Toyota SEO Case

9B16N008
TOYOTA’S INNOVATIVE SHARE ISSUE (2015)
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Taught by Anne Metivier, from 17-Jan-2020 to 30-Apr-2020. Order ref F372370.
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On June 16, 2015, Akio Toyoda, the president and chief executive officer (CEO) of Toyota Motor
Corporation (Toyota), arrived at Toyota’s annual shareholders’ meeting. The meeting agenda included the
proposal over Toyota’s new share issue. Named “Model AA” shares after the company’s first passenger
Educational material supplied by The Case Centre
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car, the shares would offer investors new hybrid securities. This proposal was creating a lot of controversy
among existing shareholders.
Order reference F372370
“No one will be disadvantaged by these shares,” Toyoda told the annual shareholders’ meeting.1 However,
it remained unclear how many shareholders had confidence in this assurance by the company’s CEO. The
share issue, which would potentially comprise up to 5 per cent of Toyota’s total outstanding shares, would
require the support of a two-thirds majority of shareholders. Potentially long and contentious deliberations
awaited Toyoda.
TOYOTA
Background
Toyota was part of Toyota Group, one of the largest conglomerates in the world. Founded by Kiichiro
Toyoda in 1937 in Japan as a spin-off from Toyota Industries, Toyota had 338,875 employees and a market
capitalization of US$239 billion as of May 2015.2 Toyota’s founding city was originally called Koromo;
however, it changed its name to Toyota in 1959 as a tribute to the prominent car maker.3
In January 2009, the firm announced that Akio Toyoda, Kiichiro’s grandson, would step in as president
after being groomed for succession for many years.4 Akio’s father, Shoichiro, ran Toyota from 1982–1992
and his uncle Tatsuro ran the company from 1992–1995. From 1995–2009, the company was run by non-
family members.5
Forbes’s list of The World’s Biggest Auto Companies in 2015 classified the company as the largest car
manufacturer in the world (ahead of Volkswagen and General Motors), with sales of 10.23 million vehicles
in 2014.6 As one of only three brands from Asia (along with Samsung and Honda), Toyota was included in
the Forbes top 50 most valuable brands in the world (ranked eighth).7
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Toyota’s business segments consisted of automotive operations, financial services operations and other
operations (see Exhibit 1). The company sold its vehicles primarily in Japan, North America, Europe and
Asia (see Exhibit 2). In fiscal year 2015, it earned net revenues of ¥27,234.5 billion (US$228.62 billion)
and a net income of ¥2,173.3 billion (US$18. billion).8 See Exhibits 3–5 for Toyota’s financial statements
and see Exhibit 6 for Toyota’s selected financial ratios.
In 1999, Toyota started trading its American depository receipts on the New York Stock Exchange (NYSE).
Since then, Toyota had been listed in stock exchanges in New York (NYSE: TM), London (LSE: TYT) and
Tokyo (TYO: 7203).9
Risk Factors10
According to the Form 20-F filed with the U.S. Securities and Exchange Commission in June 2015, Toyota

faced various risks. Among “Industry and Business Risks,” the form mentioned a highly competitive and

highly volatile worldwide automotive market. Other risks centered on Toyota’s ability to offer new,

innovative and competitively priced products; to effectively market and distribute its products; and to
maintain and develop its brand image. Furthermore, there were risks from suppliers and various digital and
information technologies. Finally, the worldwide financial services industry was highly competitive.
Among “Financial Market and Economic Risks,” the form highlighted currency and interest rate fluctuations,
prices of raw materials and the possibility of a downturn in financial markets. Finally, “Political, Regulatory,
Legal and Other Risks” included various governmental regulations and legal proceedings.
Dividend Policy and Ratings
Toyota normally paid stable dividends twice per year—including an interim dividend and a year-end
dividend—at a payout ratio of roughly 30 per cent.11 For fiscal year 2014, Toyota paid an annual dividend
of ¥165 per share. Prior to that, Toyota paid ¥50, ¥50 and ¥90 in 2011, 2012 and 2013, respectively.12
Toyota’s long-term bonds had been rated AA- by Standard & Poor’s, Aa3 by Moody’s and AA+ by Rating
and Investment Information, Inc.13
THE TOYOTA WAY 2001
Fujio Cho, the former president of Toyota, said:
The Toyota Way, which has been passed down since the company’s founding, is a unique set of
values and manufacturing ideals. Clearly, our operations are going to become more and more
globalized. With this in mind, we compiled a booklet, The Toyota Way 2001, in order to transcend
the diverse languages and cultures of our employees and to communicate our philosophy to them.14
The two main principles of The Toyota Way included continuous improvement and respect for people.
Continuous improvement referred to establishing a long-term vision, working on challenges, continuous
improvement (“Kaizen”), and going to the source of the issue or problem (“Genchi Genbutsu”).15
According to Toyota’s web page:
[Kaizen] means “continuous improvement.” No process can ever be declared perfect but it can
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always be improved. Kaizen in practice means that all team members in all parts of the organization
are continuously looking for ways to improve operations, and people at every level in the company
support this process of improvement. Kaizen also requires the setting of clear objectives and targets.
It is very much a matter of positive attitude, with the focus on what should be done rather than what
can be done.16
Culture of Innovation
Katsuaki Watanabe, the former president of Toyota, said, “There is no genius in our company. We just do
whatever we believe is right, trying every day to improve every little bit and piece. But when 70 years of
very small improvements accumulate, they become a revolution.”17
In other words, innovation can come through the patient accumulation of incremental innovations as well

as through groundbreaking changes. Over a 35-year period, Toyota had increased the number of annual

suggestions per employee from 0.1 to 48.18 Innovative culture, rewarded through an appropriate incentive

system, had become ingrained in the business.
Toyota’s attitude toward innovation permeated the following statement:

Nothing is so good that it cannot be made better. That is why we strive for constant improvement in
everything we do. It’s simply the way that we do things. We have a word for it: Kaizen. It means
continuous improvement and it is the key principle that guides us in our commitment to deliver more
to our customers.
It’s what drives us to perform over 1,500 crash simulations each year with actual Toyota vehicles,
and to our developing advanced injury-simulation software that measures injuries not measurable
with conventional crash test dummies. And, it’s a genuine commitment to new solutions today, for a
better tomorrow with our being first to market a hybrid, and to now having sold over 3 million Toyota
hybrid cars worldwide.19
TOYOTA’S “MODEL AA” SHARE ISSUE PROPOSAL
Basics
In April 2015, Toyota proposed an issue of up to ¥500 billion (US$4.1 billion)20 in a new type of stock
called “Model AA Class Shares” (named after Toyota’s first passenger car). Based on the Toyota Global
Vision announced in March 2011, Toyota was committed to solidifying a foundation that supported the
manufacturing of “ever-better cars,” further enhancing its competitiveness in manufacturing for sustainable
growth, and simultaneously pursuing and creating cutting-edge innovative technologies. Through these
efforts, Toyota undertook the challenge of the future for a “better car society” by growing steadily, year by
year, towards the realization of the Toyota Global Vision.
As it pursued the manufacturing of ever-better cars, Toyota believed that it was imperative to pass on to the
next generation its founding philosophy and spirit of manufacturing it inherited from its pioneers. It was
necessary to make company-wide efforts in research and innovation, and to continue to produce cutting-
edge technologies for society and the environment in order to achieve sustainable growth as well as to
enhance its medium- to long-term corporate value. The automotive industry began from product planning
and development and progressed through to manufacturing and sales, which required and operated on a
Page 4 9B16N008
long term business cycle. Moreover, as innovation in the industry progressed, it was essential to fully
undertake research and development, as well as development of infrastructure, in order to achieve the next
generation of innovations that would support the industry’s future and Toyota’s Global Vision. In order to
conduct medium- to long-term research and development, Toyota announced the issuance of shares. These
shares provided opportunities to invest and exercise shareholder rights with a medium-to long-term
perspective, while matching the interests of business and shareholding cycles in order to balance funding
more effectively.
These innovative shares would be unlisted and untradeable with a perpetual transfer restriction that assumed
a medium- to long-term holding period. However, after five-years from issuance investors could convert
them to tradable ordinary shares (in principle, one common share would be delivered for each “Model AA”
class share; this formula was to be specified in the Issuance Resolution) or sell them back to Toyota at the
issue price. Toyota’s executives chose a five-year “lock-up” period to align the shareholding horizon with
the horizon for the research projects that would be financed with the proceeds.21 The shares would have

voting rights and would be offered under domestic offering format. Key consumers of this offering were

supposed to be Japanese retail and institutional investors. This implied that foreign investors would be able

to buy them only through intermediaries. Therefore, it seemed that “Model AA” shares were aimed at
Japanese retail investors. Toyota’s retail investors owned slightly more than 10 per cent of the company,
but substantially less than the 20 per cent retail ownership that was typical of a Japanese company. In
comparison, foreign institutions owned roughly 31 per cent of Toyota.22
The shares would pay dividends that would be lower than ordinary dividends and steadily increasing every
year. Specifically, the amount of annual dividends would be the product of the issue price and the following
annual dividend rate: 0.5 per cent in 2016, 1 per cent in 2017, 1.5 per cent in 2018, 2 per cent in 2019, and
2.5 per cent in 2020.23
The “Model AA” shares were proposed to be priced at a minimum of 120 per cent of the price of ordinary
shares. In order to avoid dilution among common shares, Toyota planned to buy back up to ¥600 billion
worth of stock.
Toyota believed that new technologies would require a massive investment over a number of years. In
contrast, stock investors had increasingly become oriented to the short term. Investor short-termism
conflicted with the long-term research emphasis and could potentially create investor instability. Hence,
Toyota decided to match the long-term needs of its research and development to the investor horizons
through the innovative share issue. Toyoda said that:
Issuing these class shares would offer more options for our shareholders. . . . We are taking a small
step to make capital markets [in Japan] more active by widening our range of offerings. . . . This
shows how the management wants to build corporate value over five years together with
shareholders.24
Nobuyori Kodaira, Toyota’s executive vice-president, added: “We hope to enhance corporate governance
by receiving harsh and broad-range opinion from a medium to longer-term perspective.”25
Furthermore, the long-term-oriented share issue appeared consistent with a government-backed study in
2014 that “recommended creating an environment where Japanese can grow their longer-term household
assets through investment in ‘sustainably growing companies’” and “stressed the importance of attracting
long-term oriented investors who ‘understand the company well and support it.’”26
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Shareholders’ Opposition
On the other hand, foreign investors would have to go through intermediaries in order to obtain shares.
Unsurprisingly, Toyota faced significant resistance from several major (mostly foreign) shareholders. The
California State Teachers’ Retirement System (CalSTRS), which held 3.4 million shares, and the Canada
Pension Plan Investment Board (CPPIB), which held 6.1 million shares, publicly opposed the plan and
urged shareholders to vote against it.27 Furthermore, the Florida State Board of Administration and the
Ontario Teachers’ Pension Plan indicated disagreement with the plan.
Anne Sheehan, the CalSTRS director of corporate governance, said:
Toyota’s Model AA class shares would be unlisted and offered only in Japan, thus hindering
investors outside of Japan from participating in the share offering. . . . Additionally, the new share
class proposed by Toyota would be structured as debt instruments, with guaranteed and defined

dividend payments. Yet, these shares would also have voting rights equal to those of common stock

that don’t enjoy this equity risk exposure shield.28

[Toyota’s proposed “Model AA” shares] would also be convertible into common stock in five years
at a conversion rate that has yet to be determined and will ultimately be decided upon by the Toyota
board of directors. This raises concerns about potential value dilution to existing common
stockowners if a high conversion rate is set.29
Furthermore, CPPIB officials added:

[We] consider dual-class share structures to be contrary to good governance. . . . They can entrench
management against shareholder pressure for change and undermine the basic principle linking
voting to equity ownership on the basis of one-share, one-vote.30
Proxy adviser Institutional Shareholder Services, Inc. also recommended voting against the move.31 An
important governance mechanism—“voting with one’s feet” (in other words, selling shares in the event of
disagreement with company policies)—was clearly missing from this share issue. The lack of this
mechanism would also indicate the lack of the incentive for Toyota to maintain fiscal discipline.32
In response to these statements and concerns from other parties, Aaron S. Fowles, the corporate
communications manager of Toyota Motor Sales U.S.A. Inc., said in an e-mailed statement:
We understand that there are a variety of different opinions on this topic. From our perspective, we
would like to encourage shareholder investment that is aligned with the medium- to long-term nature
of the expenses we incur during research and development. Going forward, we will continue to
promote dialogue with all of our stakeholders around the world, starting with holders of common
and class shares, and reflect the results of that dialogue in our management.33
As of March 31, 2015, the breakdown of Toyota’s share ownership was as follows: foreign corporate
entities and others (31.12 per cent), financial institutions (30.25 per cent), other corporate entities (18.75
per cent), individuals (18.36 per cent), and brokerages (1.53 per cent).34
Never in the history of Toyota had a proposal by management been turned down.35 Yet analysts expected
a close vote because foreign investors held around 30 per cent of Toyota shares.
Exhibit 7 presents Toyota’s share movement in the 12 months prior to the shareholders’ meeting and Exhibit
8 presents the yield curves for the euro, Japanese yen and U.S. dollar.
Page 6 9B16N008
WHAT NEXT?
As Toyota’s annual shareholders’ meeting proceeded, different shareholders presented different points of
view with respect to the issue. The time had come to vote on the main item on the agenda—the approval of
Toyota’s new share issue. The following questions lingered on shareholders’ minds: What exactly was the
difference between “Model AA” shares and ordinary shares? What was the difference between “Model
AA” shares and bonds (or convertible bonds)? Finally, if the vote was approved, how should “Model AA”
shares be priced?
The author would like to thank the Centre for Asset Management, Research and Investments at NUS Business School
for the donation to this case. The author would also like to thank Toyota Motor Corporation and Nomura Holdings, Inc. for
their contributions to this case made possible by interviews with their executives.

Page 7 9B16N008
EXHIBIT 1: TOYOTA’S BUSINESS SEGMENTS, 2013–2015
Year Ended March 31, ¥ in Millions

2013 2014 2015
Automotive 20,378,762 23,733,855 25,006,224
Financial Services 1,150,042 1,379,267 1,621,685
All Other 535,388 578,789 606,612
Source: United States Securities and Exchange Commission Form 20-F, Toyota Motor Corporation—Form 20-F, June 24,
2015, accessed July 10, 2015, www.toyota-global.com/investors/ir_library/sec/pdf/20-F_201503_final.pdf.
EXHIBIT 2: TOYOTA’S GEOGRAPHICAL DISTRIBUTION, 2013–2015

Year Ended March 31, ¥ in Millions
2013 2014 2015

Japan 7,910,456 8,532,875 8,338,881

North America 6,167,821 7,938,615 9,430,450
Europe 2,003,113 2,614,070 2,690,803
Asia 4,058,629 4,475,382 4,531,178
Other* 1,924,173 2,130,969 2,243,209
* “Other” consists of Central and South America, Oceania, Africa and the Middle East.
Source: United States Securities and Exchange Commission Form 20-F, Toyota Motor Corporation—Form 20-F, June 24,
2015, accessed July 10, 2015, www.toyota-global.com/investors/ir_library/sec/pdf/20-F_201503_final.pdf.

Page 8 9B16N008
EXHIBIT 3: TOYOTA’S INCOME STATEMENT, 2013–2015
In Billions of ¥* FY 2013 FY 2014 FY 2015

12 Months Ending 03/31/2013 03/31/2014 03/31/2015
Total Operating Revenue (Japan) 22,064.2 25,691.9 27,234.5
Revenue 22,064.2 25,691.9 27,234.5
– Cost of Revenue 18,641.0 20,801.1 21,841.7
Gross Profit 3,423.2 4,890.8 5,392.8
+ Other Operating Revenue 0.0 0.0 0.0
– Operating Expenses 2,102.3 2,598.7 2,642.3
Operating Income 1,320.9 2,292.1 2,750.6
– Interest Expenses 23.0 19.6 22.9
– Foreign Exchange Losses (Gains) –5.6 –50.3 –88.1
– Net Non-operating Losses (Gains) –331.7 –436.7 –385.5

Pretax Income 1,635.2 2,759.5 3,201.4

– Income Tax Expenses 551.7 767.8 893.5
Income before XO Items 1,083.5 1,991.6 2,307.9

– Extraordinary Loss Net of Tax 0.0 0.0 0.0
– Minority Interests 121.3 168.5 134.6
Net Income 962.2 1,823.1 2,173.3
– Total Cash Preferred Dividends 0.0 0.0 0.0
– Other Adjustments 0.0 0.0 0.0

Net Income Avail. to Common Shareholders 962.2 1,823.1 2,173.3

Basic EPS before Abnormal Items 303.82 575.30 688.02

Basic EPS before XO Items 303.82 575.30 688.02
Basic EPS 303.82 575.30 688.02
Basic Weighted Avg. Shares 3,166.9 3,169.0 3,158.9
Diluted EPS before Abnormal Items 303.78 574.92 687.66
Diluted EPS before XO Items 303.78 574.92 687.66
Diluted EPS 303.78 574.92 687.66
Diluted Weighted Avg. Shares 3,167.2 3,170.9 3,160.4
* except marked as EPS

Note: XO Items = Extraordinary Items; EPS = Earnings per Share.
Source: Bloomberg L. P., “Income Statement for Toyota 2013–2015,” Bloomberg Database, accessed July 6, 2015.
Page 9 9B16N008
EXHIBIT 4: TOYOTA’S BALANCE SHEET, 2013–2015
In Billions of ¥ FY 2013 FY 2014 FY 2015

12 Months Ending 03/31/2013 03/31/2014 03/31/2015
Assets
+ Cash & Near Cash Items 1,718.3 2,041.2 2,284.6
+ Short-Term Investments 1,552.4 2,227.1 2,931.4
+ Accounts & Notes Receivable 7,089.3 7,665.2 8,378.5
+ Inventories 1,715.8 1,894.7 2,137.6
+ Other Current Assets 1,709.1 1,889.6 2,204.3
Total Current Assets 13,784.9 15,717.7 17,936.4
+ LT Investments & LT Receivables 12,120.3 14,867.3 16,834.7
+ Net Fixed Assets 6,851.2 7,641.3 9,295.7
+ Gross Fixed Assets 18,223.6 19,764.8 22,364.4
– Accumulated Depreciation 11,372.4 12,123.5 13,068.7

+ Other Long-Term Assets 2,726.8 3,211.1 3,663.1
Total Long-Term Assets 21,698.4 25,719.8 29,793.4

Total Assets 35,483.3 41,437.5 47,729.8
Liabilities & Shareholders’ Equity

+ Accounts Payable 2,113.8 2,213.2 2,410.6
+ Short-Term Borrowings 6,794.0 7,780.5 8,963.5

+ Other Short-Term Liabilities 4,004.8 4,687.0 5,057.4

Total Current Liabilities 12,912.5 14,680.7 16,431.5

+ Long-Term Borrowings 7,337.8 8,546.9 10,014.4
+ Other Long-Term Liabilities 2,460.1 2,990.9 3,636.6
Total Long-term Liabilities 9,797.9 11,537.8 13,651.0
Total Liabilities 22,710.5 26,218.5 30,082.5
+ Total Preferred Equity 0.0 0.0 0.0
+ Minority Interest 624.8 749.8 859.2
+ Share Capital & APIC 948.1 948.4 944.1
+ Retained Earnings & Other Equity 11,199.9 13,520.8 15,844.0
Total Equity 12,772.9 15,219.0 17,647.3
Total Liabilities & Equity 35,483.3 41,437.5 47,729.8
Note: LT = Long Term; APIC = Additional Paid-in Capital.

Source: Bloomberg L. P., “Balance Sheet for Toyota 2013–2015,” Bloomberg Database, accessed July 6, 2015.
Page 10 9B16N008
EXHIBIT 5: TOYOTA’S CASH FLOW STATEMENT, 2013–2015
In Billions of ¥ FY 2013 FY 2014 FY 2015

12 Months Ending 03/31/2013 03/31/2014 03/31/2015
Cash from Operating Activities
+ Net Income 962.2 1,823.1 2,173.3
+ Depreciation & Amortization 1,105.1 1,250.9 1,409.1
+ Other Non-cash Adjustments 455.9 101.0 –11.1
+ Changes in Non-cash Capital –71.9 471.1 114.4
Cash from Operations 2,451.3 3,646.0 3,685.8
Cash from Investing Activities

+ Disposal of Fixed Assets 39.2 39.2 41.5
+ Capital Expenditures –854.6 –970.0 –1,146.3

+ Increase in Investments –5,434.1 –7,374.7 –6,081.8

+ Decrease in Investments 3,202.5 4,063.7 3,486.4
+ Other Investing Activities 19.6 –94.4 –113.4

Cash from Investing Activities –3,027.3 –4,336.2 –3,813.5
Cash from Financing Activities

+ Dividends Paid –190.0 –396.0 –554.9
+ Change in Short-Term Borrowings 201.3 468.0 –288.7

+ Increase in Long-Term Borrowings 3,191.2 3,890.3 5,029.0

+ Decrease In Long-Term Borrowings –2,682.1 –2,988.9 –3,462.2

+ Increase in Capital Stocks 0.0 9.2 0.0
+ Decrease in Capital Stocks –43.1 –63.1 –69.3
+ Other Financing Activities 137.9 93.6 –282.7
Cash from Financing Activities 615.1 1,013.1 371.1
Net Changes in Cash 39.1 322.9 243.4
Source: Bloomberg L. P., “Cash Flow Statement for Toyota 2013–2015,” Bloomberg Database, accessed July 6, 2015.
Page 11 9B16N008
EXHIBIT 6: TOYOTA’S SELECTED FINANCIAL RATIOS, 2011–2015

In % Terms FY 2011 FY 2012 FY 2013 FY 2014 FY 2015
12 Months Ending 03/31/2011 03/31/2012 03/31/2013 03/31/2014 03/31/2015
Returns
Return on Common Equity 3.95 2.72 8.48 13.70 13.91
Return on Assets 1.36 0.94 2.91 4.74 4.87
Return on Capital 1.96 1.65 4.40 6.86 6.82
Return on Invested Capital 1.11 0.96 3.40 5.33 5.39
Margins
Gross Margin 12.52 11.81 15.51 19.04 19.80
EBITDA Margin 8.65 7.66 11.00 13.79 15.27
Operating Margin 2.47 1.91 5.99 8.92 10.10
Pretax Margin 4.10 3.39 7.41 10.74 11.75
Net Income Margin 2.15 1.53 4.36 7.10 7.98

Growth

Revenue 0.23 –2.16 18.73 16.44 6.00

EBITDA 5.23 –13.41 70.43 46.04 17.41
Operating Income 217.44 –24.06 271.43 73.53 20.00
Net Income to Common 94.88 –30.53 239.32 89.48 19.21
EPS Diluted 94.88 –30.70 236.78 89.26 19.61
Liquidity
Cash Ratio 0.33 0.25 0.25 0.29 0.32

Current Ratio 1.10 1.05 1.07 1.07 1.09
Quick Ratio 0.84 0.77 0.80 0.81 0.83

Common Equity/Total Assets 34.65 34.42 34.24 34.92 35.17
Long-term Debt/Equity 59.06 54.60 57.45 56.16 56.75
Long-term Debt/Total Assets 21.63 19.71 20.68 20.63 20.98
Total Debt/Equity 113.56 108.49 110.64 107.28 107.54
Total Debt/Total Assets 41.59 39.17 39.83 39.40 39.76
Altman’s Z-Score 1.51 1.45 1.62 1.71 1.79
Note: EBITDA = Earnings before Interest, Taxes, Depreciation and Amortization; EPS = Earnings per Share.
Source: Bloomberg L. P., “Selected Ratios for Toyota 2011–2015,” Bloomberg Database, accessed July 6, 2015.
Page 12 9B16N008
EXHIBIT 7: TOYOTA’S STOCK PRICE VS. NIKKEI 225, JUNE 2014 TO MAY 2015 (IN ¥)
[Toyota announced
AA share issue on
April 28, 2015]
Toyota prices vs. Nikkei 225
9,000.00
8,500.00
8,000.00
7,500.00
7,000.00

6,500.00

6,000.00
5,500.00
5,000.00
Toyota Nikkei 225
Source: Bloomberg L. P., “Stock Price Graph for Toyota June 2014 – May 2015,” Bloomberg Database, accessed July 6,
2015.
EXHIBIT 8: YIELD CURVES FOR EURO, JAPANESE YEN AND U.S. DOLLAR
Maturity
€ (%) ¥ (%) US$ (%)
(years)
1 –0.02 0.14 0.41
2 0.03 0.15 0.81
3 0.12 0.17 1.16
4 0.25 0.22 1.46
5 0.40 0.29 1.71
Source: Bloomberg L. P., “Yield Curves for EURO, JPY and USD,” Bloomberg Database, accessed July 6, 2015.
Page 13 9B16N008
ENDNOTES
1
M. Shiraki, “UPDATE 1-Toyota’s New Class of Stock Approved despite Opposition from Foreign Funds,” CNBC, June 16,
2015, accessed July 13, 2015, www.cnbc.com/2015/06/16/reuters-america-update-1-toyotas-new-class-of-stock-approved-
despite-opposition-from-foreign-funds.html.
2
“#8 Toyota Motor,” Forbes, accessed July 13, 2015, www.forbes.com/companies/toyota-motor.
3
J. McCurry, “Toyota: Ups and Downs of a Family Dynasty,” The Guardian, January 29, 2010, accessed July 14, 2015,
www.theguardian.com/business/2010/jan/29/toyota-family-history.
4
Ibid.
5
Ibid.
6
A. Murphy, “2015 Global 2000: The World’s Biggest Auto Companies,” Forbes, May 6, 2015, accessed July 13, 2015,
www.forbes.com/sites/andreamurphy/2015/05/06/2015-global-2000-the-worlds-biggest-auto-companies.
7
“The World’s Most Valuable Brands,” Forbes, accessed July 8, 2015, www.forbes.com/powerful-brands/#tab:rank.
8
¥ = YPY = Japanese yen. All figures are in Japanese yen, unless otherwise specified. US$1 = ¥123.40 as of June 15, 2015
and (approximately) US$1 = ¥119.15 in December 2014.
9
“Toyota Lists on the New York Stock Exchange; Shares Also Listed on the London Stock Exchange to Further
Globalization,” PR Newswire, September 29, 1999, accessed July 14, 2015, www.prnewswire.com/news-releases/toyota-

lists-on-the-new-york-stock-exchange-shares-also-listed-on-the-london-stock-exchange-to-further-globalization-

74560802.html.
10
This section is based on United States Securities and Exchange Commission Form 20-F, “Toyota Motor Corporation,”

June 24, 2015, accessed July 10, 2015, www.toyota-global.com/investors/ir_library/sec/pdf/20-F_201503_final.pdf.
11
“Dividends,” Toyota Motor Corporation, accessed July 8, 2015, www.toyota-global.com/investors/stock_information_
ratings/dividends.html.
12
Ibid.
13
“Ratings,” Toyota Motor Corporation, accessed December 18, 2015, www.toyota-global.com/investors/stock_information_
ratings/rating.html.
14
Toyota Motor Corporation Annual Report, 2003, p. 19.
15
“Toyota Way 2001,” Toyota Motor Corporation, accessed July 14, 2015, www.toyota-global.com/company/history_of_
toyota/75years/data/conditions/philosophy/toyotaway2001.html.
16
“Kaizen,” Toyota Material Handling UK Limited, accessed July 14, 2015, www.toyota-forklifts.co.uk/EN/company/Toyota-
Production-System/Kaizen/Pages/default.aspx.
17
I. Kalb, “Innovation Isn’t Just About Brainstorming New Ideas,” Business Insider, July 8, 2013, accessed July 10, 2015,
www.businessinsider.com/innovate-or-die-a-mantra-for-every-business-2013-7#ixzz3fUGOpiFO.
18
Ibid.
19
“Innovation,” Toyota Motor Corporation Australia Limited, accessed July 10, 2015,
www.toyota.com.au/toyota/promise/innovation.
20
Based on the exchange rate in April 2015.
21
P. Tasker, “Toyota’s Latest Model Should Be Copied,” Financial Times, June 23, 2015,
www.ft.com/intl/cms/s/0/d5229e0a-16a3-11e5-b07f-00144feabdc0.html#axzz3fUI6w05Z.
22
Ibid.
23
“Pricing of First Series Model AA Class Shares,” Financial Times, July 2, 2015, accessed July 10, 2015,
http://announce.ft.com/Detail/?DocKey=1323-12411910-74497J4AOPOVN9EKA024NQTVQ4.
24
Y. Kubota, “Toyota Shareholders Approve Issuance of Five-Year Shares,” The Wall Street Journal, June 16, 2015,
accessed July 13, 2015, www.wsj.com/articles/toyota-shareholders-approve-issuance-of-five-year-shares-1434431036.
25
K. Inagaki, “Toyota Wins Backing for New Category of Stock,” Financial Times, June 16, 2015, accessed July 8, 2015,
www.ft.com/intl/cms/s/0/84839e9a-13e2-11e5-aa7f-00144feabdc0.html#axzz3fNMuajud.
26
C. Trudell, Y. Hagiwara and M. Horie, “Toyota Tests Unique Stock to Draw Long-term Investors,” Bloomberg Business,
April 28, 2015, accessed July 13, 2015, www.bloomberg.com/news/articles/2015-04-28/toyota-plans-4-2-billion-share-sale-
to-develop-fuel-cell-cars.
27
B. B. Burr, “Large Pension Funds Oppose Proposed Toyota Share-class Voting Structure,” Pensions & Investments, June
9, 2015, accessed July 10, 2015, www.pionline.com/article/20150609/ONLINE/150609855/large-pension-funds-oppose-
proposed-toyota-share-class-voting-structure.
28
Vocus PRW Holdings, LLC, “CalSTRS Votes against Toyota Proposal to Create Dual-Class Shares,” June 8, 2015,
accessed July 10, 2015, www.prweb.com/releases/2015/06/prweb12775654.htm.
29
B. B. Burr, op. cit.
30
Ibid.
31
M. Shiraki, op. cit.
32
Ibid.
33
Ibid.
34
“Stock Overview,” Toyota Global Website, accessed April 12, 2015, www.toyota-
global.com/investors/stock_information_ratings/outline.html.
35
Y. Kubota, op. cit.

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TOYOTA’S INNOVATIVE SHARE ISSUE (2015)

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Distributed by The Case Centre North America Rest of the world

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Dividend Policy and Ratings

THE TOYOTA WAY 2001

Fujio Cho, the former president of Toyota, said:

According to Toyota’s web page:

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Toyota’s attitude toward innovation permeated the following statement:

TOYOTA’S “MODEL AA” SHARE ISSUE PROPOSAL

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Anne Sheehan, the CalSTRS director of corporate governance, said:

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Furthermore, CPPIB officials added:

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EXHIBIT 1: TOYOTA’S BUSINESS SEGMENTS, 2013–2015

Year Ended March 31, ¥ in Millions

EXHIBIT 2: TOYOTA’S GEOGRAPHICAL DISTRIBUTION, 2013–2015

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2015, accessed July 10, 2015, www.toyota-global.com/investors/ir_library/sec/pdf/20-F_201503_final.pdf.

EXHIBIT 3: TOYOTA’S INCOME STATEMENT, 2013–2015

In Billions of ¥* FY 2013 FY 2014 FY 2015

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– Other Adjustments 0.0 0.0 0.0

Net Income Avail. to Common Shareholders 962.2 1,823.1 2,173.3

Basic EPS before Abnormal Items 303.82 575.30 688.02

* except marked as EPS

EXHIBIT 4: TOYOTA’S BALANCE SHEET, 2013–2015

In Billions of ¥ FY 2013 FY 2014 FY 2015

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Liabilities & Shareholders’ Equity

+ Short-Term Borrowings 6,794.0 7,780.5 8,963.5

+ Other Short-Term Liabilities 4,004.8 4,687.0 5,057.4

Total Current Liabilities 12,912.5 14,680.7 16,431.5

Note: LT = Long Term; APIC = Additional Paid-in Capital.

EXHIBIT 5: TOYOTA’S CASH FLOW STATEMENT, 2013–2015

In Billions of ¥ FY 2013 FY 2014 FY 2015

Cash from Investing Activities

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Cash from Financing Activities

+ Change in Short-Term Borrowings 201.3 468.0 –288.7

+ Increase in Long-Term Borrowings 3,191.2 3,890.3 5,029.0

+ Decrease In Long-Term Borrowings –2,682.1 –2,988.9 –3,462.2

EXHIBIT 6: TOYOTA’S SELECTED FINANCIAL RATIOS, 2011–2015

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