Notice on Share Consolidation, Change in Share Unit and Partial Revision to Articles of Incorporation

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1 To Whom It May Concern Listed Company Name TOTO LTD. Representative Code No. Contact Person May 19, 2015 Madoka Kitamura President, Representative Director 5332 (First Section of Tokyo/Nagoya Stock Exchanges, Fukuoka Stock Exchange) Masanori Akasaka General Manager of Public & Investors Relations Dept. (TEL: ) Notice on Share Consolidation, Change in Share Unit and Partial Revision to Articles of Incorporation TOTO LTD. (the Company ) announces that it adopted a resolution at its Board of Directors meeting held today to submit a proposal for the consolidation of its shares to the 149th Ordinary General Meeting of Shareholders to be held on June 26, The Company also resolved to change the number of shares constituting one unit of shares and revise the articles of incorporation on condition that the proposal for the share consolidation will be approved at the said Ordinary General Meeting of Shareholders, as described below. 1. Share Consolidation (1) Reason for share consolidation Under their Action Plan Toward the Unification of Share Trading Units, Japan s stock exchanges seek to unify the minimum trading units of shares of all listed domestic corporations at 100 shares. In consideration of this background and the Company s status as an enterprise listed on the Tokyo Stock Exchange, Nagoya Stock Exchange and the Fukuoka Stock Exchange, the Company has decided to change the number of shares constituting one unit (the number of shares per share unit or the share unit) to 100 shares from 1,000 shares. Along with the change in the share unit, the Company will also consolidate its shares (at a consolidation ratio of one share for every two shares) in order to allow the share price to be at a level set forth by the stock exchanges as a desirable level for an investment unit (50,000 yen or more and less than 500,000 yen). The consolidation will be conducted also in consideration of stable holdings of Company shares by shareholders and possible fluctuations of stock prices for the mid- to long-term. 1

2 (2) Details of share consolidation 1) Type of shares to be consolidated Common shares 2) Method and ratio of consolidation On October 1, 2015, every two shares held by shareholders on the final register of shareholders as of September 30, 2015, will be consolidated into one share. 3) Decrease in number of shares (The numbers may change in the future.) outstanding shares before consolidation (as of March 31, 2015) 353,962,595 shares Decrease in number of shares due to consolidation 176,981,298 shares outstanding shares after consolidation 176,981,297 shares (Note) The Decrease in number of shares due to consolidation is a theoretical value obtained by multiplying the number of outstanding shares before consolidation by the consolidation ratio of shares. (3) Impact of share consolidation The share consolidation will reduce the number of outstanding shares by half. As there will be no change in net assets and others, the value of net assets per share will become twice as large as before the consolidation. Excluding other factors like stock fluctuations in the market, there will be no change in the asset value of Company shares. The Company also revised its dividend forecast for the year ending March 2016, announced on April 30, However, the revision came as the value of the per-share dividend will change following the stock consolidation, and there is no material change in the forecast. For details, please refer to the Notice of Revision to Dividend Forecast in Accordance with Share Consolidation, disclosed separately today. (4) Decrease in number of shareholders due to share consolidation Below is the composition of shareholders of the Company based on the register of shareholders as of March 31, shareholders (ratio) shares held (ratio) All shareholders 22,508 (100%) 353,962,595 shares (100%) Shareholders holding less than two shares 226 (1.0%) 226 shares (0.0%) Shareholders holding two shares or more 22,282 (99.0%) 353,962,396 shares (100.0%) * When the Company consolidates its shares based on the composition of shareholders above, the 226 shareholders who hold less than two shares (shares held by them total 226 shares) will lose their shareholder status due to the share consolidation. However, before the share consolidation takes effect, they can apply for the procedures to additionally purchase fractional shares less than the new share unit or to have their fractional shares less than the new share unit purchased by the Company. They are advised to contact the securities companies with which they have accounts or, if they do not have securities company accounts, to contact the administrator of the register of shareholders mentioned below. 2

3 (5) Handling of fractional shares less than one share If any fractional shares less than one share are created as a result of the share consolidation, such shares will be sold in a lump by the Company, pursuant to the provisions of the Companies Act. The proceeds from the sale will be distributed to the shareholders of the fractional shares in proportion to the numbers of their fractional shares. (6) authorized shares as of effective date of share consolidation In response to the decrease in outstanding shares due to the share consolidation and with the aim of adjusting the number of authorized shares, the Company will decrease the number of authorized shares in proportion to the consolidation ratio (one share for every two shares) as of the effective date of the share consolidation (October 1, 2015). authorized authorized shares after change shares before change (as of October 1, 2015) 1,400,000,000 shares 700,000,000 shares (7) Condition for share consolidation The share consolidation is subject to the approval of the proposal on the share consolidation at the Company s 149th Ordinary General Meeting of Shareholders to be held on June 26, Change in Share Unit (1) Reason for change in share unit As described in 1. (1) Reason for share consolidation above, the change in the share unit is responding to the Action Plan Toward the Unification of Share Trading Units of the Japanese stock exchanges. (2) Detail of change in share unit The Company will change the number of shares per share unit to 100 shares from 1,000 shares on October 1, (3) Condition for change in share unit The change in the number of shares per unit is subject to the approval of the proposal regarding 1. Share Consolidation as described above, at the Company s 149th Ordinary General Meeting of Shareholders to be held on June 26, Partial Revision to Articles of Incorporation (1) Reason for partial revision to articles of incorporation The Company will revise Article 5 ( Authorized Shares) of the articles of incorporation to consolidate its shares as described in 1. (1) Reason for share consolidation above and reduce the number of authorized shares in accordance with the ratio of the share consolidation. The Company will also revise Article 6 (Share Unit) of the articles of incorporation to change the number of shares per unit to 100 shares from 1,000 shares. In revising the articles, the Company will set a supplementary provision describing that the revision will take effect on the effective date of the share consolidation of October 1, 2015, and delete the supplementary provision as of the same day. 3

4 (2) Details of revision to articles of incorporation The details of the revision are as set forth below: Comparison table of excerpts from the existing articles of incorporation and the draft revised articles of incorporation (Underline denotes change) Existing articles of incorporation Proposed Revisions Chapter 2 Shares of Stock Chapter 2 Shares of Stock ( Authorized Shares) Article 5 The total number of shares that the Company may issue shall be 1,400,000,000 shares. ( Shares Per Unit) Article 6 The number of shares per unit of the Company shall be 1,000 shares. ( Authorized Shares) Article 5 The total number of shares that the Company may issue shall be 700,000,000 shares. ( Shares Per Unit) Article 6 The number of shares per unit of the Company shall be 100 shares. (Newly enacted) Supplemental Provisions (Effective date of partial revision to the articles of incorporation) The revision to Articles 5 and 6 of the articles of incorporation shall become effective on October 1, 2015, the effective date of a share consolidation, proposed for approval at the Company s 149th Ordinary General Meeting of Shareholders, held on June 26, This supplemental provision shall be deleted as of the effective date of the share consolidation. (3) Condition for partial revision to articles of incorporation The partial revision to the articles of incorporation is subject to the approval of the proposal regarding the share consolidation at the Company s 149th Ordinary General Meeting of Shareholders to be held on June 26, Schedule Resolutions at the Board of Directors meeting May 19, 2015 Ordinary General Meeting of Shareholders June 26, 2015 Effective date of the share consolidation October 1, 2015 Effective date of the change in the number of authorized shares October 1, 2015 Effective date of the change in share unit October 1, 2015 *As mentioned above, of the share consolidation and the change in the number of authorized shares will go into effect on October 1, However, due to the transfer procedures after stock trading, the trading unit on the Tokyo Stock Exchange will be changed from 1,000 shares to 100 shares on September 28, Appendix (Reference) Questions and Answers Regarding the Share Consolidation and the Change in the Shares Per Share Unit 4

5 (Reference) Questions and Answers Regarding the Share Consolidation and the Change in the Shares Per Share Unit Q 1 What do you mean by a consolidation of shares? A. A share consolidation is a procedure to consolidate multiple shares into a smaller number of shares. In this case, the Company plans to consolidate its shares at a ratio of one share for every two shares. Q 2 What do you mean by a change in the number of shares per share unit? A. A number of shares per share unit is the number of shares that constitutes one voting right at the general meeting of shareholders pursuant to the Companies Act, and is used at stock exchanges as the minimum number of shares for trading. At present, the number of shares per share unit for the Company is 1,000 shares, but this will become 100 shares with this change in the number of shares per share unit. Q 3 What is the purpose of the share consolidation and the change in the number of shares per share unit? A. Under their Action Plan Toward the Unification of Share Trading Units, the Tokyo Stock Exchange and other Japanese stock exchanges seek to unify the stock trading units of all listed domestic corporations to 100 shares in a bid to improve convenience for investors and other market users and enhance international competitiveness of the Japanese securities market. In consideration of this background and the Company s status as an enterprise listed on the Tokyo Stock Exchange, Nagoya Stock Exchange and Fukuoka Stock Exchange, the Company has decided to change its number of shares per share unit to 100 shares from 1,000 shares. Along with the change in the share unit, the Company will also set its share price per unit at a level set forth by the stock exchanges as a desirable level for an investment unit (50,000 yen or more and less than 500,000 yen) and consolidate its shares (at a consolidation ratio of one share for every two shares) in order to adjust the investment unit to an appropriate level, in consideration of stable holdings of Company shares by shareholders and possible fluctuations of stock prices for the mid- to long-term. Q 4 Will the share consolidation have no impact on the asset value of the Company s shares though the number of shares held will decrease? A. There will be no change in the Company s assets or capital before and after the implementation of the share consolidation. Accordingly, apart from other factors, including stock market fluctuations, there will be no change in the asset value of the Company s shares held by its shareholders in theory. This is because the number of shares held will be reduced by half following the share consolidation but the net asset value per share will be double the level before the consolidation. In addition, the stock price will also be doubled by the share consolidation, in theory. Q 5 What will become of dividends received by shareholders? A. Although the number of shares of the Company held by its shareholders will be reduced by half due to the share consolidation, the Company plans to set a level for dividends per share in consideration of the consolidation ratio (every two shares consolidated into one share) after the effective date of the share consolidation. Accordingly, apart from other factors such as fluctuations in business results, there will be no change in the total amount of dividends received by shareholders as a result of the share consolidation. However, no dividends will be received for any fractional shares (shares less than one share) created by the share consolidation. 5

6 Q6 What will become of the numbers of shares and the voting rights owned by shareholders? A. The number of shares held by shareholders after the share consolidation will be obtained by multiplying the number of the shares recorded on the register of shareholders as of September 30, 2015, by half (Fractional shares less than one share will be cut down). In addition, every 100 shares held by shareholders after the share consolidation will represent one voting right. Below are examples of the numbers of shares and voting rights held by shareholders before and after the effective date of the share consolidation and the change in the number of shares per unit. Before becoming effective After becoming effective shares held voting rights shares held voting rights Fractional shares Ex. 1 1, Ex. 2 1, None Ex Ex None Ex Ex If the share consolidation results in the creation of fractions of less than one share (such as in Examples 1, 3, 5 and 6), the Company will sell all of these fractional shares in a lump sum and pay the proceeds from the said sale to shareholders who owned the fractional shares in proportion to the number of fractional shares they owned. The Company plans to pay the proceeds from the above-mentioned sale of fractional shares in around December Furthermore, in the case of a shareholder owning only one share before the effective date (such as in Example 6), all shares owned by the said shareholder will become fractional shares through the share consolidation, causing the said shareholder to lose his or her status as a shareholder. We would like to ask their understanding for the situation. Q7 Is there any way of avoiding the creation of fractional shares? A. It is possible to avoid becoming subject to the fractional share treatment by using the system under which you may demand that the Company purchase shares less than one unit from you, or that you purchase additional shares from the Company, prior to the effective date of the share consolidation. For details of these procedures, you are kindly requested to contact the securities company with which you have an account or, if you do not have a securities company account, to contact the below-mentioned administrator of the register of shareholders of the Company. Q 8 The share consolidation will create shares less than one unit. Will it be possible to demand that the Company purchase fractional shares or sell additional shares less than one unit after the share consolidation? A. Even after the share consolidation, it will be possible for shareholders to use the system under which you may demand that the Company purchase shares less than one unit from you, or that you purchase additional shares from the Company, in connection with shares less than one unit. For details of these procedures, it is advised that you will contact the securities companies with which you have accounts or, if you do not have a securities company account, to contact the below-mentioned administrator of the register of shareholders of the Company. Q 9 Do shareholders have to implement any procedures? A. There are no particular procedures that shareholders have to implement. 6

7 Q 10 What will become of the shareholder benefit plan? A. The Company plans to review the shareholder benefit plan for the next year. The details of the review will be announced at a later date. (Inquiries) If you have inquiries about the share consolidation and the change in the number of shares per unit, please contact the securities company with which you have an account, or the below-mentioned account management institution for the special account (administrator of the register of shareholders). Stock Transfer Agent Department, Mitsubishi UFJ Trust and Banking Corporation Higashisuna, Koto-ku, Tokyo Phone: (toll-free in Japan) Reception hours: 9:00-17:00 (ex. Saturdays, Sundays, national holidays) 7