as of April 12, 2024, the Company has received a letter from its shareholder, Longchamp SICAV (proxy: Dalton Investments Inc.; the "Proposing Shareholder"), stating that it will submit a shareholder proposal (the "Shareholder Proposal") at the 146th Ordinary General Meeting of Shareholders (the "Shareholders' Meeting") scheduled to be held on June 11, 2024.
The Company has deeply examined the contents of the Shareholder Proposal, and as a result, at a meeting of the Company's Board of Directors held today, resolved to oppose the Shareholder's Proposal as follows.

Ⅰ. Contents of the Shareholder Proposal

1. Agenda

2. Summary of Proposal and Reason for Proposal

As described in the attached "Contents of the Shareholder Proposal."
The attached "Contents of the Shareholder Proposal" is the original text of the Shareholder Proposal submitted by the Proposing Shareholder.

Ⅱ. Opinion of the Board of Directors on the Shareholder Proposal

1. "(1) Amendment to the Articles of Incorporation Pertaining to Disclosures on Actions Aimed at Realizing Management Mindful of Capital Cost and Share Price"
(1) Opinion of the Board of Directors of the Company
The Board of Directors is against this proposal.

(2) Reason for opposition
This Shareholder Proposal calls for a new establishment in the Articles of Incorporation to the effect of examining initiatives for "actions aimed at realizing management mindful of capital cost and share price" requested by the Tokyo Stock Exchange on March 31, 2023 and disclosing current valuations, policies/targets and initiatives/timing of their implementation based on said request in the Corporate Governance Report and on the Company website.
However, the Company believes that the content of disclosures under that request from the Tokyo Stock Exchange should be determined on a case-by-case basis when appropriate based on the highly flexible, highly liquid nature of the Company's management strategy and operating environment. The Company therefore believes that setting forth provisions such as those under this Shareholder Proposal in its Articles of Incorporation, which stipulates fundamental norms in operating a company, is not appropriate.
The Company has adopted the "Toyoda Precepts," the spirit of its foundation, as its corporate creed. The foundation of the Company's management policy is to be in harmony with society and create sustainable growth based on the principles of contributing to various industries and serving society at large through both its "Solutions (Materials Handling Equipment/Logistics)" and "Mobility-Related" businesses as well as its "Textile Machinery" business, which the Company has continued since its foundation. With regards to management that is mindful of the cost of capital and stock price, the Company will review its policy-held shares and clarify its policy for reducing them. It will also balance fundamental investments for sustainable growth, investments to accelerate the business growth of the next generation, and shareholder returns that include the repurchase of treasury stock.
The Company will continue to strive to disclose information to shareholders and other stakeholders in a timely and appropriate manner while taking into account the importance of management that is mindful of the cost of capital and stock price.

For the above reasons, the Board of Directors of the Company is against this Shareholder Proposal.

2. "(2) Repurchase of Treasury Stock"
(1) Opinion of the Board of Directors of the Company
The Board of Directors is against this proposal.

(2) Reason for opposition
This Shareholder Proposal calls for the Company to repurchase, in cash, up to a total of 30 million shares of treasury stock for a total amount not exceeding 500 billion yen within one year of the conclusion of this Shareholders' Meeting.
The Company does not oppose returning profits to shareholders through the repurchase of treasury stock, and as resolved and disclosed at a meeting of the Board of Directors on May 10, 2024, the Company will proceed with the repurchase of up to a total of 10 million shares of treasury stock for a total amount not exceeding 180 billion yen within one year of the same date.
The Company will continue to flexibly implement policies for shareholder returns, including the repurchase of treasury stock, taking into consideration stock price trends and capital structure, while maintaining a balance with investments that strengthen our fundamentals for sustainable growth and investments to accelerate the business growth of the next generation.
The Company believes that, in order to enhance value creation, continuously generate profits, and improve corporate value over the medium to long term toward the realization of "contribute to making the earth a better place to live, enrich lifestyles, and promote a compassionate society," it is extremely important to balance fundamental investments, business growth investments, and shareholder returns while realizing a sound business environment. We will continue to consider measures for improving shareholder returns and capital efficiency while ensuring that we don't undermine said balance.

For the above reasons, the Board of Directors of the Company is against this Shareholder Proposal.

3. "(3) Approval of Amount of Compensation for Restricted Stock Compensation Plan"
(1) Opinion of the Board of Directors of the Company
The Board of Directors is against this proposal.

(2) Reason for opposition
This Shareholder Proposal calls for monetary compensation claims to be granted in order to grant up to a total of 62,000 restricted shares for a total amount not exceeding 900 million yen per year as an incentive plan linked to business performance indices including ROE and total shareholder return (TSR), in addition to compensation for Directors (up to 900 million yen per year, including up to 150 million yen per year for Outside Directors), which has been conventionally paid only in cash. It also calls for the granting of restricted shares equivalent to three times the fixed compensation on a cumulative basis over the next three years if the performance criteria are met.
The Company does not oppose the introduction of a restricted stock compensation plan itself as an incentive to continuously improve corporate value. As resolved and disclosed at a meeting of the Board of Directors on April 26, 2024, the Company has decided to revise its policy for determining the amount of compensation for Directors to introduce performance-linked stock compensation and change the composition ratio of fixed compensation, bonuses, and stock compensation, as well as performance-linked indicators, to a system more in line with the Company's management strategy. Based on this policy, the Company will propose the necessary agenda items at this Shareholders' Meeting. Under this new compensation plan, the Company will maintain the existing fixed base compensation for Directors but replace a portion of bonuses, which are performance-linked compensation, with compensation in the form of restricted shares that is linked to business performance and other factors. The Company believes that this is an effective system as it allows for the introduction of restricted stock compensation while maintaining the same level of total compensation as before, and also adopts performance-linked indicators that are in line with the Company's management strategy.
Together with various stakeholders such as shareholders, business partners, local communities, and employees, the Company will continuously examine appropriate executive compensation in order to enhance value creation, continuously generate profits, and improve corporate value over the medium to long term toward the realization of "contribute to making the earth a better place to live, enrich lifestyles, and promote a compassionate society."

For the above reasons, the Board of Directors of the Company is against this Shareholder Proposal.

End of Document

Contents of the Shareholder Proposal PDF [366.5KB / 03pages]