Table of Contents As filed with the Securities and Exchange Commission on June 24, 2016 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 20-F (Mark One) REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: March 31, 2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number: 001-14948 TOYOTA JIDOSHA KABUSHIKI KAISHA (Exact Name of Registrant as Specified in its Charter) TOYOTA MOTOR CORPORATION (Translation of Registrant's Name into English) Japan (Jurisdiction of Incorporation or Organization) 1 Toyota-cho, Toyota City Aichi Prefecture 471-8571 Japan +81 565 28-2121 (Address of Principal Executive Offices) Nobukazu Takano Telephone number: +81 565 28-2121 Facsimile number: +81 565 23-5800 Address: 1 Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan (Name, telephone, e-mail and/or facsimile number and address of registrant's contact person) Securities registered or to be registered pursuant to Section 12(b) of the Act: Title of Each Class: Name of Each Exchange on Which Registered: American Depositary Shares* The New York Stock Exchange Common Stock** * American Depositary Receipts evidence American Depositary Shares, each American Depositary Share representing two shares of the registrant's Common Stock. ** No par value. Not for trading, but only in connection with the registration of American Depositary Shares, pursuant to the requirements of the U.S. Securities and Exchange Commission. Securities registered or to be registered pursuant to Section 12(g) of the Act: None Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by the annual report: 3,037,675,870 shares of common stock (including 66,933,269 shares of common stock in the form of American Depositary Shares) and 47,100,000 First Series Model AA class shares as of March 31, 2016 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934: Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of \"accelerated filer and large accelerated filer\" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing: U.S. GAAP International Financial Reporting Standards as issued by the International Accounting Standards Board Other If \"Other\" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes No Table of Contents TABLE OF CONTENTS ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 1 ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 1 ITEM 3. KEY INFORMATION 1 SELECTED FINANCIAL DATA CAPITALIZATION AND INDEBTEDNESS REASONS FOR THE OFFER AND USE OF PROCEEDS RISK FACTORS 1 4 5 5 INFORMATION ON THE COMPANY 8 3.A 3.B 3.C 3.D ITEM 4. 4.A 4.B 4.C 4.D HISTORY AND DEVELOPMENT OF THE COMPANY BUSINESS OVERVIEW ORGANIZATIONAL STRUCTURE PROPERTY, PLANTS AND EQUIPMENT 8 9 52 53 ITEM 4A. UNRESOLVED STAFF COMMENTS 54 ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 54 OPERATING RESULTS LIQUIDITY AND CAPITAL RESOURCES RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES TREND INFORMATION OFF-BALANCE SHEET ARRANGEMENTS TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS SAFE HARBOR 54 87 90 92 92 93 94 DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 94 DIRECTORS AND SENIOR MANAGEMENT 94 5.A 5.B 5.C 5.D 5.E 5.F 5.G ITEM 6. 6.A 6.B 6.C 6.D 6.E ITEM 7. 7.A 7.B 7.C ITEM 8. 8.A 8.B ITEM 9. 9.A 9.B 9.C 9.D 9.E 9.F ITEM 10. 10.A 10.B 10.C 10.D COMPENSATION BOARD PRACTICES EMPLOYEES SHARE OWNERSHIP 102 103 104 105 MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 106 MAJOR SHAREHOLDERS RELATED PARTY TRANSACTIONS INTERESTS OF EXPERTS AND COUNSEL 106 107 107 FINANCIAL INFORMATION 107 CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION SIGNIFICANT CHANGES 107 108 THE OFFER AND LISTING 108 LISTING DETAILS PLAN OF DISTRIBUTION MARKETS SELLING SHAREHOLDERS DILUTION EXPENSES OF THE ISSUE 108 108 109 109 109 109 ADDITIONAL INFORMATION 109 SHARE CAPITAL MEMORANDUM AND ARTICLES OF ASSOCIATION MATERIAL CONTRACTS EXCHANGE CONTROLS 109 109 117 117 Table of Contents 10.E 10.F 10.G 10.H 10.I TAXATION DIVIDENDS AND PAYING AGENTS STATEMENT BY EXPERTS DOCUMENTS ON DISPLAY SUBSIDIARY INFORMATION 118 124 124 124 124 ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 124 ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 126 DEBT SECURITIES WARRANTS AND RIGHTS OTHER SECURITIES AMERICAN DEPOSITARY SHARES 126 126 126 126 ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 128 ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 128 ITEM 15. CONTROLS AND PROCEDURES 128 ITEM 16. [RESERVED] 129 ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 129 ITEM 16B. CODE OF ETHICS 129 ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES 130 ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 131 ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS 131 12.A 12.B 12.C 12.D ITEM 16F. CHANGE IN REGISTRANT'S CERTIFYING ACCOUNTANT 132 ITEM 16G. CORPORATE GOVERNANCE 132 ITEM 16H. MINE SAFETY DISCLOSURE 135 ITEM 17. FINANCIAL STATEMENTS 136 ITEM 18. FINANCIAL STATEMENTS 136 ITEM 19. EXHIBITS 137 Table of Contents As used in this annual report, the term \"fiscal\" preceding a year means the twelve-month period ended March 31 of the year referred to. All other references to years refer to the applicable calendar year, unless the context otherwise requires. As used herein, the term \"Toyota\" refers to Toyota Motor Corporation and its consolidated subsidiaries as a group, unless the context otherwise indicates. In parts of this annual report, amounts reported in Japanese yen have been translated into U.S. dollars for the convenience of readers. Unless otherwise noted, the rate used for this translation was 112.68 = $1.00. This was the approximate exchange rate in Japan on March 31, 2016. CAUTIONARY STATEMENT WITH RESPECT TO FORWARD-LOOKING STATEMENTS Written forward-looking statements may appear in documents filed with the Securities and Exchange Commission, or the SEC, including this annual report, documents incorporated by reference, reports to shareholders and other communications. The U.S. Private Securities Litigation Reform Act of 1995 provides a \"safe harbor\" for forward-looking information to encourage companies to provide prospective information about themselves without fear of litigation so long as the information is identified as forward looking and is accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those projected in the information. Toyota relies on this safe harbor in making forward-looking statements. Forward-looking statements appear in a number of places in this annual report and include statements regarding Toyota's current intent, belief, targets or expectations or those of its management. In many, but not all cases, words such as \"aim,\" \"anticipate,\" \"believe,\" \"estimate,\" \"expect,\" \"hope,\" \"intend,\" \"may,\" \"plan,\" \"predict,\" \"probability,\" \"risk,\" \"should,\" \"will,\" \"would,\" and similar expressions, are used as they relate to Toyota or its management, to identify forward-looking statements. These statements reflect Toyota's current views with respect to future events and are subject to risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those which are anticipated, aimed at, believed, estimated, expected, intended or planned. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ from those in forward-looking statements as a result of various factors. Important factors that could cause actual results to differ materially from estimates or forecasts contained in the forward-looking statements are identified in \"Risk Factors\" and elsewhere in this annual report, and include, among others: (i) changes in economic conditions, market demand, and the competitive environment affecting the automotive markets in Japan, North America, Europe, Asia and other markets in which Toyota operates; (ii) fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the U.S. dollar, the euro, the Australian dollar, the Russian ruble, the Canadian dollar and the British pound, and interest rates fluctuations; (iii) changes in funding environment in financial markets and increased competition in the financial services industry; (iv) Toyota's ability to market and distribute effectively; (v) Toyota's ability to realize production efficiencies and to implement capital expenditures at the levels and times planned by management; (vi) changes in the laws, regulations and government policies in the markets in which Toyota operates that affect Toyota's automotive operations, particularly laws, regulations and government policies relating to vehicle safety including remedial measures such as recalls, trade, environmental protection, vehicle emissions and vehicle fuel economy, as well as changes in laws, regulations and government policies that affect Toyota's other operations, including the outcome of current and future litigation and other legal proceedings, government proceedings and investigations; Table of Contents (vii) political and economic instability in the markets in which Toyota operates; (viii) Toyota's ability to timely develop and achieve market acceptance of new products that meet customer demand; (ix) any damage to Toyota's brand image; (x) Toyota's reliance on various suppliers for the provision of supplies; (xi) increases in prices of raw materials; (xii) Toyota's reliance on various digital and information technologies; (xiii) fuel shortages or interruptions in electricity, transportation systems, labor strikes, work stoppages or other interruptions to, or difficulties in, the employment of labor in the major markets where Toyota purchases materials, components and supplies for the production of its products or where its products are produced, distributed or sold; and (xiv) the impact of natural calamities including the negative effect on Toyota's vehicle production and sales. Table of Contents PART I ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS Not applicable. ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE Not applicable. ITEM 3. KEY INFORMATION 3.A SELECTED FINANCIAL DATA You should read the U.S. GAAP selected consolidated financial information presented below together with \"Operating and Financial Review and Prospects\" and Toyota's consolidated financial statements contained in this annual report. U.S. GAAP Selected Financial Data The following selected financial data have been derived from Toyota's consolidated financial statements. These financial statements were prepared in accordance with U.S. GAAP. 2012 Year Ended March 31, 2013 2014 2015 (Yen in millions, except share and per share data) 2016 Consolidated Statement of Income Data: Automotive: Revenues 16,994,546 20,419,100 23,781,404 25,062,129 25,977,416 Operating income 21,683 944,704 1,938,778 2,325,310 2,448,998 Financial Services: Revenues 1,100,324 1,170,670 1,421,047 1,661,149 1,896,224 Operating income 306,438 315,820 294,891 361,833 339,226 All Other: Revenues 1,048,915 1,066,461 1,151,280 1,255,791 1,177,387 Operating income 42,062 53,616 64,270 65,650 66,507 Elimination of intersegment: Revenues (560,132) (592,039) (661,820) (744,548) (647,909) Operating income (14,556) 6,748 (5,827) (2,229) (760) Total Company: Revenues 18,583,653 22,064,192 25,691,911 27,234,521 28,403,118 Operating income 355,627 1,320,888 2,292,112 2,750,564 2,853,971 Income before income taxes and equity in earnings of affiliated companies 432,873 1,403,649 2,441,080 2,892,828 2,983,381 Net income attributable to Toyota Motor Corporation 283,559 962,163 1,823,119 2,173,338 2,312,694 Net income attributable to Toyota Motor Corporation per common share (yen): Basic 90.21 303.82 575.30 688.02 741.36 Diluted 90.20 303.78 574.92 687.66 735.36 Shares used in computing net income attributable to Toyota Motor Corporation per common share, basic (in thousands) 3,143,470 3,166,909 3,168,989 3,158,851 3,111,306 Shares used in computing net income attributable to Toyota Motor Corporation per common share, diluted (in thousands) 3,143,470 3,167,155 3,170,911 3,160,429 3,144,947 1 Table of Contents 2012 Consolidated Balance Sheet Data (end of period): Total Assets: Short-term debt, including current portion of long-term debt Long-term debt, less current portion Toyota Motor Corporation shareholders' equity Common stock Other Data: Dividends per share (yen) Number of vehicles sold Japan North America Europe Asia Other* Year Ended March 31, 2013 2014 2015 2016 (Yen in millions, except per share and numbers of vehicles sold data) 30,650,965 35,483,317 41,437,473 47,729,830 47,427,597 5,963,269 6,042,277 6,793,956 7,337,824 7,780,483 8,546,910 8,963,492 10,014,395 8,521,088 9,772,065 10,550,261 397,050 12,148,035 397,050 14,469,148 397,050 16,788,131 397,050 16,746,935 397,050 50.0 90.0 165.0 200.0 210.0 2,070,799 1,872,423 797,993 1,326,829 1,283,885 2,278,796 2,468,804 799,085 1,683,578 1,640,401 2,365,410 2,529,398 844,003 1,608,355 1,768,867 2,153,694 2,715,173 859,038 1,488,922 1,755,037 2,059,093 2,839,229 844,412 1,344,836 1,593,758 Worldwide total 7,351,929 8,870,664 9,116,033 8,971,864 8,681,328 *\"Other\" consists of Central and South America, Oceania, Africa and the Middle East, etc. Dividend Information Toyota normally pays dividends twice per year, including an interim dividend and a year-end dividend. Toyota's articles of incorporation provide that retained earnings can be distributed as dividends pursuant to a resolution of its board of directors. Toyota's board of directors resolves to pay year-end dividends to holders of common shares and registered pledgees of common shares of record as of March 31, the record date, in each year. At the 111th Ordinary General Shareholders' Meeting held in June 2015, Toyota's shareholders approved amendments to Toyota's articles of incorporation permitting the issuance of Model AA Class Shares in the future. The articles of incorporation currently provide that in the event that Toyota pays a year-end dividend to holders of common shares, it will pay a year-end dividend to any holders of Model AA Class Shares or registered pledgees of Model AA Class Shares of record as of the record date for the year-end dividend, in the amount payable on the Model AA Class Shares pursuant to their terms (\"AA Dividends\"), in preference to holders of common shares or registered pledgees of common shares. In addition to these year-end dividends, Toyota may pay an interim dividend in the form of cash distributions from its distributable surplus to holders of common shares and pledgees of common shares of record as of September 30, the record date, in each year by a resolution of its board of directors. The articles of incorporation currently provide that in the event that Toyota pays such interim dividends, Toyota will pay an amount equivalent to one-half of the AA Dividends (\"AA Interim Dividends\") as an interim dividend to any holders of Model AA Class Shares or registered pledgees of Model AA Class Shares of record as of the record date for the interim dividend, in preference to holders of common shares or registered pledgees of common shares. If the amount of the dividends from surplus paid to holders of Model AA Class Shares or registered pledgees of Model AA Class Shares is less than the prescribed amount of AA Dividends in any fiscal year, the amount of the shortfall will be carried forward to and accumulate in the following fiscal year and thereafter. Dividends from surplus will be paid to holders of Model AA Class Shares or registered pledgees of Model AA Class Shares in preference to the payment of interim and year-end dividends until such payment reaches the amount of the accumulated unpaid dividends on the Model AA Class Shares. 2 Table of Contents For a further discussion of Model AA Class Shares, please see \"Additional Information Memorandum and Articles of Association.\" In addition, under the Companies Act of Japan (the \"Companies Act\"), dividends may be paid to holders of common shares and pledgees of record of common shares as of any record date, other than those specified above, as set forth in Toyota's articles of incorporation or as determined by its board of directors from time to time. Under the Companies Act, dividends may be distributed in cash or (except in the case of interim dividends mentioned in the third preceding paragraph) in kind, subject to limitations on distributable surplus and to certain other conditions. The following table sets forth the dividends declared per common share by Toyota for each of the periods shown. The periods shown are the six months ended on that date. The U.S. dollar equivalents for the cash dividends shown are based on the noon buying rate for Japanese yen on the last date of each period set forth below. Period Ended September 30, 2011 March 31, 2012 Cash Dividends per Common Share Yen U.S. dollars 20.0 30.0 0.25 0.36 September 30, 2012 March 31, 2013 September 30, 2013 March 31, 2014 September 30, 2014 March 31, 2015 September 30, 2015 March 31, 2016 30.0 60.0 65.0 100.0 75.0 125.0 100.0 110.0 0.38 0.63 0.66 0.97 0.68 1.04 0.83 0.97 Toyota deems the benefit of its shareholders as one of its priority management policies, and it continues to work to improve its corporate structure to realize sustainable growth in order to enhance its corporate value. Toyota will strive to continue to pay stable dividends on its common shares aiming at a consolidated dividend payout ratio, defined as dividends per common share divided by net income attributable to Toyota Motor Corporation per common share, of 30% while giving due consideration to factors such as business results for each term, investment plans and its cash reserves. Toyota will pay dividends on the First Series Model AA Class Shares in accordance with a prescribed calculation method. In order to successfully compete in this highly competitive industry, Toyota plans to utilize its internal funds for the early commercialization of technologies for next-generation environment and safety giving priority to customer safety and sense of security. Considering these factors, with respect to the dividends for fiscal 2016, Toyota has determined to pay a year-end dividend of 110 yen per common share by a resolution of the board of directors pursuant to Toyota's articles of incorporation. As a result, combined with the interim dividend of 100 yen per common share, the annual dividend will be 210 yen per common share, and the total amount of the dividends on common shares for the year will be 645.5 billion yen. Furthermore, through repurchasing shares, Toyota will return capital to shareholders and promote capital efficiency and agile capital policy in view of the business environment. In fiscal 2016, Toyota repurchased 39 million common shares, for an aggregate purchase price of 293.3 billion yen, in order to return to shareholders the profits derived from Toyota's business operations in the fiscal year ended March 31, 2015 and repurchased 23 million common shares, for an aggregate purchase price of 139.3 billion yen, in order to return to shareholders the profits derived from Toyota's business operations in the interim period ended September 30, 2015. 3 Table of Contents In addition, in fiscal 2016, Toyota repurchased 47 million common shares, for an aggregate purchase price of 349.9 billion yen, in order to avoid dilution of common shares as a result of the issuance of the First Series Model AA Class Shares. Furthermore, Toyota has determined to repurchase 100 million common shares (maximum), for an aggregate purchase price of 500.0 billion yen (maximum), in order to return to shareholders the profits derived from Toyota's business operations in the second half of the fiscal year ended March 31, 2016 by a resolution of the board of directors on May 11, 2016. Exchange Rates In parts of this annual report, yen amounts have been translated into U.S. dollars for the convenience of investors. Unless otherwise noted, the rate used for the translations was 112.68 = $1.00. This was the approximate exchange rate in Japan on March 31, 2016. The following table sets forth information regarding the noon buying rates for Japanese yen in New York City as announced for customs purposes by the Federal Reserve Bank of New York expressed in Japanese yen per $1.00 during the periods shown. At the end of May 2016, the noon buying rate was 110.75 = $1.00. The average exchange rate for the periods shown is the average of the month-end rates during the period. Fiscal Year Ended or Ending March 31, At End of Period Average (of month-end rates) ( per $1.00) 82.41 94.16 102.98 119.96 112.42 110.75 78.86 83.26 100.46 110.78 120.13 108.83 2012 2013 2014 2015 2016 2017 (through May 31, 2016) Month Ended High Low 85.26 96.16 105.25 121.50 125.58 112.06 75.72 77.41 92.96 101.26 111.30 106.34 High Low ( per $1.00) December 31, 2015 January 31, 2016 February 29, 2016 March 31, 2016 April 30, 2016 May 31, 2016 123.52 121.05 121.06 113.94 112.06 110.75 120.27 116.38 111.36 111.30 106.90 106.34 Fluctuations in the exchange rate between the Japanese yen and the U.S. dollar will affect the dollar equivalent of the price of the shares on the Japanese stock exchanges. As a result, exchange rate fluctuations are likely to affect the market price of the American Depositary Shares (\"ADSs\") on the New York Stock Exchange (\"NYSE\"). Toyota will declare any cash dividends on shares of capital stock in Japanese yen. Exchange rate fluctuations will also affect the U.S. dollar amounts received on conversion of cash dividends. Exchange rate fluctuations can also materially affect Toyota's reported operating results. In particular, a strengthening of the Japanese yen against the U.S. dollar can have a material adverse effect on Toyota's reported operating results. For a further discussion of the effects of currency rate fluctuations on Toyota's operating results, please see \"Operating and Financial Review and Prospects Operating Results Overview Currency Fluctuations.\" 3.B CAPITALIZATION AND INDEBTEDNESS Not applicable. 4 Table of Contents 3.C REASONS FOR THE OFFER AND USE OF PROCEEDS Not applicable. 3.D RISK FACTORS Industry and Business Risks The worldwide automotive market is highly competitive. The worldwide automotive market is highly competitive. Toyota faces intense competition from automotive manufacturers in the markets in which it operates. Although the global economy continues to recover gradually, competition in the automotive industry has further intensified amidst difficult overall market conditions. In addition, competition is likely to further intensify in light of further continuing globalization in the worldwide automotive industry, possibly resulting in industry reorganizations. Factors affecting competition include product quality and features, safety, reliability, fuel economy, the amount of time required for innovation and development, pricing, customer service and financing terms. Increased competition may lead to lower vehicle unit sales, which may result in a further downward price pressure and adversely affect Toyota's financial condition and results of operations. Toyota's ability to adequately respond to the recent rapid changes in the automotive market and to maintain its competitiveness will be fundamental to its future success in existing and new markets and to maintain its market share. There can be no assurances that Toyota will be able to compete successfully in the future. The worldwide automotive industry is highly volatile. Each of the markets in which Toyota competes has been subject to considerable volatility in demand. Demand for vehicles depends to a large extent on economic, social and political conditions in a given market and the introduction of new vehicles and technologies. As Toyota's revenues are derived from sales in markets worldwide, economic conditions in such markets are particularly important to Toyota. Reviewing the general economic environment for the fiscal year ended March 2016, with respect to the world economy, the U.S. economy has seen ongoing recovery mainly due to steady progress of personal consumption, and the European economy has seen a moderate recovery in the eurozone. Meanwhile, weaknesses have been seen in China and other Asian emerging countries. The Japanese economy has been on a moderate recovery as a whole, while weakness could be seen in personal consumption and other areas. For the automobile industry, although markets have progressed in a steady manner, especially in the U.S., markets in some emerging countries have become stagnant, and the Japanese market has slowed down mainly in the sales of mini-vehicles due to the tax increase. The shifts in demand for automobiles are continuing, and it is unclear how this situation will transition in the future. Toyota's financial condition and results of operations may be adversely affected if the shifts in demand for automobiles continues or progresses further. Demand may also be affected by factors directly impacting vehicle price or the cost of purchasing and operating vehicles such as sales and financing incentives, prices of raw materials and parts and components, cost of fuel and governmental regulations (including tariffs, import regulation and other taxes). Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect Toyota's financial condition and results of operations. Toyota's future success depends on its ability to offer new, innovative and competitively priced products that meet customer demand on a timely basis. Meeting customer demand by introducing attractive new vehicles and reducing the amount of time required for product development are critical to automotive manufacturers. In particular, it is critical to meet customer demand with respect to quality, safety and reliability. The timely introduction of new vehicle models, at competitive prices, meeting rapidly changing customer preferences and demand is more fundamental to Toyota's success than ever, as the automotive market is rapidly transforming in light of the changing global economy. 5 Table of Contents There is no assurance, however, that Toyota will adequately and appropriately respond to changing customer preferences and demand with respect to quality, safety, reliability, styling and other features in a timely manner. Even if Toyota succeeds in perceiving customer preferences and demand, there is no assurance that Toyota will be capable of developing and manufacturing new, price competitive products in a timely manner with its available technology, intellectual property, sources of raw materials and parts and components, and production capacity, including cost reduction capacity. Further, there is no assurance that Toyota will be able to implement capital expenditures at the level and times planned by management. Toyota's inability to develop and offer products that meet customers' preferences and demand with respect to quality, safety, reliability, styling and other features in a timely manner could result in a lower market share and reduced sales volumes and margins, and may adversely affect Toyota's financial condition and results of operations. Toyota's ability to market and distribute effectively is an integral part of Toyota's successful sales. Toyota's success in the sale of vehicles depends on its ability to market and distribute effectively based on distribution networks and sales techniques tailored to the needs of its customers. There is no assurance that Toyota will be able to develop sales techniques and distribution networks that effectively adapt to changing customer preferences or changes in the regulatory environment in the major markets in which it operates. Toyota's inability to maintain well-developed sales techniques and distribution networks may result in decreased sales and market share and may adversely affect its financial condition and results of operations. Toyota's success is significantly impacted by its ability to maintain and develop its brand image. In the highly competitive automotive industry, it is critical to maintain and develop a brand image. In order to maintain and develop a brand image, it is necessary to further increase customers' confidence by providing safe, high-quality products that meet customer preferences and demand. If Toyota is unable to effectively maintain and develop its brand image as a result of its inability to provide safe, high-quality products or as a result of the failure to promptly implement safety measures such as recalls when necessary, vehicle unit sales and/or sale prices may decrease, and as a result revenues and profits may not increase as expected or may decrease, adversely affecting its financial condition and results of operations. Toyota relies on suppliers for the provision of certain supplies including parts, components and raw materials. Toyota purchases supplies including parts, components and raw materials from a number of external suppliers located around the world. For some supplies, Toyota relies on a single supplier or a limited number of suppliers, whose replacement with another supplier may be difficult. Inability to obtain supplies from a single or limited source supplier may result in difficulty obtaining supplies and may restrict Toyota's ability to produce vehicles. Furthermore, even if Toyota were to rely on a large number of suppliers, first-tier suppliers with whom Toyota directly transacts may in turn rely on a single second-tier supplier or limited second-tier suppliers. Toyota's ability to continue to obtain supplies from its suppliers in a timely and cost-effective manner is subject to a number of factors, some of which are not within Toyota's control. These factors include the ability of Toyota's suppliers to provide a continued source of supply, and Toyota's ability to effectively compete and obtain competitive prices from suppliers. A loss of any single or limited source supplier or inability to obtain supplies from suppliers in a timely and cost-effective manner could lead to increased costs or delays or suspensions in Toyota's production and deliveries, which could have an adverse effect on Toyota's financial condition and results of operations. The worldwide financial services industry is highly competitive. The worldwide financial services industry is highly competitive. Increased competition in automobile financing may lead to decreased margins. A decline in Toyota's vehicle unit sales, an increase in residual value risk due to lower used vehicle price, an increase in the ratio of credit losses and increased funding costs are factors which may impact Toyota's financial services operations. If Toyota is unable to adequately respond to the changes and competition in automobile financing, Toyota's financial services operations may adversely affect its financial condition and results of operations. 6 Table of Contents Toyota's operations and vehicles rely on various digital and information technologies. Toyota depends on various information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, including sensitive data, and to manage or support a variety of business processes and activities, including manufacturing, research and development, supply chain management, sales and accounting. In addition, Toyota's vehicles may rely on various digital and information technologies, including information service and driving assistance functions. Despite security measures, Toyota's digital and information technology networks and systems may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers, computer viruses, breaches due to unauthorized use, errors or malfeasance by employees and others who have or gain access to the networks and systems Toyota depends on, service failures or bankruptcy of third parties such as software development or cloud computing vendors, power shortages and outages, and utility failures or other catastrophic events like natural disasters. Such incidents could materially disrupt critical operations, disclose sensitive data, interfere with information services and driving assistance functions in Toyota's vehicles, and/or give rise to legal claims or proceedings, liability or regulatory penalties under applicable laws, which could have an adverse effect on Toyota's brand image and its financial condition and results of operations. Financial Market and Economic Risks Toyota's operations are subject to currency and interest rate fluctuations. Toyota is sensitive to fluctuations in foreign currency exchange rates and is principally exposed to fluctuations in the value of the Japanese yen, the U.S. dollar and the euro and, to a lesser extent, the Australian dollar, the Russian ruble, the Canadian dollar and the British pound. Toyota's consolidated financial statements, which are presented in Japanese yen, are affected by foreign currency exchange fluctuations through translation risk, and changes in foreign currency exchange rates may also affect the price of products sold and materials purchased by Toyota in foreign currencies through transaction risk. In particular, strengthening of the Japanese yen against the U.S. dollar can have an adverse effect on Toyota's operating results. Toyota believes that its use of certain derivative financial instruments including foreign exchange forward contracts and interest rate swaps and increased localized production of its products have reduced, but not eliminated, the effects of interest rate and foreign currency exchange rate fluctuations. Nonetheless, a negative impact resulting from fluctuations in foreign currency exchange rates and changes in interest rates may adversely affect Toyota's financial condition and results of operations. For a further discussion of currency and interest rate fluctuations and the use of derivative financial instruments, see \"Operating and Financial Review and Prospects Operating Results Overview Currency Fluctuations,\" \"Quantitative and Qualitative Disclosures About Market Risk,\" and notes 21 and 22 to Toyota's consolidated financial statements. High prices of raw materials and strong pressure on Toyota's suppliers could negatively impact Toyota's profitability. Increases in prices for raw materials that Toyota and Toyota's suppliers use in manufacturing their products or parts and components such as steel, precious metals, non-ferrous alloys including aluminum, and plastic parts, may lead to higher production costs for parts and components. This could, in turn, negatively impact Toyota's future profitability because Toyota may not be able to pass all those costs on to its customers or require its suppliers to absorb such costs. A downturn in the financial markets could adversely affect Toyota's ability to raise capital. Should the world economy suddenly deteriorate, a number of financial institutions and investors will face difficulties in providing capital to the financial markets at levels corresponding to their own financial capacity, and, as a result, there is a risk that companies may not be able to raise capital under terms that they would expect to receive with their creditworthiness. If Toyota is unable to raise the necessary capital under appropriate conditions on a timely basis, Toyota's financial condition and results of operations may be adversely affected. 7 Table of Contents Political, Regulatory, Legal and Other Risks The automotive industry is subject to various governmental regulations. The worldwide automotive industry is subject to various laws and governmental regulations including those related to vehicle safety and environmental matters such as emission levels, fuel economy, noise and pollution. In particular, automotive manufacturers such as Toyota are required to implement safety measures such as recalls for vehicles that do not or may not comply with the safety standards of laws and governmental regulations. In addition, Toyota may, in order to reassure its customers of the safety of Toyota's vehicles, decide to voluntarily implement recalls or other safety measures even if the vehicle complies with the safety standards of relevant laws and governmental regulations. Many governments also impose tariffs and other trade barriers, taxes and levies, or enact price or exchange controls. Toyota has incurred, and expects to incur in the future, significant costs in complying with these regulations. If Toyota launches products that result in safety measures such as recalls, Toyota may incur various costs including significant costs for free repairs. Furthermore, new legislation or changes in existing legislation may also subject Toyota to additional expenses in the future. If Toyota incurs significant costs related to implementing safety measures or meeting laws and governmental regulations, Toyota's financial condition and results of operations may be adversely affected. Toyota may become subject to various legal proceedings. As an automotive manufacturer, Toyota may become subject to legal proceedings in respect of various issues, including product liability and infringement of intellectual property. Toyota may also be subject to legal proceedings brought by its shareholders and governmental proceedings and investigations. Toyota is in fact currently subject to a number of pending legal proceedings and government investigations. A negative outcome in one or more of these pending legal proceedings could adversely affect Toyota's financial condition and results of operations. For a further discussion of governmental regulations, see \"Information on the Company Business Overview Governmental Regulation, Environmental and Safety Standards\" and for legal proceedings, please see \"Information on the Company Business Overview Legal Proceedings.\" Toyota may be adversely affected by natural calamities, political and economic instability, fuel shortages or interruptions in social infrastructure, wars, terrorism and labor strikes. Toyota is subject to various risks associated with conducting business worldwide. These risks include natural calamities; political and economic instability; fuel shortages; interruption in social infrastructure including energy supply, transportation systems, gas, water, or communication systems resulting from natural hazards or technological hazards; wars; terrorism; labor strikes and work stoppages. Should the major markets in which Toyota purchases materials, parts and components and supplies for the manufacture of Toyota products or in which Toyota's products are produced, distributed or sold be affected by any of these events, it may result in disruptions and delays in the operations of Toyota's business. Should significant or prolonged disruptions or delays related to Toyota's business operations occur, it may adversely affect Toyota's financial condition and results of operations. ITEM 4. INFORMATION ON THE COMPANY 4.A HISTORY AND DEVELOPMENT OF THE COMPANY Toyota Motor Corporation is a limited liability, joint-stock company incorporated under the Commercial Code of Japan and continues to exist under the Companies Act. Toyota commenced operations in 1933 as the automobile division of Toyota Industries Corporation (formerly, Toyoda Automatic Loom Works, Ltd.). Toyota became a separate company on August 28, 1937. In 1982, the Toyota Motor Company and Toyota Motor Sales merged into one company, the Toyota Motor Corporation of today. As of March 31, 2016, Toyota operated through 548 consolidated subsidiaries (including variable interest entities) and 200 affiliated companies, of which 54 companies were accounted for through the equity method. 8 Table of Contents See \" Business Overview Capital Expenditures and Divestitures\" for a description of Toyota's principal capital expenditures and divestitures between April 1, 2013 and March 31, 2016 and information concerning Toyota's principal capital expenditures and divestitures currently in progress. Toyota's principal executive offices are located at 1 Toyota-cho, Toyota City, Aichi Prefecture 471-8571, Japan. Toyota's telephone number in Japan is +81-565-28-2121. 4.B BUSINESS OVERVIEW Toyota primarily conducts business in the automotive industry. Toyota also conducts business in finance and other industries. Toyota sold 8,681 thousand vehicles in fiscal 2016 on a consolidated basis. Toyota had net revenues of 28,403.1 billion and net income attributable to Toyota Motor Corporation of 2,312.6 billion in fiscal 2016. Toyota's business segments are automotive operations, financial services operations and all other operations. The following table sets forth Toyota's sales to external customers in each of its business segments for each of the past three fiscal years. Automotive Financial Services All Other 2014 Yen in millions Year Ended March 31, 2015 2016 23,733,855 1,379,267 578,789 25,006,224 1,621,685 606,612 25,923,813 1,854,007 625,298 Toyota's automotive operations include the design, manufacture, assembly and sale of passenger vehicles, minivans and commercial vehicles such as trucks and related parts and accessories. Toyota's financial services business consists primarily of providing financing to dealers and their customers for the purchase or lease of Toyota vehicles. Toyota's financial services also provide retail installment credit and leasing through the purchase of installment and lease contracts originated by Toyota dealers. Related to Toyota's automotive operations, Toyota engages in intelligent transport systems (\"ITS\"). Toyota's all other operations business segment includes the design and manufacture of prefabricated housing and information technology related businesses including a web portal for automobile information called GAZOO.com, etc. Toyota sells its vehicles in approximately 190 countries and regions. Toyota's primary markets for its automobiles are Japan, North America, Europe and Asia. The following table sets forth Toyota's sales to external customers in each of its geographical markets for each of the past three fiscal years. 2014 Japan North America Europe Asia Other* Yen in millions Year Ended March 31, 2015 8,532,875 7,938,615 2,614,070 4,475,382 2,130,969 8,338,881 9,430,450 2,690,803 4,531,178 2,243,209 2016 8,588,437 10,822,772 2,507,292 4,475,623 2,008,994 * \"Other\" consists of Central and South America, Oceania, Africa and the Middle East. During fiscal 2016, 23.7% of Toyota's automobile unit sales on a consolidated basis were in Japan, 32.7% were in North America, 9.7% were in Europe and 15.5% were in Asia. The remaining 18.4% of consolidated unit sales were in other markets. 9 Table of Contents The Worldwide Automotive Market Toyota estimates that annual worldwide vehicle sales totaled approximately 91 million units in 2015. Automobile sales are affected by a number of factors including: social, political and economic conditions; introduction of new vehicles and technologies; and costs incurred by customers to purchase and operate automobiles. These factors can cause consumer demand to vary substantially from year to year in different geographic markets and in individual categories of automobiles. In fiscal 2016, the U.S. economy experienced steady growth, with Europe undergoing gradual recovery following additional monetary easing measures while the economy in Japan lacked strength as the improvement in the jobs market did not impact income and consumption remained low. Growth in emerging markets slowed due to weakness of local currencies deriving partly from a downturn in the Chinese economy, as well as a decline in prices of natural resources in resource-producing countries. The automotive industry was also impacted by this trend. In 2015, with respect to developed countries, markets in Europe and the United States expanded. In addition, in Japan, market demand decreased despite a recovery in general consumption levels and signs of recovery from the consumption tax increase in April 2014. In emerging markets, the expansion of the Chinese market continued, but markets in other emerging countries contracted. However, in the medium- to long-term, Toyota expects the automotive market to grow driven principally by the growth in emerging markets. Global competition is expected to be severe, as competition in compact and lowprice vehicles intensifies, and technological development and development of new products become more frequent with a heightened global awareness of the environment and more stringent fuel economy standards. In 2015, China, North America, Europe and Asia were the world's largest automotive markets. The share of each market across the globe, which Toyota estimates based on the available automobile sales data in each country and region information, was 28% for China, 23% for North America (22% excluding Mexico and Puerto Rico), 21% for Europe and 10% for Asia. In China, new vehicle sales increased to approximately 25.0 million units. In North America, new vehicle sales increased to approximately 20.8 million units. In Europe, new vehicle sales increased to approximately 19.0 million units. In Asia (including India but excluding Japan and China), new vehicle unit sales increased from the previous year to approximately 9.3 million units. The worldwide automotive industry is affected significantly by government regulations aimed at reducing harmful effects on the environment, enhancing vehicle safety and improving fuel economy. These regulations have added to the cost of manufacturing vehicles. Many governments also mandate local procurement of parts and components and impose tariffs and other trade barriers and price or exchange controls as a means of creating jobs, protecting domestic producers or influencing their balance of payments. Changes in regulatory requirements and other government-imposed restrictions can limit an automaker's operations. These regulations can also make it difficult to repatriate profits to an automaker's home country. The development of the worldwide automotive market includes the continuing globalization of automotive operations. Manufacturers seek to achieve globalization by localizing the design and manufacture of automobiles and their parts and components in the markets in which they are sold. By expanding production capabilities beyond their home markets, automotive manufacturers are able to reduce their exposure to fluctuations in foreign exchange rates as well as to trade restrictions and tariffs. 10 Table of Contents Recently, there have been many global business alliances and investments entered into between manufacturers in the global automotive industry. There are various reasons behind these transactions including the need to respond to the excessive global capacity in the production of automobiles, the need to reduce costs and improve efficiency by increasing the number of automobiles produced using common vehicle platforms and by sharing research and development expenses for environmental and other technology, the desire to expand a company's global presence through increased size and the desire to expand into particular segments or geographic markets. Toyota believes that its research and development initiatives, particularly the development of environmentally friendly new vehicle technologies, vehicle safety and information technology, provide it with a strategic advantage. Toyota's ability to compete in the global automotive industry will depend in part on Toyota's successful implementation of its business strategy. This is subject to a number of factors, some of which are not in Toyota's control. These factors are discussed in \"Operating and Financial Review and Prospects\" and elsewhere in this annual report. Toyota Global Vision In March 2011, Toyota unveiled its \"Toyota Global Vision\" corporate outline for the future, which serves not only to give direction to Toyota employees around the world, but also to convey such direction to customers and to the public at large. Toyota will work to achieve sustained growth through the realization of the following ideals which are parts of the Vision: \"The safest and most responsible ways of moving people\" Safety is Toyota's highest priority, and Toyota will continue to provide world-class safety. Toyota will also continue to contribute to environmental quality and to human happiness by using leading environmental technology and by deploying that technology in a growing line of vehicle models. At the same time, Toyota will work through the provision of products, sales and services that exceed customer expectation to offer a rewarding experience for customers. \"Enriching lives around the world\" Toyota has been consistently true to its founding spirit of serving society through conscientious manufacturing, and it will continue working in that spirit to contribute to enhance the quality of life wherever it has operations. Toyota will strive to continue contributing to economic vitality wherever it has operations by generating stable employment and by participating in mutually beneficial business relationships with dealers and suppliers. It will also strive to continue to actively engage in initiatives for human resources development and the promotion of cultural activities of its host communities. \"Lead the way to the future of mobility\" Toyota will lead the industry in technological development that will spawn next-generation mobility. For example, it will explore possibilities in personal mobility and in the convergence of information technology for automobiles and \"smart grids\" for optimizing energy generation and consumption. Toyota will strive to offer products and services that match the needs in each market. Toyota will strive to advance environmental technology and develop low-carbon technologies and technologies for maximizing safety through interaction with the transport infrastructure to lay a foundation for sustainable and amenable future mobility. 11 Table of Contents \"Our commitment to quality, constant innovation\" Toyota is committed to providing quality vehicles that are highly reliable and driven with a sense of safety and reliability. Toyota will constantly reinvent itself and continue to engage in cutting-edge technology development. Toyota will work towards offering vehicles around the world that address the needs of today and of tomorrow at affordable prices. \"Continued awareness for the Earth and environment\" Toyota will continue to work towards minimizing environmental impact in its manufacturing and other operations, and products. With an emphasis on environmental awareness, Toyota will in its operations work towards energy conservation, reduction in carbon dioxide emission, efficient use of resources such as recycling, and human resource development and production methods that allow for coexistence with nature. \"Exceed expectations and be rewarded with a smile\" Everyone at Toyota will continuously maintain a sense of gratitude to customers and will strive to earn smiles with products and services that are stimulating and inspiring and exceed customer expectations. \"There is always a better way\" All Toyota employees will share the recognition that there is always a better way and share a commitment to continuous improvement, which are fundamental to The Toyota Way. \"Meet challenging goals by engaging the talent and passion of people\" Toyota will nurture a corporate culture where teamwork and individual creativity thrive and where people will approach their work with pride and passion. Toyota will honor the spirit of diversity in recruiting, training and promoting capable individuals around the world. Human resources development at Toyota will continue to promote the transfer of the company's monozukuri spirit of conscientious manufacturing and related skills and know-how from one generation to the next. As for the future business environment, the U.S. is expected to continue recovering and Europe, chiefly in the eurozone, is expected to continue its moderate recovery. Meanwhile, China and other emerging countries are showing a risk of a slowdown. With regards to the Japanese economy, attention needs to be paid to an economic decline caused by a slowdown in emerging countries. The automotive market is expected to progress steadily in developed countries, though concerns over slowdowns in emerging countries continue. In addition, measures to respond to environmental and fuel consumption regulations in various countries and to reinforce efforts toward the development of safety technologies are required, while companies in other businesses are newly venturing into the development of automated driving technology. Fierce competition is thus intensifying on a global scale. In this severe business environment, Toyota intends to steadily progress toward the realization of the Toyota Global Vision through sustainable growth based on the following policies: First, Toyota intends to contribute to the realization of a future mobility society through pioneering technologies, products and businesses. Toyota will develop human resources who will foresee the future and courageously take on new challenges. 12 Table of Contents Second, Toyota intends to reinforce true competitiveness in order to grow as steadily as a tree adding annual growth rings. Toyota will thoroughly improve quality, establish new working methods to sincerely engage with \"customers and cars,\" and enhance its crisis management abilities for responding to crises of every type. In order to realize the above vision, Toyota reorganized its corporate structure in April 2016 to establish a three-part structure: product-based in-house companies, region-based business units, and the head office. At the product-based in-house companies, streamlined operation from planning through manufacturing enables quick and independent decision-making. Within the region-based business units, Toyota aims to build even more regional operations. The head office will work to formulate a medium- to long-term vision and management strategy, including an appropriate allocation of resources, with an eye toward the future. Based on these initiatives, Toyota will contribute to \"enriching lives of communities\" by providing \"everbetter cars.\" This is expected to encourage more customers to purchase Toyota cars and thereby lead to the establishment of a stable business base. By perpetuating this cycle, Toyota will aim to realize sustainable growth and enhance corporate value. In addition, through full observance of corporate ethics such as compliance with applicable laws and regulations, Toyota will fulfill its social responsibilities. Toyota Environmental Challenge 2050 Positioning responding to environmental issues as one of the most prioritized challenges for management, Toyota has tackled head-on activities such as the development and promotion of next-generation vehicles including hybrid vehicles and fuel cell vehicles, efficient production that puts less of a burden on the environment, the recycling of end-of-life vehicles and hybrid vehicle batteries, planting trees for the coexistence of humans and nature in harmony, and conservation of ecosystems. However, in recent years, the seriousness of environmental issues is increasing over a wide area, as evidenced by global warming, water shortages, resource depletion, and degradation of biodiversity. In response to the situation, Toyota believes it is necessary to take on new challenges that consider the world 20 or 30 years in the future, in order to remain closely aligned with the global environment. Accordingly, Toyota announced Toyota Environmental Challenge 2050 in October 2015. With the aims of reducing the environmental impact of vehicles as much as possible as well as moving toward a net positive impact, by 2050 in order to contribute to the realization of a sustainable society, the Toyota Environmental Challenge 2050 has set forth the following six challenges for Toyota to address. 1. New Vehicles Zero CO2 Emissions Challenge 2. Life Cycle Zero CO2 Emissions Challenge 3. Plant Zero CO2 Emissions Challenge 4. Challenge of Minimizing and Optimizing Water Usage 5. Challenge of Establishing a Recycling-Based Society and Systems 6. Challenge of Establishing a Future Society in Harmony with Nature Further strengthening collaboration with the Toyota group and all other stakeholders, Toyota will consolidate new ideas, dynamism and technology to tackle together the realization of a truly sustainable society from a longterm perspective. Automotive Operations Toyota's revenues from its automotive operations were 25,977.4 billion in fiscal 2016, 25,062.1 billion in fiscal 2015 and 23,781.4 billion in fiscal 2014. 13 Table of Contents Toyota produces and sells passenger vehicles, minivans and commercial vehicles such as trucks. Toyota Motor Corporation's subsidiary, Daihatsu Motor Co., Ltd. (\"Daihatsu\"), produces and sells mini-vehicles and compact cars. Hino Motors, Ltd. (\"Hino\"), also a subsidiary of Toyota Motor Corporation, produces and sells commercial vehicles such as trucks and buses. Toyota also manufactures automotive parts, components and accessories for its own use and for sale to others. On January 29, 2016, Toyota and Daihatsu announced that, with an aim to strengthen competitiveness in the small car segment, they entered into a share exchange agreement to make Daihatsu a wholly-owned subsidiary of Toyota as of August 1, 2016. Under a joint strategy, Toyota and Daihatsu will be able to plan and implement optimal strategies including combining their technical expertise and bases of operations, joint development of nextgeneration technology, bold cost reduction and expansion of product lineups with a global brand strategy. Daihatsu will play a key role in developing globally competitive small cars of both brands based on the technology Daihatsu has developed through manufacturing of mini-vehicles. Vehicle Models Toyota's vehicles (produced by Toyota, Daihatsu and Hino) can be classified into three categories: hybrid vehicles, conventional engine vehicles, and fuel cell vehicles. Toyota's product line-up includes subcompact and compact cars, mini-vehicles, mid-size, luxury, sports and specialty cars, recreational and sport-utility vehicles, pickup trucks, minivans, trucks and buses. Hybrid Vehicles The world's first mass-produced hybrid car was Toyota's Prius. It runs on an efficient combination of a gasoline engine and motor. This system allows the Prius to travel more efficiently than conventional engine vehicles of comparable size and performance. The hybrid design of the Prius also results in the output of 75% less emission than the maximum amount allowed by Japanese environmental regulations. Toyota views the Prius as the cornerstone of its emphasis on designing and producing eco-friendly automobiles. In the last three years, Toyota has strengthened its hybrid lineup by introducing the fully remodeled IS300h in May 2013, the fully remodeled Corolla Axio HV/Corolla Fielder HV in August 2013, the fully remodeled Harrier HV in December 2013, the fully remodeled Voxy HV/Noah HV in January 2014, the NX300h in July 2014, the RC300h and the Esquire HV in September 2014, the fully remodeled Alphard and Vellfire in January 2015, the Sienta HV in June 2015, the fully remodeled RX-HV in September 2015 and the fully remodeled Prius in November 2015. In the hybrid vehicles area, where strong growth is anticipated, Toyota aims to continue its efforts to offer a diverse line-up of hybrid vehicles, enhance engine power while improving fuel economy and otherwise work towards increasing the sales of hybrid vehicles. Fuel Cell Vehicles Toyota began limited sales of a fuel cell vehicle in Japan and the United States in December 2002. In June 2005, Toyota's new fuel cell passenger vehicle became the first in Japan to acquire vehicle type certification under the Road Vehicles Act, as amended, on March 31, 2005, by Japan's Ministry of Land, Infrastructure, Transport and Tourism. Leases for fuel cell vehicles began in July 2005. By 2007, Toyota was able to make improvements to start-up and cruising distance at temperatures below freezing, which were technological challenges. Toyota has made advances by solving technological issues such as the above and worked towards the practical use of such solutions, culminating in the general sale of the world's first mass produced fuel cell vehicle MIRAI in Japan beginning in December 2014, in the United States beginning in June 2015 and in Europe beginning in September 2015. 14 Table of Contents Conventional Engine Vehicles Subcompact and Compact Toyota's subcompact and compact cars include the four-door Corolla sedan, which is one of Toyota's bestselling models. The Yaris, marketed as the Vitz in Japan, is a subcompact car designed to perform better and offer greater comfort than other compact cars available in the market with low emissions that are particularly attractive to European consumers. In Europe, Toyota introduced the fully remodeled Aygo in June 2014. In Japan, Toyota introduced the remodeled Corolla Axio/Fielder in May 2012, the remodeled Porte and its variant, the Spade, in July 2012 and the remodeled Auris in August 2012. In India, Asia, China and other markets, Toyota introduced the Etios and Vios. In addition, Toyota introduced the AGYA, which is designed and manufactured by Daihatsu. Moreover, Scion iA, which is designed and manufactured by Mazda Motor Corporation, was newly introduced in July 2015. Mini-Vehicles Mini-vehicles are manufactured and sold by Daihatsu. Daihatsu manufactures mini-vehicles, passenger vehicles, commercial vehicles and auto parts. Mini-vehicles are passenger vehicles, vans or trucks with engine displacements of 660 cubic centimeters or less. Daihatsu sold approximately 530 thousand mini-vehicles and 177 thousand automobiles on a consolidated basis during fiscal 2016. Daihatsu's largest market is Japan, which accounted for approximately 80% of Daihatsu's unit sales during fiscal 2016. From 2011, Toyota began to sell some mini-vehicles manufactured by Daihatsu under the Toyota brand. Mid-Size Toyota's mid-size models include the Camry, which has been the bestselling passenger car in the United States for eighteen of the past nineteen calendar years (from 1997 to present) and also for the last fourteen consecutive years. The Camry was fully remodeled in August 2011. Camry sales in the United States for 2015 were approximately 429 thousand units (including Camry hybrids). In addition, Toyota's other mid-size models include the REIZ for the Chinese market, the Avensis, which was remodeled in November 2008 for the European market, and the Mark X, which was remodeled in October 2009 for the Japanese market. Luxury & Large In North America, Europe, Japan and other regions, Toyota's luxury lineup consists primarily of vehicles sold under the Lexus brand name. Lexus pas