Toyota Motor : Corporate Governance Reports

(Translation)

December 23, 2021

TOYOTA MOTOR CORPORATION

Akio Toyoda Telephone Number: 0565-28-2121

Code Number: 7203 https://global.toyota/en/

Corporate governance at Toyota Motor Corporation ("TMC") is as follows:

1. TMC's Basic Policy on Corporate Governance and Capital Structure, Business Attributes and Other Basic Information

1. Basic Policy

TMC has positioned the sustainable growth and the stable long-term growth of corporate value as priority management issues.

Believing that in carrying this out, it is essential that it both builds positive relationships with all stakeholders, including shareholders and customers as well as business partners, local communities and employees, as well as continues to supply products that will satisfy its customers, TMC has been working to enhance corporate governance.

[Reason not to implement each principle of Corporate Governance Code]

Descriptions in this report are based on the revised Corporate Governance Code issued in June 2021, which includes matters relating to the Prime Market of the Tokyo Stock Exchange, which are scheduled to be applied from April 2022.

TMC implemented all of the principles of its Corporate Governance Code.

[Disclosure based on each principle of Corporate Governance Code]

1. Business principles【Principle 3.1 (i)】

1. Corporate philosophy
   TMC, since its formation till today, has been following the "Toyoda Precepts," which

captures the spirit of Sakichi Toyoda, the founder of the Toyota Group, and his insights into research, inventions and business management, as the foundation for its management.

Toyoda Precepts (https://global.toyota/en/company/vision-and-philosophy/philosophy/)

In 1992, given changes in the social landscape and the business structure, TMC established "Guiding Principles at Toyota" based on the "Toyoda Precepts" in order to promote business in cooperation with people in different countries and regions throughout the world, notwithstanding differences in cultures and values.

"Guiding Principles at Toyota"

1. Honor the language and spirit of the law of every nation and undertake open and fair business activities to be a good corporate citizen of the world.
2. Respect the culture and customs of every nation and contribute to economic and social development through corporate activities in their respective communities.
3. Dedicate our business to providing clean and safe products and to enhancing the quality of life everywhere through all of our activities.

1. 1. Create and develop advanced technologies and provide outstanding products and services that fulfill the needs of customers worldwide.
   2. Foster a corporate culture that enhances both individual creativity and the value of teamwork, while honoring mutual trust and respect between labor and management.
   3. Pursue growth through harmony with the global community via innovative management.
   4. Work with business partners in research and manufacture to achieve stable, long-term growth and mutual benefits, while keeping ourselves open to new partnerships.
2. Vision

Taking into account the business environment then, the "Toyota Global Vision" was published in March 2011 based on the "Guiding Principles at Toyota." The "Toyota Global Vision" clarifies the direction that TMC should take as a company, based on the thought that "Toyota aspires to be a company that is chosen by its customers. Toyota wants to be a company that brings smiles to the faces of customers who have chosen us."

"Toyota Global Vision"

(https://global.toyota/en/company/vision-and-philosophy/global-vision/)

(3) Toyota Philosophy

In order to advance its transition to a mobility company, TMC has reflected on the path it has taken thus far and has formulated the "Toyota Philosophy" as a roadmap for the future.

TMC's mission is "Producing Happiness for All" by expanding the possibilities of people, companies and communities through addressing the challenges of mobility as a mobility company. In order to do so, TMC will continue to create new and unique value with various partners by relentlessly committing towards monozukuri (manufacturing), and by fostering imagination for people and society.

Please see the end of this report for details on the "Toyota Philosophy."

2. Business strategies and business plans 【Principle 3.1 (i), Supplementary Principle 3.1.3】

Towards the achievement of its "Toyota Global Vision," TMC is analyzing its customers' values, technology trends, market trends and other factors looking further into 2030 and beyond, clarifying its business challenging and, based on that, discussing its long-term direction. Furthermore, having grasped the business situation based on its key businesses (vehicles, financial, others) and business regions (Japan, North America, Europe, Asia, others), TMC has established a medium-term management plan for each region, taking into consideration the prospect of markets and exchange rates, its production and supply system on a global basis and other factors.

As the automotive industry enters into a phase of revolutionary evolution at an unprecedented pace, TMC has decided to focus in 2020 on efforts toward fostering innovation to open the way to "our future" (challenges for the future) and strengthening true competitiveness (sustainable growth) by implementing "innovation of the way we work," as an initiative that we must carry through, in order to survive in a time of profound transformation that could happen only once in a hundred years and realize a new mobility society. In addition, to facilitate prompt and accurate decision-making, a senior management meeting is held every week, and information is shared in a timely manner among top management and front-line personnel through various means of communication.

TMC has disclosed in the "Annual Report" (scheduled to be reorganized into "Integrated Reports") its long-term strategy for enhancing its corporate value and the ways that it is contributing to the sustainable development of society in order to communicate them to stakeholders. In addition, as for TMC's initiatives related to sustainability, it has developed the Sustainability Fundamental Policy and various other individual policies, and is striving to implement them to contribute to the sustainable development of society through corporate activities, which has been TMC's objective since its founding. TMC has disclosed information such as its policies and the status of initiatives in the "Sustainability Data Book." (The Sustainability Data Book is updated from time to time in accordance with the progress of TMC's activities.)

Please read this report and the Sustainability Data Book for information about TMC's initiatives regarding investment in human capital, etc.

As for intellectual property, TMC is focusing on the issues to be addressed that are described in the Japanese annual securities report and "Selected Initiatives" in Item 4.B of the

20-F. Specifically, as part of its efforts to address social issues such as bringing about a carbon neutral society, as well as through creating autonomous vehicles and connected car technologies and through its initiatives regarding Woven City, TMC is actively investing in intellectual property and intangible assets. TMC expects 1.18 trillion yen in research and development expenses for this fiscal year, including the aforementioned investments, and is filing approximately 12,000 patent applications a year domestically and internationally. TMC also plans on disclosing its initiatives regarding its investment in intellectual property in the "Sustainability Data Book".

TMC has disclosed its initiatives regarding climate-change related risks and opportunities based on the TCFD (Task Force on Climate-related Financial Disclosures) framework recommendations in the Sustainability Data Book.

In order to convey top management's aspirations and the company's direction to all stakeholders of TMC, TMC communicates what TMC is really like through "Toyota Times."

"Annual Report" (https://global.toyota/en/ir/library/annual/)

"Sustainability Data Book" (https://global.toyota/en/sustainability/report/sdb/) "Japanese annual securities report" (https://global.toyota/jp/ir/library/securities-report/) "20-F"(https://global.toyota/en/ir/library/sec/)

"Toyota Times" (https://toyotatimes.jp/en/)

3. Basic views and guidelines on corporate governance 【Principle 3.1 (ii)】

Please see 1. "Basic Policy" of this report under the section entitled "I. TMC's Basic Policy on Corporate Governance and Capital Structure, Business Attributes and Other Basic Information."

4. Roles and duties of the Board of Directors and senior management

The scope of delegation to the management 【Supplementary Principle 4.1.1】

By specifying matters to be resolved at its Board of Directors and matters to be reported to its Board of Directors in the Regulations of the Board of Directors, TMC delegates management to executive officers and carries out "acceleration of decision-making" and "appropriate supervision."

With respect to its framework for executing its operations, TMC, with the aim of realizing the Toyota Global Vision, has been continuing its efforts to respond swiftly to the external environment, which is changing faster than ever. Following the introduction of "region-based management" in 2011, the "business unit system" in 2013, and the "in-house company system" in 2016, in April 2017, TMC further clarified that Members of the Board of Directors are responsible for decision-making and management oversight and that operating officers are responsible for operational execution for purposes of further accelerating decision-making and operational execution.

Furthermore, in 2018, TMC brought forward the timing of executive changes from April, when it used to take place, to January, in order to further accelerate management oversight that is fully coordinated with the workplace. In addition, TMC transformed the company structure into one that enables decision-making that is both close to the needs of customers and close to where the action takes place, by taking measures such as reviewing the corporate strategy function and restructuring the Japan Sales Business Group into a group based by regions rather than sales channels.

In 2019, to further advance its "acceleration of management" and the development of a diverse and talented workforce, TMC made executive and organizational changes as follows.

• Executives are composed of only senior managing officers and people of higher rank.
• A new classification called "senior professional/senior management" (kanbushoku in Japanese) grouped and replaced the following titles or ranks: managing officers,

executive general managers, (sub-executive managerial level) senior grade 1 and senior grade 2 managers, and grand masters

From the perspective of appointing the right people to the right positions, senior professionals/senior management are positioned in a wide range of posts, from those of chief officer, deputy chief officer, plant general manager, senior general manager to group manager,

regardless of age or length of employment, to deal with management issues as they arise and to strengthen their development as part of a diverse and talented workforce through genchi genbutsu (on-site learning and problem-solving).

In April 2020, TMC consolidated the post of executive vice president and the post of operating officer into the post of operating officer and in July 2020, clarified the responsibilities of operating officers. TMC redefined the role of operating officer to be members who, together with the president, have cross-functional oversight of the entire company. Furthermore, in-house company presidents, regional CEOs and chief officers, as on-site leaders of business implementation elements, were given authority while being consolidated into the rank of senior professionals/senior management. The roles of operating officers and senior professionals/senior management are to be determined where and as needed, and persons appointed as operating officers and senior professionals/senior management are to change in accordance with the challenges faced and the path that should be taken, as the company exercises greater flexibility than ever in appointing the right people to the right positions.

TMC, based on its basic policy of appointing the right people to the right positions, has been swiftly and continuously innovating. TMC will further press forward with the tide of such innovations, aiming for a corporate structure capable of carrying out management from a viewpoint that is optimal for a global company.

Views on the balance, diversity and size of the Board of Directors 【Supplementary Principle

4.11.1】

With respect to the system regarding Members of the Board of Directors, TMC has comprehensively considered and appointed the right person for the right position to make appropriate and prompt decision-making. TMC believes that it is critical to appoint individuals who contribute to decision-making aimed at sustainable growth into the future according to the concept of the "Toyoda Precepts," which set forth our founding philosophy. Moreover, these individuals should be able to play a significant role in transforming TMC into a "mobility company" through responding to social transformation by using CASE (an acronym for Connected, Autonomous/Automated, Shared, and Electric) external partnerships based on trust and friendship and internal two-way interactive teamwork, while working in furtherance of the SDGs and towards solutions for other social challenges.

In addition, TMC expects the Outside Members of the Board of Directors to utilize their extensive and rich experience and knowledge in TMC's management from an independent standpoint.

The Board of Directors shall consist of persons with the extensive and deep knowledge and significant expertise that TMC needs, with consideration given to diversity.

5. System to appropriately perform roles and duties of the Board of Directors and senior management

Policy and procedures for determining remuneration for top-level executives and Members of the Board of Directors 【Principle 3.1 (iii), Supplementary Principle 4.10.1】

TMC believes that it is critical to appoint individuals who contribute to decision-making aimed at sustainable growth into the future according to the concept of the "Toyoda Precepts," which set forth our founding philosophy. Moreover, these individuals should be able to play a significant role in transforming TMC into a "mobility company" through responding to social transformation by using CASE external partnerships based on trust and friendship and internal two-way interactive teamwork, while working in furtherance of the SDGs and towards solutions for other social challenges. TMC's director compensation system is an important means through which to promote various initiatives and is determined based on the following policy.

It should be a system that encourages Members of the Board of Directors to work to improve the medium- to long-term corporate value of TMC

It should be a system that can maintain compensation levels that will allow TMC to secure and retain talented personnel

It should be a system that motivates Members of the Board of Directors to promote management from the same viewpoint as our shareholders with a stronger sense of responsibility as corporate managers

Remuneration and other payments to the Board of Directors is paid within the total amount of remuneration as resolved at the shareholders' meeting. The Board of Directors decides by resolution the policy for determining remuneration for and other payments to each member of the Board of Directors. Remuneration for Members of the Board of Directors is effectively linked to corporate performance while reflecting individual job responsibilities and performance. Remuneration standards in each member's home country are also taken into account when determining remuneration amounts and methods. Remuneration for Outside Members of the Board of Directors and Audit & Supervisory Board Members consists only of fixed payments. As a result, this remuneration is not readily impacted by business performance, helping to ensure independence from management.

The amounts of remuneration for the Company's Members of the Board of Directors and the remuneration system are decided by the Board of Directors and the "Executive Compensation Meeting," a majority of the members of which are Outside Members of the Board of Directors, to ensure the independence of the decisions. The Executive Compensation Meeting consists of Takeshi Uchiyamada, Member and Chairman of the Board of Directors (Chairman of the Executive Compensation Meeting), Koji Kobayashi, Member of the Board of Directors, and Ikuro Sugawara, Sir Philip Craven and Teiko Kudo, each an Outside Member of the Board of Directors. The Board of Directors resolves the policy for determining remuneration for and other payments to each member of the Board of Directors and the executive remuneration system as well as the total amount of remuneration for a given fiscal year. The Board of Directors also resolves to delegate the determination of the amount of remuneration for each Member of the Board of Directors to the Executive Compensation Meeting. The Executive Compensation Meeting reviews the remuneration system for Members of the Board of Directors and senior management on which it will consult with the Board of Directors and determines the amount of remuneration for each Member of the Board of Directors, taking into account factors such as corporate performance as well as individual job responsibilities and performance, in accordance with the policy for determining remuneration for and other payments to each member of the Board of Directors established by the Board of Directors. The Board of Directors considers that such decisions made by the Executive Compensation Meeting are in line with the policy on determining remuneration and other payments for each member of the Board of Directors.

Remuneration for Audit & Supervisory Board Members is determined by the Audit & Supervisory Board within the scope determined by resolution of the shareholders' meeting.

Policy and procedures for appointing/dismissing top-level executives and nominating candidates for Members of the Board of Directors and Audit & Supervisory Board Members 【Principle 3.1

(iv), Supplementary Principle 4.10.1】

With respect to the system regarding Members of the Board of Directors, TMC has comprehensively considered and appointed the right person for the right position to make appropriate and prompt decision-making. TMC believes that it is critical to appoint individuals who contribute to decision-making aimed at sustainable growth into the future according to the concept of the "Toyoda Precepts", which set forth our founding philosophy. Moreover, these individuals should be able to play a significant role in transforming TMC into a "mobility company" through responding to social transformation by using CASE external partnerships based on trust and friendship and internal two-way interactive teamwork, while working in furtherance of the SDGs and towards solutions for other social challenges.

In addition, TMC expects the Outside Members of the Board of Directors to utilize their extensive and rich experience and knowledge in TMC's management from an independent standpoint.

The Board of Directors shall consist of persons with the extensive and deep knowledge and significant expertise that TMC needs, with consideration given to diversity.

With the aim of ensuring independence, members of TMC's "Executive Appointment Meeting," of which a majority of the members are Outside Members of the Board of Directors,