環境報告書2003 | Toyota Industries Corporation

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For the Six Months Ended September 30, 2002

S E M I A N N U A L R E P O R T

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What is now Toyota Industries Corporation (“Toyota Industries”) was founded in 1926 as

Toyoda Automatic Loom Works, Ltd. by the renowned Japanese inventor Sakichi Toyoda to

manufacture automatic looms. The enterprise proceeded over the years to diversify into such

fields as automobiles, materials handling equipment and electronics. In line with its strategy of

globalization, Toyota Industries now has production facilities in Europe, North America and

other regions.

The business universe of Toyota Industries consists of four segments: Automobile, which

comprises the vehicle (automobile assembly), engine and car air-conditioning compressor

businesses; Materials Handling Equipment, which specializes in forklift trucks and warehouse

equipment; Textile Machinery, which covers the spinning and weaving machinery businesses;

and Others, which includes electronics and other businesses. Each of these segments already

has or is building a secure footing in its particular fields. While the Car Air-Conditioning

Compressor and Materials Handling Equipment businesses currently make up the mainstays of

Toyota Industries’ operations, we believe that the Electronics Business is well positioned to

develop into the core of our future operations. Accordingly, we have been allocating

significant resources to these three businesses.

Our long-term strategy is to establish a conglomerate premium through technological and

market synergies among our various businesses in order to produce added value in terms of

overall performance.

PROFILE

Cautionary Statement with Respect to Forward-Looking Statements

This semiannual report contains projections and other forward-looking statements that involve risks and uncertainties. Our use of the words “expect,” “anticipate,” “estimate,” “forecast,” “plan” and similar expressions should be understood in this context. Projections and forward-looking statements are based on the current expectations and estimates of Toyota Industries Corporation and its Group companies regarding their plans, outlook, strategies and results for the future. All such projections and forward-looking statements are based on management’s assumptions and beliefs derived from the information available to it at the time of producing this report and are not guarantees of future performance. These projections and forward-looking statements are subject to change without notice, and Toyota Industries Corporation and its Group companies will not necessarily inform you of such changes. Therefore, it is advised that you should not rely solely upon these projections and forward-looking statements in making your investment decisions. You should also be aware that certain risks and uncertainties could cause the actual results of Toyota Industries Corporation and its Group companies to differ materially from any projections or forward-looking statements discussed in this report. These risks and uncertainties include, but are not limited to, the following:

i) Domestic and overseas economic conditions, particularly levels of consumer spending, demand for our products and private sector capital expenditure ii) Adverse changes in laws and regulations, such as trade restrictions and tariffs, or stricter safety or emissions regulations, resulting in higher costs and/or sales

restrictions

iii) Currency exchange rate fluctuations, notably involving yen, U.S. dollars, Asian currencies and the euro — the currencies in which Toyota Industries Corporation and its Group companies have holdings and use to conduct their international business

iv) Fluctuations in market prices of securities in which Toyota Industries Corporation and its Group companies have substantial holdings

v) The ability of Toyota Industries Corporation and its Group companies to maintain their strength in many product development and geographical areas, through such means as new product development and launches in highly competitive markets characterized by continual new product introductions, rapid technological advances and fluctuations in demand

vi) Effects of natural disasters, terrorist activities, war or political instability in the markets Toyota Industries Corporation and its Group companies serve

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CONSOLIDATED FINANCIAL HIGHLIGHTS

Toyota Industries Corporation

Six months ended September 30, 2002 and 2001 (unaudited)

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Contents

Consolidated Statements of Cash Flows ...……… 14

Notes to Consolidated Financial Statements ..……..……… 15

Certificate by Executive Vice President in Charge of Accounting and Finance ..…………..………..……. 23

Directors and Corporate Auditors ………...……... 23

Corporate Data ...………...………...……...……… 24

Investor Information ………... Back Cover Consolidated Financial Highlights .………...…… 1

To Our Shareholders .………...……2

Topics .……...………...….… 6

Management’s Discussion and Analysis of Financial Condition and Results of Operations .…………... 8

Consolidated Balance Sheets .……...…...…10

Consolidated Statements of Income .…...………12

Consolidated Statements of Shareholders’ Equity ...…...……13

For The Six Months

Net sales ¥ 520,489 ¥ 478,965 8.7% $ 4,245,424

Operating income 25,214 24,410 3.3 205,661

Income before income taxes 25,370 26,640 (4.8) 206,933

Net income 13,614 15,135 (10.0) 111,044

Depreciation and amortization 26,847 25,918 3.6 218,980

Capital expenditures 40,080 44,132 (9.2) 326,917

Research and development expenses 14,626 14,255 2.6 119,299

Per share of common stock (in yen or U.S. dollars):

Net income — basic 43.57 48.35 (9.9) 0.36

Net income — diluted 39.05 43.55 (10.3) 0.32

Cash dividends 10.00 9.00 11.1 0.08

At The Six Months‘ End

Total assets ¥1,692,295 ¥1,613,296 4.9% $13,803,385

Shareholders’ equity 823,014 784,522 4.9 6,713,002

Number of employees 24,877 23,206 7.2

2002

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥122.60 = US$1, the exchange rate on September 30, 2002. Millions of yen

Thousands of U.S. dollars

2002 2001 % change

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Akira Yokoi

Chairman

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RATIFYING

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NVIRONMENT

TO OUR SHAREHOLDERS

Tadashi Ishikawa

President

We are pleased to present the results of operations of Toyota Industries Corporation (the “Company”) and its consolidated subsidiaries (“Toyota Industries”) for the six months ended September 30, 2002 (the “term”).

Our results for the term can be summarized in a single word: Gratifying. We achieved record highs for consolidated net sales, operating income and ordinary income. Consolidated net sales totaled ¥520.5 billion (US$4,245.4 million) for the term, an increase of 8.7% compared with the six months ended September 30, 2001 (the “previous term”). Consolidated operating income was ¥25.2 billion (US$205.7 million) for the term, an increase of 3.3% compared with the previous term. Consolidated ordinary income was ¥26.9 billion (US$219.5 million) for the term, an increase of 1.0% over the previous term. Consolidated net income, however, was down 10.0% to ¥13.6 billion (US$111.0 million). This was due largely to a loss on disposal of property, plant and equipment that accompanied the relocation of a foundry plant.

Our results were particularly gratifying considering the adverse business environment that prevailed during the term. Except for certain regions such as Asia, the world economy as a whole remained sluggish due to a slow recovery in the U.S. and falling stock prices worldwide. The Japanese economy seemed to have hit bottom at the beginning of the term and some industries showed signs of an upturn. However, a poor stock market performance, weak private sector capital investment and stagnant consumer spending due to employment insecurities together produced an economic standstill.

Despite the unfavorable business environment, we were able to improve as compared with the previous term on consolidated

net sales, operating income and ordinary income because we succeeded in implementing a clearly defined strategy that exploited our competitive strengths in each of our business segments and in making further significant cost reductions.

Note: U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥122.60=US$1, the approximate exchange rate on the Tokyo Foreign Exchange Market on September 30, 2002.

All Business Segments

in Good Shape

All of Toyota Industries’ business segments saw their net sales improve over the previous term. However, the level of operating income varied by business segment, even though most segments maintained stable operating incomes.

Note: Segment net sales figures do not include intersegment transactions. However, segment operating income figures do include operating income arising from intersegment transactions.

Automobile Segment

Our Automobile Segment consists of vehicle (automobile assembly), engine, car air-conditioning compressor and other businesses (including foundry parts and electronic components for automobiles). Net sales were ¥291.2 billion (US$2,375.4 million) for the term, an increase of 9.4% over the previous term, and accounted for 56.0% of our total net sales for the term. The increase was due mainly to a rise in sales of car air-conditioning compressors and the fact that Toyota Motor Corporation (“TMC”) started charging for some parts for automobiles we assemble that had previously been supplied free. Operating income was ¥15.3 billion (US$124.6 million) for the term, an increase of 12.8% compared with the previous term.

Vehicle Business

(Automobile Assembly Business)

During the term, we assembled four models under

consignment from TMC: Vitz (Yaris in Europe), TOYOTA’s global strategic small car; RAV4 compact sport utility vehicle; bB Open Deck; and Sprinter Carib (Corolla Wagon overseas, discontinued in July 2002). Though sales of the RAV4 were strong in North America, sales of the Vitz (Yaris), our mainstay vehicle, decreased as a result of TMC’s full-fledged local production of the Yaris in Europe and intensified competition in the domestic small car market. Total Vehicle Business unit production for the term was 109,514, a decrease of 11,735 from the previous term.

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(US$1,111.7 million) for the term, an increase of 5.3% over the previous term. The increase was due to an increased sales ratio of a more expensive model, as well as the fact that Toyota Industries Corporation now pays for tires and hubcaps previously supplied free by TMC and recoups an identical aggregate amount in the form of increased unit prices to TMC.

Engine Business

We produce gasoline and diesel engines for TMC vehicles and for our own line of forklift trucks and other industrial vehicles. During the term, gasoline engine production totaled 86,436 units, a decrease of 2,155 units from the previous term. Production of the 2AZ gasoline engine for the Estima (Previa in Europe), which started in August 2002, was insufficient to make up for a decrease in production of the 5E gasoline engine.

Production of diesel engines totaled 107,258 units for the term, an increase of 16,166 units over the previous term. Production of the 1CD 2000cc direct injection turbo diesel engine with common rail fuel system, which are fitted in the Avensis, Corolla and RAV4 for Europe, increased.

Total engine production amounted to 193,694 units for the term, an increase of 14,011 units over the previous term.

In April 2001, Toyota Industries Corporation absorbed TMC’s Industrial Equipment Sales Division. Sales of engines for forklift trucks, which Toyota Industries Corporation previously sold to TMC, are now recorded as intersegment transactions. Excluding intersegment sales, sales of gasoline engines totaled 72,208 units for the term, a decrease of 4,246 units from the previous term, and sales of diesel engines totaled 98,022 units for the term, an increase of 16,095 units over the previous term. On the same basis, total engine sales amounted to 170,230 units for the term, an increase of 11,849 units over the previous term.

Net sales excluding intersegment sales totaled ¥58.5 billion (US$477.1 million) for the term, an increase of 12.3% over the previous term.

Car Air-Conditioning Compressor Business

Car air-conditioning compressors developed and manufactured by Toyota Industries are marketed to leading auto manufacturers worldwide through DENSO Corporation (“DENSO”). For the term, sales in Japan increased due largely to a transfer of the assembly line for scroll-type compressors from DENSO.

Overseas, strong car sales in the U.S. led to an increase in orders, and vigorous sales activities in Europe resulted in expanded sales. In Japan, we sold 2.7 million units for the term, an increase of 0.3 million units over the previous term. Overseas, we sold 5.1 million units for the term, an increase of 0.7 million units over the previous term. Total unit sales amounted to 7.8 million units for the term, an increase of 1.0 million units over the previous term.

Net sales totaled ¥87.7 billion (US$715.7 million) for the term, an increase of 11.9% over the previous term.

Materials Handling Equipment Segment

Our Materials Handling Equipment Segment manufactures and sells forklift trucks, warehouse trucks, automated storage and retrieval systems, and automatic guided vehicle systems. Net sales for the term totaled ¥181.0 billion (US$1,476.5 million), an increase of 0.3% over the previous term. Operating income was ¥7.6 billion (US$61.8 million) for the term, a decrease of 5.4% from the previous term.

Sales of the Materials Handling Equipment Segment increased slightly over the previous term due in part to an increase in the number of consolidated subsidiaries, i.e., overseas forklift truck sales subsidiaries. Another factor for the increase was that strong sales of materials handling systems such as automated storage and retrieval systems made up for a decrease in sales of forklift trucks and other materials handling equipment.

During the term, total demand in the Japanese forklift truck market decreased to approximately 90% of the previous term, while our sales were 95% of the previous term, outperforming market demand. In North America and Europe, total demand for the term was similarly sluggish due to the aftershocks of last year’s September 11 terrorist attacks in the U.S. and other factors, but our sales, which exclude those of BT Industries, outperformed the market.

BT Industries’ orders received during the term (January to June 2002) were slightly up over the previous term (January to June 2001). Orders received in Europe decreased in the first quarter, but improved in the second quarter, marking a slight increase over the previous term. We believe that the North American market has bottomed out, and BT Industries’ orders received increased compared with the previous term. On the other hand, BT Industries’ sales during the term decreased 8% from the previous term. Sales in Europe remained at

approximately the same level, but sales in North America registered a double-digit decrease as a percentage compared with the previous term. Whereas a substantial order backlog resulted in higher sales in the previous term, sales in 2001 exceeded orders received, and the order backlog had therefore decreased at the end of the year.

Our Materials Handling Equipment Segment also manufactures and sells tow tractors, skid steer loaders, shovel loaders, sweepers and other industrial equipment.

Textile Machinery Segment

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President

TO OUR SHAREHOLDERS

income was ¥0.7 billion (US$5.7 million) for the term, an increase of 249.8% over the previous term. This increase was due largely to a substantial increase in exports of air-jet looms to China and aggressive cost-reduction activities.

During the term, sales of the Spinning Machinery Business fell short of those for the previous term. Sales in Japan and Pakistan increased as a result of strong sales activities, but sales in Bangladesh, Uzbekistan and Thailand decreased. The Weaving Machinery Business, on the other hand, received a large order for air-jet looms from a group of textile manufacturers in Jiangsu Province, China earlier this year, resulting in a substantial increase in exports to that country. Sales of water-jet looms also increased in China, boosting sales of the Weaving Machinery Business over the previous term.

Others Segment

The Others Segment comprises businesses that we entered comparatively recently. Although our operations in these fields are still relatively limited, we expect them to become a key pillar of Toyota Industries in the future. One of these businesses is TIBC Corporation (“TIBC”), a joint venture with Ibiden Co., Ltd. TIBC produces ball grid array (BGA) plastic package substrates for IC chipsets, and flexible printed circuit (FPC) substrates for IC cards. This segment also includes the manufacture and sales of press dies and production equipment.

Net sales of the Others Segment totaled ¥25.4 billion (US$207.6 million) for the term, an increase of 58.1% over the previous term. This increase was because an increase in sales of production equipment and the consolidation of all five Taikoh Transportation Group companies (which amounted to ¥11.4 billion) outweighed a decrease in Electronics Business sales, including those of TIBC, which resulted from the bursting of the IT “bubble.” Operating income totaled ¥1.6 billion (US$12.9 million) for the term, a decrease of 44.2% from the previous term, reflecting a performance by TIBC that did not meet expectations, and other factors.

ST Liquid Crystal Display Corp. (“ST-LCD”), which produces low-temperature polysilicon TFT-LCDs, is a 50-50 joint venture with Sony Corporation, and we believe that ST-LCD will form the core of our Electronics Business in the medium to long term. ST-LCD is not consolidated but accounted for by the equity method in Toyota Industries’ consolidated financial results. ST-LCD’s performance for the term was worse than the previous term due to an increase in depreciation that arose from the start-up of a second production line.

Achievements During the Term

Cost Reduction Activities

During the term, we reduced costs aggressively and improved manufacturing productivity. In April 2001, Toyota Industries

Corporation embarked on an ambitious three-year cost-reduction program to be implemented throughout the Company. We have so far achieved most of the objectives as planned. We established a special project team in each business division to ensure that our cost-reduction activities were systematic and thorough. As well as enhancing our ongoing VE (Value Engineering) and VA (Value Analysis) activities, we sought to optimize our procurement of materials and components globally, and reduced general expenses and head office fixed costs.

Exploiting IT

The exploitation of the latest advances in IT is one of our important strategic objectives. We believe that the potential impact of IT on competitiveness will be significant.

Using IT, we are overhauling our traditional way of doing business to accelerate management processes. We are also seeking to improve productivity in our development and production departments through installation of

three-dimensional CAD (Computer Aided Design) systems throughout the Company.

In addition, we are pushing ahead with the introduction of ERP (Enterprise Resource Planning) systems to facilitate an improvement in overall management and to allow swifter decision-making through universal access to a unified management database. We have already set up ERP in our Accounting and Purchasing departments.

In May 2002, we opened “e-Lab,” our base station for building a Group-wide information system and conducting IT research. The e-Lab is responsible for researching digital simulation technologies with a view to reducing lead-times from development to manufacture to shipment. It is also involved in developing an optimal network system for joint development of parts with suppliers and for parts procurement.

Capital and Business Collaboration

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Akira Yokoi

Chairman

President

Toyota Industries Corporation and Aichi Corporation (“Aichi”), the Company acquired the new shares issued by Aichi. As a result, the Company now holds 34% of Aichi’s outstanding shares. We also obtained a warrant granting us an option to purchase up to 51% of Aichi’s shares in May 2003. We will closely monitor the effectiveness of the collaboration before deciding whether to exercise the warrant and welcome Aichi into our network of subsidiaries. Although currently suffering from a deteriorating market environment, Aichi is a leading

manufacturer of aerial lift equipment, with a market share of over 70% in Japan. In order to improve its performance, Aichi has been working to reduce costs and inventories, and shorten lead-times from order to shipment.

The Company will provide Aichi with capital, production technology and production control know-how. In the future, we plan to transfer TOYOTA Material Handling Company’s* (“TMHC’s”) manufacturing operations for special-purpose vehicles, including aerial lift equipment and skid steer loaders, to Aichi, and have Aichi become a specialized manufacturer of these vehicles. TMHC will in turn concentrate on the manufacture of materials handling equipment such as forklift trucks and warehouse equipment. Through efficient allocation of management resources, we will work to turn around Aichi’s performance as well as increase our shareholder value.

* TOYOTA Material Handling Company is a division of Toyota Industries Corporation, and manufactures and sells TOYOTA-brand materials handling equipment.

Business Outlook for Fiscal 2003

The future course of the world economy is even more unpredictable than ever. In the U.S., once-robust consumer spending is waning and enterprises are cutting back on capital investment. In Europe, some countries are showing signs of an upswing, but Germany is slowing down and the situation in Europe as a whole is one of stagnation. In Japan, a rapid rebound in consumer spending cannot be expected in the face of rising unemployment, and the slow recovery of the U.S. economy makes it difficult for Japan to turn its economy around through exports. Economies in the rest of Asia, especially China, continue to expand, but it is generally agreed that the pace of expansion will slacken as a result of the slow recovery in the U.S. We expect that in the second half of fiscal 2003, ending March 31, 2003, Toyota Industries will face increasingly challenging economic conditions.

In these circumstances, we will seek to ensure that our products and services are attuned to customer needs. We will also continue with our cost-reduction activities. Our strategy will also include a wider use of IT in improving management efficiency and a strengthening of our management base to make it even more responsive to market changes.

We are confident that our long-standing policy of

diversification will pay off in an unstable market environment, in

that even if some of our businesses experience difficulties, other businesses will perform well, so allowing Toyota Industries to continue on the path to stable and sustainable growth.

For fiscal 2003 in full, we forecast the following:

Consolidated net sales of ¥1,060 billion (US$8,646 million), an increase of 8.1% over fiscal 2002 and representing a ¥70 billion increase over our forecast at the beginning of fiscal 2003; ordinary income of ¥50 billion (US$408 million), an increase of 4.5% over fiscal 2002 and representing a ¥2 billion increase over our forecast at the beginning of fiscal 2003; and net income of ¥25 billion (US$204 million), a decrease of 8.5% from fiscal 2002 and representing a ¥1.5 billion increase over our forecast at the beginning of fiscal 2003.

Note: The financial projections set forth above are based upon a number of assumptions and estimates that, while presented with numerical 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 are likely 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 that the financial projections will be achieved. Current negative market trends in the global economy make it particularly difficult to predict product demand and other related matters.

Increasing Shareholder Value

The most important aspect of our corporate mission is to increase shareholder value. We consistently aim to improve medium- to long-term profitability and increase shareholder value through efficient management and implementation of ambitious strategies with specific goals in each business area. Concurrently, as a responsible corporate citizen, we emphasize activities to protect the natural environment and fulfill our other social responsibilities.

We thank all of our stakeholders, including shareholders, customers, suppliers, local communities and employees, for their support. As we look to secure further growth in shareholder value, we respectfully request a continuation of the support we have enjoyed to date.

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TOPICS

In this section, we review the highlights of Toyota Industries’ activities from April to October 2002.

Commencement of Higashiura Plant

In July 2002, Higashiura Plant started operations to

manufacture parts for car air-conditioning compressors. The market demand for our compressors is expected to rise, and in order to cope with this increase, we are reinforcing the production capacity of our facilities in Japan, North America and Europe. In Japan, now that we have completed our Higashiura Plant, we have a three-plant structure — in Kariya, Obu and Higashiura.

Under the concept of using natural energy and attaining harmony with the surrounding environment, we constructed Higashiura Plant to consume 20% less electricity than conventional plants of comparable size and production capacity. We installed clean energy systems such as wind and solar power generators as well as a cogeneration system. We also installed a water recycling

system and a rainwater utilization system to conserve water resources.

Local Production and Sale of

Forklift Trucks in China

In anticipation of expanding demand in China, TOYOTA Material Handling Company (“TMHC”) is constructing a new forklift truck assembly plant within the premises of Toyota Industry (Kunshan) Co., Ltd. (“TIK”), which is engaged in the production of foundry parts in Kunshan, Jiangsu Province, China. TMHC is slated to begin local production and sale of forklift trucks in April 2003. To begin with, the local plant will assemble 1-3 ton internal combustion forklift trucks, top sellers in China, with an annual production capacity of 550 units. Closely monitoring the trend in demand, TMHC will gradually increase unit production as well as the number of models manufactured in China.

Local Production of Diesel Engines

in Poland

In October 2002, we established Toyota Motor Industries Poland Sp.zo.o. (“TMIP”) jointly with Toyota Motor

Corporation (“TMC”) to manufacture diesel engines in Jelcz-Laskowice, Poland. The Company’s equity share is 40%. To accommodate an expected expansion of demand in Europe, TMIP will engage in the production of 2000cc-class diesel engines. TMIP is expected to start operations in 2005, with an annual production capacity of 120,000 units. The total investment in this enterprise is expected to be 170 million euros.

Introduction of Electric Pallet Trucks

into Japanese Market

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products of BT Industries, already highly regarded in Europe and the U.S., will lead to a realization of potential demand in Japan.

* L&F stands for “Logistics and Forklifts,” and refers to materials handling systems, and industrial vehicles and equipment.

Production Start-Up of

2AZ-FE Gasoline Engines

In August 2002, we started production of the 2400cc 2AZ gasoline engine with aluminum block and variable valve timing under consignment from TMC. This engine is fitted in the Estima (Previa) for Japan, Europe and Australia.

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Exhibition of Materials Handling

Equipment at Hannover Messe 2002

In April 2002, Hannover Messe, one of the world’s largest industrial technology trade fairs, was held in Hannover, Germany, with the participation of more than 7,000 companies from 80 countries around the world. Both Toyota Industrial Equipment Europe, S.A.R.L. (“TIEE”), the European division of TMHC, and BT Industries exhibited their own brand products at CeMAT 2002, an exhibition within “The World Fair for Material Handling and Logistics,” one of seven specialized fairs at Hannover Messe.

TIEE showed mainly electric trucks such as the Easymover electric pallet truck, the 7FBRE reach truck and the 7FBMF electric counterbalanced forklift truck, showcasing its wide-ranging product lineup and its capacity for finely-tuned after-service. Under the theme of “Share Our Strength,” TIEE is confident of success in promoting its ability to cater precisely to a broad range of materials handling needs.

BT Industries displayed a full range of products including the CARGO counterbalanced trucks, as well as warehouse trucks such as the BT IXION stacker truck, BT ORION/MINIMOVER electric pallet trucks and BT VECTOR very narrow aisle truck. Under the theme of “Don’t Buy Trucks,” BT Industries emphasized the benefits of long-term rental and its capability to provide full maintenance services.

BT Booth

TOYOTA 7FBMF Electric Counterbalanced Forklift Truck

Cutting-Edge Textile Machinery

Showcased at CITME2002

From October 15 to 19, 2002, the 8th China International Textile Machinery Exhibition (CITME2002) was held in Beijing, China. We displayed three units of the JAT610, our best-selling

Environmental Report 2002

In July 2002, we published the latest edition of our Environmental Report, produced annually since 1999. Written with reference to guidelines established by the

Ministry of the Environment, the report explains our environmental protection activities in detail. In our 2002 edition, we detail the progress of our Third Environmental Action Plan (April 2001 to March 2006), as well as development of environment-friendly products through the

implementation of LCA (Life Cycle Assessment). We also outline our collective efforts to reduce the release of pollutants during production processes and their impact on the environment through efficient use of energy and resources. In addition, the report contains environmental accounting data, calculated in accordance with the guidelines laid down by the Japanese Ministry of the Environment.

The contents of the latest Environmental Report, together with details of our recent activities and related matters, are also posted on our Web site at http:// www.toyota-industries.com/environment/. air-jet loom since its

introduction in 1996, the JAT710 air-jet loom, to be marketed in January 2003, and the LW600 water-jet loom. Also displayed was a three-dimensional cut-model of a compact spinning system, which enables spinning of high-grade compact yarn with higher strength, less hairiness and improved evenness. The

RX240NEW-EST, which is equipped with

this system, has been on the market since October 2002.

Advanced, Environment-Friendly

Technology at Tokyo Motor Show 2002

We displayed a selection of our advanced auto technologies at the 36th Tokyo Motor Show, held from October 29 to November 3, 2002 at the Makuhari Messe, Chiba, on the outskirts of Tokyo. Under our show theme of “Toyota Industries Corporation supports transportation to accommodate people around the world,” we displayed our product lineup with emphasis on environmental safety, high efficiency and reduced costs in a variety of materials handling situations. We also introduced key devices and environmental and electronics technologies that back up these products.

We showcased car air-conditioning compressors, including the CO2 refrigerant compressor (displayed for the first time in

Japan) and continuous variable displacement compressors, as well as electronic parts such as a battery charging system for electric vehicles, DC-DC converter for hybrid vehicles and super compact radio tuner module. In the materials handling field, we exhibited a hand pallet truck and

electric hand pallet trucks, provided by BT Industries on an OEM basis, as well as Aichi

Corporation’s truck-mounted aerial lift.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Selling, general and administrative expenses totaled ¥58.5 billion for the term, an increase of ¥6.5 billion (12.6%) over the 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 and manufacturing 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.

Non-Operating Income and Expenses

Interest and dividend income was ¥9.1 billion for the term, an increase 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 in earnings of affiliates.

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 of property, plant and equipment that accompanied the relocation of a foundry plant.

Income Taxes

Current and deferred income taxes, net for the term totaled ¥11.1 billion, an increase of ¥0.3 billion (3.0%) over the previous 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.

Net Income

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

Financial Position

Total assets at the end of the term stood at ¥1,692.3 billion, a decrease 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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on information 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 with Respect to Forward-Looking Statements” at the beginning of this semiannual report, which pertains to the report as a whole.

Results of Operations

Net Sales

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 for the future remained uncertain.

Against this background, total consolidated net sales of Toyota Industries amounted to ¥520.5 billion for the term, an increase of ¥41.5 billion (8.7%) compared with the six months ended September 30, 2001 (the “previous term”). The increase was due mainly to increased sales of our products in the Automobile and Textile Machinery segments. Below are Toyota Industries’ sales for the term by geographic segment, before elimination of intersegment transactions.

■

Japan

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

■

North America

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

■

Europe

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

■

Others

Sales totaled ¥2.0 billion for the term, an increase of ¥0.1 billion (5.9%) over the previous term.

* Please refer to “To Our Shareholders” for results by business segment.

Cost of Sales and Selling, General and

Administrative Expenses

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the end of the term, an increase of ¥14.6 billion (4.3%) over the previous fiscal year. This increase was due to the

construction of Higashiura Plant and “e-Lab,” our information technology research laboratory, as well as the consolidation of Taikoh Transportation Group.

Intangible assets stood at ¥94.0 billion at the end of the term, a decrease of ¥0.9 billion (0.9%) from the previous fiscal year. This decrease was because a decrease in goodwill outweighed an increase in software.

Investments and other assets stood at ¥933.2 billion at the end of the term, a decrease of ¥109.3 billion (10.5%) from the previous 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 the term, an increase of ¥140.6 billion (59.4%) over the previous fiscal year. Short-term loans increased ¥133.1 billion since certain 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 the term, 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 of short-term loans. Deferred tax liabilities also decreased by ¥44.9 billion (14.2%), because the carrying amount of investment securities decreased.

Minority interest in consolidated subsidiaries increased ¥3.8 billion (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 the term, 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%.

Cash Flows

Net cash provided by operating activities was ¥42.4 billion for the term, an increase of ¥10.8 billion (34.2%) over the previous term. An increase in receivables was offset by a decrease in inventories, income tax payments and an increase in other liabilities.

Net cash used in investing activities was ¥42.8 billion for the term, a decrease of ¥14.5 billion (25.3%) from the previous term. This decrease was due mainly to the expenditure arising from 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 the previous 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, an increase of ¥0.3 billion over the previous term.

Including translation adjustments, cash and cash

equivalents for the term increased ¥6.2 billion, compared with a 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.

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 other factors as it makes every effort to meet the expectations of shareholders.

Toyota Industries Corporation will use retained earnings to aggressively pursue business expansion and strengthen its corporate constitution in order to secure future profits for its shareholders. It will also use retained earnings to purchase treasury 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 over the previous term. The interim cash dividend was payable on November 26, 2002.

Stock Repurchase Program

On June 27, 2002, the Ordinary General Meeting of Shareholders resolved to authorize the Board of Directors of Toyota Industries Corporation to repurchase up to 20 million of the Company’s common shares at a total purchase price not exceeding ¥50 billion. This allows the Company to implement flexible capital policies in accordance with the current business environment.

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

In June 2002, the Ordinary General Meeting of Shareholders of Toyota Industries Corporation approved a grant of share acquisition 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 and 115 associate directors and general managers). The number of shares granted per person varies from 2,000 to 20,000 in accordance with the degree of contribution to the Company.

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CONSOLIDATED BALANCE SHEETS

As of September 30 and March 31, 2002, and September 30, 2001 (unaudited)

Current assets:

Cash and cash equivalents (Note 2(3))

Trade notes and accounts receivable

Short-term investments (Notes 2(4) and 6)

Inventories (Note 2(5))

Deferred tax assets

Other current assets

Less — allowance for doubtful accounts (Note 2(8))

Total current assets

Fixed assets:

Property, plant and equipment (Note 2(6)):

Buildings and structures

Machinery, equipment and vehicles

Tools, furniture and fixtures

Land

Construction in progress

Total property, plant and equipment

Intangible assets (Note 2(7)):

Software

Goodwill

Total intangible assets

Investments and other assets:

Investments in securities (Notes 2(4) and 6)

Long-term loans

Long-term prepaid expenses

Deferred tax assets

Other investments and other assets

Less — allowance for doubtful accounts (Note 2(8))

Total investments and other assets

Total fixed assets

Total assets $ 630,392 975,057 70,669 544,641 103,238 242,275 (14,608) 2,551,664 919,755 1,255,155 126,754 441,770 129,486 2,872,920 61,966 704,886 766,852 7,147,936 83,246 118,328 23,050 241,281 (1,892) 7,611,949 11,251,721 $13,803,385

Millions of yen

(Note 1)

¥ 77,286

119,542 8,664 66,773 12,657 29,703 (1,791) 312,834 112,762 153,882 15,540 54,161 15,875 352,220 7,597 86,419 94,016 876,337 10,206 14,507 2,826 29,581 (232) 933,225 1,379,461 ¥1,692,295 ¥ 71,120 107,821 7,979 70,511 10,081 29,731 (1,917) 295,326 102,659 149,259 15,483 46,550 23,692 337,643 6,347 88,528 94,875 986,355 11,533 11,927 2,237 30,621 (116) 1,042,557 1,475,075 ¥1,770,401 ASSETS

The accompanying notes are an integral part of these financial statements.

2002

2002 2002

September 30 March 31 September 30 September 30

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Current liabilities:

Trade notes and accounts payable ¥ 111,251

Short-term loans (Note 3(2)) 33,371

Other payables 21,662

Accrued expenses 36,327

Accrued income taxes 8,611

Deposits received from employees 18,548

Deferred tax liabilities 494

Other current liabilities (Note 3(2)) 6,375

Total current liabilities 236,639

Long-term liabilities:

Long-term debt 281,983

Deferred tax liabilities 315,978

Allowance for retirement benefits 28,840

Other long-term liabilities 9,293

Total long-term liabilities 636,094

Total liabilities 872,733

Minority interest in consolidated subsidiaries 18,856

Shareholders’ equity:

Common stock:

Authorized — 1,091,245,000 shares

Issued — 313,324,451 shares as of September 30, 2002 –

313,299,249 shares as of March 31, 2002 68,022

313,299,249 shares as of September 30, 2001 –

Capital surplus 89,327

Retained earnings 253,975

Net unrealized gains on other securities (Notes 2(4) and 6) 456,415

Foreign currency translation adjustments 12,361

Treasury stock at cost (1,288)

— 1,512,010 shares as of September 30, 2002

503,091 shares as of March 31, 2002

499,235 shares as of September 30, 2001

Total shareholders’ equity 878,812

Total liabilities and shareholders’ equity ¥1,770,401

LIABILITIES AND SHAREHOLDERS’ EQUITY

¥ 111,741

166,467

19,181

38,223

12,208

19,039

964

9,370

377,193

156,290

271,112

32,664

9,325

469,391

846,584

22,697

68,047

–

89,365

264,180

392,595

11,970

(3,143)

823,014

¥1,692,295

$ 911,427

1,357,806

156,452

311,770

99,576

155,294

7,863

76,427

3,076,615

1,274,796

2,211,354

266,427

76,060

3,828,637

6,905,252

185,131

555,033

–

728,915

2,154,812

3,202,243

97,635

(25,636)

6,713,002

$13,803,385

Millions of yen

(Note 1)

2002

2002 2002

September 30 March 31 September 30 September 30

2001

¥ 103,811

38,725

19,629

37,104

10,891

18,374

65

6,185

234,784

278,677

262,548

27,683

8,312

577,220

812,004

16,770

–

68,022

88,516

245,418

381,074

2,773

(1,281)

784,522

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CONSOLIDATED STATEMENTS OF INCOME

For the six months ended September 30, 2002 and 2001 (unaudited)

Net sales ¥478,965

Cost of sales 402,612

Gross profit 76,353

Selling, general and administrative expenses 51,943

Operating income 24,410

Non-operating income:

Interest income 4,370

Dividends income 4,086

Other non-operating income 3,362

Non-operating expenses:

Interest expenses (5,488)

Other non-operating expenses (4,100)

Ordinary income 26,640

Extraordinary losses:

Loss on disposal of property, plant and equipment –

Income before income taxes 26,640

Income taxes — current 12,144

Income taxes — deferred (1,352)

Minority interest in consolidated subsidiaries 713

Net Income ¥ 15,135

Net income per share — basic ¥48.35

Net income per share — diluted 43.55

Cash dividends per share 9.00

Millions of yen

(Note 1)

2002

2001

2002

For the six months ended September 30

$4,245,424

3,562,724

682,700

477,039

205,661

38,067

36,085

38,164

(42,928)

(55,595)

219,454

(12,521)

206,933

118,002

(27,365)

5,252

$ 111,044

$0.36

0.32

0.08 ¥520,489

436,790

83,699

58,485

25,214

4,667

4,424

4,679

(5,263)

(6,816)

26,905

(1,535)

25,370

14,467

(3,355)

644

¥ 13,614

¥43.57

39.05

10.00

(15)

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Common stock

Capital surplus

Retained earnings

Translation adjustments Net unrealized

gains on other securities

Treasury stock at cost

Balance at March 31, 2002 $554,829 $728,605 $2,071,574 $3,722,798 $100,824 $(10,505)

Net income – – 111,044 – – –

Cash dividends – – (25,514) – – –

Bonuses to directors and corporate auditors – – (2,292) – – –

Net unrealized gains on other securities – – – (520,555) – –

Foreign currency translation adjustments – – – – (3,189) –

Conversions of convertible bonds 204 204 – – – –

Other – 106 – – – (15,131)

Balance at September 30, 2002 $555,033 $728,915 $2,154,812 $3,202,243 $ 97,635 $(25,636)

Thousands of U.S. dollars (Note 1)

Balance at March 31, 2001 313,296 ¥68,019 ¥88,513 ¥233,368 ¥ 558,673 ¥ 2,746 ¥ (21)

Net income – – – 15,135 – – –

Cash dividends – – – (2,820) – – –

Bonuses to directors and corporate auditors – – – (265) – – –

Net unrealized gains on other securities – – – – (177,599) – –

Foreign currency translation adjustments – – – – – 27 –

Conversions of convertible bonds 3 3 3 – – – –

Other (499) – – – – – (1,260)

Balance at September 30, 2001 312,800 68,022 88,516 245,418 381,074 2,773 (1,281)

Balance at March 31, 2002 312,796 68,022 89,327 253,975 456,415 12,361 (1,288)

Net income – – – 13,614 – – –

Cash dividends – – – (3,128) – – –

Bonuses to directors and corporate auditors – – – (281) – – –

Net unrealized gains on other securities – – – – (63,820) – –

Foreign currency translation adjustments – – – – – (391) –

Conversions of convertible bonds 25 25 25 – – – –

Other (1,009) – 13 – – – (1,855)

Balance at September 30, 2002 311,812 ¥68,047 ¥89,365 ¥264,180 ¥ 392,595 ¥11,970 ¥(3,143)

Number of shares (Thousands)

Common stock

Capital surplus

Retained earnings

Translation adjustments Net unrealized

gains on other securities

(16)

CONSOLIDATED STATEMENTS OF CASH FLOWS

Cash flows from operating activities:

Income before income taxes ¥ 25,370 ¥ 26,640 $ 206,933

Adjustments to reconcile income before income taxes to net cash provided by operating activities:

Depreciation and amortization 26,847 25,918 218,980

Increase in allowance for doubtful accounts 37 28 302

Interest and dividends income (9,091) (8,456) (74,152)

Interest expenses 5,263 5,488 42,928

Equity in net loss (earnings) of affiliates 1,791 (544) 14,608

(Increase) decrease in receivables (9,596) 5,335 (78,271)

Decrease (increase) in inventories 2,266 (1,067) 18,483

Decrease in payables (803) (9,983) (6,550)

Others, net 8,520 131 69,495

Subtotal 50,604 43,490 412,756

Interest and dividends income received 9,519 8,475 77,643

Interest expenses paid (5,857) (5,745) (47,773)

Income taxes paid (11,910) (14,665) (97,145)

Net cash provided by operating activities 42,356 31,555 345,481

Cash flows from investing activities:

Payments for purchases of marketable securities (1,662) (1,008) (13,556)

Proceeds from sales of marketable securities 3,038 2,000 24,780

Payments for purchases of property, plant and equipment (43,927) (35,464) (358,295)

Proceeds from sales of property, plant and equipment 452 429 3,687

Payments for purchases of investment securities (11,335) (3,904) (92,455)

Proceeds from sales of investment securities 9,748 72 79,511

Payments for acquisition of subsidiaries’ stock

resulting in change in scope of consolidation 1,133 (674) 9,241

Payments for loans made (1,489) (1,506) (12,145)

Proceeds from collections of loans 2,412 1,528 19,674

Payments for acquisition of business – (23,685) –

Others, net (1,216) 4,884 (9,919)

Net cash used in investing activities (42,846) (57,328) (349,477)

Cash flows from financing activities:

(Decrease) increase in short-term loans (796) 7,137 (6,493)

Proceeds from long-term loans 21,421 7,060 174,723

Repayments of long-term loans (8,337) (1,282) (68,002)

Payments for purchase of treasury stocks (1,855) (1,382) (15,131)

Cash dividends paid (3,128) (2,820) (25,514)

Cash dividends paid for minority shareholders (194) (319) (1,582)

Others, net 567 187 4,625

Net cash provided by financing activities 7,678 8,581 62,626

Translation adjustments of cash and cash equivalents (1,022) 153 (8,336)

Net increase (decrease) in cash and cash equivalents 6,166 (17,039) 50,294

Cash and cash equivalents at beginning of period 71,120 95,297 580,098

Cash and cash equivalents at end of period ¥ 77,286 ¥ 78,258 $ 630,392

(Note 1) Millions of yen

2002 2001 2002

For the six months ended September 30

(17)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of presenting interim consolidated financial statements

(2) Investments in unconsolidated subsidiaries

and affiliates

Investments in two unconsolidated subsidiaries and 18 affiliates as of September 30, 2002 and investments in two unconsolidated subsidiaries and 17 affiliates as of September 30, 2001 are accounted for by the equity method of accounting.

Investments in unconsolidated subsidiaries and affiliates not accounted for by the equity method are stated at cost due to their insignificant effect on the consolidated financial statements.

The major affiliates accounted for by the equity method are listed on page 25.

(3) Cash and cash equivalents

Cash and cash equivalents include all highly liquid investments, generally with original maturities of three months or less, that are readily convertible to known amounts of cash and are so near maturity that they present insignificant risk of changes in value because of changes in interest rates.

(4) Marketable securities and investments

in securities

Toyota Industries classifies securities into four categories by purpose of holding: trading securities, held-to-maturity securities, other securities, and investments in

unconsolidated subsidiaries and affiliates. Toyota Industries did not have trading securities or held-to-maturity securities as of September 30, 2002 and 2001, respectively. Other securities with fair values are stated at fair value based on market prices at interim period end. Unrealized gains and losses are included in net unrealized gains on other securities as a separate component of shareholders’ equity. Cost of sales of such securities is determined by the moving average method. Other securities without fair values are stated at cost, as determined by the moving average method.

Investments in unconsolidated subsidiaries and affiliates are accounted for by the equity method (see Note 2 (2) above).

The accompanying interim consolidated financial statements have been prepared based on the accounts maintained by Toyota Industries Corporation (the “Company”) and its consolidated subsidiaries (together, hereinafter referred to as “Toyota Industries”) in accordance with the provisions set forth in the Japanese Commercial Code and the Securities and Exchange Law, and in conformity with accounting principles and practices generally accepted in Japan, which are different in certain respects from the application and disclosure requirements of International Accounting Standards.

Certain items presented in the interim consolidated financial statements submitted to the Director of Kanto Finance Bureau in Japan have been reclassified in these

accounts for the convenience of readers outside Japan. The interim consolidated financial statements are not intended to present the consolidated financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Japan.

Amounts in U.S. dollars are included solely for the convenience of readers outside Japan. The rate of ¥122.60 = US$1, the approximate rate of exchange prevailing at September 30, 2002, has been used in translation. The inclusion of such amounts is not intended to imply that the Japanese yen have been or could be readily converted, realized or settled in U.S. dollars at this rate or any other rates.

2. Summary of significant accounting policies

(1) Consolidation

The interim consolidated financial statements include the accounts of the Company and its 118 subsidiaries

(32 domestic subsidiaries and 86 overseas subsidiaries, which are listed on pages 24 and 25) as of September 30, 2002 and 109 subsidiaries (26 domestic subsidiaries and 83 overseas subsidiaries) as of September 30, 2001. The unconsolidated subsidiaries are excluded from consolidation because such subsidiaries would have no material effect on the consolidated financial statements of Toyota Industries, or Toyota Industries’ owning a majority of such subsidiaries’ shares would be temporary.

For the six-month period ended September 30, 2002, seven subsidiaries were newly added to the scope of consolidation, and two unconsolidated subsidiaries are excluded from the scope of consolidation because majority ownership of those two subsidiaries is temporary.

For the six-month period ended September 30, 2001, 12 subsidiaries were newly added to the scope of

consolidation and three BT Industries group companies have been excluded from the scope of consolidation. Since five subsidiaries out of 12 subsidiaries were deemed as being acquired by the Company as of the interim period end, they were consolidated only in the balance sheets. Two

unconsolidated subsidiaries are excluded from the scope of consolidation because majority ownership of those two subsidiaries is temporary.

The interim periods of certain subsidiaries are different from the interim period of the Company. Since the difference is not more than three months, the Company is using those subsidiaries’ statements for their interim periods, making adjustments for significant transactions that

materially affect the financial position or results of operations.

All significant intercompany transactions, balances and unrealized profits among Toyota Industries have been eliminated.

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(5) Inventories

Inventories are stated mainly at cost determined by the moving average method.

(6) Property, plant and equipment, and

depreciation

Property, plant and equipment are stated at cost.

Depreciation expenses of property, plant and equipment are computed mainly by the declining-balance method for the Company and Japanese subsidiaries and by the straight-line method for foreign subsidiaries. Significant renewals and additions are capitalized at cost. Repair and maintenance are charged to income as incurred.

Accumulated depreciation as of September 30, 2002 and 2001 was ¥462,196 million ($3,769,951 thousand) and ¥434,792 million, respectively.

(7) Intangible assets and amortization

Amortization of intangible assets is computed using the straight-line method. Software costs for internal use are amortized by the straight-line method over their expected useful lives (mainly five years).

Goodwill, if material, is amortized principally over less than 20 years on a straight-line basis, while immaterial goodwill is charged to income as incurred.

(8) Allowances for doubtful accounts

Toyota Industries adopted the policy of providing an allowance for doubtful accounts in an amount sufficient to cover possible losses on collection by estimating individually uncollectible amounts and applying to the remaining accounts a percentage determined by certain factors such as historical collection experiences.

(9) Deferred charges

Stock issuance costs and bond issuance costs are expensed as incurred.

(10) Allowance for retirement benefits

Toyota Industries accrues an amount which is considered to be incurred in the period based on estimated benefit obligations and estimated pension assets at the end of period.

To provide for the retirement benefits for directors and corporate auditors, an amount which is calculated at the end of the period as required by an internal rule describing the retirement benefits for directors and corporate auditors is accrued.

(11) Lease transactions

Finance leases other than those that are deemed to transfer the ownership of the leased assets to lessees are accounted for mainly by the method similar to that applicable to ordinary operating leases.

(12) Consumption tax

The consumption tax under the Japanese Consumption Tax Law withheld by Toyota Industries on sales of goods is not included in the amount of net sales in the accompanying interim consolidated statements of income, and the consumption tax paid by Toyota Industries under the law on purchases of goods and services, and expenses are not included in the related amount.

(13) Hedge accounting

(a) Method of hedge accounting

Mainly the deferral method of hedge accounting is applied. In case of foreign currency forward contracts and foreign currency option contracts, the hedged items are translated at contracted forward rates if certain conditions are met.

(b) Hedging instruments and hedged items

Hedging

instruments: Derivative instruments (interest rate swaps, foreign currency forwards and foreign currency options)

Hedged items: Risk of change in interest rate on borrowings and risk of change in forward exchange rate on transactions

denominated in foreign currencies (monetary assets and liabilities, marketable securities and forecasted transactions)

(c) Hedging policy

Hedging transactions are executed and controlled based on Toyota Industries’ internal rule. Toyota Industries is hedging interest rate risks and foreign currency risks. Toyota Industries’ hedging activities are reported periodically to a director responsible for accounting.

(d) The method used to measure hedge effectiveness

Hedge effectiveness is measured by comparing accumulated changes in market price of hedged items and hedging instruments or accumulated changes in estimated cash flows from the inception of the hedge to the date of measurements performed. Currently it is considered that there are high correlations between them.

(e) Others

Due to the fact that counterparties to Toyota Industries represent major financial institutions which have high creditworthiness, Toyota Industries believes that the overall credit risk related to its financial instruments is insignificant.

(14) Appropriation of retained earnings

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Investments in securities

Property, plant and equipment (other) Machinery, equipment and vehicles Trade notes and accounts receivable Cash and bank deposits

Total

$204,568 72,382 4,568 3,931 342 $285,791

Millions of yen

¥17,467 9,727 – 200 29

¥27,423

2002 2001

3. Assets pledged as collateral

(1) Assets pledged as collateral as of September 30, 2002 and 2001 are as follows:

¥25,080 8,874 560 482 42

¥35,038

2002

(2) Secured liabilities as of September 30, 2002 and 2001 are as follows:

Other current liabilities Short-term loans Long-term debt Bonds

Total

$152,814 72,838 32,007 2,447

$260,106

Millions of yen

¥17,984 11,859 3,273 300

¥33,416

2002

2002 2001

¥18,735 8,930 3,924 300

¥31,889

4. Contingent liabilities

Guarantees given by the Company

Guarantees given by consolidated subsidiaries Guarantee forwards given by the Company

Acts similar to guarantees given by consolidated subsidiaries

$231,289 48,312 30,677 –

¥ 283 2,869 3,251 14,522

¥28,356 5,923 3,761 –

Guarantees given by consolidated subsidiaries as of

September 30, 2002 and 2001 consist of 455,290 thousand of Swedish krona and 250,538 thousand of Swedish krona,

Toyota Industries is contingently liable for guarantees as of September 30, 2002 and 2001 as follows:

Millions of yen

2002

2002 2001