2014. 5. 23

FY2014–2017 Mid-term Management Plan Securities Identification Code: 5332

Table of

Contents 1. Introduction

2. TOTO V-Plan 2017

2

3. Looking Back on FY2009–2013 (Results)

4. FY2014–2017 Medium-term Management Plan

5. Advancing to the Next Stage of Growth

Introduction: Our General Principles

Kazuchika Okura, first president

Saburo Momoki, second president

Kindness is more important

than anything else.

Perform your work in a spirit of

service.

Supplying quality products and

satisfying users are the real

goals of business.

If you achieve these goals, you

will be rewarded with profits

and remuneration.

In the world, there are many

people who pursue only profits.

They will end their lives without

knowing the real goals of

business.

The predecessor’s remarks

Company mottos

“Supplying quality products and satisfying users are the real goals of business.”

Taking on our founder’s idea as our company motto and moving forward to realize it

Celebrating the 100th anniversary of TOTO’s foundation and advancing to the next century of rapid progress

Toyo Toki Co., Ltd.

Founded in 1917

3

Take pride in your work,

and strive to do your best.

“Quality and Uniformity,”

“Service and Trust,”

“Cooperation and Prosperity”

Has developed highly valued technologies for sanitary ceramics

worldwide, thanks to nearly a century of experience built up since

the launch of the first such product in Japan

Left: Japan’s first ceramic seated

flush toilet was produced in 1914

The Ceramic Sanitary Ware Laboratory was established in 1912 to develop ceramic

sanitary ware. After much trial and error that involved preparing as many as 17,280

different glaze-ceramic compounds, the laboratory finally produced the first ceramic toilet.

The prefabricated bathroom module is the result of TOTO’s

unremitting efforts. In the 50 years that have passed since its

development, the module has become widely used in ordinary

households.

Right: The latest Sazana model:

A new production method has been

adopted, using a common platform

In order to respond to shorter construction periods, box unit construction (a leading-edge

technology in which the unit is delivered by truck and installed using a crane after being

completely assembled at a factory) has been adopted.

4

Right: The latest NEOREST series

boasts an antibacterial function and

3.8 liters per flush

Left: Prefabricated bathroom

installed at Hotel New Otani, a hotel

that was constructed prior to the

Tokyo 1964 Olympic Games

Introduction: Our General Principles

TOTO takes on the challenge of manufacturing, which began with our founder’s desire

to offer people a clean, comfortable life.

These technological, development and

production-technology capabilities

have been developed over the past century.

5

Manufacturing Marketings

Supply chain

Providing new value in the lives

of customers worldwide

Introduction: Our General Principles

The TOTO Group will provide customers worldwide with a new “everyday lifestyle”

and continue to be indispensable to society.

TOTO V-Plan 2017 ( the Long-term Management Plan )

Be a truly global company by 2017 Provide customers over the world with a new ”every day” and continue to be indispensable to society.

FY2017:Achieve net of ¥650.0 billion, operating income of ¥61.0 billion and ROA・ROE of 10%

Realizing ‘TOTO Global Environmental Vision’

Strengthening corporate structure to ensure profit generation

V-Plan 2017 Plan

Net sales: ¥455 billion

Operating income: ¥ 37 billion

Cultivating new markets

to drive growth

Net sales: ¥158 billion

Operating income: ¥22 billion

Business expansion, based

on a global perspective

Net sales: ¥37 billion

Operating income: ¥3 billion

Marketing innovations

Supply chain innovations

Manufacturing innovations

Management resource Innovations

Strengthening corporate governance

V-Plan 2017 Plan V-Plan 2017 Plan

6

The Management Plan FY2012–

2014 was announced in May 2012.

TOTO continued and accelerated

innovation to set itself on its way to

growth. As a result, we have

achieved our goals 1 year earlier

than initially planned.

Announcing the Medium-term Management Plan FY2014–2017

as the final step of the TOTO V-Plan 2017, which we have implemented since FY2010

In 2009, TOTO announced its

Long-term Management Plan

for the period up to 2017.

In 2010 and 2011, the company

laid the foundations to realizing

the plan.

Medium-term Management Plan

FY2012–2014

Positioning of the Medium-term Management Plan

TOTO V-Plan 2017: Our Progress So Far

TOTO V-Plan 2017

Medium-term Management Plan

FY2014–2017

This is the final step in achieving

the V-Plan, and a preparatory period

for the next century of rapid progress.

TOTO aims to attain both growth

and efficiency by overcoming

discontinuity and uncertainties and

establishing our position as the

world’s No. 1 company in the industry.

7

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■Net Sales ■ Operating Income ■ Operating Margin

（億円）

8

1.4％

3.2％

4.1％

1.6％

4.9％

8.5％

6.8％

7.9％ 9.4％ 8.7％

（億円）

TOTO V-Plan 2017: Financial Summary and Plans

(In 100 millions of yen) (In 100 millions of yen)

Since the TOTO V-Plan 2017 was formulated, TOTO has seen its business performance recover

steadily due to the effects of various innovative activities. We expect to make even further progress.

’09 ’10 ’11 ’12 ’13 ’14 (plan) ’15 (plan) ’16 (plan) ’17 (plan) （FY）

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09 10 11 12 13

-43

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157

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Results for FY2009–2013: Domestic Housing Equipment Business

Net sales, operating income and operating margin for new housing and remodeling segments

In its V-Plan 2017, TOTO actively pushed innovation on a company-wide scale.

The operating margin grew substantially in both the new housing and remodeling segments.

Past results

Platforms

[New housing] [Remodeling]

Net sales Operating income Operating margin

(In 100 millions of yen) (In 100 millions of yen)

1. Sanitary ware 2. Integrated bath system 3. Washlet

Innovation in supply chain Reduction in logistic lead time

(3.9 to 2 days at all bases)

Innovation in purchasing

Cost reduction became an integral

part of daily operations.

9

’09 ’10 ’11 ’12 ’13

0

100

200

50

150

-1.7%

-0.4%

2.3% 2.6%

4.4%

（FY）

’09 ’10 ’11 ’12 ’13

2.8%

4.6%

5.7%

7.1%

10.2%

（FY）

(In 100 millions of yen) (In 100 millions of yen)

Results for FY2009–2013: Overseas Housing Equipment Business

Overseas housing equipment business (FY2009–2013)

In all markets, TOTO increased its net sales and operating income

from FY2009 to FY2013.

(FY)

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1200

-20

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40

60

80

100

120

140

160

180

(In 100 millions of yen)

(In 100 millions of yen)

(FY)

Net Sales

Operating Income

In all regions, both net sales

and profits grew compared to

FY2009.

In particular, China saw both

its net sales and profits rise

significantly, driving the

overall overseas business.

Asia and the Americas

continued to perform well as

their economies recovered.

In Europe, where we started

business in FY2008, TOTO

increased sales and continued

to reduce operating losses as

our sales network expanded.

Americas China Asia & Oceania Europe

Applying TOTO’s water-management

capabilities to our overseas operations

’09 ’10 ’11 ’12 ’13

’09 ’10 ’11 ’12 ’13

10

(In 100 millions of yen)

-20

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40

60

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100

-20

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20

40

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11

88 89

▲9 ▲15

95.2

55.2

▲6 ▲17

90

52

77.1

▲6.4 ▲20

88.7 91.3

▲10 ▲15.2 ▲15.5

53.3

▲13.9

Net sales

■ Operating income

(In 100 millions of yen)

Net sales

■ Operating income

’12 ’13 ’11 ’10 ’09

We are aiming to develop fuel cells into a viable business at an early stage by promoting the manufacture and

development of solid oxide fuel cells (SOFCs), which uses “Only One” TOTO technology, and power generation

modules, which are the core component of fuel cells.

Fuel cells

Ceramic business Green building materials business TOTO has built a business system adaptive to environmental

change and established the foundations for making a profit.

• The company has moved forward to solve customers’ problems in a timely manner by

offering solutions with the aim of maintaining the ratio of new products at 30% or

higher.

• The company has also been working on synchronizing production between customers,

TOTO, and suppliers, setting up a production system firmly linked to demand.

• The company maintained and increased its overall operational efficiency by reviewing

its production system.

(FY)

TOTO has improved its profit structure by reorganizing its

product lineups and plants.

• The company has reorganized its product lineups through selection and

concentration. We have thoroughly reviewed our sales strategy for each product.

• The company has established an efficient production system through reorganization

of its production bases.

• The company has bolstered its licensing business, including overseas. Up to now,

we have made licensing agreements with about 100 companies (as of FY2013).

’12 ’13 ’11 ’10 ’09 (FY)

TOTO has worked to improve its profit structure by focusing on its “Only One”

technology and narrowing down the number of products it offers.

Results for FY2009–2013: New Domain Business

12

ROA= Operating income basis, ROE= Net income basis

企業価値の持続的向上を追求していく

FY ’12 FY ’13

Net Sales 476.2 billion

yen

553.4 billion

yen

Operating

Income 23.3 billion

yen

47.1 billion

yen

ROA 6.0％ 10.7％

ROE 8.8％ 19.4％

FY ’14 FY ’15 FY ’16 FY ’17

544 billion

yen

580 billion

yen

610 billion

yen

650 billion

yen

37.2 billion

yen

46 billion

yen

53 billion

yen

61 billion

yen

Over 10％

Over 10％

Working proactively to enhance corporate value continuously

FY2014–2017 Medium-term Management Plan

100 128 148

262

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10%

95

100

105

110

115

120

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5%

10%

15%

20%

50

100

150

200

100

112

106

118

100

135 149

210

■Operating Margin

FY2014–2017 Medium-term Management Plan: Overview

Domestic housing equipment business

[Vision] Continue growth and establish a high-profit business structure

FY2017 goal: 455 billion yen in net sales and 37 billion yen in operating income

FY2017 goal: 323 billion yen in net sales for remodeling and 132 billion yen in net sales

for new housing

In the future, the main pillar of growth will continue to be remodeling business. In order to

continue to win in the remodeling market, TOTO will reinforce its remodeling business

strategy and work proactively to maintain and increase its competitive superiority in the

segment.

Overseas housing equipment business

[Vision] Establish and maintain our position as the No. 1 manufacturer in each region

FY2017 goal: 158 billion yen in net sales and 22 billion yen in operating income

The overseas housing equipment business is the engine of growth. TOTO will establish

and maintain its position as a high-grade brand in each region. Also, we will work

proactively to increase net sales and operating income by pushing three initiatives:

implementing sales strategies that meet local needs, establishing sales foundations in

emerging economies, and increasing sales of Washlet models.

New business domains

[Vision] Bring the three businesses into the black and pursue growth for the next generation

FY2017 goal: 37 billion yen in net sales and 3 billion yen in operating income

TOTO will make the most of its “Only One” technology to ensure growth of its new

businesses, so that they promise to develop even further in the future. The company aims

to bring the three new businesses, including fuel cells, into the black during the period of

the Medium-term Management Plan.

■Changes in Net Sales and Sales Plans

(with FY2012 as 100)

’12 ’13 ’14 ’15 ’16 ’17 (FY)

’12 ’13 ’14 ’15 ’16 ’17 (FY)

’12 ’13 ’14 ’15 ’16 ’17 (FY)

14

FY2014–2017 Medium-term Management Plan: Domestic Housing Equipment Business

Plans for net sales and operating income (consolidated)

While demand for new housing is expected to

fall, demand for remodeling should continue

to grow steadily in the future—at an annual

rate of around 3%. TOTO will reinforce its

strategy, focusing on the segments where

demand is expected to grow. In this way, we

will maintain and increase our competitive

superiority in the remodeling segment.

(In 100 millions of yen)

FY2014

Plan PlanCompared to the

FY2014 level

Net sales 2,750 3,230 +17%Operating income 199 337 +138Net sales 1,360 1,320 ▲3%Operating income 34 33 ▲1Net sales 4,110 4,550 +11%Operating income 233 370 +137Operating margin 5.7% 8.1% +2.5P

Remodeling

New housing

Total

FY2017

Housing starts

Down by about 20%

Remodeling index

Growing at an annual rate of 3%

Retirement of baby boomers

Growth in the number of people likely

to remodel their houses

Number of visitors to Japan

from overseas

FY2020: about 180 billion persons

Assumptions for change in the macroeconomic environment from FY2013 to FY2017

Growing demand

Growth in the number of baby boomers

who are likely to remodel their houses

Increase in the number of used houses

on the market

House remodeling Public remodeling Shift to UD and more attention

to aged persons

UD: Universal Design

Net sales: 455 billion yen, operating income: 37 billion yen, operating margin: 8%

Maintaining and increasing competitive superiority in the remodeling segment

Reference：Ministry of Land, Infrastructure,

Transport and Tourism

15

※TDY=TOTO・DAIKEN・YKK AP

FY2014–2017 Medium-term Management Plan: Domestic Housing Equipment Business; Remodeling

Meeting the needs of baby boomers

likely to remodel their houses

Since September 2012, TOTO has offered “remodeling for your second

life,” a plan developed for customers aged 50–69 who are likely to

remodel their houses. This plan, which boasts high design quality,

responds to needs arising from the ageing process.

Stepping up efforts to propose “remodeling

for your second life”

Remodeling

while living at

home

About 70% of people who

remodel their houses are in

their 50s and 60s.

Source: Cabinet Office’s “Annual Report

on the Japanese Economy and

Public Finance”

Market scale:

About 2.8 trillion yen

* TOTO estimate

People in

their thirties

In their

forties

In their fifties

In their sixties

In their

seventies

[Three stages of housing offered by TOTO]

Preparation Support Caregiving

To enjoy a healthy,

comfortable life

If the resident needs a stick or a

helping hand to walk, stand up,

or sit down

If it becomes difficult for the

resident to walk

TOTO will continue to plan and develop new products and step up

its efforts to sell them through showrooms, fairs, events, etc.

TDY will also provide houses in which people can live into old age

with a sense of security.

Meeting the need to get used housing

onto the market

Stepping up efforts to meet demand for remodeling arising from

the sale of used housing

• Stepping up efforts to meet demand for used condominiums; this is continuing

to grow, mainly in the Tokyo metropolitan area

• Referring customers who sell or buy used houses to TOTO’s remodeling club

stores, mainly through the Internet and showrooms

• Working with real estate agencies to uncover demand for remodeling with high

value added

Moving house

Bolster strategy for public remodeling

Expanding demand for remodeling at facilities for aged persons

and medical institutions

TOTO will continue to introduce its Smile Partner products. We will work with

the Hospital Restroom Society of Healing to identify user needs. We will also

approach business operators and other organizations to stimulate demand for

remodeling.

Stepping up “in-town toilet” activities

Positioning toilets in restaurants, stores, tourist facilities, guesthouses, and so

forth as an infrastructure to be improved as Japan aims to become a tourist

country; stimulating and meeting demand for remodeling of toilets in order to

offer UD-based comfortable spaces

TOTO will continue to introduce suitable products that meet the needs of growing markets. It will also

precisely meet demand for remodeling, which is expected to grow in a stable manner in the future.

FY ’17 FY ’13

16

Net sales: 158 billion yen, operating income: 22 billion yen, operating margin: 14% Ensure continuous growth by bolstering the global business foundation

TOTO to become a truely global company by 2017 The overseas housing equipment business is a driver to realize this vision and achieve growth in the future

FY ’09

■Increase the percentage

of overseas sales to 24%

in FY2017

12% 18% 24%

4%

84%

3%

79%

6%

70%

■ Overseas Housing Equipment Business

■ Domestic Housing Equipment Business

■ New Domain Business

■Product development centered on water-saving toilets

• Increase the percentage of 4.8-liter toilets shipped to 80% in FY2017

• Introducing 1-gallon* toilets into the market as a pioneer among water-saving toilets

■Expand and strengthen the sales network

• Increase the number of flagship showrooms and enhance their appeal through renewal

• Establish sales foundations in emerging markets and develop new sales channels

■ Increase sales of Washlet models

■ Increase the visibility of TOTO as a high-grade brand

• Step up efforts to increase sales of toilets with a built-in Washlet

• Increase the visibility of Washlet, mainly by introducing new models and encouraging high-grade construction sites to use Washlet models

FY2014–2017 Medium-term Management Plan: Overseas Housing Equipment Business

Implement sales strategies that meet the needs of

target markets in each region

Establish sales foundations in emerging markets

Increase sales of Washlet, the top-priority product

Common

strategy Build an optimal production system globally

* 1 gallon = 3.8 liters

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17

Enhance brand appeal by emphasizing product appeal

Enhance competitiveness in the North American market

Strengthen production systems in the Americas

Maintain TOTO’s position as the highest-grade brand

Step up sales in the Chinese interior (continued)

Increase the visibility and sales of Washlet models

Improve the sales and supply systems

Enhance the brand appeal by mounting aggressive sales to high-grade construction sites

Establish sales foundations in emerging economies

Increase the visibility and sales of Washlet models

Reinforce the supply system

Enhance the market presence of TOTO as a high-grade brand

Increase the visibility and sales of Washlet models through a business alliance with Germany’s Villeroy & Boch AG

Emphasize our technological prowess and product appeal by exhibiting at ISH*

’14 ’17 （FY） ’14

■Net sales ■Operating income

’17 ’14

’17

’14 ’17

400

274

360

212

710

585

110

47

25

12

140 132

50

29

’13

37

544

124

’13

’13

244

12

’13

184

28

FY2014–2017 Medium-term Management Plan: Overseas Housing Equipment Business

* International Sanitary and Heating: One of the world’s largest

exhibitions of sanitary equipment and instruments, which is held

in Frankfurt, Germany every 2 years.

Europe

China Americas

Asia & Oceania

(In 100 millions of yen)

■Net sales ■Operating income (In 100 millions of yen)

■Net sales ■Operating income ■Net sales

（FY）

（FY） （FY）

(In 100 millions of yen) (In 100 millions of yen)

(In 100 millions of yen) (In 100 millions of yen) (In 100 millions of yen)

18

Net sales: 13 billion,

Operating income: 1.3 billion

※SOFC：Solid Oxide Fuel Cell

FY2014–2017 Medium-term Management Plan: New Domain Business

Ceramics business

Step up efforts to offer solutions to establish a

stable profit structure

AD (Aerosol Deposition)

coating materials using new

technology

Super-large alumina materials

Next-generation receptacles

Net sales: 37 billion yen, operating income: 3 billion yen, operating income ratio: 8% TOTO aims at business growth in new growing markets, making the most of its “Only One” technology.

Net sales: 15.5billion,

Operating income: 1.7 billion

Net sales: 8.5 billion,

Operating income: profitable

Environmental construction materials

business

Continue to focus on

priority areas to set

the business on its

way to growth

Fuel cell business Aim to launch SOFC

modules and build a mass-

production system as fuel

cells are expected to come

into wider use (around

FY2018)

Power generation units

FY’10～FY’13 FY’14～FY’17

Domestic Housing

Equipment Business

62 billion yen

Costs for restructuring of sanitary-ware production

Costs for restructuring in the Tokyo metropolitan area

Showroom-related costs

60 billion yen～

Production-restructuring costs Showroom-related costs

Overseas Housing

Equipment Business

32 billion yen

Costs for building new production bases and reinforcing existing ones (East China No. 2 Plant, Fujian Plant, and plants in Thailand and India)

40 billion yen～

Costs for building new production bases and reinforcing existing ones

Others

35 billion yen

Investment for computerization Research and development

equipment costs

40 billion yen

Investment for computerization Research and development

equipment costs

Total 129 billion yen 140 billion yen～

Expand investments related to production restructuring Continue active investments in the future with expansion of production,

reinforcement of infrastructure, and other future goals in mind

19

FY2014–2017 Medium-term Management Plan

20

Maintain stable dividend payment with a payout ratio

of 30% as the target

1. Investment for future growth

2. Stable and continuous payment of dividends

3. Acquisition of treasury stock and repayment of interest-bearing debts

such as borrowings

TOTO’s capital-policy priorities

[Topics in FY2013]

In order to return profits on equity and real estate

sold to shareholders, TOTO acquired and wrote off

treasury stock worth 10 billion yen.

The acquisition of treasury stock was completed on October 7, 2013.

The treasury stock was written off on August 9, 2013.

In the future, in light of

capital investment projects

and cash flows, TOTO may

further acquire and write

off treasury stock in

accordance with its capital-

policy priorities.

Returning Profits to Shareholders

TOTO Global Environmental Vision

21

Water, Earth & A Better Tomorrow Since its founding, the TOTO Group has recognized

the tremendous value of water. Today, with ever-increasing

water shortages and the rise of global warming,

we are redefining our relationship with this essential resource

and are even more dedicated to sustaining the environment

through the development of high-quality,

water-efficient products.

Turning on a faucet and taking a shower are

ordinary activities, but now they are opportunities

to save water and reduce CO2 emissions.

Adding “protection of water resources” to our list of

Global Environment Goals highlights our efforts

to produce products that facilitate environmental sustainability.

The TOTO group will work as one and meet these crucial

objectives, and we sincerely hope that our involvement in local

communities leads to better living, and a better tomorrow.

Formulating the environmental vision shared by all TOTO Group companies

All Group companies will make concerted efforts to address social challenges

through their business activities.

Medium-term

Management

Plan FY2012–

2014

[2010–12] [2012–13]

Medium-term Management Plan FY2014–2017

Final step to achieve the goals of V-Plan

Run-up to the next century of rapid progress

[2014–17]

…For the Next 100th

Laying the

foundation

[2018 and

thereafter]

Next step to

achieve

continuous

growth

The 100th anniversary in itself is only one point in time.

In order to achieve continuous growth, TOTO aims to constantly increase

its corporate value and develop its business from a long-term perspective.

Aim to achieve the goals of V-Plan 2017 for the next century of rapid progress

TOTO V-Plan 2017

[2017] Celebrating the 100th

anniversary of

TOTO’s foundation

Advancing to the Next Stage of Growth

22

0

10

20

30

40

50

2009 2013 2017 (FY)

(In tens of thousands of units)

’09 ’13 ’17

Position the period up to 2017 as the run-up to the next century of rapid progress and lay the foundations for continuous future global growth

23

Global marketing Develop the most suitable products and build sales promotion systems for each region, with the aim of establishing TOTO as the region’s No. 1 brand

Basic platform

• Popularize Washlet models in earnest

All TOTO Group companies, positioning Washlet as a global product, will take concerted action to popularize it in various parts of the world in earnest.

• Restructure the global planning and development system

Plant in India (scheduled to start operation in July 2014)

• Investments in production equipment linked to supply strategy

Plan for investment in production equipment in India, and then Asia & Oceania

Global supply chain

Japan

China

Europe Americas

Asia & Oceania

Growth goals for FY2018 and after <Net sales> Americas: Around 10% China: Comparable to GDP growth Asia & Oceania: Around 20% Europe: Base for popularizing the TOTO

brand across the entire world

Change in the number of Washlet models sold (overseas markets)

Local consumption of locally produced

products

Establishing a supply system from a global perspective

Plan a global planning and development system, including domestic and overseas bases

Supplying to each region’s unique preferences

Advancing to the Next Stage of Growth

This presentation material contains forward-looking statements based on

assumptions, estimates and plans as of May 23, 2014.

Actual performance may differ materially from these forward-looking statements

due to risks and undermined factors arising from changes in the world economy,

competition and foreign currency exchange rates.