INFORMATION REQUIRED IN PROXY STATEMENT

PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES

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Filed by a Party other than the Registrant o

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NACCO INDUSTRIES, INC.

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NOTICE OF ANNUAL MEETING

       The Annual Meeting of stockholders of NACCO Industries, Inc. (the “Company”) will be held on Wednesday, May 12, 2004 at 9:00 A.M., at 5875 Landerbrook Drive, Mayfield Heights, Ohio, for the following purposes:

      The Board of Directors has fixed the close of business on March 15, 2004 as the record date for the determination of stockholders entitled to notice of, and to vote at, the Annual Meeting or any adjournment thereof.

March 18, 2004

     The Company’s Annual Report for the year ended December 31, 2003 is being mailed to stockholders concurrently herewith. The Annual Report contains financial and other information about the Company, but is not incorporated into the Proxy Statement and is not deemed to be a part of the proxy soliciting material.

     Please promptly fill out, sign, date and mail the enclosed form(s) of proxy if you do not expect to be present at the Annual Meeting. If you hold shares of both Class A Common Stock and Class B Common Stock, two forms of proxy are enclosed and BOTH should be filled out and returned. A self-addressed envelope is enclosed for your convenience. No postage is required if mailed in the United States.

PROXY STATEMENT – March 18, 2004

       This Proxy Statement is furnished in connection with the solicitation by the Board of Directors of NACCO Industries, Inc., a Delaware corporation (the “Company”), of proxies to be used at the annual meeting of stockholders of the Company to be held on May 12, 2004 (the “Annual Meeting”). This Proxy Statement and the related form(s) of proxy are being mailed to stockholders commencing on or about March 18, 2004.

      If the enclosed form(s) of proxy are executed and returned, the shares represented by them will be voted as directed on all matters properly coming before the Annual Meeting for a vote. Proxies that are properly signed without any indication of voting instructions will be voted for the election of each director nominee, for the confirmation of the appointment of the independent auditors, and as recommended by the Board of Directors with regard to any other matters or, if no recommendation is given, in their own discretion. The proxies may be revoked at any time prior to their exercise by giving notice to the Company in writing or by executing and delivering a later dated proxy. Attendance at the Annual Meeting will not automatically revoke a proxy, but a stockholder attending the Annual Meeting may request a ballot and vote in person, thereby revoking a previously granted proxy.

      Stockholders of record at the close of business on March 15, 2004 will be entitled to notice of, and to vote at, the Annual Meeting. On that date, the Company had outstanding and entitled to vote 6,591,233 shares of Class A Common Stock, par value $1.00 per share (“Class A Common”), and 1,620,091 shares of Class B Common Stock, par value $1.00 per share (“Class B Common”). Each share of Class A Common is entitled to one vote for a nominee for each of the twelve directorships to be filled and one vote on each other matter properly brought before the Annual Meeting. Each share of Class B Common is entitled to ten votes for each such nominee and ten votes on each other matter properly brought before the Annual Meeting.

      At the Annual Meeting, in accordance with Delaware law and the Company’s By-Laws, the inspectors of election appointed by the Board of Directors for the Annual Meeting will determine the presence of a quorum and will tabulate the results of stockholder voting. As provided by Delaware law and the Company’s By-Laws, the holders of a majority of the Company’s stock, issued and outstanding, and entitled to vote at the Annual Meeting and present in person or by proxy at the Annual Meeting, will constitute a quorum for the meeting. The inspectors of election intend to treat properly executed proxies marked “abstain” as “present” for purposes of determining whether a quorum has been achieved at the Annual Meeting. The inspectors will also treat proxies held in “street name” by brokers that are voted on at least one, but not voted on all, of the proposals to come before the Annual Meeting (“broker non-votes”) as “present” for purposes of determining whether a quorum has been achieved at the Annual Meeting.

      Class A Common and Class B Common will vote as a single class on all matters anticipated to be brought before the Annual Meeting. In accordance with Delaware law, the twelve director nominees receiving the greatest number of votes will be elected directors. In accordance with Delaware law and the Company’s By-Laws, the holders of a majority of the voting power of the Company’s stock which is present in person or by proxy, and which is actually voted, will decide any other proposal which is brought before the Annual Meeting. As a result, abstentions in respect of any proposal and broker non-votes will not be counted for purposes of determining whether a proposal has received the requisite approval by the Company’s stockholders.

      In accordance with Delaware law and the Company’s By-Laws, the Company may, by a vote of the stockholders, in person or by proxy, adjourn the Annual Meeting to a later date or dates, without changing the record date. If the Company were to determine that an adjournment were desirable, the appointed proxies would use the discretionary authority granted pursuant to the proxy cards to vote in favor of such an adjournment.

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BUSINESS TO BE TRANSACTED

1. Election of Directors

      It is intended that shares represented by proxies in the enclosed form(s) will be voted for the election of the nominees named in the following table to serve as directors for a term of one year and until their successors are elected, unless contrary instructions are received. All of the nominees listed below presently serve as directors of the Company and were elected at the Company’s 2003 annual meeting of stockholders. If an unexpected occurrence should make it necessary, in the judgment of the proxy holders, to substitute some other person for any of the nominees, shares represented by proxies will be voted for such other person as the proxy holders may select.

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Beneficial Ownership of Class A Common and Class B Common

      Set forth in the following tables is the indicated information as of December 31, 2003 (except as otherwise indicated) with respect to (1) each person who is known to the Company to be the beneficial owner of more than five percent of the Class A Common, (2) each person who is known to the Company to be the beneficial owner of more than five percent of the Class B Common and (3) the beneficial ownership of Class A Common and Class B Common by the directors, the Company’s Chief Executive Officer and the four other most highly compensated executive officers of the Company and its subsidiaries during 2003 (the “Named Executive Officers”) and all executive officers and directors as a group. Beneficial ownership of Class A Common and Class B Common has been determined for this purpose in accordance with Rules 13d-3 and 13d-5 of the Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934 (the “Exchange Act”), which provide, among other things, that (a) a person is deemed to be the beneficial owner of Class A Common or Class B Common if such person, directly or indirectly, has or shares voting power or investment power with respect to such stock or has the right to acquire such ownership within 60 days, and (b) when two or more persons agree to act together for the purpose of holding, voting or disposing of Class A Common or Class B Common, as the case may be, the group formed thereby is deemed to be a person which has acquired beneficial ownership of all Class A Common or Class B Common, as the case may be, beneficially owned by each member of the group. Accordingly, the amounts shown in the tables do not purport to represent beneficial ownership for any purpose other than compliance with SEC reporting requirements. Further, beneficial ownership as determined in this manner does not necessarily bear on the economic incidence of ownership of Class A Common or Class B Common.

      Holders of shares of Class A Common and Class B Common are entitled to different voting rights with respect to each class of stock. Each share of Class A Common is entitled to one vote per share. Each share of Class B Common is entitled to ten votes per share. Holders of Class A Common and holders of Class B Common generally vote together on matters submitted to a vote of NACCO’s stockholders.

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AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP

CLASS A COMMON STOCK

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CLASS B COMMON STOCK

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      Thomas E. Taplin is Clara Taplin Rankin’s brother and Margaret E. Taplin is the sister-in-law of Clara Taplin Rankin and Thomas E. Taplin. Britton T. Taplin is the son of Thomas E. Taplin, and David F. Taplin is the step-son of Margaret E. Taplin. Clara Taplin Rankin is the mother of Alfred M. Rankin, Jr. J.C. Butler, Jr., an executive officer of the Company, is the son-in-law of Alfred M. Rankin, Jr. The combined beneficial ownership of such persons shown in the foregoing tables (including shares as to which such persons had the right to acquire beneficial ownership within 60 days after December 31, 2003, pursuant to the Non-Employee Directors’ Plan) equals 1,850,998 shares, or 28.11%, of the Class A Common and 1,148,588 shares, or 70.83%, of the Class B Common outstanding on December 31, 2003 (including shares deemed to be outstanding for purposes of calculating the percentage owned pursuant to Rule 13d-3 under the Exchange Act). The combined beneficial ownership of all directors of the Company (including shares as to which the directors had the right to acquire beneficial ownership within 60 days after December 31, 2003), together with Clara Taplin Rankin, Margaret E. Taplin, Thomas E. Taplin and all of the executive officers of the Company whose beneficial ownership of Class A Common and Class B Common must be disclosed in the foregoing tables in accordance with Rule 13d-3 under the Exchange Act, equals 1,902,906 shares, or 28.89%, of the Class A Common and 1,151,563 shares, or 71.01%, of the Class B Common outstanding on December 31, 2003 (including shares deemed to be outstanding for purposes of calculating the percentage owned pursuant to Rule 13d-3 under the Exchange Act). Such shares of Class A Common and Class B Common together represent 58.85% of the combined voting power of all Class A Common and Class B Common outstanding on such date (including shares deemed to be outstanding for purposes of calculating the percentage owned pursuant to Rule 13d-3 under the Exchange Act).

      There exists no arrangement or understanding between any director and any other person pursuant to which such director was elected. Each director and executive officer serves until his successor is elected and qualified.

Directors’ Meetings and Committees

      The Board of Directors has an Audit Review Committee and a Nominating, Organization and Compensation Committee (the “Nominating and Compensation Committee”). During 2003, the members of the Audit Review Committee were Robert M. Gates (Chairman), Leon J. Hendrix, Jr., David H. Hoag, Richard de J. Osborne, Michael E. Shannon and Britton T. Taplin, and the members of the Nominating and Compensation Committee were Robert M. Gates, David H. Hoag, Richard de J. Osborne, Ian M. Ross (Chairman) and John F. Turben. The other standing committees of the Board of Directors are the Executive Committee, which during 2003 was comprised of Robert M. Gates, Dennis W. LaBarre, Alfred M. Rankin, Jr. (Chairman), Ian M. Ross and John F. Turben, and the Finance Committee, which during 2003 was comprised of Leon J. Hendrix, Jr., Dennis W. LaBarre, Alfred M. Rankin, Jr., Michael E. Shannon, Britton T. Taplin, David F. Taplin and John F. Turben (Chairman).

      The Audit Review Committee held nine meetings in 2003. The Audit Review Committee has the responsibilities set forth in its Charter with respect to: the quality and integrity of the Company’s financial statements; the Company’s compliance with legal and regulatory requirements; the Company’s guidelines and policies to monitor and control its major financial risk exposures; the qualifications, independence and selection of the independent auditor; the performance of the Company’s internal audit function and independent auditors; assisting the Board of Directors and the Company in interpreting and applying the Company’s Corporate Compliance Program and other issues related to Company and employee ethics; and

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      The Nominating and Compensation Committee held five meetings in 2003. The Nominating and Compensation Committee reviews executive compensation; fixes compensation of the executive officers and incentive compensation; recommends the adoption of and administers or monitors the administration of all benefit plans; and has the authority to grant stock options. For all periods prior to the Annual Meeting, the Nominating and Compensation Committee also reviews and recommends to the Board of Directors criteria for membership on the Board of Directors, reviews and recommends to the Board of Directors the optimum number and qualifications of directors believed to be desirable, has established and monitors a system to receive suggestions for nominees to directorships of the Company, and identifies and recommends to the Board of Directors specific candidates for membership on the Board of Directors. The Committee (or a successor committee) will consider director candidates recommended by the Company’s stockholders. See “Procedures for Submission and Consideration of Director Candidates.” Each member of the Nominating and Compensation Committee is independent, as independence for Nominating and Compensation Committee members is defined in the listing standards of the New York Stock Exchange.

      The Finance Committee held four meetings in 2003. The Finance Committee reviews the financing and financial risk management strategies of the Company and its principal subsidiaries and makes recommendations to the Board of Directors on all matters concerning finance.

      The Executive Committee held no meetings in 2003. The Executive Committee may exercise all of the powers of the Board of Directors over the management and control of the business of the Company during the intervals between meetings of the Board of Directors.

      The Board of Directors held five meetings in 2003. In 2003, all of the incumbent directors attended at least 75 percent of the total meetings held by the Board of Directors and by the committees on which they served during their tenure.

      The Board of Directors has determined that, based primarily on the ownership of Class A Common and Class B Common by the members of the Taplin and Rankin families and their voting history, the Company has the characteristics of a “controlled company,” as that term is defined in Section 303A of the listing standards of the New York Stock Exchange. Accordingly, the Board of Directors has determined that the Company should be characterized as a “controlled company.” However, the Board of Directors has elected to not make use at the present time of any of the exceptions to the requirements of the listing standards of the New York Stock Exchange that are available to controlled companies. Accordingly, at least a majority of the members of the Board of Directors is independent, as independence for Directors is defined in the listing standards of the New York Stock Exchange. In making a determination as to the independence of its Directors, the Company followed the listing standards of the New York Stock Exchange and broadly

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      In accordance with the listing standards of the New York Stock Exchange, the non-management directors of the Company are scheduled to meet in executive session, without management, in February of each year, beginning in 2005. The Chairman of the Compensation Committee shall preside at such meetings. Additional meetings of the non-management directors may be scheduled from time to time when the non-management directors believe such meetings are desirable. The determination of the director who should preside at such additional meetings will be made based upon the principal subject matter to be discussed at the meeting.

      The Company holds a regularly scheduled meeting of its Board of Directors in conjunction with its Annual Meeting of Stockholders. Directors are expected to attend the Annual Meeting absent an appropriate excuse. All twelve members of the Board of Directors attended the Company’s 2003 Annual Meeting of Stockholders.

Certain Business Relationships

      Dennis W. LaBarre, a director of the Company and its principal subsidiaries, is a partner in the law firm of Jones Day. Such firm provided legal services on behalf of the Company and its principal subsidiaries during 2003 on a variety of matters, and it is anticipated that such firm will provide such services in 2004.

Report of the Audit Review Committee

      The Board of Directors of the Company adopted a written Audit Review Committee Charter in 2000. An amended and restated Audit Review Committee Charter was adopted in 2004, a copy of which is attached hereto as Exhibit A. All members of the Audit Review Committee are independent as defined in Section 303.01(B)(2)(a) and (3) of the listing standards of the New York Stock Exchange as currently in effect.

      The Audit Review Committee has reviewed and discussed with the Company’s management and Ernst & Young LLP, the Company’s independent auditors for 2003, the audited financial statements of the Company contained in the Company’s Annual Report to Stockholders for the year ended December 31, 2003. The Audit Review Committee has also discussed with the Company’s independent auditors the matters required to be discussed pursuant to SAS No. 61 (Codification of Statements on Auditing Standards, Communication with Audit Committees) and Rule 2-07 of Regulation S-X (Communication with Audit Committees).

      The Audit Review Committee has received and reviewed the written disclosures and the letter from Ernst & Young LLP required by Independence Standards Board Standard No. 1 (titled, “Independence Discussions with Audit Committees”), and has discussed with Ernst & Young LLP its independence.

      Based on the review and discussions referred to above, the Audit Review Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, filed with the SEC.

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Compensation of Directors

      During 2003, each director who was not an officer of the Company or its subsidiaries received a retainer of $40,000 for the calendar year for service on the Board of Directors and on subsidiary boards of directors. In addition, each such director received $1,000 for attending each meeting of the Board of Directors and each meeting of a committee thereof, as well as for each meeting of a subsidiary board of directors or committee thereof on which such director served. Such fees for attendance at board meetings could not exceed $2,000 per day. In addition, the chairman of each committee of the Board of Directors and the subsidiary boards of directors received $4,000 for the year for service as committee chairman.

      Under the Non-Employee Directors’ Plan, each director who was not an officer of the Company or its subsidiaries received 50% of his annual retainer ($20,000) in shares of Class A Common. These shares cannot be assigned, pledged, hypothecated or otherwise transferred by the director, voluntarily or involuntarily, other than (a) by will or the laws of descent and distribution, (b) pursuant to a qualifying domestic relations order or (c) to a trust for the benefit of the director, or his spouse, children or grandchildren. The foregoing restrictions on transfer lapse upon the earliest to occur of (i) the date which is ten years after the last day of the calendar quarter for which such shares were earned, (ii) the date of the death or permanent disability of the director, (iii) five years (or earlier with the approval of the Board of Directors) from the date of the retirement of the director from the Board of Directors of the Company and (iv) the date that a director is both retired from the Board of Directors of the Company and has reached 70 years of age. In addition, each director has the right under the Non-Employee Directors’ Plan to receive shares of Class A Common in lieu of cash for up to 100% of the balance of his annual retainer, meeting attendance fees and any committee chairman’s fee. These voluntary shares are not subject to the foregoing restrictions.

Compensation of Executive Officers

      The following table sets forth the annual, long-term and all other compensation for services in all capacities to the Company and its subsidiaries of the Named Executive Officers of the Company and its principal subsidiaries, NACCO Materials Handling Group, Inc. (“NMHG”), Hamilton Beach/ Proctor-Silex, Inc. (“Hamilton Beach/ Proctor-Silex”) and The North American Coal Corporation (“North American Coal”).

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Stock Option Grants

      The Company did not grant any stock options under the Company’s 1975 Stock Option Plan or 1981 Stock Option Plan during the fiscal year ended December 31, 2003 to any person, including the Named Executive Officers. The Company has not granted stock options since 1989 in the belief that the likely value realized is unclear both in amount and in its relationship to performance. At December 31, 2003, there were no outstanding options to purchase shares of the Company’s Class A Common or Class B Common.

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Long-Term Incentive Plans

      The following table sets forth information concerning awards to the Named Executive Officers during fiscal year 2003, and estimated payouts in the future, under long-term incentive plans of the Company and its principal subsidiaries.

Long-Term Incentive Plans — Awards in Last Fiscal Year

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Report of the Compensation Committee on Executive Compensation

      The Nominating and Compensation Committee of the Company’s Board of Directors and the Nominating, Organization and Compensation Committees of the Company’s subsidiary boards of directors (collectively, the “Compensation Committee”) have furnished the following report on executive compensation. The members of the Nominating and Compensation Committee for 2003 were Robert M. Gates, David H. Hoag, Richard de J. Osborne, Ian M. Ross (Chairman) and John F. Turben. The members of the Nominating, Organization and Compensation Committees of the Company’s principal subsidiaries, NMHG, Hamilton Beach/ Proctor-Silex and North American Coal, consist of these individuals, as well as Dennis W. LaBarre and Alfred M. Rankin, Jr. Messrs. LaBarre and Rankin are not members of the Nominating and Compensation Committee of the Company, and their participation in this report is limited to the portions of the report relating to the Company’s subsidiaries.

      The guiding principle of the executive compensation program of the Company and its subsidiaries has been the maintenance of a strong link between an executive officer’s compensation and individual performance and the performance of the Company or the subsidiary for which the executive officer has responsibility.

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      In accordance with the foregoing philosophy, the Compensation Committee approves a mix of base salaries and incentive plans for each executive officer such that base salary levels are at levels appropriate to allow incentive plans to serve as significant motivating factors. Base salary and incentive compensation levels for each officer are determined by the Compensation Committee, which considers recommendations made by the Company’s independent outside compensation consultant. The consultant bases its recommendations upon an analysis of similar positions at a broad range of domestic industries, as well as an understanding of the Company’s philosophy, as summarized above. Incentive-based compensation plans are designed to provide significant rewards for achieving or surpassing annual operating and financial performance objectives, as well as to align the compensation interests of executive officers with the long-term interests of stockholders by basing a substantial portion of the incentive compensation package upon return on total capital employed performance and book value appreciation rather than on cyclical movements in stock price. Finally, in addition to providing other limited perquisites, target levels of perquisites for executive officers are converted into fixed dollar amounts and paid in cash, an approach which recognizes that perquisites are largely just another form of compensation, albeit separate and distinct from salary and incentive compensation.

      In sum, the executive compensation program at the Company and its subsidiaries is designed to reward executive officers with competitive total compensation for achievement of specific corporate and individual goals, while at the same time making them long-term stakeholders in the Company. In years when the Company has lower financial results, payouts under the incentive components of the Company’s compensation plans will be lower. In years when the Company has better financial results, payouts under the incentive components of the Company’s compensation plans will be greater. The Company believes that over time the program will encourage executive officers to earn incentive pay significantly greater than 100% of target by delivering outstanding managerial performance.

      Under Section 162(m) of the Internal Revenue Code of 1986, as amended, a public company is generally denied deductions for compensation paid to the chief executive officer and the other four most highly compensated executive officers to the extent that the compensation for any of such individuals exceeds one million dollars for the taxable year. An exception to this general rule exists for payments that are made for attainment of one or more performance goals meeting certain criteria. In response to this law and the regulations promulgated thereunder, the stockholders of the Company have approved the Supplemental Short-Term Plan and the NACCO Long-Term Plan. Both plans were designed so that, together with steps taken by the Compensation Committee in the administration of the plans, payouts on awards made under the plans should not count towards the one million dollar cap, which the law imposes for purposes of federal income tax deductibility. While the Compensation Committee intends to preserve the deductibility of compensation payable to the Company’s executive officers, deductibility will be only one among a number of factors considered in determining appropriate levels or modes of compensation. The Company intends to maintain the flexibility to compensate executive officers based upon an overall determination of what it believes is in the best interests of the Company and its stockholders.

      The three main elements of the Company’s executive compensation program — base salary, short-term incentive compensation and long-term incentive compensation — are carefully reviewed by the Compensation Committee in relation to the performance of the Company and its subsidiaries.

      Base Salary. To assist the Compensation Committee in fixing base salary levels which are at adequately competitive levels, an independent outside consultant analyzes a survey of a broad group of domestic industrial organizations from all segments of industry ranging in size from under $150 million to over $5 billion in annual revenues. Organizations participate in the survey based upon their voluntary submission of data to the

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      Because the Compensation Committee uses Salary Midpoints based on studies of domestic industrial organizations from all segments of industry, the Company does not believe that there is a meaningful relationship between executive salary levels of each subsidiary determined by the Compensation Committee and the executive salary levels of the companies that make up the Russell 2000 Producer Durables Index. That index, which is used by the Company as the published industry index for comparison to the Company’s stock price performance, was chosen because NMHG, which manufactures forklifts, is the Company’s largest subsidiary in terms of asset value and revenues.

      Short-Term Incentive Compensation. At the beginning of 2003, the Compensation Committee adopted target performance levels for return on total capital employed for the Company (upon which awards under the Company’s Supplemental Short-Term Plan and a portion of the Company’s Short-Term Plan are based) and its subsidiaries, and various performance criteria for the Company’s subsidiaries such as net income, economic value income, market share, revenue, sales development, and support costs (depending on the business unit) (upon which awards under a portion of the Company’s Short-Term Plan and the annual incentive compensation plans of the Company’s subsidiaries are based) for that year. The short-term incentive plans for the Company and its subsidiaries essentially follow the same basic pattern for award determination. Performance targets are established within the Compensation Committee’s discretion, and are generally based upon management’s recommendations as to the performance objectives of the particular business for the year. Target awards for executive officers are established at specified percentages of each individual’s Salary Midpoint.

      Final awards for each individual under the short-term incentive plans of the Company and its subsidiaries are based on the individual’s target award, adjusted for performance by the business unit against the established targets, and for all such plans except the Supplemental Short-Term Plan, for performance by the individual against individual goals. The Compensation Committee, in its discretion, may also increase or decrease awards under all such plans (except for the Supplemental Short-Term Plan pursuant to which awards for the Named Executive Officers may be decreased, but not increased), and may approve the payment of awards where business unit performance would otherwise not meet the minimum criteria set for payment of awards. Generally short-term incentive payments will not exceed 150% of the target amount.

      The short-term annual incentive plans of the Company and its subsidiaries provide target compensation of 5% to 75% of Salary Midpoint, depending on the executive officer’s position. Although it varies by business unit, target awards generally are tied to the annual operating and financial targets for the particular business unit, and in most cases, to longer-term objectives such as long-term return on total capital employed performance targets for the business unit.

      Long-Term Incentive Compensation. For 2003, the long-term incentive compensation plans for the Company and its subsidiaries, established at target performance levels by the Compensation Committee, were designed to provide the equivalent of 5% to 145% of Salary Midpoint (unless the amount is currently taxable, in which case the targets are increased as necessary to permit plan participants to satisfy their tax withholding obligations).

      The long-term incentive compensation plan for the parent holding company used the Company’s consolidated return on total capital employed as a measure of incentive compensation. The consolidated return on total capital employed target is established by the Nominating and Compensation Committee, and is set at a level believed to provide an appropriate measure of stockholder protection. In general, each year participants

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      Approximately 65% of all of the foregoing awards are distributed in shares of Class A Common, the transfer of which is restricted for ten years, with the number of shares awarded being based on the average closing price of Class A Common on the New York Stock Exchange at the end of each week during the last year of the appropriate performance period. An average price mechanism, rather than year-end price or price on the date of payment, is used in determining the number of shares to be awarded because the Nominating and Compensation Committee believes that valuation at a single point in time in a year is likely to lead to inappropriate results. The balance of the award is paid in cash and is intended to be the approximate amount required to be withheld by the Company and paid to applicable federal, state and local income taxing authorities based upon statutorily determined withholding rates. The Nominating and Compensation Committee has the power to adjust the percentage of awards that are paid in stock.

      The Nominating and Compensation Committee believes that these incentive compensation plan awards promote a long-term focus on the profitability of the Company because, although a recipient may receive a payout after the end of the base period and each consistent performance period, the recipient is effectively required to invest the noncash portion of the payout in the Company for up to ten years. This is because the shares distributed may not be transferred for ten years following the last day of the base period. During the restriction period, the ultimate value of a payout is subject to change based upon the value of the Class A Common. The value is enhanced as the value of the Class A Common appreciates (or is decreased as the value of the Class A Common depreciates), and thus such awards provide the recipient with an incentive over the ten-year period to increase the value of the Company, to be reflected in the increased value of the Class A Common.

      The subsidiaries’ long-term incentive compensation plans are linked to future performance of the particular business unit. Similar to the parent holding company’s long-term incentive plan, each subsidiary plan establishes target awards based on an executive officer’s Salary Midpoint. NMHG’s long-term plans for 2003 use NMHG’s return on total capital employed as a measure of incentive compensation. The return on total capital employed targets are established by the NMHG Nominating, Organization and Compensation Committee and the target awards are adjusted as of the end of the base period based upon NMHG’s return on total capital employed performance. The NMHG long-term plans give the NMHG Nominating, Organization and Compensation Committee the authority to increase or decrease awards and adjust the incentive compensation measures. Participants are then awarded “book value units” which have a five-year payment restriction from the date of the award. The actual amount paid after the payment restriction lapses depends on the increase in the book value of NMHG over the time period. Participants in the plan may elect to have such amount deferred under the plan for up to ten years from the date of the award, and if the award has been deferred through the full ten-year period, the participant may further elect to have the award deferred and paid under the NMHG Unfunded Benefit Plan. Similarly, Hamilton Beach/ Proctor-Silex’s long-term plans for 2003 use Hamilton Beach/ Proctor-Silex’s return on total capital employed as a measure of incentive compensation. The return on total capital employed targets are established by the Hamilton Beach/ Proctor-Silex Nominating, Organization and Compensation Committee and the target awards are adjusted as of the end of the base period based upon Hamilton Beach/ Proctor-Silex’s return on total capital employed performance. The Hamilton Beach/ Proctor-Silex long-term plans give the Hamilton Beach/ Proctor-Silex Nominating, Organization and Compensation Committee the authority to increase or decrease awards and

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      The long-term incentive plans at the Company and its subsidiaries generally require long-term commitment on the part of the Company’s executive officers, and cash withdrawals or stock sales are generally not permitted for a number of years. Rather, the awarded amount is effectively invested in the enterprise for an extended period to strengthen the tie between stockholders’ and executive officers’ long-term interests. The ultimate compensation purpose of such long-term incentive plans is to enable executive officers to accumulate capital through future managerial performance, which contributes to the future success of the Company’s businesses.

      The compensation awarded to the Company’s chief executive officer reflects the basic philosophy generally discussed above that compensation for all employees should be based on Company and individual performance.

      The Nominating and Compensation Committee considered that the Company reported improved consolidated earnings and strong cash flow for 2003 despite a difficult environment for foreign currency exchange rates and slower than expected recoveries in various markets in which the Company’s products are sold. The Committee also considered that the Company made substantial additional progress on the restructuring, profit improvement and growth programs underway at the Hamilton Beach/ Proctor-Silex, NACCO Materials Handling Group, North American Coal and Kitchen Collection businesses. These programs, which were initiated in 2002 or earlier years, were designed to put these businesses in the best possible position to compete in the depressed market conditions of 2003, and also to prepare these businesses for enhanced profitability in the future as market conditions improve. Overall, the Committee believes that Mr. Rankin continues to provide strong leadership as chief executive officer of the Company.

      After careful consideration of the overall results of the Company and its subsidiaries, the on-going impact of the Company’s restructuring plans and continued progress towards strategic goals in 2003, the Nominating and Compensation Committee increased Mr. Rankin’s base salary by three percent for 2003. The Nominating and Compensation Committee established Mr. Rankin’s short-term incentive compensation target for 2003 at 75% of his Salary Midpoint. The actual performance of the Company in 2003 in terms of consolidated return on total capital employed was below the targeted level of performance, and the actual performance of certain

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      Long-term incentive compensation payouts for 2003 are based on the Company’s 2002 and 2003 financial results. The long-term award targeted for Mr. Rankin for 2003 by the Nominating and Compensation Committee was 160.0% of his Salary Midpoint (adjusted from 145.0% to take into consideration the fact that the award is currently taxable to Mr. Rankin). The Award to Mr. Rankin under the NACCO Long-Term Plan for the two-year period from January 1, 2002 through December 31, 2003, which was paid in early 2004, was 28.0% of his targeted amount.

      The NACCO Long-Term Plan also provides for payment of “consistent performance awards” when the Company’s consolidated adjusted return on equity over five-year periods exceeds a pre-established target. The consolidated adjusted return on equity calculated pursuant to the 1999 NACCO Long-Term Plan for the five-year period ending December 31, 2003 was below the target established in 1999. Accordingly, no plan participants, including Mr. Rankin, received consistent performance awards.

Compensation Committee Interlocks and Insider Participation

      Alfred M. Rankin, Jr., a director of the Company and its principal subsidiaries and a member of the compensation committees of the principal subsidiaries of the Company (but not of the Company), is chairman, president and chief executive officer of the Company.

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Stock Price Performance Presentation

      The following graphs compare the Company’s total annual stock price performance on Class A Common against the total stock price performance of the Russell 2000 Index and, in the case of Graph 1, the Russell 2000 Producer Durables Index for the periods indicated. The graphs present the year-end value of a $100 investment, at the base point, for each index assuming the reinvestment of dividends.

      In accordance with the regulations promulgated by the SEC, Graph 1 compares the stock price performance based upon the difference between the stock price at the beginning of each fiscal year and the stock price at the end of the fiscal year for the five-year period commencing January 1, 1999 (base point December 31, 1998) and ending December 31, 2003.

1999-2003 Stock Price Performance

    Assumes $100 invested at December 31, 1998 with dividends reinvested

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     The Company believes that the measurement set forth in Graph 1, which is based upon the stock price at a single point in time in each year, does not adequately reflect the Company’s stock price performance over the period because of the numerous periodic fluctuations throughout the year in both the price of the Company’s stock and the level of the Russell 2000 Index. The Company, therefore, has provided Graph 2, which compares the returns for the Company and the Russell 2000 Index based upon the average of the daily closing stock price (portrayed by the data presented in bold type) compared with the corresponding information from Graph 1, which is based upon the change in the stock price for each fiscal year for the same period as in Graph 1.

1999-2003 Stock Price Performance

Assumes $100 invested at December 31, 1998 with dividends reinvested

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     The Company believes that although sustained operating and financial performance will ultimately be reflected in stock price, the five-year period portrayed in the foregoing graphs is too brief a period over which to measure the results of significant strategic activities, and that corporate financial and strategic performance will be reflected in stock price only when measured over the long term. Accordingly, the long-term incentive compensation plans of the Company and its subsidiaries are linked to values reflecting long-term operating and financial achievement, not short-term stock price fluctuations, as further described in the “Report of the Compensation Committee on Executive Compensation — Executive Compensation and Company Performance — Long-Term Incentive Compensation” on pages 20 through 22. The Company, therefore, has included Graph 3, which compares the 10-year returns for the Company and the Russell 2000 Index based on the average stock price for the year computed using the same method as in Graph 2 for the 10-year period commencing January 1, 1994 (base point December 31, 1993) and ending December 31, 2003.

1994-2003 Stock Price Performance

[Additional columns below]

[Continued from above table, first column(s) repeated]

Assumes $100 invested at December 31, 1993 with dividends reinvested

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     The following table contains the annual returns expressed in percentages for the indices set forth in the preceding graphs.

Annual Returns of Indices Included on Stock Price Performance Graphs