Toto : Corporate Governance Report

This notice has been translated from the original notice in Japanese.

In the event of any discrepancy, the original in Japanese shall prevail.

Updated: November 29, 2021

TOTO Ltd.

President, Representative Director

Noriaki Kiyota

Contact: General Manager of Management Planning Dept. Yoshihisa Tanaka

Securities code: 5332

https://jp.toto.com/

The corporate governance of TOTO Ltd. is described below.

1. Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information

1. Basic Views

The TOTO Group strives to be a great company, trusted by people all around the world, contributing to the betterment of society. In addition to being a corporate entity engaged in the pursuit of profit through fair competition, the Group conducts its business in such a way as to continue to benefit society broadly. In order to realize this target, we believe it is important to build a system for pursuing and supervising fair and equitable management, and clearly define a philosophy that serves as the basis of such a system.

1. The TOTO Group has developed a philosophy system for TOTO Group management. This includes a common Group philosophy, representing the inherited values of TOTO that will be carried forward into the future. This represents the "heart" of our philosophy. Also, our philosophy system includes visions for business activities representing the direction of our action to be reviewed in accordance with the demands of the times. This is positioned as the "body in action." All of our business activities are based on this philosophy system.

[Company Mottos]

"Take pride in your work and strive to do your best."

"Quality and Uniformity" "Service and Trust" and "Cooperation and Prosperity"

[TOTO Group Corporate Philosophy]

The TOTO Group strives to be a great company, trusted by people all around the world, and contributing to the betterment of society.

To achieve our philosophy, TOTO will:

• Create an enriched and more comfortable lifestyle and culture built on our plumbing products.
• Pursue customer satisfaction by exceeding expectations with our products and services.
• Provide high-quality products and services through ongoing research and development.
• Protect the global environment by conserving finite natural resources and energy.
• Create an employee friendly work environment that respects the individuality of each employee.

[Charter of TOTO Group Corporate Behavior]

The TOTO Group wants to be an entity that constantly assumes a leading role in the realization of a sustainable society by creating added value, which is useful for society, and employment, as well as by autonomous and responsible actions through fair and free competition. To realize that, all people working for the TOTO Group strive to play an active role with a strong sense of duty based on the concepts indicated in the corporate motto and philosophy, and to fulfill their social responsibilities.

The Charter of TOTO Group Corporate Behavior stipulates the basic stance of behavior of all people working for TOTO Group to realize all stakeholders' satisfaction.

• The TOTO Group shall pursue customer satisfaction and provide products and services that are environmentally friendly, safe and easy to use through innovation to realize sustainable economic growth and solve social issues.
• The TOTO Group shall develop sensible business activities in transparent, fair ways, and responsible procurement, and sustain sound normal relationships with political organizations and governmental administrations.
• The TOTO Group shall facilitate communications with society; disclose corporate information proactively, effectively, and fairly; and have constructive dialogs with a variety of stakeholders to improve corporate value.
• The TOTO Group shall respect the human rights of every person in all countries and regions in its business activities and contribute to their development.
• The TOTO Group shall improve customer satisfaction through appropriate information provision on products and services and honest communication.
• The TOTO Group shall improve the ability of all people working for TOTO and realize a workstyle where diversity and individuality are respected in a pleasant working environment where importance is placed on health and safety.
• The TOTO Group shall build awareness of global environment issues as common issues of all humankind and aggressively tackle these issues from a global point of view as essential for the existence and activities of the company.
• As a good corporate citizen, the TOTO Group shall constructively participate in and contribute to the development of communities and society overall.
• The TOTO Group shall be prepared for actions of antisocial powers, terrorist attacks, and cyberattacks, as well as natural disasters, and thoroughly implement organizational crisis management.
• TOTO's top management shall build effective governance and, as their role, rigidly put corporate ethics into practice not only within the TOTO Group but also across supply chains, including business partners. When a situation that conflicts with this charter and may lose the trust of society arises,
  TOTO's top management shall exercise leadership to resolve it.

1. To ensure operational decisions and business execution in compliance with relevant laws and regulations and TOTO's Articles of Incorporation, TOTO has a Board of Directors and an Audit & Supervisory Board, and retains independent accounting auditors.
   The Board of Directors, emphasizing fairness, objectivity, and transparency, has appointed three Outside Directors who are independent of the TOTO Group. The Outside Directors give various advice and make proposals on our overall management.
   The Audit & Supervisory Board audits the business execution of Directors and consists of four members, including two outside members. We have built a system to ensure their effective audits through their attendance of major meetings, including meetings of the Board of Directors, and the exchange of opinions with Directors on a regular basis.
2. To complement audits by Audit & Supervisory Board Members and independent accounting auditors and to build a stronger internal control system, we have established the Internal Audit Office in-house, which is independent of operational divisions. With the establishment of the Internal Audit Office, we have strengthened our internal audits under the direction of the President.
   Audit & Supervisory Board Members, independent accounting auditors and members of the Internal Audit Office carry out audits as a three-party audit team. In addition, we strive to enhance the quality and effectiveness of audits through close collaboration among the three parties, which involves reviewing audit results by Audit & Supervisory Board Members and exchanging information at meetings, among other activities.

[Reasons for Non-compliance with the Principles of the Corporate Governance Code] [Updated] All principles are provided based on the code revised in June 2021.

We believe that in order to supervise business operations and to make important decisions, TOTO's Board of Directors must be composed of members with diverse perspectives, experience and highly professional skills. The current board members include several employees with experience working overseas to respond to the globalization of the business. Although all the members currently are male, we would like to appoint a diverse range of members that include female members in the future.

[Disclosure Based on the Principles of the Corporate Governance Code] [Updated]

All principles are provided based on the code revised in June 2021.

Comprehensively taking into account the maintenance and strengthening of business alliances and various business transactions, as well as relationships involving business activities, TOTO strategically holds listed stocks in which the strengthening of relationships would contribute to an increase in corporate value. At Meetings of the Board of Directors, TOTO quantitatively evaluates the transaction volume and safety of such stocks and qualitatively evaluates whether they contribute to an enhancement of the corporate value, judges whether or not to continue holding them, and makes decisions to sell shares that no longer need to be held, annually on an each brand basis.

TOTO exercises voting rights with regard to strategic stockholdings after carefully examining the details of the proposals and judging whether to contribute to an increase in the corporate value of investees for the medium to long terms on the assumption of contributing to the interests of TOTO. Additionally, TOTO converses with the investees on details of the proposals, if necessary.

TOTO has established rules where competitive transactions and transactions involving a conflict-of- interest with Directors or companies that Directors substantially control shall be subject to an approval of the Board of Directors.

TOTO also investigates and specifies related parties that carry the possibility of having an impact on

TOTO's financial position and operating results based on the "Accounting Standard for Related Party Disclosures" and the "Guidance on Accounting Standard for Related Party Disclosures," confirms the

existence of transactions with said related parties and the importance of said transactions, and, if there are transactions to be disclosed, carries out such disclosure accordingly.

The TOTO Group respects the individuality of diverse human resources, such as age, sexuality, and nationality, and wants to create an enriched and more comfortable lifestyle and culture built through new ideas born from it. In the Mid-Term Management Issues (WILL 2030 STAGE 1) by 2023, TOTO promotes developing an environment where a diverse range of talents play important roles by promoting female advancement, employment of people with disabilities, efforts to protect LGBTQ rights, and Challenge Support for all employees, including Achievement of 65 Years Old Retirement, aiming to create a company where, based on its strength in diversity, diverse human resources gather and work comfortably irrespective of age, working time, location, and type of job, and have the motivation to take on new challenges.

The details on our diversity, human resource development and work environment development are described in the following URLs.

(Diversity) https://jp.toto.com/company/csr/employees/diversity/index.htm

(Human Resource Development) https://jp.toto.com/company/csr/employees/resource/index.htm (Work Environment Development) https://jp.toto.com/company/csr/employees/balance/index.htm

In order to ensure pension payments to beneficiaries in the future, TOTO has set up a special department in the Accounting & Finance Division to manage the corporate pension

funds ,complememted our expertise and knowledge while receiving advice from an outside pension consulting company. We have also set up the Pension Management Committee, which consists of employees from the Human Resource Division and Accounting & Finance Division with the appropriate skills and Labor Union chairman, who represents the beneficiaries, to discuss matters concerning the

management and administration of pension funds, as well as their operations, including the basis policy of terms and operations. Matters we consider important shall be discussed in management meetings to acquire approval.

1. Company objectives (such as corporate philosophy), corporate strategies, and management plans TOTO's Corporate Philosophy and mid- to long-term management plans are disclosed on TOTO's website and in its presentation materials and integrated reports.

-Summary of TOTO's Common Group Philosophy

TOTO's Common Group Philosophy is shown in section (1) under "1. Basic Views" of "Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information" in this report.

- Summary of Mid- to Long-Term Management Plans

The TOTO Group aims to provide everyone with comfortable, healthy lives, contributing to the realization of a carbon neutral and sustainable society by 2050. Aiming to contribute to society and the global environment and realize a clean and comfortable, healthy life, the TOTO Group formulated TOTO WILL 2030, a new shared value creation strategy for 10 years starting from FY 2021. Setting the first three years (between FY 2021 and FY 2023) to achieve the midterm management plans as the midterm management issues period (WILL 2030 STAGE 1), the TOTO Group will set out specific goals and respond to environmental changes. Through WILL 2030 STAGE 1, TOTO will further integrate business activities and the TOTO Global Environmental Vision to improve corporate values further. The strategic framework is based on Corporate Governance, the basis of corporate activities, and Digital Innovation to stay ahead of changes of the times with a focus on the two core domains of the global housing equipment business and new business and the three cross-organizational innovation activities with a view toward company-wide optimization.

(Group's Philosophy System) https://jp.toto.com/company/profile/philosophy/index.htm (Mid-Term Management Plans) https://jp.toto.com/company/ir/individual/vision/index.htm

1. Basic Views and Basic Policy on Corporate Governance
   The Basic Views and Basic Policy on Corporate Governance of TOTO are stated in "1. Basic Views" of "Basic Views on Corporate Governance, Capital Structure, Corporate Profile and Other Basic Information" in this report.
2. Policies and Procedures for Determining the Compensation of Senior Management and Directors by the Board of Directors
   Basic views on TOTO's compensation framework are stated in "[Directors' Compensation]" under "1. Organizational Composition and Operation" of the "Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in Management" in this report and in the business report of the "Convocation Notice of the Ordinary General Meeting of Shareholders."
3. Policies and Procedures for Appointing Senior Management and Nominating Candidates for Directors and Audit & Supervisory Board Members by the Board of Directors
   Basic views on the appointment of candidates for Directors and Audit & Supervisory Board Members of TOTO are stated in "[Directors]" under "1. Organizational Composition and Operation" and "2.
   Matters Relating to Functions of Business Execution, Auditing, Oversight, Nomination, and
   Compensation Decisions (Overview of Current Corporate Governance System)" of "Business Management Organization and Other Corporate Governance Systems Regarding Decision Making,
   Execution of Business, and Oversight in Management" in this report and in the business report of the "Convocation Notice of the Ordinary General Meeting of Shareholders."

1. Explanations for Each Individual Appointment and Nomination with Respect to the Appointments of Senior Management and the Nominations of Candidates Directors and Audit & Supervisory Board Members by the Board of Directors
   Reasons for the nomination of Outside Directors and Outside Members of the Audit & Supervisory Board are stated in "[Directors]" and "[Audit & Supervisory Board Members]" under "1. Organizational
   Composition and Operation" of "Business Management Organization and Other Corporate Governance Systems Regarding Decision Making, Execution of Business, and Oversight in
   Management" in this report.
   Also, reasons for the nomination of Inside Directors and Standing Members of the Audit & Supervisory Board are as described below:

[Directors] Madoka Kitamura:

Mr. Madoka Kitamura has served as President, Representative Director and Chairman of the Board of the Company and has abundant experience and achievements as a manager.

The Company believes that he is highly capable of enhancing the entire group's corporate governance and supervising the execution of Company business, and therefore selected and appointed him as Director.

Noriaki Kiyota:

Mr. Noriaki Kiyota has served as Representative Director and Executive Vice President and President, Representative Director of the Company and has abundant experience and achievements as a manager.

The Company believes that he is highly capable of realizing management strategies of the Mid-Term Management Issues (WILL 2030 STAGE1) in the New Shared Value Creation Strategy TOTO WILL2030, and therefore selected and appointed him as Director.

Satoshi Shirakawa:

Having been responsible for Management Planning Division and the Sales Promotion Group, Mr. Satoshi Shirakawa has served as Representative Director and Executive Vice President since 2020. He has abundant experience and achievements as a manager.

The Company believes that he is highly capable of promoting Marketing Innovation and realizing management strategies for the Mid-Term Management Issues (WILL2030 STAGE1) in the New Shared Value Creation Strategy TOTO WILL2030, therefore selected and appointed him as Director.

Ryosuke Hayashi:

Having been responsible for restroom product development and the Company's Washlet business, Mr. Ryosuke Hayashi has served as Director and Senior Managing Executive Officer since 2020. He has abundant experience and achievements as a manager.

The Company believes that he is highly capable of promoting New business domains and realizing management strategies for the Mid-Term Management Issues (WILL2030 STAGE1) in the New Shared Value Creation Strategy TOTO WILL2030, supervising the Business Division, and therefore selected and appointed him as Director.

Tomoyuki Taguchi:

Having been responsible for accounting and finance, Mr. Tomoyuki Taguchi has served as Director and Managing Executive Officer since 2018. He has abundant experience and achievements as a manager.

The Company believes that he is highly capable of promoting Management Resource Innovation and realizing management strategies for the Mid-Term Management Issues (WILL2030 STAGE1) in the New Shared Value Creation Strategy TOTO WILL2030, supervising the Administrative Division, and therefore selected and appointed him as Director.

Shinya Tamura

Having been assigned overseas and been responsible for the Global Business Promotion Division and the Company's business in the Americas, Mr. Shinya Tamura has served as Director and

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