<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission file number 1-9961
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TOYOTA MOTOR CREDIT CORPORATION
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(Exact name of registrant as specified in its charter)
California 95-3775816
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
19001 S. Western Avenue
Torrance, California 90509
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 787-1310
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Securities registered pursuant to section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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6.30% Fixed Rate Medium-Term
Notes due January 25, 1999 New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of November 30, 1998, the number of outstanding shares of capital
stock, par value $10,000 per share, of the registrant was 91,500, all of which
shares were held by Toyota Motor Sales, U.S.A., Inc.
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<PAGE>
PART I
ITEM 1. BUSINESS.
General
Toyota Motor Credit Corporation ("TMCC") is a wholly-owned subsidiary of Toyota
Motor Sales, USA, Inc. ("TMS") and was incorporated in California in 1982 and
commenced operations in 1983. TMCC provides retail leasing, retail and
wholesale financing and certain other financial services to authorized Toyota
and Lexus vehicle and Toyota industrial equipment dealers and their customers
in the United States (excluding Hawaii)and the Commonwealth of Puerto Rico.
TMCC has four wholly-owned subsidiaries, one of which is engaged in the
insurance business, one limited purpose subsidiary formed primarily to acquire
and securitize retail finance receivables, one limited purpose subsidiary
formed primarily to acquire and securitize lease finance receivables and one
subsidiary which provides retail and wholesale financing and certain other
financial services to authorized Toyota and Lexus vehicle dealers and their
customers in the Commonwealth of Puerto Rico. TMCC does business as Toyota
Motor Credit Corporation and Lexus Financial Services. TMCC and its
subsidiaries are collectively referred to as the "Company".
In September 1998, Toyota Credit Argentina S.A. ("TCA") was incorporated and
upon commencement of operations will provide retail and wholesale financing to
authorized Toyota vehicle dealers and their customers in Argentina. TCA is
owned 85% by Toyota Motor Corporation ("TMC") and 15% by TMCC.
The Company's earnings are primarily impacted by the level of average earning
assets, comprised primarily of investments in operating leases and finance
receivables, and asset yields as well as outstanding borrowings and the cost of
funds. The Company's business is substantially dependent upon the sale of
Toyota and Lexus vehicles in the United States. Changes in the volume of sales
of such vehicles resulting from governmental action, changes in consumer
demand, changes in pricing of imported units due to currency fluctuations, or
other events, could impact the level of finance and insurance operations of the
Company. To date, the level of the Company's operations has not been
restricted by the level of sales of Toyota and Lexus vehicles.
An operating agreement between TMCC, TMS and Toyota Motor Manufacturing North
America, Inc. ("TMMNA") (the "Operating Agreement"), provides that TMCC will
establish its own financing rates and is under no obligation to TMS to finance
wholesale obligations from any dealers or retail obligations of any customers.
In addition, pursuant to the Operating Agreement, TMS will arrange for the
repurchase of new Toyota and Lexus vehicles financed at wholesale by TMCC at
the aggregate cost financed in the event of dealer default. The Operating
Agreement also specifies that TMS will retain 100% ownership of TMCC as long as
TMCC has any funded debt outstanding and that TMS and TMMNA will make necessary
equity contributions or provide other financial assistance deemed appropriate
to ensure that TMCC maintains a minimum coverage on fixed charges of 1.10 times
such fixed charges in any fiscal quarter. Under the Operating Agreement, all
loans by TMS and TMMNA to TMCC must be subordinated to all other indebtedness
of TMCC. The Operating Agreement does not constitute a guarantee by TMS or
TMMNA of any obligations of TMCC. The fixed charge coverage provision of the
Operating Agreement is solely for the benefit of the holders of TMCC's
commercial paper, and the Operating Agreement may be amended or terminated at
any time without notice to, or the consent of, holders of other TMCC
obligations.
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<PAGE>
Retail Leasing
TMCC purchases primarily new vehicle lease contracts originated by Toyota and
Lexus dealers. Lease contracts purchased must first meet TMCC's credit
standards after which TMCC assumes ownership of the leased vehicles and is
generally permitted to take possession of vehicles upon lessee default. TMCC
is responsible for contract collection and administration during the lease
period and for the value of the vehicle at lease maturity if the vehicle is not
purchased by the lessee or dealer. Off-lease vehicles returned to TMCC are
sold through a network of auction sites located throughout the United States as
well as through the internet. TMCC requires lessees to carry fire, theft,
collision and liability insurance on leased vehicles covering the interests of
both TMCC and the lessee. Leasing revenues contributed 80%, 83% and 82% to
total financing revenues for the fiscal years ended September 30, 1998, 1997
and 1996, respectively.
In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust
(the "Titling Trust"), to act as lessor and to hold title to leased vehicles in
specified states in connection with a lease securitization program. TMCC acts
as the servicer for lease contracts purchased by the Titling Trust from Toyota
and Lexus dealers and services such lease contracts in the same manner as
contracts owned directly by TMCC. TMCC holds an undivided trust interest in
lease contracts owned by the Titling Trust, and such lease contracts are
included in TMCC's lease assets, until such time as the beneficial interests in
such contracts are transferred in connection with a securitization transaction.
Retail Financing
TMCC purchases primarily new and used vehicle installment contracts from Toyota
and Lexus dealers. Certain of the used vehicle contracts purchased by TMCC are
"Certified" Toyota and Lexus used vehicle contracts which relate to vehicles
purchased by dealers, reconditioned and certified to meet certain Toyota and
Lexus standards, and sold or leased with an extended warranty from the
manufacturer. Installment contracts purchased must first meet TMCC's credit
standards and thereafter TMCC retains responsibility for contract collection
and administration. TMCC acquires security interests in the vehicles financed
and generally can repossess vehicles if customers fail to meet contract
obligations. Substantially all of TMCC's retail financings are non-recourse
which relieves the dealers from financial responsibility in the event of
repossession. TMCC requires retail financing customers to carry fire, theft
and collision insurance on financed vehicles covering the interests of both
TMCC and the customer. Retail financing revenues contributed 17%, 14% and 14%
to total financing revenues for the fiscal years ended September 30, 1998, 1997
and 1996, respectively.
TMS has historically and continues to sponsor special lease and retail programs
by subsidizing below market lease and retail contract rates.
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<PAGE>
A summary of vehicle retail leasing and financing activity follows:
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Contract volume:
Lease................ 312,000 262,000 276,000 179,000 204,000
Retail............... 282,000 247,000 229,000 170,000 210,000
------- ------- ------- ------- -------
Total............. 594,000 509,000 505,000 349,000 414,000
======= ======= ======= ======= =======
Average amount financed:
Lease................ $24,600 $24,200 $23,300 $24,800 $23,700
Retail............... $17,100 $16,500 $16,200 $15,100 $14,000
Outstanding portfolio at
period end ($Millions):
Lease............. $11,872 $11,622 $11,917 $9,305 $7,569
Retail............ $7,834 $5,866 $5,105 $4,489 $5,162
Number of accounts 1,193,000 1,061,000 1,069,000 946,000 929,000
</TABLE>
Retail receivables and interests in lease finance receivables sold, totaling
$3.3 billion as of September 30, 1998 and $2.4 billion as of September 30,
1997, which TMCC continues to service, are excluded from the outstanding
portfolio amounts in the above table.
Wholesale Financing
TMCC provides wholesale financing primarily to qualified Toyota and Lexus
vehicle dealers to finance inventories of new Toyota and Lexus vehicles and
used Toyota, Lexus and other vehicles. TMCC acquires security interests in
vehicles financed at wholesale, and substantially all such financings are
backed by corporate or individual guarantees from or on behalf of participating
dealers. In the event of dealer default, TMCC has the right to liquidate any
assets acquired and seek legal remedies pursuant to the guarantees. Pursuant
to the Operating Agreement, TMS will arrange for the repurchase of new Toyota
and Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed
in the event of dealer default.
A summary of vehicle wholesale financing activity follows:
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Dealer loans ($Millions)..... $9,802 $8,573 $8,017 $7,626 $7,055
Dealer repayments ($Millions) $9,600 $8,684 $8,221 $7,444 $7,032
Outstanding portfolio at
period end ($Millions).... $746 $563 $668 $886 $727
Average amount financed
per vehicle............... $21,562 $20,695 $19,926 $18,999 $17,530
</TABLE>
TMCC also makes term loans to dealers for business acquisitions, facilities
refurbishment, real estate purchases and working capital requirements. These
loans are typically secured with liens on real estate, other dealership assets
and/or personal guarantees of the dealers. Wholesale and other dealer
financing revenues contributed 3%, 3% and 4% to total financing revenues for
the fiscal years ended September 30, 1998, 1997 and 1996, respectively.
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<PAGE>
Insurance
The principal activities of TMCC's insurance subsidiary include marketing,
underwriting, claims administration and providing certain coverages related to
vehicle service agreements and contractual liability agreements sold by or
through Toyota and Lexus vehicle dealers and affiliates to customers. In
addition, the insurance subsidiary insures and reinsures certain TMS and TMCC
risks. Income before income taxes from insurance operations contributed 16%,
12% and 7% to total income before income taxes for the fiscal years ended
September 30, 1998, 1997 and 1996, respectively.
Servicing
TMCC remains as servicer on accounts included in its asset-backed
securitization transactions and is paid a servicing fee.
Funding
Funding to support the Company's level of earning assets is provided by access
to the capital markets as well as earning asset liquidations and funds provided
by operating activities. Capital market funding has generally been in the form
of commercial paper, domestic and euro medium-term notes and bonds and
transactions through the Company's asset-backed securitization programs.
The Company uses a variety of derivative financial instruments to manage
interest rate and currency exchange exposures. The derivative instruments used
include cross currency and interest rate swap agreements, indexed note swap
agreements and option-based products. The Company does not use any of these
instruments for trading purposes.
Competition and Government Regulations
TMCC's primary competitors for retail leasing and financing are commercial
banks, savings and loan associations, credit unions, finance companies and
other captive automobile finance companies. Commercial banks and other captive
automobile finance companies also provide wholesale financing for Toyota and
Lexus dealers. Competition for the principal products and services provided
through the insurance operations is primarily from national and regional
independent service contract providers. TMCC's strategy is to supplement, with
competitive financing and insurance programs, the overall commitment of TMS to
offer a complete package of services to authorized Toyota and Lexus dealers and
their customers.
The finance and insurance operations of the Company are regulated under both
federal and state law. A majority of states have enacted legislation
establishing licensing requirements to conduct retail and other finance and
insurance activities. Most states also impose limits on the maximum rate of
finance charges. In certain states, the margin between the present statutory
maximum interest rates and borrowing costs is sufficiently narrow that, in
periods of rapidly increasing or high interest rates, there could be an adverse
effect on the Company's operations in these states if the Company were unable
to pass on increased interest costs to its customers. In addition, state laws
differ as to whether anyone suffering injury to person or property involving a
leased vehicle may bring an action against the owner of the vehicle merely by
virtue of that ownership. To the extent that applicable state law permits such
an action, TMCC may be subject to liability to such an injured party. However,
the laws of most states either do not permit such suits or limit the lessor's
liability to the amount of any liability insurance that the lessee was required
under applicable law to maintain (or, in some states, the lessor was permitted
to maintain), but failed to maintain. TMCC's lease contracts contain
provisions requiring the lessees to maintain levels of insurance satisfying
applicable state law and TMCC maintains certain levels of contingent liability
insurance for protection from catastrophic claims.
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<PAGE>
The Company's operations are also subject to regulation under federal and state
consumer protection statutes. The Company continually reviews its operations
for compliance with applicable laws. Future administrative rulings, judicial
decisions and legislation may require modification of the Company's business
practices and documentation.
Employee Relations
At November 30, 1998, the Company had approximately 2,800 full-time employees.
The Company considers its employee relations to be good.
Segment Information
Financial information regarding industry segments is set forth in Note 17 of
the Notes to Consolidated Financial Statements.
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<PAGE>
Toyota Motor Sales, U.S.A., Inc.
TMS is primarily engaged in the wholesale distribution of automobiles, light
trucks, industrial equipment and related replacement parts and accessories
throughout the United States (excluding Hawaii). Additionally, TMS exports
automobiles and related replacement parts and accessories to Europe, Asia and
United States territories.
TMS' corporate headquarters is located in Torrance, California. TMS has port
facilities, regional sales offices and parts distribution centers located
throughout the United States. Toyota vehicles are distributed in the United
States in twelve regional sales areas, ten of which are operated by or through
TMS and two which are serviced by private distributors who purchase vehicles
directly from TMS and distribute to Toyota dealers within their respective
regions. For the year ended September 30, 1998, these private distributors,
Gulf States Toyota, Inc. of Houston, Texas and Southeast Toyota Distributors,
Inc. of Deerfield Beach, Florida, accounted for approximately 31% of the Toyota
vehicles sold in the United States (excluding Hawaii). Lexus vehicles are
directly distributed by TMS to Lexus dealers throughout the United States
(excluding Hawaii).
For the year ended September 30, 1998, TMS sold approximately 1,317,000
automobiles and light trucks in the United States (excluding Hawaii), of which
approximately 825,000 were manufactured in the United States; TMS exported
approximately 43,700 automobiles. TMS' sales represented approximately 28% of
TMC's worldwide sales volume for the year ended March 31, 1998. For the years
ended September 30, 1998 and 1997, Toyota and Lexus vehicles accounted for
approximately 8.4% and 8.0%, respectively, of all retail automobile and light
truck unit sales volume in the United States.
Total revenues for TMS for the fiscal years ended September 30, 1998, 1997 and
1996, aggregated approximately $32.6 billion, $28.8 billion, and $27.5 billion,
respectively, of which approximately $29.2 billion, $25.3 billion, and $24.4
billion, respectively, were attributable to revenues other than those
associated with financial services. At September 30, 1998, 1997 and 1996, TMS
had total assets of approximately $27.4 billion, $23.6 billion, and $25.1
billion, respectively. TMS had net worth in excess of $4.1 billion and net
income in excess of $225 million for each of the fiscal years ended September
30, 1998, 1997 and 1996.
TMS and TMMNA are wholly-owned subsidiaries of Toyota Motor North America, Inc.
("TMA"), a holding company owned 100% by TMC. TMMNA is the holding company for
all manufacturing operations in the United States and coordinates and supports
numerous manufacturing related administrative functions. Total revenues for
TMMNA for the fiscal years ended September 30, 1998 and 1997, aggregated
approximately $11.9 billion and $10.6 billion, respectively, all of which was
attributable to revenues other than those associated with financial services.
At September 30, 1998 and 1997, TMMNA had total assets of approximately $4.2
billion and $3.5 billion respectively. TMMNA had net worth in excess of $2.4
billion and net income in excess of $100 million for the fiscal years ended
September 30, 1998 and 1997.
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<PAGE>
ITEM 2. PROPERTIES.
The headquarters of the Company for both finance and insurance operations is
located in Torrance, California. In addition, the finance operation has three
regional offices and 33 branch offices in cities throughout the United States
and one branch office in the Commonwealth of Puerto Rico. The insurance
operation has six regional sales offices; five of these premises are shared
with the finance operation's branch offices. A finance and insurance service
center is located in Cedar Rapids, Iowa. All premises are occupied under
lease.
ITEM 3. LEGAL PROCEEDINGS.
Various claims and actions are pending against TMCC and its subsidiaries with
respect to finance and insurance activities, taxes and other matters arising
from the ordinary course of business. Certain of these actions are or purport
to be class action suits. Management and internal and external counsel perform
periodic reviews of pending claims and actions to determine the probability of
adverse verdicts and resulting amounts of liability. The amounts of liability
on pending claims and actions as of September 30, 1998 were not determinable;
however, in the opinion of management, the ultimate liability resulting
therefrom should not have a material adverse effect on TMCC's consolidated
financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
TMCC is a wholly-owned subsidiary of TMS and, accordingly, all shares of the
Company's stock are owned by TMS. There is no market for TMCC's stock.
No dividends have been declared or paid to date.
-8-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Financing Revenues:
Leasing.......................... $ 2,595 $ 2,730 $ 2,448 $ 1,904 $ 1,231
Retail financing................. 547 446 415 431 413
Wholesale and other
dealer financing.............. 98 89 109 121 86
------- ------- ------- ------- -------
Total financing revenues......... 3,240 3,265 2,972 2,456 1,730
Depreciation on leases........... 1,681 1,781 1,620 1,232 736
Interest expense................. 994 918 820 716 486
------- ------- ------- ------- -------
Net financing revenues........... 565 566 532 508 508
Insurance premiums earned and
contract revenues............. 112 97 86 76 71
Investment and other income...... 79 66 41 30 23
------- ------- ------- ------- -------
Net financing revenues
and other revenues............ 756 729 659 614 602
------- ------- ------- ------- -------
Expenses:
Operating and administrative..... 323 259 235 207 194
Provision for credit losses...... 127 136 115 66 78
Insurance losses and loss
adjustment expenses........... 55 51 49 41 37
------- ------- ------- ------- -------
Total expenses................... 505 446 399 314 309
------- ------- ------- ------- -------
Income before income taxes....... 251 283 260 300 293
Provision for income taxes....... 107 121 108 117 118
------- ------- ------- ------- -------
Net Income....................... $ 144 $ 162 $ 152 $ 183 $ 175
======= ======= ======= ======= =======
Ratio of earnings to
fixed charges................. 1.25 1.31 1.32 1.42 1.60
BALANCE SHEET DATA
Investments in operating
leases, net.................... $ 9,765 $10,257 $10,831 $8,148 $6,215
Finance receivables, net......... $11,521 $8,452 $7,474 $7,227 $7,834
Total assets..................... $23,225 $19,830 $19,309 $16,225 $14,791
Notes and loans payable.......... $17,597 $14,745 $15,014 $12,696 $11,833
Capital stock.................... $915 $915 $915 $865 $865
Retained earnings................ $1,303 $1,159 $997 $844 $662
</TABLE>
Certain prior period amounts have been reclassified to conform with the current
period presentation.
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<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net Income
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The following table summarizes TMCC's net income by business segment for the
fiscal years ended September 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
(Dollars in Millions)
Net income:
Financing operations................ $119 $142 $140
Insurance operations................ 25 20 12
---- ---- ----
Total net income................. $144 $162 $152
==== ==== ====
</TABLE>
Net income from financing operations decreased 16% in fiscal 1998 primarily due
to increased provision for residual value losses as well as higher operating
and administrative expenses, partially offset by increased investment and other
income and lower provision for credit losses. The increase in fiscal 1997
financing operations net income from fiscal 1996 reflects higher net financing
revenues attributable to earning asset growth and increased investment and
other income, substantially offset by increased provision for residual value
losses, higher operating and administrative expenses and higher credit losses.
Net income from insurance operations increased 25% and 67% in fiscal 1998 and
1997, respectively, primarily due to increased underwriting profit from
providing coverage under various agreements as well as higher investment
income.
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<PAGE>
Earning Assets
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The composition of TMCC's net earning assets (which excludes retail receivables
and interests in lease finance receivables sold through securitization
transactions), as of the balance sheet dates reported herein and TMCC's vehicle
lease and retail contract volume and finance penetration for the years ended
September 30, 1998, 1997, and 1996 are summarized below:
<TABLE>
<CAPTION>
September 30,
---------------------------
1998 1997 1996
------- ------- -------
(Dollars in Millions)
<S> <C> <C> <C>
Vehicle lease
Investment in operating leases, net........ $ 9,559 $10,124 $10,745
Finance leases, net........................ 2,313 1,498 1,172
------- ------- -------
Total vehicle leases......................... 11,872 11,622 11,917
Vehicle retail finance receivables, net...... 7,834 5,866 5,105
Vehicle wholesale and other receivables...... 1,800 1,434 1,486
Allowance for credit losses.................. (220) (213) (203)
------- ------- -------
Total net earning assets..................... $21,286 $18,709 $18,305
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Total contract volume:
Vehicle lease............................. 312,000 262,000 276,000
Vehicle retail............................ 282,000 247,000 229,000
------- ------- -------
Total........................................ 594,000 509,000 505,000
======= ======= =======
TMS sponsored contract volume:
Vehicle lease............................. 170,000 72,000 190,000
Vehicle retail............................ 80,000 17,000 52,000
------- ------- -------
Total........................................ 250,000 89,000 242,000
======= ======= =======
Used contract volume:
Vehicle lease............................. 7,000 6,000 3,000
Vehicle retail............................ 94,000 103,000 72,000
------- ------- -------
Total........................................ 101,000 109,000 75,000
======= ======= =======
Finance penetration (excluding fleet):
Vehicle lease............................. 25.3% 23.2% 26.2%
Vehicle retail............................ 15.7% 13.0% 15.0%
------- ------- -------
Total........................................ 41.0% 36.2% 41.2%
======= ======= =======
</TABLE>
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<PAGE>
TMCC's net earning assets as of September 30, 1998 increased from September 30,
1997 due to growth in lease, retail and wholesale earning assets. The increase
in lease earning assets was primarily due to higher lease contract volume,
partially offset by the sale of $1.6 billion of interests in lease finance
receivables. The increase in retail earning assets was primarily due to higher
retail contract volume. Wholesale earning assets increased from September 30,
1997 primarily due to higher dealer inventories. The increase in allowance for
credit losses reflects asset growth.
TMCC's net earning assets as of September 30, 1997 increased from September 30,
1996 primarily due to growth in retail earning assets attributable to a higher
level of used vehicle financing, partially offset by a decline in lease and
wholesale earning assets.
In October 1996, TMCC created Toyota Lease Trust, a Delaware business trust
(the "Titling Trust"), to act as a lessor and to hold title to leased vehicles
in specified states. The value of the lease contracts purchased by the Titling
Trust in fiscal 1998 and 1997 represented approximately 40% and 29%,
respectively, of all lease contracts purchased by both TMCC and the Titling
Trust. TMCC holds an undivided trust interest in lease contracts owned by the
Titling Trust, and such lease contracts are included in TMCC's lease assets,
until such time as the beneficial interests in such contracts are transferred
in connection with a securitization transaction. Substantially all leases
owned by the Titling Trust are classified as finance receivables due to
certain residual value insurance arrangements in place with respect to such
leases, while leases of similar nature originated outside of the Titling Trust
are classified as operating leases. The continued acquisition of leases by
the Titling Trust has changed the composition of earning assets resulting in
an increasing mix of finance receivables relative to operating lease assets
due to the classification differences described above.
TMS sponsors special lease and retail programs which subsidize reduced monthly
payments on certain Toyota and Lexus new vehicles and Toyota industrial
equipment to qualified lease and retail customers. Support amounts received
from TMS in connection with these programs approximate the balances required by
TMCC to maintain revenues at standard program levels and are earned over the
expected lease and retail installment contract terms. The level of sponsored
program activity varies based on TMS marketing strategies, and revenues earned
vary based on the mix of Toyota and Lexus vehicles, timing of programs and the
level of support provided. TMCC's revenues earned from TMS sponsored special
lease and retail contracts outstanding totaled $142 million, $174 million and
$174 million for fiscal years 1998, 1997 and 1996, respectively.
TMCC's lease and retail contract volume for the year ended September 30, 1998
increased from 1997 levels as a result of strong sales of Toyota and Lexus
vehicles as well as higher levels of programs sponsored by TMS.
Slightly higher contract volume in 1997 compared to 1996 was primarily due to
higher retail used contract volume as well as strong Toyota and Lexus vehicle
sales, partially offset by reduced programs sponsored by TMS.
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<PAGE>
Net Financing Revenue and Other Revenues
- ----------------------------------------
TMCC's net financing revenues decreased slightly in fiscal 1998 primarily due
to increased provision for residual value losses, described below under
depreciation on leases, as well as increased interest expense, partially offset
by increased retail and wholesale revenues. TMCC's continued use of the
Titling Trust to purchase leases has caused a shift in the composition of
earning assets from operating leases to finance receivables, as discussed
earlier, and resulted in increased revenues from finance leases (until such
interests in leases were sold in securitization transactions) and reduced
operating lease revenues and depreciation on operating leases. The increase in
fiscal 1997 net financing revenues reflects growth in average earning assets,
partially offset by increased provision for residual value losses and increased
interest expense.
Insurance premiums earned and contract revenues increased 15% and 13% in fiscal
1998 and 1997, respectively, due to higher underwriting revenues associated
with in-force agreements.
The following table summarizes TMCC's investment and other income for the
fiscal years ended September 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
Years Ended September 30,
--------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
<S> <C> <C> <C>
Investment income................................... $ 32 $ 30 $ 19
Servicing fee income................................ 26 13 7
Gains on assets sold................................ 21 23 15
---- ---- ----
Investment and other income...................... $ 79 $ 66 $ 41
==== ==== ====
</TABLE>
Increasing investment and other income from 1996 to 1998 reflects primarily
higher levels of servicing fee income from accounts included in the Company's
asset-backed securitization programs. Servicing fee income increased 100% and
86% in fiscal 1998 and 1997, respectively, due to growth in the combined
balance of sold interests in lease finance and sold retail receivables.
Gains recognized on asset-backed securitization transactions generally
accelerate the recognition of income on lease and retail contracts, net of
servicing fees and other related deferrals, into the period the assets are
sold. Numerous factors can affect the timing and amounts of these gains, such
as the type and amount of assets sold, the structure of the sale, key
assumptions used and current financial market conditions.
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<PAGE>
Depreciation on Leases
- ----------------------
The following table sets forth the items included in TMCC's depreciation on
leases for the years ended September 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
September 30,
---------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
(Dollars in Millions)
Straight-line depreciation on operating leases.... $1,501 $1,649 $1,497
Provision for residual value losses............... 260 132 123
Parent support for certain vehicle disposition
losses........................................ (80) - -
------ ------ ------
Total depreciation on leases...................... $1,681 $1,781 $1,620
====== ====== ======
</TABLE>
Straight-line depreciation expense decreased 9% for fiscal 1998 corresponding
with a decline in average operating lease assets. As discussed earlier, the
acquisition of leases by the Titling Trust has increased the ratio of lease
finance receivables relative to operating lease assets, which results in
reduced operating lease revenues and depreciation on operating leases. The
increase in depreciation expense from fiscal 1996 to 1997 was primarily due to
growth in average operating lease assets.
TMCC is subject to residual value risk in connection with its lease portfolio.
TMCC's residual value exposure is a function of the number of off-lease
vehicles returned for disposition and any shortfall between the net
disposition proceeds and the estimated unguaranteed residual values on
returned vehicles. If the market value of a leased vehicle at contract
termination is less than its contract residual value, the vehicle is more
likely to be returned to TMCC. A higher rate of vehicle returns exposes TMCC
to a higher risk of aggregate losses.
Total unguaranteed residual values related to TMCC's vehicle lease portfolio
declined from approximately $9.0 billion at September 30, 1997 to $7.6 billion
at September 30, 1998 reflecting the acquisition of residual value insurance
on an increasing number of leases in connection with the lease securitization
program as well as sales of interests in lease finance receivables. In
addition, TMCC entered into insurance policies in July 1998 with Gramercy
Place Insurance Limited, a single purpose licensed Cayman Islands insurance
company, to insure TMCC against specified potential losses in respect of the
residual value risk associated with identified pools of retail closed end
lease contracts which further reduced unguaranteed residual value levels.
TMCC maintains an allowance for estimated losses on lease vehicles returned to
the Company for disposition at lease termination. The level of allowance
required to cover future vehicle disposition losses is based upon projected
vehicle return rates and projected residual value losses derived from market
information on used vehicle sales, historical factors, including lease return
trends, and general economic factors.
-14-
<PAGE>
The increase in the provision for residual value losses in fiscal 1998
reflects higher off-lease vehicle return rates as well as higher residual
value losses per vehicle sold at auction. The number of returned leased
vehicles sold by TMCC during a specified period as a percentage of the number
of lease contracts that as of their origination dates were scheduled to
terminate ("full term return ratio") was 40% for fiscal 1998 as compared to
18% and 14% for fiscal 1997 and 1996, respectively. Losses at vehicle
disposition increased $118 million and $53 million during fiscal 1998 and
fiscal 1997, respectively, though per unit residual value loss rates have
improved for the quarter ended September 30, 1998 as compared with the
previous quarters ended June 30, 1998 and March 31, 1998. TMCC believes that
the increase in vehicle returns and losses is due in part to (i) the
relatively large number of 24 month Toyota vehicle leases maturing during the
current fiscal year, which historically experience higher return rates and
losses per unit than longer term contracts (ii) the impact of competitive new
vehicle pricing for core Toyota and Lexus models which has put downward
pressure on late model Toyota and Lexus used vehicle prices and (iii) the
large supply of late model used vehicles in the used car market which may also
be affecting return rates by depressing market prices. TMCC believes that per
unit loss rates have increased primarily as a result of the factors described
above with respect to higher vehicle return rates. In addition, per unit loss
rates may also be affected by the amount of accessories or installed optional
equipment included on leased vehicles and the types of installed optional
equipment included theron. Although per unit loss rates are typically the
result of a combination of factors, to the extent certain types of optional
equipment depreciate more quickly than the value attributable to the base
leased vehicle, leased vehicles having a greater portion of their overall
manufacturer's suggested retail price attributable to such optional equipment
will experience relatively higher level of losses.
The Company has taken action to reduce vehicle disposition losses by adjusting
the lease term purchase mix and developing strategies to maximize proceeds on
vehicles sold through auction. In addition, TMCC implemented a new residual
value setting policy for new Toyota vehicles that separately calculates the
residual value applicable to the base vehicle and the residual value
applicable to certain specified optional accessories and optional equipment.
During fiscal 1998, the Company received Parent support for vehicle
disposition losses; no assurance can be provided as to either the level of
Parent support or the continuation of the support arrangement beyond fiscal
1998. TMCC's lease portfolio includes contracts with original terms ranging
from 12 to 60 months; the average original contract term in TMCC's operating
lease portfolio was 36 months and 35 months at September 30, 1998 and 1997,
respectively.
No assurance can be made that the full term return ratio and per unit losses on
lease vehicles will return to historical levels and will not increase further.
-15-
<PAGE>
Interest Expense
- ----------------
Interest expense increased 8% and 12% in fiscal 1998 and 1997, respectively,
reflecting higher average borrowings outstanding required to fund the growth in
average earning assets, slightly offset by a decline in the average cost of
borrowings. The weighted average cost of borrowings was 5.85%, 5.87% and 5.90%
for the years ended September 30, 1998, 1997 and 1996, respectively.
Operating and Administrative Expenses
- -------------------------------------
Operating and administrative expenses increased 25% and 10% in fiscal 1998 and
1997, respectively. The increases reflect primarily additional personnel and
operating costs required to support TMCC's growing customer base as well as
growth in the Company's insurance operations. TMCC anticipates continued
growth in expenses reflecting increasing headcount and operating costs
associated with portfolio growth and expanded customer service activities as
well as costs in connection with technology upgrades and software modifications
to address year 2000 issues.
Provision for Credit Losses
- ---------------------------
TMCC's provision for credit losses decreased 7% during fiscal 1998 reflecting
management's estimate that current reserve levels are adequate based on
improved credit loss experience, portfolio composition and other factors. The
18% increase in fiscal 1997 reflects higher credit losses, increased mix of
used vehicles in the retail portfolio and earning asset growth. TMCC has not
significantly altered its underwriting standards. Allowances for credit losses
are evaluated periodically, considering historical loss experience and other
factors, and are considered adequate to cover expected credit losses as of
September 30, 1998.
-16-
<PAGE>
An analysis of credit losses and the related allowance follows, excluding net
losses on receivables sold subject to limited recourse provisions:
<TABLE>
<CAPTION>
Years ended September 30,
------------------------------------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Allowance for credit losses
at beginning of period......... $213 $203 $171 $164 $121
Provision for credit losses....... 127 136 115 66 78
Charge-offs....................... (120) (116) (81) (63) (47)
Recoveries........................ 17 12 12 12 12
Other Adjustments................. (17) (22) (14) (8) -
---- ---- ---- ---- ----
Allowance for credit losses
at end of period............... $220 $213 $203 $171 $164
==== ==== ==== ==== ====
Allowance for credit losses
as a percent of gross
earning assets................. 1.02% 1.13% 1.10% 1.10% 1.15%
Credit losses as a percent
of average earning assets...... .51% .55% .41% .34% .30%
Aggregate balances at end of
period for lease rentals
and installments 60
or more days past due.......... $30 $30 $29 $20 $15
Aggregate balances at end of
period for lease rentals
and installments 60 or more
days past due as a percent
of net investments in operating
leases and gross receivables
outstanding.................... .14% .15% .15% .12% .10%
</TABLE>
-17-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company requires, in the normal course of business, substantial funding to
support the level of its earning assets. Significant reliance is placed on the
Company's ability to obtain debt funding in the capital markets in addition to
funding provided by earning asset liquidations and cash provided by operating
activities as well as transactions through the Company's asset-backed
securitization programs. Debt issuances have generally been in the form of
commercial paper and domestic and euro medium-term notes ("MTNs") and bonds.
On occasion, this funding has been supplemented by loans and equity
contributions from TMS.
Commercial paper issuances are used to meet short-term funding needs.
Commercial paper outstanding under TMCC's commercial paper program ranged from
approximately $1.3 billion to $3.7 billion during fiscal 1998, with an average
outstanding balance of $2.4 billion. For additional liquidity purposes, TMCC
maintains syndicated bank credit facilities with certain banks which aggregated
$3.0 billion at September 30, 1998. No loans were outstanding under any of
these bank credit facilities during fiscal 1998. TMCC also maintains, along
with TMS, uncommitted, unsecured lines of credit with banks totaling
$175 million. At September 30, 1998, TMCC had issued approximately $12 million
in letters of credit, primarily related to the Company's insurance operations.
Long-term funding requirements are met through the issuance of a variety of
debt securities underwritten in both the United States and international
capital markets. Domestic and euro MTNs and bonds have provided TMCC with
significant sources of funding. During fiscal 1998, TMCC issued approximately
$5.0 billion of domestic and euro MTNs and bonds all of which had original
maturities of one year or more.
The original maturities of all MTNs and bonds outstanding at September 30,
1998 ranged from one to eleven years. As of September 30, 1998, TMCC had
total MTNs and bonds outstanding of $14.9 billion, of which $7.8 billion was
denominated in foreign currencies.
TMCC anticipates continued use of MTNs and bonds in both the United States and
international capital markets. The Company maintains a shelf registration with
the SEC providing for the issuance of MTNs and other debt securities. At
November 30, 1998, approximately $2.5 billion was available for issuance under
this registration statement. The maximum aggregate principal amount authorized
to be outstanding at any time under TMCC's euro MTN program is $16.0 billion.
Approximately $5.7 billion was available for issuance under the euro MTN
program as of November 30, 1998. The United States and euro MTN programs may
be expanded from time to time to allow for the continued use of these sources
of funding. In addition, TMCC may issue bonds in the international capital
market that are not issued under its euro MTN program.
Additionally, TMCC uses its asset-backed securitization programs to generate
funds for investment in earning assets. During the year ended September 30,
1998, TMCC sold interests in lease finance receivables totaling $1,643 million
as described in Note 7 of the Notes to the Consolidated Financial Statements.
In addition, on December 3, 1998, the Company sold interests in lease finance
receivables totaling $782 million. During fiscal 1998, the number and
principal amount of leases purchased by the Toyota Lease Trust in connection
with TMCC's lease securitization program comprised a significant and increasing
percentage of what otherwise would have been TMCC's lease portfolio. However,
until leases are included in a securitization transaction, they continue to be
classified as finance receivables on TMCC's balance sheet.
-18-
<PAGE>
TMCC's ratio of earnings to fixed charges was 1.25, 1.31 and 1.32 in the years
ended September 30, 1998, 1997, and 1996, respectively. TMCC believes that the
decline in the ratio has not affected its ability to maintain liquidity or
access to outside funding sources. The decline in the ratio is due to several
factors including higher interest expense, higher provisions for residual value
losses and increased operating expenses attributable to TMCC's growing customer
base, customer service and technology initiatives and costs in connection with
the year 2000 project.
Cash flows provided by operating, investing and financing activities have been
used primarily to support earning asset growth. Cash provided by the
liquidation of earning assets, totaling $17.3 billion and $15.6 billion during
fiscal 1998 and 1997, respectively, was used to purchase additional investments
in operating leases and finance receivables, totaling $23.6 billion and $19.9
billion during fiscal 1998 and 1997, respectively. Investing activities
resulted in a net use of cash of $4.5 billion and $2.3 billion in fiscal 1998
and 1997, respectively, as the purchase of additional earning assets exceeded
cash provided by the liquidation of earning assets. Net cash provided by
operating activities totaled $2.0 billion in both fiscal 1998 and 1997, and net
cash provided by financing activities totaled $2.5 billion and $0.3 billion,
during fiscal 1998 and 1997, respectively. The Company believes that cash
provided by operating and investing activities as well as access to domestic
and international capital markets, the issuance of commercial paper and asset-
backed securitization transactions will provide sufficient liquidity to meet
its future funding requirements.
During the past fiscal year, the long-term debt rating of TMC and its
subsidiaries (including TMCC) has been and continues to be under review by
certain nationally recognized statistical rating organizations and was
downgraded by one of such rating organizations. TMCC does not believe that
these rating organization actions have had a material adverse effect on its
liquidity or access to the capital markets.
-19-
<PAGE>
Year 2000 Date Conversion
- -------------------------
The year 2000 issue concerns the inability of computer systems and related
applications to function properly in the year 2000 and beyond. As a wholly-
owned subsidiary of TMS, TMCC is participating in TMS' comprehensive action
plan to identify and address year 2000 issues. As part of the year 2000
action plan, TMCC is identifying and evaluating potential year 2000 problems
and is implementing changes designed to yield year 2000 compliance in its
information technology systems, including mainframe, distributed and desktop
computer systems, networks and telecommunications (collectively, "IT systems")
and its non-information technology systems, including security and HVAC
systems, automated access readers and other machinery and equipment
(collectively, "embedded systems"). An additional component of the year 2000
action plan involves TMCC's communications with its external business partners
for the purpose of assessing and reducing the risk that TMCC's operations
could be adversely affected by such third parties' noncompliance with year
2000 issues.
Phases
The year 2000 action plan consists of four phases, some of which are being
conducted concurrently:
Inventory and Assessment: During this phase an inventory is taken of all
software and/or hardware components of significant applications or systems.
Software and hardware that is no longer in use or is planned to be replaced
before the year 2000, is identified and removed from the scope of the project.
Once the inventory is completed and verified, a preliminary determination of
whether the software or hardware is likely to have year 2000 date issues is
made either by manual review, vendor inquiry or by use of software tools
designed to search for date impacts. Once the assessment is completed, a
business critical prioritized plan is developed for remediation, testing, and
implementing the remediated hardware or software in the remaining phases.
Remediation: During this phase, software for which TMS or TMCC owns the
source code will be scanned and corrected. In most instances, TMCC will use
the "windowing" approach to fix source code which uses program logic to
correct year 2000 date issues. In some cases, it will be necessary to expand
the year field from two to four digits where the year 2000 date issue can not
be solved with the "windowing" method. Software for which TMS or TMCC does
not own the source code will be remediated by obtaining the year 2000 ready
version of the software from the vendor. For hardware and operating system
software, the year 2000 ready component will also be obtained from the vendor.
Testing: The testing phase focuses mainly on remediated hardware and software
that supports business critical functions. Test plans and test cases are
expected to be developed and performed for each application. For software
modified by TMCC, tests will be designed to demonstrate that application
functionality has not changed as a result of the remediation.
Implementation: During this phase, the remediated hardware and software
components will be implemented in the production environment. At this time,
policies and procedures will be implemented to ensure that additional
modifications to remediated and tested hardware and/or software are year 2000
compliant.
-20-
<PAGE>
State of Readiness
The Company has identified the following six areas for specific review and
remediation in connection with its year 2000 compliance efforts:
Critical Business Systems Applications: Includes distributed and mainframe
applications used in operations such as retail and lease financing, customer
account processing, collections, insurance operations and accounting systems.
TMCC has completed the inventory and assessment of these systems and is
currently in the remediation and testing phases. Testing and validation of
remediated systems will continue through the second quarter of calendar year
1999 with implementation expected by the third quarter of calendar year 1999.
Desktop Systems: Includes commercial off-the-shelf software as well as custom
developed applications. TMCC has completed the inventory and assessment of
these systems and related software applications. Remediation and testing of
business critical custom developed systems is underway with implementation
expected by the third quarter of calendar year 1999. Replacement of non-
compliant off-the-shelf software applications is expected by the second
quarter of calendar year 1999.
Technical Infrastructure: Includes mainframe, distributed and PC systems,
networks, and telecommunications. TMCC is in the process of completing the
inventory of its technical infrastructure which is expected to be completed by
the first quarter of calendar year 1999 with the assessment phase expected to
be completed by the second quarter of calendar year 1999. Testing of business
critical components will begin in the first quarter of calendar year 1999 with
implementation expected by the third quarter of calendar year 1999.
Embedded Systems: Includes non-information technology systems described
above. TMCC has completed an inventory of embedded systems at its facilities.
Assessment of these systems is being conducted through communication with
manufacturers and/or suppliers and will include remediation and onsite testing
of critical systems. Implementation is expected to be completed by the second
quarter of calendar year 1999.
External Compliance: Includes financial institutions, dealers, suppliers,
trustees, underwriters and affiliates ("business partners"). Critical
business partners have been identified and prioritized. Letters and surveys
have been sent to business partners to assess the risk associated with those
business partners' failure to remediate their own year 2000 issues. TMCC is
currently following up with non-responding and non-compliant at-risk critical
business partners and expects to complete the assessment phase by the first
quarter of calendar year 1999. Testing of business critical systems with
external business partners will follow the assessment phase and continue
through calendar year 1999.
Non-Critical Systems: Includes systems and applications from the above-listed
areas which have been prioritized as non-critical. Such systems and
applications will be reviewed on an ongoing basis and assessed for year 2000
compliance throughout calendar year 1999.
-21-
<PAGE>
TMS has contacted its affiliates and others involved in the manufacture of
Toyota and Lexus vehicles and equipment to determine the status of year 2000
product compliance, and based on information received to date, TMCC is not
aware of any year 2000 problems that would affect the operational safety of
these products.
Year 2000 Costs
Costs associated with the year 2000 systems and software modifications are
generally expensed as incurred. TMS is allocating a portion of its year 2000
costs to TMCC. TMCC's allocated cost incurred through fiscal year 1998 was
$8.2 million. TMCC's allocated total cost for the year 2000 issue is
estimated to be $20 million. The estimated total cost to be incurred by TMCC
in connection with its year 2000 compliance efforts is not expected to have a
material impact on the Company's results of operations, liquidity or capital
resources.
Year 2000 Risks
The most reasonably likely worst case scenario with respect to the year 2000
issue is the failure of a business partner, particularly another financial
institution, to be year 2000 compliant. Although TMCC does not currently
anticipate that it will experience significant business disruptions as a
result of year 2000 problems, there remains uncertainty in this area. The
failure to achieve year 2000 compliance by energy and water utilities,
governmental agencies or other private or public suppliers of general
infrastructure could present substantial difficulties to TMCC's business
operations in the affected geographic areas. The inability of TMCC, its
external business partners or the public and private suppliers of general
infrastructure to identify and timely resolve year 2000 problems could result
in a significant adverse affect on the Company's operations and financial
results, including an inability to collect receivables, pay obligations,
process new business, raise capital and occupy facilities.
Year 2000 Contingency Plan
The Company is currently developing a contingency plan to address problems
resulting from year 2000 noncompliance. TMCC's contingency planning will
focus on identifying systems of TMCC and its business partners that TMCC
believes would be the most likely to experience year 2000 problems. The
contingency plan is expected to include arrangements with back-up vendors,
suppliers and other resources to permit operations to be conducted temporarily
on a manual basis. Completion of the contingency plan is expected by the
third quarter of calendar year 1999, although continuing revisions will be
made on an ongoing basis throughout the year as circumstances change and
additional information becomes available.
-22-
<PAGE>
Euro Conversion
- ---------------
On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "participating countries") are scheduled to establish fixed
conversion rates between their existing sovereign currencies (the "legacy
currencies") and the euro. The participating countries have agreed to adopt
the euro as their common legal currency on that date at which time the euro
will trade on currency exchanges and be available for non-cash transactions.
Following introduction of the euro, the legacy currencies are scheduled to
remain legal tender in the participating countries as denominations of the
euro between January 1, 1999 and January 1, 2002 (the "transition period").
During the transition period, public and private parties may pay for goods and
services using either the euro or the participating country's legacy currency.
Beginning January 1, 2002, the participating countries will issue new euro-
denominated bills and coins for use in cash transactions and legacy currencies
will be withdrawn from circulation, signifying the completion of the euro
conversion process.
As TMCC does not currently support Toyota finance operations in Europe, the
impact of the euro conversion is limited to issues in connection with raising
funds in the European capital markets. TMCC generally hedges all foreign
exchange exposure associated with its funding activities which limits its
exposure to movements in foreign exchange rates. In addition, payments in
foreign currencies owed by TMCC are made by its counterparties under
International Swaps and Derivatives Association, Inc. ("ISDA") master
agreements governing swap transactions. Accordingly, TMCC does not anticipate
needing to make any material changes to its systems to accommodate these types
of payments. TMCC has provided changes to its standard settlement
instructions to the extent necessary to reflect changes in account information
and payment instructions occurring as a result of the introduction of the
euro. TMCC does not believe that it will experience significant issues
relating to the continuity of TMCC's contracts arising from the introduction
of the euro. The ISDA Master Agreements entered into by TMCC are generally
governed by New York law. New York has adopted legislation which prevents a
party to a contract from unilaterally breaking or changing its contractual
obligations as a result of the euro conversion. In addition, TMCC is a party
to the EMU Protocol published by ISDA designed to clarify the effects of
certain issues surrounding the introduction of the euro including continuity
of contracts, price source changes, payment netting and certain definitions.
At the current time, TMCC cannot assess completely the impact of the
introduction of the euro. However, the Company does not expect the
introduction of the euro to have a material adverse effect on its operations
or financial results. The Company plans to consider the euro in future
funding strategies and will continue to fund in all markets which are cost-
effective.
-23-
<PAGE>
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the
Private Securities Litigation Reform Act of 1995
The foregoing Business description and Management's Discussion and Analysis
contain various "forward looking statements" within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, which represent the Company's expectations or
beliefs concerning future events, including the following: that the Company
considers its employee relations to be good; that the ultimate liability
resulting from pending claims and actions should not have a material adverse
effect on the Company's consolidated financial position or results of
operations; that TMCC anticipates continued growth in operating expenses
associated with portfolio growth, expanded customer service activities,
technology upgrades and software modifications to address year 2000 issues;
that allowances for credit losses are considered adequate to cover expected
credit losses; the Company's continued use of MTNs and bonds in the United
States and the international capital markets; that the Company does not
currently anticipate non-performance by any of its counterparties; that the
decline in the ratio of earnings to fixed charges has not affected the
Company's ability to maintain liquidity or access to outside funding sources;
that cash provided by operating and investing activities as well as access to
domestic and international capital markets, the issuance of commercial paper
and asset-backed securitization transactions will provide sufficient liquidity
to meet the Company's future funding requirements; that the Company's action
plan for year 2000 compliance efforts will be carried out as described under
Item 7 - "Year 2000 Date Conversion - Phases and - State of Readiness"; that
the Company expects to complete its year 2000 compliance efforts on its
critical systems on a timely basis; that the total estimated cost in connection
with the year 2000 issue is not expected to have a material impact on the
Company's results of operations, liquidity or capital resources; that the risk
to the Company with respect to year 2000 issues is as described under Item 7 -
"Year 2000 Date Conversion - Year 2000 Risks"; that the Company's contingency
plan to address year 2000 issues will be as described under Item 7 - "Year 2000
Date Conversion - Year 2000 Contingency Plan" and completion of the Company's
contingency plan relating to the year 2000 issue is expected by the third
quarter of calendar year 1999; that TMCC does not anticipate needing to make
any material changes to its systems to accommodate the introduction of the
euro; that TMCC does not believe that it will experience significant issues
relating to the continuity of TMCC's contracts arising from the introduction of
the euro; that TMCC does not expect the introduction of the euro to have a
material adverse effect on its operations or financial results.
The Company cautions that these statements are further qualified by important
factors that could cause actual results to differ materially from those in the
forward looking statements, including, without limitation, the following:
decline in demand for Toyota and Lexus products; the effect of economic
conditions; a decline in the market acceptability of leasing; the effect of
competitive pricing on interest margins; increases in prevailing interest
rates; changes in pricing due to the appreciation of the Japanese yen against
the United States dollar; the effect of governmental actions; the effect of
competitive pressures on the used car market and residual values and the
continuation of the other factors causing an increase in vehicle returns and
disposition losses; the continuation of, and if continued, the level and type
of special programs offered by TMS; the ability of the Company to successfully
access the United States and international capital markets; the effects of any
rating agency actions; the monetary policies exercised by the European Central
Bank and other monetary authorities; unanticipated problems or delays in the
completion by the Company of its year 2000 action plan; failure of TMCC's
business partners to timely resolve their year 2000 issues ; the failure of the
Company to develop and implement an adequate contingency plan relating to year
2000 issues; increased costs associated with the Company's debt funding
efforts; with respect to the effects of litigation matters, the discovery of
facts not presently known to the Company or determination by judges, juries or
other finders of fact which do not accord with the Company's evaluation of the
possible liability from existing litigation; and the ability of the Company's
counterparties to perform under interest rate and cross currency swap
agreements. Results actually achieved thus may differ materially from expected
results included in these statements.
-24-
<PAGE>
New Accounting Standards
In February 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 132, "Employers Disclosure About Pensions and Other Postretirement
Benefits." SFAS No. 132 standardizes the disclosure requirements for pension
and other postretirement benefits, requires additional information on changes
in the benefit obligations and fair values of plan assets and eliminates
certain previously required disclosures. The Company does not have a pension
plan separate from TMS; all full-time employees of the Company are eligible to
participate in the TMS pension plan. Benefit obligations and fair values of
plan assets for employees of the Company are not determined separately from
TMS. The impact on the Company of adoption of SFAS No. 132 is not expected to
be significant.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP provides guidance
on accounting for certain costs in connection with obtaining or developing
computer software for internal use and requires that entities capitalize such
costs once certain criteria are met. Currently, the Company expenses as
incurred the costs in connection with implementing internal-use software. The
Company adopted SOP 98-1 as of October 1, 1998.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-up
Activities," effective for fiscal years beginning after December 15, 1998.
SOP 98-5 provides guidance on the financial reporting of start-up costs and
organization costs. This SOP requires start-up activities and organization
costs to be expensed as incurred. Currently, the Company expenses start-up
costs and organization costs as incurred.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. SFAS No. 133 requires companies to record derivatives on the
balance sheet as assets and liabilities, measured at fair value. Gains and
losses resulting from changes in the values of those derivatives would be
accounted for as components of comprehensive income depending on the use of the
derivative and whether it qualifies for hedge accounting. The Company has not
determined the impact that adoption of this standard will have on its
consolidated financial statements. The Company plans to adopt SFAS No. 133 by
October 1, 1999, as required.
-25-
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
TMCC uses a variety of interest rate and currency derivative financial
instruments to manage interest rate and currency exchange exposures. The
derivative instruments used include cross currency and interest rate swaps,
indexed note swaps and option-based products. TMCC does not use any of these
instruments for trading purposes. The total notional amounts of TMCC's
derivative financial instruments at September 30, 1998 and 1997 were
$23.4 billion and $20.8 billion, respectively. The notional amounts of
interest rate and indexed note swap agreements and option-based products do not
represent amounts exchanged by the parties and, thus, are not a measure of the
Company's exposure through its use of derivatives. The only market rate risk
related to TMCC's portfolio is interest rate risk as foreign currency risks are
entirely hedged through cross currency interest rate swap agreements.
TMCC uses interest rate swap agreements in managing its exposure to interest
rate fluctuations. Interest rate swap agreements are executed as an integral
part of specific debt transactions or on a portfolio basis. TMCC's interest
rate swap agreements involve agreements to pay fixed and receive a floating
rate, or receive fixed and pay a floating rate, at specified intervals,
calculated on an agreed-upon notional amount. Interest rate swap agreements
may also involve basis swap contracts which are agreements to exchange the
difference between certain floating interest amounts, such as the net payment
based on the commercial paper rate and the London Interbank Offered Rate
("LIBOR"), calculated on an agreed-upon notional amount.
TMCC also uses option-based products in managing its exposure to interest rate
fluctuations. Option-based products are executed on a portfolio basis and
consist primarily of purchased interest rate cap agreements. Option-based
products are agreements which either grant TMCC the right to receive or require
TMCC to make payments at specified interest rate levels.
TMCC uses indexed note swap agreements in managing its exposure in connection
with debt instruments whose interest rate and/or principal redemption amounts
are derived from other underlying instruments. Indexed note swap agreements
involve agreements to receive interest and/or principal amounts associated with
the indexed notes, denominated in either U.S. dollars or a foreign currency,
and to pay fixed or floating rates on fixed U.S. dollar liabilities.
TMCC uses cross currency interest rate swap agreements to entirely hedge
exposure to exchange rate fluctuations on principal and interest payments for
borrowings denominated in foreign currencies. Notes and loans payable issued
in foreign currencies are hedged by concurrently executed cross currency
interest rate swap agreements which involve the exchange of foreign currency
principal and interest obligations for U.S. dollar obligations at agreed-upon
currency exchange and interest rates.
Derivative financial instruments used by TMCC involve, to varying degrees,
elements of credit risk in the event a counterparty should default and market
risk as the instruments are subject to rate and price fluctuations. Credit
risk is managed through the use of credit standard guidelines, counterparty
diversification, monitoring of counterparty financial condition and master
netting agreements in place with all derivative counterparties. TMCC does not
currently anticipate non-performance by any of its counterparties and has no
reserves related to non-performance as of September 30, 1998; TMCC has not
experienced any counterparty default during the three years ended September 30,
1998.
-26-
<PAGE>
Changes in interest rates may impact TMCC's future weighted average interest
rate on outstanding debt as a result of floating rate liabilities. As of
September 30, 1998, an interest rate increase of 1% (100 basis points) would
raise TMCC's weighted average interest rate, including the effects of interest
rate swap agreements and option-based products, by .73%, from 5.63% to an
estimated 6.36%. Conversely, an interest rate decrease of 1% (100 basis
points) would lower TMCC's weighted average interest rate, including the
effects of interest rate swap agreements and option-based products, by .88%,
from 5.63% to an estimated 4.75% at September 30, 1998.
TMCC uses a value-at-risk methodology, in connection with other management
tools, to assess and manage the interest rate risk of aggregated loan and lease
assets and financial liabilities, including interest rate derivatives and
option-based products. Value-at-risk represents the potential losses for a
portfolio from adverse changes in market factors for a specified period of
time and likelihood of occurrence (i.e. level of confidence). TMCC's value-
at-risk methodology incorporates the impact from adverse changes in market
interest rates but does not incorporate any impact from other market changes,
such as foreign currency exchange rates or commodity prices, which do not
affect the value of TMCC's portfolio. The methodology assumes that changes in
interest rates are lognormally distributed. For options and instruments with
non-linear returns, the model uses the Black Scholes method to approximate
changes in fair value. The value-at-risk methodology excludes changes in fair
values related to investments in marketable securities as these amounts are not
significant. TMCC estimates value-at-risk using historical interest rate
volatilities for the past two years and a stratified random sampling
methodology.
The value at risk and the average value at risk of TMCC's portfolio as of
September 30, 1998 and for the fiscal year ending September 30, 1998, measured
as the potential 30 day loss in fair value from assumed adverse changes in
interest rates is as follows:
<TABLE>
<CAPTION>
Average for the
As of Fiscal year ending
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Mean portfolio value................... $3,500.0 million $3,270.0 million
Value at risk.......................... $32.5 million $29.8 million
Percentage of the mean portfolio value. 0.9% 0.9%
Confidence level....................... 95.0% 95.0%
</TABLE>
TMCC's calculated value-at-risk exposure represents an estimate of reasonably
possible net losses that would be recognized on its portfolio of financial
instruments assuming hypothetical movements in future market rates and is not
necessarily indicative of actual results which may occur. It does not
represent the maximum possible loss nor any expected loss that may occur, since
actual future gains and losses will differ from those estimated, based upon
actual fluctuations in market rates, operating exposures, and the timing
thereof, and changes in the composition of TMCC's portfolio of financial
instruments during the year.
-27-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
Page
-------
Report of Independent Accountants................................ 29
Consolidated Balance Sheet at September 30, 1998 and 1997........ 30
Consolidated Statement of Income for the
years ended September 30, 1998, 1997 and 1996................. 31
Consolidated Statement of Shareholder's Equity for
the years ended September 30, 1998, 1997 and 1996............. 32
Consolidated Statement of Cash Flows for the
years ended September 30, 1998, 1997 and 1996................. 33
Notes to Consolidated Financial Statements....................... 34-61
All schedules have been omitted because they are not required, not applicable,
or the information has been included elsewhere.
-28-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Shareholder of
Toyota Motor Credit Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of shareholder's equity and of cash flows
present fairly, in all material respects, the financial position of Toyota
Motor Credit Corporation (a wholly-owned subsidiary of Toyota Motor Sales,
U.S.A., Inc.) and its subsidiaries at September 30, 1998 and 1997, and the
results of their operations and their cash flows for each of the three years in
the period ended September 30, 1998, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
Toyota Motor Credit Corporation's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/S/ PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
October 30, 1998
-29-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED BALANCE SHEET
(Dollars in Millions)
<TABLE>
<CAPTION>
September 30,
-----------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents.................. $ 156 $ 177
Investments in marketable securities....... 435 329
Investments in operating leases, net....... 9,765 10,257
Finance receivables, net................... 11,521 8,452
Receivable from Parent and Affiliate....... 512 112
Other receivables.......................... 304 113
Deferred charges........................... 167 164
Other assets............................... 266 183
Income taxes receivable.................... 99 43
------- -------
Total Assets...................... $23,225 $19,830
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Notes and loans payable.................... $17,597 $14,745
Accrued interest........................... 176 213
Accounts payable and accrued expenses...... 995 1,072
Deposits................................... 240 248
Deferred income............................ 607 517
Deferred income taxes...................... 1,379 954
------- -------
Total Liabilities.................... 20,994 17,749
------- -------
Commitments and Contingencies
Shareholder's Equity:
Capital stock, $l0,000 par value
(100,000 shares authorized; issued
and outstanding 91,500 in 1998 and
1997)................................ 915 915
Retained earnings....................... 1,303 1,159
Accumulated other comprehensive income.. 13 7
------- -------
Total Shareholder's Equity........... 2,231 2,081
------- -------
Total Liabilities and
Shareholder's Equity.............. $23,225 $19,830
======= =======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-30-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Millions)
<TABLE>
<CAPTION>
Years ended September 30,
----------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Financing Revenues:
Leasing................................. $2,595 $2,730 $2,448
Retail financing........................ 547 446 415
Wholesale and other dealer financing.... 98 89 109
------ ------ ------
Total financing revenues................... 3,240 3,265 2,972
Depreciation on leases.................. 1,681 1,781 1,620
Interest expense........................ 994 918 820
------ ------ ------
Net financing revenues..................... 565 566 532
Insurance premiums earned and contract
revenues................................ 112 97 86
Investment and other income................ 79 66 41
------ ------ ------
Net financing revenues and other revenues.. 756 729 659
------ ------ ------
Expenses:
Operating and administrative............ 323 259 235
Provision for credit losses............. 127 136 115
Insurance losses and loss adjustment
expenses............................. 55 51 49
------ ------ ------
Total expenses............................. 505 446 399
------ ------ ------
Income before income taxes................. 251 283 260
Provision for income taxes................. 107 121 108
------ ------ ------
Net Income................................. $ 144 $ 162 $ 152
====== ====== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-31-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY
(Dollars in Millions)
<TABLE>
<CAPTION>
Accumulated
Other
Capital Retained Comprehensive
Stock Earnings Income/(Loss) Total
------- -------- ------------- -------
<S> <C> <C> <C> <C>
Balance at September 30, l995.... $ 865 $ 845 $ (1) $1,709
------ ------- ---------- ------
Net income in 1996............... - 152 - 152
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 3 3
------ -------- ---------- ------
Total Comprehensive Income - 152 3 155
------ -------- ---------- ------
Issuance of capital stock........ 50 - - 50
------ -------- ---------- ------
Balance at September 30, 1996.... 915 997 2 1,914
------ -------- ---------- ------
Net income in 1997............... - 162 - 162
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 5 5
------ ------- ---------- ------
Total Comprehensive Income - 162 5 167
------ -------- ---------- ------
Balance at September 30, 1997.... 915 1,159 7 2,081
------ -------- ---------- ------
Net income in 1998............... - 144 - 144
Change in net unrealized gains
on available-for-sale
marketable securities......... - - 6 6
------ ------- ---------- ------
Total Comprehensive Income - 144 6 150
------ -------- ---------- ------
Balance at September 30, 1998.... $ 915 $ 1,303 $ 13 $2,231
====== ======= ========== ======
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-32-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in Millions)
<TABLE>
<CAPTION>
Years ended September 30,
---------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... $ 144 $ 162 $ 152
------ ------ ------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization.................. 1,826 1,822 1,641
Provision for credit losses.................... 127 136 115
Gain from sale of finance receivables, net..... (21) (23) (15)
(Decrease) increase in accrued interest........ (37) (13) 36
Increase in deferred income taxes.............. 420 149 178
Increase in other assets....................... (614) (198) (59)
Increase (decrease) in other liabilities....... 139 (74) 220
------ ------ ------
Total adjustments................................... 1,840 1,799 2,116
------ ------ ------
Net cash provided by operating activities.............. 1,984 1,961 2,268
------ ------ ------
Cash flows from investing activities:
Addition to investments in marketable
securities....................................... (996) (581) (222)
Disposition of investments in marketable
securities....................................... 901 638 68
Addition to investments in operating leases......... (4,552) (4,269) (6,081)
Disposition of investments in operating leases...... 3,303 3,057 1,723
Purchase of finance receivables..................... (19,034) (15,595) (13,136)
Liquidation of finance receivables.................. 14,003 12,553 11,938
Proceeds from sale of finance receivables........... 1,830 1,956 905
------ ------ ------
Net cash used in investing activities.................. (4,545) (2,241) (4,805)
------ ------ ------
Cash flows from financing activities:
Proceeds from issuance of capital stock............. - - 50
Proceeds from issuance of notes and loans payable... 6,039 5,482 5,894
Payments on notes and loans payable................. (4,250) (4,510) (4,587)
Net increase (decrease) in commercial paper,
with original maturities less than 90 days....... 751 (685) 1,249
------ ------ ------
Net cash provided by financing activities.............. 2,540 287 2,606
------ ------ ------
Net (decrease) increase in cash and cash equivalents... (21) 7 69
Cash and cash equivalents at the beginning
of the period....................................... 177 170 101
------ ------ ------
Cash and cash equivalents at the end of the
period.............................................. $ 156 $ 177 $ 170
====== ====== ======
Supplemental disclosures:
Interest paid....................................... $995 $906 $778
Income taxes paid................................... $6 $5 $3
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-33-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Nature of Operations
- -----------------------------
Toyota Motor Credit Corporation ("TMCC") provides retail and wholesale
financing, retail leasing and certain other financial services to authorized
Toyota and Lexus vehicle and Toyota industrial equipment dealers and their
customers in the United States (excluding Hawaii) and Puerto Rico. TMCC is a
wholly-owned subsidiary of Toyota Motor Sales, U.S.A., Inc. ("TMS" or the
"Parent"). TMS is primarily engaged in the wholesale distribution of
automobiles, trucks, industrial equipment and related replacement parts and
accessories throughout the United States (excluding Hawaii). Substantially all
of TMS's products are purchased from Toyota Motor Corporation ("TMC") or its
affiliates.
TMCC has four wholly-owned subsidiaries, Toyota Motor Insurance Services, Inc.
("TMIS"), Toyota Motor Credit Receivables Corporation ("TMCRC"), Toyota
Leasing, Inc. ("TLI") and Toyota Credit de Puerto Rico Corporation ("TCPR").
TMCC and its wholly-owned subsidiaries are collectively referred to as the
"Company". Effective July 1, 1998, Toyota Motor Insurance Company, Toyota
Motor Insurance Corporation of Vermont and Toyota Motor Life Insurance Company
which had been wholly-owned subsidiaries of TMCC became wholly-owned
subsidiaries of TMIS. The insurance subsidiaries provide certain insurance
services along with certain insurance and contractual coverages in connection
with the sale and lease of vehicles. In addition, the insurance subsidiaries
insure and reinsure certain TMS and TMCC risks. TMCRC, a limited purpose
subsidiary, operates primarily to acquire retail finance receivables from TMCC
for the purpose of securitizing such receivables. TLI, a limited purpose
subsidiary, operates primarily to acquire lease finance receivables from TMCC
for the purpose of securitizing such leases. TCPR was established in January
1996 to provide retail and wholesale financing and certain other financial
services to authorized Toyota and Lexus vehicle dealers and their customers in
Puerto Rico; TCPR commenced operations in October 1996.
In September 1998, Toyota Credit Argentina S.A. ("TCA") was incorporated and
upon commencement of operations will provide retail and wholesale financing to
authorized Toyota vehicle dealers and their customers in Argentina. TCA is
owned 85% by TMC and 15% by TMCC.
The Company's business is substantially dependent upon the sale of Toyota and
Lexus vehicles in the United States. Changes in the volume of sales of such
vehicles resulting from governmental action, changes in consumer demand,
changes in pricing of imported units due to currency fluctuations, or other
events could impact the level of finance and insurance operations of the
Company.
-34-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Use of Estimates
----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of TMCC and its
wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated.
Cash and Cash Equivalents
-------------------------
Cash equivalents, consisting primarily of money market instruments and debt
securities, represent highly liquid investments with original maturities of
three months or less.
Investments in Marketable Securities
------------------------------------
Investments in marketable securities consist of debt and equity securities.
Debt securities designated as held-to-maturity are carried at amortized cost
and are reduced to net realizable value for other than temporary declines in
market value. Debt and equity securities designated as available-for-sale are
carried at fair value with unrealized gains or losses included in accumulated
other comprehensive income, net of applicable taxes. Realized investment gains
and losses, which are determined on the specific identification method, are
reflected in income.
Investments in Operating Leases
-------------------------------
Investments in operating leases are recorded at cost and depreciated on a
straight-line basis, over the lease terms to the estimated residual value.
Revenue from operating leases is recognized on a straight-line basis over the
lease terms.
Finance Receivables
-------------------
Finance receivables are recorded at the present value of the related future
cash flows. Revenue associated with finance receivables is recognized on a
level-yield basis over the contract terms.
-35-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Allowance for Credit Losses
---------------------------
Allowances for credit losses are evaluated periodically, considering historical
loss experience and other factors, and are maintained in amounts considered by
management to be appropriate in relation to receivables outstanding and
expected future loss experience. Losses are charged to the allowance for
credit losses when it has been determined that collateral cannot be recovered
and any shortfall between proceeds received and the carrying cost of
repossessed collateral is charged to the allowance. Recoveries are credited to
the allowance for credit losses.
Allowance for Residual Value Losses
-----------------------------------
Allowances for estimated losses on lease vehicles returned to TMCC for
disposition at lease termination are established based upon projected vehicle
return rates and projected residual value losses derived from historical and
market information as well as general economic factors. The provision for
residual value losses is included in lease depreciation expense.
Deferred Charges
----------------
Deferred charges consist primarily of premiums paid for option-based products,
underwriters' commissions and other debt issuance costs which are amortized to
interest expense over the life of the related instruments on a straight-line
basis.
Derivative Financial Instruments
--------------------------------
TMCC uses a variety of derivative financial instruments to manage funding costs
and risks associated with changes in interest and foreign currency exchange
rates. The derivative instruments used include interest rate, cross currency
interest rate and indexed note swap agreements and option-based products. TMCC
does not use any of these instruments for trading purposes. The derivative
financial instruments are specifically designated to the underlying debt
obligations or to portfolio level risks. Cash flows related to these
instruments are classified in the same categories as cash flows from related
borrowing activities.
Interest Rate Swap Agreements
-----------------------------
Interest rate swap agreements are executed as an integral part of specific debt
transactions or on a portfolio basis. The differential paid or received on
interest rate swap agreements is recorded on an accrual basis as an adjustment
to interest expense over the term of the agreements.
Cross Currency Interest Rate Swap Agreements
--------------------------------------------
Cross currency interest rate swap agreements are executed as an integral part
of foreign currency debt transactions. The differential between the contract
rates and the foreign currency spot exchange rates as of the reporting dates is
classified in other receivables or accounts payable and accrued expenses; the
differential paid or received on the interest rate swap portion of the
agreements is recorded on an accrual basis as an adjustment to interest expense
over the term of the agreements.
-36-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Indexed Note Swap Agreements
----------------------------
Indexed note swap agreements are executed as an integral part of indexed note
transactions. Any differential between contract rates and foreign currency
spot exchange rates as of the reporting dates is classified in other
receivables or accounts payable and accrued expenses; the interest differential
paid or received on indexed note swap agreements is recorded on an accrual
basis as an adjustment to interest expense over the term of the agreements.
Option-Based Products
---------------------
Option-based products are executed on a portfolio basis. Premiums paid for
option-based products are included in deferred charges and are amortized to
interest expense over the life of the instruments on a straight-line basis.
Amounts receivable under option-based products are recorded on an accrual basis
as a reduction to interest expense.
Insurance Operations
--------------------
Revenues from insurance premiums and from providing coverage under various
contractual agreements are earned over the terms of the respective policies and
agreements in proportion to estimated claims activity. Certain costs of
acquiring new business, consisting primarily of commissions and premium taxes,
are deferred and amortized over the terms of the related policies on the same
basis as revenues are earned. The liability for reported losses and the
estimate of unreported losses are recorded in accounts payable and accrued
expenses. Commission and fee income are recognized in relation to the level of
services performed.
Income Taxes
------------
TMCC uses the liability method of accounting for income taxes under which
deferred tax assets and liabilities are adjusted to reflect changes in tax
rates and laws in the period such changes are enacted resulting in adjustments
to the current period's provision for income taxes.
The Company joins with TMS in filing consolidated federal income tax returns
and combined or consolidated income tax returns in certain states. Federal and
state income tax expense is generally recognized as if the Company filed its
tax returns on a stand alone basis. In those states where TMCC joins in the
filing of consolidated or combined income tax returns, TMCC is allocated its
share of the total income tax expense based on the Company's income or loss
which would be allocable to such states if the Company filed separate returns.
Based on an informal tax sharing agreement with TMS and other members of the
TMS group, the Company pays TMS for its share of the consolidated federal and
consolidated or combined state income tax expense and is reimbursed for the
benefit of any of its tax basis losses utilized in the consolidated federal and
consolidated or combined state income tax returns.
-37-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Summary of Significant Accounting Policies (Continued)
- ---------------------------------------------------
Asset-Backed Securitization Transactions
----------------------------------------
TMCC periodically sells retail receivables and interests in lease finance
receivables through limited purpose subsidiaries TMCRC and TLI, respectively.
TMCC retains servicing rights for sold assets and receives a servicing fee
which is recognized over the remaining term of the related sold retail
receivables or interests in lease finance receivables. TMCRC and TLI retain
subordinated interests in the excess cash flows of these transactions, certain
cash deposits and other related amounts which are held as restricted assets
subject to limited recourse provisions. The Company's retained interests in
such receivables are included in investments in marketable securities and are
classified as available for sale.
Pre-tax gains on sold retail receivables and interests in lease finance
receivables are recognized in the period in which the sale occurs and are
included in other income. In determining such gains, the investment in the
sold retail receivable and interests in lease finance receivable pool is
allocated between the portion sold and the portion retained based on their
relative fair values on the date sold.
New Accounting Standards
------------------------
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP provides guidance
on accounting for certain costs in connection with obtaining or developing
computer software for internal use and requires that entities capitalize such
costs once certain criteria are met. Currently, the Company expenses as
incurred the costs in connection with implementing internal-use software. The
Company adopted SOP 98-1 as of October 1, 1998.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", effective for fiscal years beginning after
June 15, 1999. SFAS No. 133 requires companies to record derivatives on the
balance sheet as assets and liabilities, measured at fair value. Gains and
losses resulting from changes in the values of those derivatives would be
accounted for as components of comprehensive income depending on the use of the
derivative and whether it qualifies for hedge accounting. The Company has not
determined the impact that adoption of this standard will have on its
consolidated financial statements. The Company plans to adopt SFAS No. 133 by
October 1, 1999, as required.
Reclassifications
-----------------
Certain 1997 and 1996 amounts have been reclassified to conform with the 1998
presentation.
-38-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Investments in Marketable Securities
- ---------------------------------------------
TMCC records its investments in marketable securities which are designated as
available-for-sale at fair value estimated using quoted market prices or
discounted cash flow analysis. Unrealized gains, net of income taxes, related
to available-for-sale securities are included in comprehensive income.
Securities designated as held-to-maturity are recorded at amortized cost.
The estimated fair value and amortized cost of investments in marketable
securities are as follows:
<TABLE>
<CAPTION>
September 30, 1998
------------------------------------------
Gross Gross
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ---------- ----------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Available-for-sale securities:
Equity securities................... $ 62 $ 73 $ 11 $ -
Asset-backed securities............. 201 211 10 -
U.S. debt securities................ 61 63 2 -
Corporate debt securities........... 77 76 1 (2)
---- ---- ---- ----
Total available-for-sale securities.... $401 $423 $ 24 $ (2)
==== ====
Held-to-maturity securities:
U.S. debt securities................ 12 12
---- ----
Total marketable securities............ $413 $435
==== ====
</TABLE>
<TABLE>
<CAPTION>
September 30, 1997
------------------------------------------
Gross Gross
Fair Unrealized Unrealized
Cost Value Gains Losses
---- ----- ---------- ----------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Available-for-sale securities:
Equity securities................... $ 50 $ 58 $ 8 $ -
Asset-backed securities............. 185 188 3 -
U.S. debt securities................ 46 46 - -
Corporate debt securities........... 21 21 - -
---- ---- ---- ----
Total available-for-sale securities.... $302 $313 $ 11 $ -
==== ====
Held-to-maturity securities:
U.S. debt securities................ 16 16
---- ----
Total marketable securities............ $318 $329
==== ====
</TABLE>
-39-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 3 - Investments in Marketable Securities (Continued)
- ---------------------------------------------
The contractual maturities of investments in marketable securities at
September 30, 1998 are as follows:
<TABLE>
<CAPTION>
Available-for-Sale Held-to-Maturity
Securities Securities
------------------ ----------------
Fair Fair
Cost Value Cost Value
---- ----- ---- -----
(Dollars in Millions)
<S> <C> <C> <C> <C>
Within one year...................... $ 13 $ 13 $ 3 $ 3
After one year through five years.... 61 62 9 9
After five years through ten years... 24 25 - -
After ten years...................... 40 39 - -
Equity securities.................... 62 73 - -
Asset-backed securities.............. 201 211 - -
---- ---- ---- ----
Total............................. $401 $423 $ 12 $ 12
==== ==== ==== ====
</TABLE>
The proceeds from sales of available-for-sale securities were $659 million and
$416 million for the years ended September 30, 1998 and 1997, respectively.
Realized gains and losses on sales of available-for-sale securities were
$6 million and $1 million, respectively, for the year ended September 30, 1998,
and $5 million and $2 million, respectively for the year ended September 30,
1997 and were immaterial for the year ended September 30, 1996.
-40-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 4 - Investments in Operating Leases
- ----------------------------------------
Investments in operating leases, net consisted of the following:
<TABLE>
<CAPTION>
September 30,
----------------------
1998 1997
------- -------
(Dollars in Millions)
<S> <C> <C>
Vehicles................................. $11,809 $12,557
Equipment and other...................... 442 338
------- -------
12,251 12,895
Accumulated depreciation................. (2,386) (2,535)
Allowance for credit losses.............. (100) (103)
------- -------
Investments in operating leases, net.. $9,765 $10,257
======= =======
</TABLE>
Rental income from operating leases was $2,372 million, $2,568 million and
$2,292 million for the years ended September 30, 1998, 1997 and 1996,
respectively. Future minimum rentals on operating leases for each of the five
succeeding years ending September 30, are: 1999 - $1,796 million; 2000 -
$1,103 million; 2001 - $436 million; 2002 - $44 million; 2003 - $6 million and
thereafter - $2 million. A substantial portion of TMCC's operating lease
contracts have historically been terminated prior to maturity; future minimum
rentals as shown above should not be considered as necessarily indicative of
future cash collections.
Note 5 - Finance Receivables
- ----------------------------
Finance receivables, net consisted of the following:
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
------ ------
(Dollars in Millions)
<S> <C> <C>
Retail............................... $8,395 $6,315
Finance leases....................... 2,856 1,938
Wholesale and other dealer loans..... 1,099 885
------ ------
12,350 9,138
Unearned income...................... (709) (576)
Allowance for credit losses.......... (120) (110)
------ ------
Finance receivables, net.......... $11,521 $8,452
======= ======
</TABLE>
-41-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Finance Receivables (Continued)
- ----------------------------
Contractual maturities are as follows:
<TABLE>
<CAPTION>
Due in the Wholesale
Years Ending and Other
September 30, Retail Dealer Loans
------------- ------ ------------
(Dollars in Millions)
<S> <C> <C>
1999.................. $2,598 $ 878
2000.................. 2,330 50
2001.................. 1,875 64
2002.................. 1,150 49
2003.................. 414 40
Thereafter............ 28 18
------ ------
Total.............. $8,395 $1,099
====== ======
</TABLE>
Finance leases, net consisted of the following:
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
------ ------
(Dollars in Millions)
<S> <C> <C>
Minimum lease payments.................. $2,339 $1,260
Estimated unguaranteed residual values.. 517 678
------ ------
Finance leases....................... 2,856 1,938
Unearned income......................... (434) (336)
Allowance for credit losses............. (20) (24)
------ ------
Finance leases, net.................. $2,402 $1,578
====== ======
</TABLE>
The aggregate balances related to finance receivables 60 or more days past due
totaled $16 million and $17 million at September 30, 1998 and 1997,
respectively. Future minimum finance lease payments for each of the five
succeeding years ending September 30, are: 1999 - $571 million; 2000 -
$536 million; 2001 - $905 million; 2002 - $209 million and 2003 - $118 million.
A substantial portion of TMCC's finance receivables have historically been
repaid prior to contractual maturity dates; contractual maturities and future
minimum lease payments as shown above should not be considered as necessarily
indicative of future cash collections. The majority of retail and finance
lease receivables do not involve recourse to the dealer in the event of
customer default.
-42-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 6 - Allowance for Credit Losses
- ------------------------------------
An analysis of the allowance for credit losses follows:
<TABLE>
<CAPTION>
Years ended September 30,
--------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
<S> <C> <C> <C>
Allowance for credit losses
at beginning of period........... $213 $203 $171
Provision for credit losses......... 127 136 115
Charge-offs......................... (120) (116) (81)
Recoveries.......................... 17 12 12
Other adjustments................... (17) (22) (14)
---- ---- ----
Allowance for credit losses
at end of period................. $220 $213 $203
==== ==== ====
</TABLE>
Note 7 - Sale of Retail Receivables and Interests in Lease Finance Receivables
- ------------------------------------------------------------------------------
TMCC maintains programs to sell retail receivables and interests in lease
finance receivables through limited purpose subsidiaries TMCRC and TLI,
respectively. During fiscal year 1998, TMCC sold interests in lease finance
receivables totaling $1,643 million, as described below.
TMCC holds an Undivided Trust Interest ("UTI") in leases held in a titling
trust established by TMCC. In May 1998 and September 1998, TMCC identified
certain leases included in the UTI to be allocated to a separate portfolio
represented by a Special Unit of Beneficial Interest ("SUBI") totaling
$515 million and $1,128 million, respectively. TMCC then sold the SUBI to TLI
which in turn contributed substantially all of the SUBI to a trust; TMCC
continues to act as servicer for all assets represented by the UTI and the SUBI
and is paid a servicing fee. TLI retains subordinated interests in the excess
cash flows of these transactions, certain cash deposits and other related
amounts which are held as restricted assets subject to limited recourse
provisions. None of the the lease assets represented by the SUBI or the
restricted assets are available to satisfy any obligations of TMCC.
-43-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Sale of Retail Receivables and Interests in Lease Finance Receivables
- ------------------------------------------------------------------------------
(Continued)
Following is a summary of amounts included in investment in marketable
securities and other receivables:
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
---- ----
(Dollars in Millions)
<S>
Investment in marketable securities <C> <C>
Interest only strips................ $114 $ 77
Allowance for estimated credit and
residual value losses on sold
receivables....................... (62) (28)
Undivided interest in trust......... 53 24
---- ----
Total........................... $105 $ 73
==== ====
Other receivables
Cash deposits....................... $ 78 $ 51
==== ====
</TABLE>
The pretax gain resulting from the sale of interests in lease finance
receivables and retail receivables totaled approximately $15 million,
$23 million and $15 million in fiscal 1998, 1997 and 1996, respectively, after
providing an allowance for estimated credit and residual value losses.
Principal collections related to the lease receivables sold in September 1997
and May 1998 were used to purchase additional vehicle lease contracts resulting
in gains of approximately $6 million for fiscal 1998.
The outstanding balance of the lease finance receivables represented by the
sold SUBI which TMCC continues to service totaled $2.8 billion and $1.3 billion
at September 30, 1998 and 1997, respectively. The outstanding balance of sold
retail finance receivables which TMCC continues to service totaled $493 million
and $1.1 billion at September 30, 1998 and 1997, respectively.
-44-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Notes and Loans Payable
- --------------------------------
Notes and loans payable at September 30, 1998 and 1997, which consisted of
senior debt, included the following:
<TABLE>
<CAPTION>
September 30,
----------------------
1998 1997
------- -------
(Dollars in Millions)
<S> <C> <C>
Commercial paper, net................... $ 2,546 $ 1,512
------- -------
Other senior debt, due in the years
ending September 30,:
1998.............................. - 2,868
1999.............................. 1,943 1,324
2000.............................. 2,521 2,505
2001.............................. 2,678 2,154
2002.............................. 2,689 2,660
2003.............................. 1,884 242
Thereafter........................ 3,223 1,364
------- -------
14,938 13,117
Unamortized premium..................... 113 116
------- -------
Total other senior debt........... 15,051 13,233
------- -------
Notes and loans payable........ $17,597 $14,745
======= =======
</TABLE>
Short-term borrowings include commercial paper and certain medium-term notes
("MTNs"). The weighted average remaining term of commercial paper was 15 days
and 23 days at September 30, 1998 and 1997, respectively. The weighted average
interest rate on commercial paper was 5.57% and 5.58% at September 30, 1998 and
1997, respectively. Short-term MTNs with original terms of one year or less,
included in other senior debt, were $488 million and $221 million at September
30, 1998 and 1997, respectively. The weighted average interest rate on these
short-term MTNs was 5.52% and 5.46% at September 30, 1998 and 1997,
respectively, including the effect of interest rate swap agreements.
The weighted average interest rate on other senior debt was 5.65% and 5.85% at
September 30, 1998 and 1997, respectively, including the effect of interest
rate swap agreements and option-based products. The rates have been calculated
using rates in effect at September 30, 1998 and 1997, some of which are
floating rates that reset daily. Approximately 3% of other senior debt at
September 30, 1998 had interest rates, including the effect of interest rate
swap agreements, that were fixed for a period of more than one year. The
weighted average of these fixed interest rates was 5.36% at September 30,
1998. Approximately 41% of other senior debt at September 30, 1998 had
floating interest rates that were covered by option-based products. The
weighted average strike rate on these option-based products was 5.99% at
September 30, 1998. TMCC manages interest rate risk through continuous
adjustment of the mix of fixed and floating rate debt using interest rate swap
agreements and option-based products.
-45-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 8 - Notes and Loans Payable (Continued)
- --------------------------------
Included in notes and loans payable at September 30, 1998 and 1997 were
unsecured notes denominated in various foreign currencies as follows:
<TABLE>
<CAPTION>
September 30,
------------------------------
1998 1997
----------- -----------
(Amounts in Millions)
<S> <C> <C>
Australian dollar................... - 250
British pound sterling.............. 564 150
Canadian dollar..................... - 300
Czech koruna........................ - 2,000
Danish kroner....................... 400 400
Dutch guilder....................... 250 500
French franc........................ 1,545 1,545
German deutsche mark................ 3,442 2,772
Greek drachma....................... 5,000 -
Hong Kong dollar.................... - 150
Italian lire........................ 927,300 927,300
Japanese yen........................ 134,240 187,502
Luxembourg franc.................... 2,000 2,000
New Zealand dollar.................. 200 200
South African rand.................. 250 400
Swedish kronor...................... 1,060 670
Swiss franc......................... 3,385 1,950
</TABLE>
Concurrent with the issuance of these unsecured notes, TMCC entered into cross
currency interest rate swap agreements to convert these obligations at maturity
into U.S. dollar obligations which in aggregate total a principal amount of
$8.3 billion at September 30, 1998. TMCC's foreign currency debt was
translated into U.S. dollars in the financial statements at the various foreign
currency spot exchange rates in effect at September 30, 1998. The receivables
or payables arising as a result of the differences between the September 30,
1998 foreign currency spot exchange rates and the contract rates applicable to
the cross currency interest rate swap agreements are classified in other
receivables or accounts payable and accrued expenses, respectively, and would
in aggregate total a net payable position of $520 million at
September 30, 1998.
-46-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value of Financial Instruments
- --------------------------------------------
The fair value of financial instruments at September 30, 1998 and 1997, was
estimated using the valuation methodologies described below. Considerable
judgement was employed in interpreting market data to develop estimates of fair
value; accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current market
exchange. The use of different market assumptions or valuation methodologies
could have a material effect on the estimated fair value amounts.
The carrying amounts and estimated fair values of the Company's financial
instruments at September 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
September 30,
---------------------------------------------------
1998 1997
------------------------ ------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ---------- ----------- ----------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Balance sheet financial
instruments:
Assets:
Cash and cash equivalents........... $156 $156 $177 $177
Investments in marketable
securities....................... $435 $435 $329 $329
Retail finance receivables, net..... $9,120 $9,164 $6,875 $6,724
Other receivables................... $157 $157 $103 $103
Receivables from cross currency
interest rate swap agreements.... $147 $292 $10 $20
Liabilities:
Notes and loans payable............. $17,597 $18,376 $14,745 $15,290
Payables from cross currency
interest rate swap agreements.... $667 $401 $801 $543
Other payables...................... $328 $328 $271 $271
</TABLE>
-47-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------
<TABLE>
<CAPTION>
September 30,
-------------------------------------------------
1998 1997
----------------------- ------------------------
Contract or Unrealized Contract or Unrealized
Notional Gains/ Notional Gains/
Amount (Losses) Amount (Losses)
----------- ---------- ----------- ----------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Off-balance sheet
financial instruments:
Cross currency interest
rate swap agreements.... $8,969 $(92) $6,534 $(491)
Interest rate swap
agreements.............. $7,284 $346 $6,318 $127
Option-based products...... $6,300 $5 $5,600 $16
Indexed note swap
agreements.............. $755 $(30) $2,340 $(1)
</TABLE>
The fair value estimates presented herein are based on information available to
management as of September 30, 1998 and 1997. Although the Company is not
aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively reevaluated for purposes of
these financial statements since September 30, 1998 and 1997 and, therefore,
current estimates of fair value may differ significantly from the amounts
presented herein.
The methods and assumptions used to estimate the fair value of financial
instruments are summarized as follows:
Cash and Cash Equivalents
-------------------------
The carrying amount of cash and cash equivalents approximates market value due
to the short maturity of these investments.
Investments in Marketable Securities
------------------------------------
The fair value of marketable securities was estimated using quoted market
prices or discounted cash flow analysis.
Retail Finance Receivables
--------------------------
The carrying amounts of $1 billion and $800 million of variable rate finance
receivables at September 30, 1998 and 1997, respectively, were assumed to
approximate fair value as these receivables reprice at prevailing market rates.
The fair value of fixed rate finance receivables was estimated by discounting
expected cash flows using the rates at which loans of similar credit quality
and maturity would be originated as of September 30, 1998 and 1997.
-48-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Fair Value of Financial Instruments (Continued)
- --------------------------------------------
Other Receivables and Other Payables
------------------------------------
The carrying amount and fair value of other receivables and other payables are
presented separately from the receivables and payables arising from cross
currency interest rate swap agreements. The carrying amount of the remaining
other receivables and payables approximate market value due to the short
maturity of these instruments.
Notes and Loans Payable
-----------------------
The fair value of notes and loans payable was estimated by discounting expected
cash flows using the interest rates at which debt of similar credit quality and
maturity would be issued as of September 30, 1998 and 1997. The carrying
amount of commercial paper was assumed to approximate fair value due to the
short maturity of these instruments.
Cross Currency Interest Rate Swap Agreements
--------------------------------------------
The estimated fair value of TMCC's outstanding cross currency interest rate
swap agreements was derived by discounting expected cash flows using quoted
market exchange rates and quoted market interest rates as of September 30, 1998
and 1997.
Interest Rate Swap Agreements
-----------------------------
The estimated fair value of TMCC's outstanding interest rate swap agreements
was derived by discounting expected cash flows using quoted market interest
rates as of September 30, 1998 and 1997.
Option-based Products
---------------------
The estimated fair value of TMCC's outstanding option-based products was
derived by discounting expected cash flows using market exchange rates and
market interest rates as of September 30, 1998 and 1997.
Indexed Note Swap Agreements
----------------------------
The estimated fair value of TMCC's outstanding indexed note swap agreements was
derived using quoted market prices as of September 30, 1998 and 1997.
-49-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk
- -----------------------------------------------------------
Inventory Lines of Credit
- -------------------------
TMCC has extended inventory floorplan lines of credit to dealers, the unused
portion of which amounted to $1,038 million and $1,163 million at September 30,
1998 and 1997, respectively. Security interests are acquired in vehicles and
equipment financed and substantially all such financings are backed by
corporate or individual guarantees from or on behalf of the participating
dealers.
Derivative Financial Instruments
- --------------------------------
TMCC uses a variety of derivative financial instruments to manage its currency
exchange rate risk arising as a result of borrowings denominated in foreign
currencies and its interest rate risk as explained in this note. TMCC does not
enter into these arrangements for trading purposes.
A reconciliation of the activity of TMCC's derivative financial instruments for
the years ended September 30, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
September 30,
----------------------------------------------------------------
Cross
Currency
Interest Interest Indexed
Rate Swap Rate Swap Option-based Note Swap
Agreements Agreements Products Agreements
------------ ------------ ------------- ------------
1998 1997 1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in Billions)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning Notional Amount... $6.5 $5.6 $6.3 $6.8 $5.6 $6.2 $2.4 $1.9
Add:
New agreements........... 3.6 2.0 3.1 2.0 2.6 2.6 0.3 1.0
Less:
Expired agreements....... 1.1 1.1 2.1 2.5 1.9 3.2 1.9 0.5
---- ---- ---- ---- ---- ---- ---- ----
Ending Notional Amount...... $9.0 $6.5 $7.3 $6.3 $6.3 $5.6 $0.8 $2.4
==== ==== ==== ==== ==== ==== ==== ====
</TABLE>
-50-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Interest Rate Risk Management
- -----------------------------
TMCC uses interest rate swap agreements in managing its exposure to interest
rate fluctuations. Interest rate swap agreements are executed as an integral
part of specific debt transactions or on a portfolio basis. TMCC's interest
rate swap agreements involve agreements to pay fixed and receive a floating
rate, or receive fixed and pay a floating rate, at specified intervals,
calculated on an agreed-upon notional amount. Interest rate swap agreements
may also involve basis swap contracts which are agreements to exchange the
difference between certain floating interest amounts, such as the net payment
based on the commercial paper rate and the London Interbank Offered Rate
("LIBOR"), calculated on an agreed-upon notional amount. The original
maturities of interest rate swap agreements ranged from one to five years at
September 30, 1998.
TMCC also uses option-based products in managing its exposure to interest rate
fluctuations. Option-based products are executed on a portfolio basis and
consist primarily of purchased interest rate cap agreements. Option-based
products are agreements which either grant TMCC the right to receive or require
TMCC to make payments at specified interest rate levels. Approximately 41% of
TMCC's other senior debt at September 30, 1998 had floating interest rates that
were covered by option-based products which had an average strike rate of
5.99%. The premiums paid for option-based products are included in deferred
charges and are amortized to interest expense over the life of the instruments
on a straight-line basis. Amounts receivable under option-based products are
recorded as a reduction to interest expense. The original maturities of
option-based products ranged from one to four years at September 30, 1998.
The aggregate notional amounts of interest rate swap agreements and option-
based products outstanding at September 30, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
---- ----
(Dollars in Billions)
<S> <C> <C>
Fixed rate swaps............................... $1.1 $1.5
Floating rate swaps............................ 5.2 4.1
Basis swaps.................................... 1.0 0.7
---- ----
Total interest rate swap agreements........ $7.3 $6.3
==== ====
Option-based products.......................... $6.3 $5.6
==== ====
</TABLE>
-51-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Interest Rate Risk Management (Continued)
- -----------------------------
TMCC uses indexed note swap agreements in managing its exposure in connection
with debt instruments whose interest rate and/or principal redemption amounts
are derived from other underlying instruments. Indexed note swap agreements
involve agreements to receive interest and/or principal amounts associated with
the indexed notes, denominated in either U.S. dollars or a foreign currency,
and to pay fixed or floating rates on fixed U.S. dollar liabilities. At
September 30, 1998, TMCC was the counterparty to $0.8 billion of indexed note
swap agreements, of which $0.3 billion was denominated in foreign currencies
and $0.5 billion was denominated in U.S. dollars. At September 30, 1997, TMCC
was the counterparty to $2.4 billion of indexed note swap agreements, of which
$0.3 billion was denominated in foreign currencies and $2.1 billion was
denominated in U.S. dollars. The original maturities of indexed note swap
agreements ranged from one to ten years at September 30, 1998.
The notional amounts of interest rate and indexed note swap agreements and
option-based products do not represent amounts exchanged by the parties and,
thus, are not a measure of the Company's exposure through its use of
derivatives. The amounts exchanged are calculated based on the notional
amounts and other terms of the derivatives which relate to interest rates or
financial or other indexes.
Foreign Exchange Risk Management
- --------------------------------
TMCC uses cross currency interest rate swap agreements to manage exposure to
exchange rate fluctuations on principal and interest payments for borrowings
denominated in foreign currencies. Notes and loans payable issued in foreign
currencies are hedged by concurrently executed cross currency interest rate
swap agreements which involve the exchange of foreign currency principal and
interest obligations for U.S. dollar obligations at agreed-upon currency
exchange and interest rates. The aggregate notional amounts of cross currency
interest rate swap agreements at September 30, 1998 and 1997 were $9.0 billion
and $6.5 billion, respectively. The original maturities of cross currency
interest rate swap agreements ranged from one to ten years at September 30,
1998.
-52-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 10 - Financial Instruments with Off-Balance Sheet Risk (Continued)
- -----------------------------------------------------------
Credit Risk Management
- ----------------------
TMCC manages the risk of counterparty default through the use of credit
standard guidelines, counterparty diversification and monitoring of
counterparty financial condition. At September 30, 1998, approximately 88% of
TMCC's derivative financial instruments, based on notional amounts, were with
commercial banks and investment banking firms assigned investment grade ratings
of "AA" or better by national rating agencies. TMCC does not anticipate non-
performance by any of its counterparties and has no reserves related to non-
performance as of September 30, 1998; TMCC has not experienced any counterparty
default during the three years ended September 30, 1998. Additionally, TMCC's
loss in the event of counterparty default is partially mitigated as a result of
master netting agreements in place with all derivative counterparties which
allow the net difference between TMCC and each counterparty to be exchanged in
the event of default.
Credit exposure of derivative financial instruments is represented by the fair
value of contracts with a positive fair value at September 30, 1998 reduced by
the effects of master netting agreements. The credit exposure of TMCC's
derivative financial instruments at September 30, 1998 was $499 million on an
aggregate notional amount of $23.3 billion.
Note 11 - Pension and Other Benefit Plans
- -----------------------------------------
All full-time employees of the Company are eligible to participate in the TMS
pension plan commencing on the first day of the month following hire. Benefits
payable under this non-contributory defined benefit pension plan are based upon
the employees' years of credited service and the highest sixty consecutive
months' compensation, reduced by a percentage of social security benefits. For
each of the years ended September 30, 1998, 1997 and 1996, the Company's
pension expense was $4 million. At September 30, 1998, 1997 and 1996, the
accumulated benefit obligation and plan net assets for employees of the Company
were not determined separately from TMS; however, the plan's net assets
available for benefits exceeded the accumulated benefit obligation. TMS
funding policy is to contribute annually the maximum amount deductible for
federal income tax purposes.
-53-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Provision for Income Taxes
- ------------------------------------
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
Years ended September 30,
--------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
<S> <C> <C> <C>
Current
Federal........................... $(317) $(14) $(47)
State............................. (16) (14) (23)
---- ---- ----
Total current ................. (333) (28) (70)
---- ---- ----
Deferred
Federal........................... 399 109 129
State............................. 41 40 49
---- ---- ----
Total deferred................. 440 149 178
---- ---- ----
Provision for income taxes.. $107 $121 $108
==== ==== ====
</TABLE>
A reconciliation between the provision for income taxes computed by applying
the federal statutory tax rate to income before income taxes and actual income
taxes provided is as follows:
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------
1998 1997 1996
---- ---- ----
(Dollars in Millions)
<S> <C> <C> <C>
Provision for income taxes at
federal statutory tax rate......... $ 88 $ 99 $91
State and local taxes (net of
federal tax benefit)............... 17 17 17
Other, including changes in
applicable state tax rates......... 2 5 -
---- ---- ----
Provision for income taxes......... $107 $121 $108
==== ==== ====
Effective tax rate.................... 42.81% 42.69% 41.52%
</TABLE>
-54-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Provision for Income Taxes (Continued)
- ------------------------------------
The deferred federal and state income tax liabilities are as follows:
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
---- ----
(Dollars in Millions)
<S> <C> <C>
Federal........................................ $1,235 $831
State.......................................... 144 123
------ ----
Net deferred income tax liability........... $1,379 $954
====== ====
</TABLE>
The Company's deferred tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
September 30,
---------------------
1998 1997
----- -----
(Dollars in Millions)
<S> <C> <C>
Assets:
Alternative minimum tax..................... $ 304 $ 472
Provision for losses........................ 65 148
Deferred administrative fees................ 71 63
NOL carryforwards........................... 42 56
Deferred acquisition costs.................. 8 8
Unearned insurance premiums................. 4 3
Revenue recognition......................... 1 3
Other....................................... 2 -
------ -----
Deferred tax assets...................... 497 753
------ -----
Liabilities:
Lease transactions.......................... 1,679 1,511
State taxes................................. 189 190
Other....................................... 8 6
------ -----
Deferred tax liabilities................. 1,876 1,707
------ -----
Valuation allowance...................... - -
------ -----
Net deferred income tax liability..... $1,379 $ 954
====== =====
</TABLE>
TMCC has state tax net operating loss carryforwards of $993 million which
expire beginning in fiscal 1999 through 2013.
-55-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 13 - Comprehensive Income
- ------------------------------
Effective September 30, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 requires that all components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. This accounting
standard requires that an entity classify items of other comprehensive income
by their nature in a financial statement as well as separate disclosure of
accumulated other comprehensive income in the equity section of the balance
sheet. Financial statements for prior periods provided for comparative
purposes have been reclassified, as required. TMCC has included all of the
components of comprehensive income in the Consolidated Statement of
Shareholder's Equity. The company's total comprehensive earnings were as
follows:
<TABLE>
<CAPTION>
Years Ended September 30,
-------------------------------
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
(Dollars in Millions)
Net income.................................... $ 144 $ 162 $ 152
Other comprehensive income:
Unrealized gains arising during
period (net of tax of $4, $3 and $1
in 1998, 1997 and 1996).............. 9 7 3
Less: reclassification adjustment for
gains included in net income
(net of tax of $2 and $1
in 1998 and 1997)................. (3) (2) -
------ ------ ------
Net unrealized gain on available-for-sale
marketable securities................... 6 5 3
------ ------ ------
Total Comprehensive Income................. $ 150 $ 167 $ 155
====== ====== ======
</TABLE>
-56-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Related Party Transactions
- ------------------------------------
An operating agreement with TMS (the "Operating Agreement") provides that 100%
ownership of TMCC will be retained by TMS as long as TMCC has any funded debt
outstanding and that TMS will provide necessary equity contributions or other
financial assistance it deems appropriate to ensure that TMCC maintains a
minimum coverage on fixed charges of 1.10 times such charges in any fiscal
quarter. The coverage provision of the Operating Agreement is solely for the
benefit of the holders of TMCC's commercial paper and the Operating Agreement
may be amended or terminated at any time without notice to, or the consent of,
holders of other TMCC obligations. The Operating Agreement does not constitute
a guarantee by TMS of any obligations of TMCC.
TMCC has an arrangement to borrow and invest funds with TMS at short term
market rates. For the years ended September 30, 1998, 1997 and 1996, TMCC had
no borrowings from TMS. The Operating Agreement provides that borrowings from
TMS are subordinated to all other indebtedness of TMCC. For the years ended
September 30, 1998, 1997 and 1996, the highest amounts of funds invested with
TMS were $567 million, $817 million and $224 million, respectively; interest
earned on these investments totaled $3 million, $5 million and $5 million for
the years ended September 30, 1998, 1997 and 1996, respectively.
Under an arrangement with the Parent, TMS provided support to TMCC for certain
vehicle disposition losses incurred during fiscal 1998. TMS support amounts
included in the Consolidated Statement of Income related to this arrangement
totaled $80 million for the year ended September 30, 1998.
TMS provides certain technical and administrative services and incurs certain
expenses on the Company's behalf and, accordingly, allocates these charges to
the Company. The charges, reimbursed by TMCC to TMS, totaled $13 million,
$12 million and $12 million for the years ended September 30, 1998, 1997 and
1996, respectively. In addition, TMS sponsors special retail and lease
programs offered by TMCC; for the years ended September 30, 1998, 1997 and
1996, TMCC recognized revenue of $142 million, $174 million and $174 million,
respectively, related to TMS sponsored programs.
The Company leases its headquarters facility from TMS; rent expense paid to TMS
for this facility totaled $3 million for each of the years ended September 30,
1998, 1997 and 1996. TMCC leases a corporate aircraft to TMS and provides
wholesale financing for TMS affiliates; TMCC recognized revenue related to
these arrangements of $7 million, $5 million and $3 million for the years ended
September 30, 1998, 1997 and 1996, respectively.
TMIS and TMICV provide certain insurance services, and insurance and
reinsurance coverages, respectively, to TMS. Premiums, commissions and fees
earned on these services for the years ended September 30, 1998, 1997 and 1996
totaled $18 million, $12 million and $7 million, respectively.
At September 30, 1998, TMCC has an intercompany loan receivable from Toyota
Credit Canada Inc., an affiliate of the Company, in the amount of $170 million.
Interest charged on this loan reflects current market rates and is immaterial
for the year ended September 30, 1998.
-57-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 15 - Lines of Credit/Standby Letters of Credit
- ---------------------------------------------------
To support its commercial paper program, TMCC maintains syndicated bank credit
facilities with certain banks which aggregated $3.0 billion and $2.0 billion at
September 30, 1998 and 1997, respectively. No loans were outstanding under any
of these bank credit facilities as of September 30, 1998 or 1997.
To facilitate and maintain letters of credit, TMCC maintains, along with TMS,
uncommitted, unsecured lines of credit with banks totaling $175 million and
$250 million as of September 30, 1998 and 1997, respectively. Approximately
$12 million in letters of credit had been issued, primarily related to the
Company's insurance operations as of September 30, 1998, compared to $24
million as of September 30, 1997. The letters of credit for the insurance
companies are used to satisfy requirements of certain insurance carriers and
state insurance regulatory agencies.
Note 16 - Commitments and Contingent Liabilities
- ------------------------------------------------
At September 30, 1998, the Company was a lessee under lease agreements for
facilities with minimum future commitments as follows: years ending
September 30, 1999 - $10 million; 2000 - $7 million; 2001 - $6 million;
2002 - $4 million; 2003 - $2 million; thereafter - $1 million.
TMCC has guaranteed payments of principal and interest on $58 million principal
amount of flexible rate demand pollution control revenue bonds maturing in
2006, issued in connection with the Kentucky manufacturing facility of an
affiliate.
Effective June 1998, TMCC has guaranteed payments of principal, interest and
premiums, if any, on $40 million principal amount of flexible rate demand solid
waste disposal revenue bonds issued by Putnam County, West Virginia maturing in
June 2028, issued in connection with the West Virginia manufacturing facility
of an affiliate.
TMCC has guaranteed the obligations of TMIS relating to vehicle service
insurance agreements issued in several states. These guarantees have been
given without regard to any security and without any limitation as to duration
or amount.
An operating agreement between TMCC and TCPR (the "Agreement"), provides that
TMCC will make necessary equity contributions or provide other financial
assistance TMCC deems appropriate to ensure that TCPR maintains a minimum
coverage on fixed charges of 1.10 times such fixed charges in any fiscal
quarter. The Agreement does not constitute a guarantee by TMCC of any
obligations of TCPR. The fixed charge coverage provision of the Agreement is
solely for the benefit of the holders of TCPR's commercial paper, and the
Agreement may be amended or terminated at any time without notice to, or the
consent of, holders of other TCPR obligations.
Various legal actions, governmental proceedings and other claims are pending or
may be instituted or asserted in the future against TMCC and its subsidiaries
with respect to matters arising from the ordinary course of business. Certain
of these actions are or purport to be class action suits, seeking sizeable
damages. Certain of these actions are similar to suits which have been filed
against other financial institutions and captive finance companies. The
amounts of liability on these claims and actions as of September 30, 1998 were
not determinable; however, in the opinion of management, the ultimate liability
resulting therefrom should not materially affect TMCC's consolidated financial
position or results of operations.
-58-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - Segment Information
- -----------------------------
The Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise
and Related Information, during the fourth quarter of fiscal year 1998.
SFAS No. 131 establishes standards for reporting information about operating
segments in annual financial statements and requires selected information
about operating segments in interim financial reports. It also establishes
standards for related disclosures about products and services, geographic
areas and major customers. An operating segment is defined as a component of
an enterprise that engages in business activities from which it may earn
revenues and incur expenses, whose operating results are regularly reviewed by
the enterprise's chief operating decision maker in deciding how to allocate
resources and in assessing performance and for which separate financial
information is available.
The Company's operating segments include finance and insurance operations.
Finance operations include retail leasing, retail and wholesale financing and
certain other financial services to authorized Toyota and Lexus vehicle and
Toyota industrial equipment dealers and their customers in the United States
(excluding Hawaii) and Puerto Rico. Insurance operations are performed by TMIS
and subsidiaries. The principal activities of TMIS include marketing,
underwriting, claims administration and providing certain coverages related to
vehicle service agreements and contractual liability agreements sold by or
through Toyota and Lexus vehicle dealers and affiliates to customers in the
United States (excluding Hawaii). In addition, the insurance subsidiaries
insure and reinsure certain TMS and TMCC risks.
The accounting policies of the operating segments are the same as those
described in Note 2 of the Notes to Consolidated Financial Statements. The
Company reports consolidated financial information for both external and
internal purposes. Currently, TMCC's finance and insurance segments operate
only in the United States and Puerto Rico.
-59-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 17 - Segment Information (Continued)
- -----------------------------
Financial results for the Company's operating segments are summarized below:
<TABLE>
<CAPTION>
September 30,
---------------------------------------
1998 1997 1996
--------- --------- ---------
(Dollars in Millions)
<S> <C> <C> <C>
Assets:
Financing operations.................... $ 22,858 $ 19,519 $ 19,052
Insurance operations.................... 630 447 308
Eliminations/reclassifications.......... (263) (136) (51)
--------- --------- ---------
Total assets.......................... $ 23,225 $ 19,830 $ 19,309
========= ========= =========
Gross revenues:
Financing operations.................... $ 3,295 $ 3,311 $ 3,001
Insurance operations.................... 136 125 103
Eliminations............................ - (8) (5)
--------- --------- ---------
Total gross revenues.................. $ 3,431 $ 3,428 $ 3,099
========= ========= =========
Depreciation and amortization:
Financing operations.................... $ 1,825 $ 1,821 $ 1,640
Insurance operations.................... 1 1 1
--------- --------- ---------
Total depreciation and amortization... $ 1,826 $ 1,822 $ 1,641
========= ========= =========
Interest Expense:
Financing operations.................... $ 994 $ 918 $ 820
Insurance operations.................... - - -
--------- --------- ---------
Total interest expense $ 994 $ 918 $ 820
========= ========= =========
Interest Income:
Financing operations.................... $ - $ - $ -
Insurance operations.................... 19 15 13
--------- --------- ---------
Total interest income $ 19 $ 15 $ 13
========= ========= =========
Income tax expense:
Financing operations.................... $ 92 $ 108 $ 101
Insurance operations.................... 15 13 7
--------- --------- ---------
Total income tax expense.............. $ 107 $ 121 $ 108
========= ========= =========
Net Income:
Financing operations.................... $ 119 $ 142 $ 140
Insurance operations.................... 25 20 12
--------- --------- ---------
Net Income............................ $ 144 $ 162 $ 152
========= ========= =========
Capital expenditures:
Financing operations.................... $ 32 $ 14 $ 6
Insurance operations.................... 1 1 1
--------- --------- ---------
Total capital expenditures............ $ 33 $ 15 $ 7
========= ========= =========
</TABLE>
-60-
<PAGE>
TOYOTA MOTOR CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 18 - Selected Quarterly Financial Data (Unaudited)
- -------------------------------------------------------
<TABLE>
<CAPTION>
Total
Financing Interest Depreciation Net
Revenues Expense on Leases Income
---------- -------- ------------ --------
(Dollars in Millions)
<S> <C> <C> <C> <C>
Year Ended September 30, 1998:
First quarter.............. $ 799 $234 $ 425 $ 37
Second quarter............. 802 239 416 30
Third quarter.............. 813 249 424 32
Fourth quarter............. 826 272 416 45
------ ---- ------ ----
Total................... $3,240 $994 $1,681 $144
====== ==== ====== ====
Year Ended September 30, 1997:
First quarter.............. $ 830 $227 $ 471 $ 38
Second quarter............. 829 225 446 47
Third quarter.............. 812 228 438 44
Fourth quarter............. 794 238 426 33
------ ---- ------ ----
Total................... $3,265 $918 $1,781 $162
====== ==== ====== ====
Year Ended September 30, 1996:
First quarter.............. $ 688 $193 $ 370 $ 41
Second quarter............. 723 196 393 36
Third quarter.............. 768 210 416 40
Fourth quarter............. 793 221 441 35
------ ---- ------ ----
Total................... $2,972 $820 $1,620 $152
====== ==== ====== ====
</TABLE>
Note 19 - Subsequent Events
- ---------------------------
Effective October 1, 1998, TMCC has guaranteed payments of principal, interest
and premiums, if any, on two $10 million principal amount of flexible rate
demand pollution control revenue bonds issued by Gibson County, Indiana
maturing in October 2027 and January 2028, issued in connection with the
Indiana manufacturing facility of an affiliate.
-61-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There is nothing to report with regard to this item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information regarding the directors and
executive officers of TMCC as of November 30, 1998.
Name Age Position
---- --- --------
Yoshio Ishizaka........... 58 Director and President, TMCC;
Director and President, TMS;
Director, TMC
George Borst ............. 50 Director, Senior Vice President
and General Manager, TMCC;
Senior Vice President, TMS
Nobu Shigemi.............. 54 Director, Senior Vice President
and Treasurer, TMCC; Group Vice
President, TMS
Robert Pitts.............. 50 Director and Secretary, TMCC;
Group Vice President, TMS
Yale Gieszl............... 56 Director, TMCC; Director and
Executive Vice President, TMS
Chiaki Yamaguchi.......... 48 Director, TMCC; Senior Vice
President and Treasurer, TMS
Douglas West.............. 53 Director, TMCC; Senior Vice
President and Secretary, TMS
Ryuji Araki............... 58 Director, TMCC; Managing Director, TMC
Michael Deaderick......... 52 Group Vice President - Operations
and Assistant Secretary, TMCC
All directors of TMCC are elected annually and hold office until their
successors are elected and qualified. Officers are elected annually and serve
at the pleasure of the Board of Directors.
Mr. Ishizaka was named Director and President of TMCC and TMS in June 1996.
From January 1990 to May 1996, Mr. Ishizaka was General Manager of the Europe
Division of TMC, and in September 1992, he was named a Director of TMC.
Mr. Ishizaka has been employed with TMC, in various positions, since 1964.
Mr. Borst was named Director and Senior Vice President and General Manager of
TMCC in April 1997 and Senior Vice President of TMS in June 1997. From January
1993 to May 1997, Mr. Borst was Group Vice President of TMS. From April 1989
to December 1992, Mr. Borst was a Vice President of TMS. Mr. Borst has been
employed with TMS, in various positions, since 1985.
Mr. Shigemi was named Director, Senior Vice President and Treasurer of TMCC and
Group Vice President of TMS in September 1994. From January 1994 to August
1994, Mr. Shigemi was General Manager of TMC's Finance Division. From January
1993 to December 1993, he was the Project General Manager of the Accounting
Division of TMC. From February 1982 to December 1992, he worked in the Tokyo
Secretarial Division having been named a manager in February 1983 and Deputy
General Manager in February 1990. Mr. Shigemi has been employed with TMC, in
various positions, since 1968.
-62-
<PAGE>
Mr. Pitts was named Director of TMCC and Group Vice President of TMS in April
1993 and Secretary of TMCC in April 1997. From January 1984 to March 1993, he
was an executive with TMCC having been named General Manager in January 1984
and Vice President in April 1989. Mr. Pitts has been employed with TMS and
TMCC, in various positions, since 1971.
Mr. Gieszl was named Director of TMCC in September 1988. He is also a Director
and Executive Vice President of TMS, positions he has held since December 1989
and June 1992, respectively. From January 1982 to May 1992, he was a Senior
Vice President of TMS. From October 1982 to May 1992, he held the position of
Senior Vice President of TMCC, and from September 1988 to May 1992, he also
held the position of Secretary of TMCC. Mr. Gieszl has been employed with TMS,
in various positions, since 1970.
Mr. Yamaguchi was named Director of TMCC and Senior Vice President and
Treasurer of TMS in May 1998. Mr. Yamaguchi became the General Manager of the
Financial Planning and Insurance Department of TMC in January 1997 and was
nominated as the General Manager of Funds and Foreign Exchange Management
Department in January 1998. From February 1990 to December 1996, Mr. Yamaguchi
worked for Chairman Shoichiro Toyoda as an Executive Assistant in the Toyota
head office. From September 1985 to January 1990, Mr. Yamaguchi worked in
London as a representative of the TMC Finance Division. Mr. Yamaguchi has been
employed with TMC, in various positions, since 1972.
Mr. West was named Director of TMCC and Senior Vice President and Secretary of
TMS in June 1996. From June 1996 to March 1997, Mr. West was also a Senior
Vice President and Secretary of TMCC. From April 1993 to May 1996, Mr. West
was a Group Vice President of TMS. From April 1989 to March 1993, Mr. West was
a Vice President of TMS. Mr. West has been employed with TMS, in various
positions, since 1982.
Mr. Araki was named Director of TMCC in September 1995. He was named Managing
Director of TMC's Board of Directors in June 1997 and has served on TMC's Board
of Directors since September 1992. Mr. Araki has been employed with TMC, in
various positions, since 1962.
Mr. Deaderick was named Group Vice President - Operations of TMCC in April 1998
and Assistant Secretary in April 1997. From April 1995 to April 1998, Mr.
Deaderick was Vice President - Marketing and Operations of TMCC. From February
1990 to April 1995, Mr. Deaderick was Vice President and General Manager of
TMIS. Mr. Deaderick has been employed with TMCC and TMS, in various positions,
since 1971.
-63-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth all compensation awarded to, earned by, or paid
to the Company's Principal Executive Officer and the most highly compensated
executive officers whose salary and bonus for the latest fiscal year exceeded
$100,000, for services rendered in all capacities to the Company for the fiscal
years ended September 30, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------
Other Annual All
Name and Fiscal Compensation Other
Principal Position Year Salary ($) Bonus ($) ($)<F1> ($)<F2>
- --------------------- ------ ---------- --------- ------------ -------
<S> <C> <C> <C> <C> <C>
George Borst <F3> 1998 $237,700 $150,300 - $3,300
Principal Executive 1997 $115,500 $56,700 - $3,300
Officer 1996 N/A N/A N/A N/A
Nobu Shigemi <F4> 1998 $294,700 $34,700 $41,300 -
Senior Vice President 1997 $309,700 $49,600 $44,000 -
1996 $325,900 $50,900 $51,700 -
Michael Deaderick 1998 $193,200 $94,400 - $7,000
Group Vice President 1997 $176,600 $81,600 - $6,400
1996 $135,300 $70,600 - $6,000
<FN>
- ------------
<F1> The amounts in this column represent housing allowances and relocation
costs.
<F2> The amounts in this column represent the Company's allocated contribution
under the TMS Savings Plan (the "Plan"), a tax-qualified 401(k) Plan.
Participants in the Plan may elect, subject to applicable law, to contribute up
to 6% of their base compensation on a pre-tax basis to which the Company adds
an amount equal to two-thirds of the employee's contribution. Participants are
vested 25% each year with respect to the Company's contribution and are fully
vested after four years. Subject to the limitations of the Plan, employee and
Company contributions are invested in various investment options at the
discretion of the employee. TMS also maintains a 401(k) Excess Plan, a non-
qualified deferred compensation plan which has similar provisions to the Saving
Plan.
<F3> Effective April 1, 1997, Mr. Borst was appointed as Principal Executive
Officer. The compensation presented for Mr. Borst in fiscal year 1997 reflects
amounts earned for services to the Company during the partial period of the
fiscal year Mr. Borst served as Principal Executive Officer.
<F4> Decline in certain annual compensation amounts relates to foreign currency
adjustments.
</FN>
</TABLE>
Employee Benefit Plan
The following pension plan table presents typical annual retirement benefits
under the TMS Pension Plan for various combinations of compensation and years
of credited service for participants who retire at age 62, assuming no final
average bonus and excluding Social Security offset amounts. The amounts are
subject to Federal statutory limitations governing pension calculations and
benefits.
-64-
<PAGE>
<TABLE>
<CAPTION>
Annual Benefits for
Final Average Years of Credited Service
Annual ------------------------------------
Compensation 15 20 25
------------- -------- -------- --------
<S> <C> <C> <C>
$50,000 $15,000 $20,000 $25,000
$100,000 $30,000 $40,000 $50,000
$150,000 $45,000 $60,000 $75,000
$200,000 $60,000 $80,000 $100,000
$250,000 $75,000 $100,000 $125,000
$300,000 $90,000 $120,000 $150,000
$350,000 $105,000 $140,000 $175,000
$400,000 $120,000 $160,000 $200,000
$450,000 $135,000 $180,000 $225,000
$500,000 $150,000 $200,000 $250,000
</TABLE>
All full-time employees of the Company are eligible to participate in the TMS
Pension Plan commencing on the first day of the month following hire. Benefits
payable under this non-contributory defined benefit pension plan are based upon
final average compensation, final average bonus and years of credited service.
Final average compensation is defined as the average of the participant's base
rate of pay, plus overtime, during the highest-paid 60 consecutive months prior
to the earlier of termination or normal retirement. Final average bonus is
defined as the highest average of the participant's fiscal year bonus, and
basic seniority-based cash bonus for non-managerial personnel, over a period of
60 consecutive months prior to the earlier of termination or normal retirement.
A participant generally becomes eligible for the normal retirement benefit at
age 62, and may be eligible for early retirement benefits starting at age 55.
The annual normal retirement benefit under the Pension Plan, payable monthly,
is an amount equal to the number of years of credited service (up to 25 years)
multiplied by the sum of (i) 2% of the participant's final average compensation
less 2% of the estimated annual Social Security benefit payable to the
participant at normal retirement and (ii) 1% of the participant's final average
bonus. The normal retirement benefit is subject to reduction for certain
benefits under any union-sponsored retirement plan and benefits attributable to
employer contributions under any defined-contribution retirement plan
maintained by TMS and its subsidiaries or any affiliate that has been merged
into the TMS Pension Plan.
The TMS Supplemental Executive Retirement Plan (TMS SERP) authorizes a benefit
to be paid to eligible executives, including Mr. Borst and Mr. Deaderick.
Benefits under the TMS SERP, expressed as an annuity payable monthly, are based
on 2% of the executive's compensation recognized under the plan after deducting
the executive's primary Social Security benefit, multiplied by the years of
service credited under the plan (up to a maximum of 30), offset by benefits
payable under the TMS Pension Plan. A covered participant's compensation may
include base pay and a percentage (not in excess of 100%) of bonus pay,
depending on the executive's length of service in certain executive positions.
Similarly, years of service credited under the plan are determined by
reference, in part, to the executive's length of service in certain executive
positions. No benefit is payable under the TMS SERP to an executive unless the
executive's termination of employment occurs on a date, after the executive
reaches age 55, that is agreed in writing by the President of TMS and the
executive; and the executive is vested in benefits under the TMS Pension Plan,
or unless the executive accepts an invitation to retire extended by the
President of TMS.
-65-
<PAGE>
Mr. Borst is a participant in the TMS Pension Plan and the TMS SERP and had
13 years of total credited service as of September 30, 1998. Based upon years
of credited service allocable to the Company, Mr. Borst would be entitled to
receive and the Company would be required to pay approximately $7,000 in annual
pension plan benefits when Mr. Borst reaches age 62. Mr. Borst would also be
entitled to receive pension benefits from TMS based upon services to and
compensation by TMS.
Mr. Deaderick is a participant in the TMS Pension Plan and the TMS SERP and had
25 years of total credited service as of September 30, 1998. Based upon years
of credited service allocable to the Company, Mr. Deaderick would be entitled
to receive and the Company would be required to pay approximately $45,000 in
annual pension plan benefits when Mr. Deaderick reaches age 62. Mr. Deaderick
would also be entitled to receive pension benefits from TMS based upon services
to and compensation by TMS.
Compensation of Directors
No amounts are paid to members of the TMCC Board of Directors for their
services as directors.
Compensation Committee Interlocks and Insider Participation
Members of the Executive Committee of the Board of Directors, which consists of
the directors of the Company other than Mr. Araki, participate in decisions
regarding the compensation of the executive officers of the Company. Certain
of the members of the Executive Committee are current or former executive
officers of the Company. Certain of the members of the Executive Committee are
also current executive officers and directors of TMS and its affiliates and
participate in compensation decisions for those entities.
-66-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
As of the date hereof, all of TMCC's capital stock is owned by TMS.
ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS.
Transactions between the Company and its parent, TMS, are included in Note 2,
Note 11, Note 14, Note 15 and Note 16 of the Notes to the Consolidated
Financial Statements. Certain directors and executive officers of TMCC are
also directors and executive officers of TMS. In addition, see Item 1,
Business - General, for a description of certain obligations of TMMNA to TMCC.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1)Financial Statements
Included in Part II, Item 8 of this Form 10-K. See Index to
Financial Statements on page 28.
(2)Exhibits
The exhibits listed on the accompanying Exhibit Index, starting on
page 69, are filed as part of, or incorporated by reference into,
this Report.
(b)Reports on Form 8-K
The following Reports on Form 8-K were filed during the quarter ended
September 30, 1998, none of which contained financial statements:
Date of Report Items Reported
--------------- ----------------------------------------
August 20, 1998 Item 5 - Other Events
September 3, 1998 Item 7 - Financial Statements, Pro Forma
Financial Information and Exhibits
September 15, 1998 Item 7 - Financial Statements, Pro Forma
Financial Information and Exhibits
-67-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Torrance,
State of California, on the 22nd day of December, 1998.
TOYOTA MOTOR CREDIT CORPORATION
By /S/ GEORGE BORST
------------------------------
George Borst
Senior Vice President
and General Manager
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated on the 22nd day of December, 1998.
Signature Title
--------- -----
Senior Vice President and General
Manager and Director
/S/ GEORGE BORST (Principal Executive Officer)
- ------------------------------------
George Borst
Senior Vice President/
Treasurer and Director
/S/ NOBU SHIGEMI (Principal Financial Officer)
- ------------------------------------
Nobu Shigemi
Vice President - Finance
and Administration
/S/ GREGORY WILLIS (Principal Accounting Officer)
- ------------------------------------
Gregory Willis
/S/ YOSHIO ISHIZAKA Director
- ------------------------------------
Yoshio Ishizaka
/S/ DOUGLAS WEST Director
- ------------------------------------
Douglas West
/S/ ROBERT PITTS Director
- ------------------------------------
Robert Pitts
-68-
<PAGE>
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- --------
3.1(a) Articles of Incorporation filed with the California
Secretary of State on October 4, 1982. (1)
3.1(b) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
January 24, 1984. (1)
3.1(c) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
January 25, 1985. (1)
3.1(d) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
September 6, 1985. (1)
3.1(e) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
February 28, 1986. (1)
3.1(f) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
December 3, 1986. (1)
3.1(g) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
March 9, 1987. (1)
3.1(h) Certificate of Amendment of Articles of Incorporation
filed with the California Secretary of State on
December 20, 1989. (2)
3.2 Bylaws as amended through January 16, 1993. (6)
4.1 Issuing and Paying Agency Agreement dated August 1,
1990 between TMCC and Bankers Trust Company. (3)
4.2(a) Indenture dated as of August 1, 1991 between TMCC and
The Chase Manhattan Bank, N.A. (4)
- -----------------
(1) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Registration Statement on Form S-1, File No. 33-22440.
(2) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1989,
Commission File number 1-9961.
(3) Incorporated herein by reference to Exhibit 4.2 filed with TMCC's
Report on Form 10-K for the year ended September 30, 1990,
Commission File number 1-9961.
(4) Incorporated herein by reference to Exhibit 4.1(a), filed with TMCC's
Registration Statement on Form S-3, File No. 33-52359.
(6) Incorporated herein by reference to the same numbered Exhibit filed
with TMCC's Report on Form 10-K for the year ended September 30, 1993,
Commission File number 1-9961.
-69-
<PAGE>
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
4.2(b) First Supplemental Indenture dated as of
October 1, 1991 among TMCC, Bankers Trust Company
and The Chase Manhattan Bank, N.A. (5)
4.3(a) Second Amended and Restated Agency Agreement dated
July 24, 1997 among TMCC, The Chase Manhattan Bank
and Chase Manhattan Bank Luxembourg S.A. (22)
4.3(b) Amendment No.1 to Second Amended and Restated Agency Filed
Agreement dated July 24, 1998 among TMCC, The Chase Herewith
Manhattan Bank and Chase Manhattan Bank Luxembourgh S.A
4.4 TMCC has outstanding certain long-term debt as set
forth in Note 8 of the Notes to Consolidated Financial
Statements. Not filed herein as an exhibit, pursuant
to Item 601(b) (4)-(iii)(A) of Regulation S-K under
the Securities Act of 1933, is any instrument which
defines the rights of holders of such long-term debt,
where the total amount of securities authorized
thereunder does not exceed 10% of the total assets
of TMCC and its subsidiaries on a consolidated
basis. TMCC agrees to furnish copies of all such
instruments to the Securities and Exchange Commission
upon request.
10.1(a) Operating Agreement dated January 16, 1984 between
TMCC and TMS. (16)
10.1(b) Amendment No. 1 to Operating Agreement dated May 14, 1996
between TMCC and TMS. (11)
10.1(c) Amendment No. 2 to Operating Agreement dated December 1,
1997 between TMCC, TMS and TMMNA (23)
- -----------------
(5) Incorporated herein by reference to Exhibit 4.1 filed with TMCC's
Current Report on Form 8-K dated October 16, 1991, Commission File
No. 1-9961.
(11) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Report on Form 10-Q for the quarter ended March 31, 1996, Commission
File No. 1-9961.
(16) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Registration Statement on Form S-1, File No. 33-22440.
(22) Incorporated herein by reference to Exhibit 4.3(a) filed with TMCC's
Current Report on Form 10-K for the year ended September 30, 1997,
Commission File No. 1-9961.
(23) Incorporated herein by reference to Exhibit 10.1(c) filed with TMCC's
Current Report on Form 10-K for the year ended September 30, 1997,
Commission File No. 1-9961.
-70-
<PAGE>
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
10.2 Pooling and Servicing Agreement among TMCRC,
as Seller, TMCC, as Servicer, and Bankers Trust Company,
as Trustee (including forms of Class A and Class B
Certificates) dated as of September 1, 1995. (7)
10.3 Receivables Purchase Agreement dated as of September 1,
1995 between TMCC, as Seller, and TMCRC Corporation,
as Purchaser. (8)
10.4 Form of Indemnification Agreement between TMCC and
its directors and officers. (12)
10.5(a) Three-year Credit Agreement (the "Three-year Agreement")
dated as of September 29, 1994 among TMCC, Morgan
Guaranty Trust Company of New York, as agent, and
Bank of America National Trust and Savings Association,
The Bank of Tokyo, Ltd., The Chase Manhattan Bank, N.A.,
Citicorp USA, Inc. and Credit Suisse, as Co-Agents.
Not filed herein as an exhibit, pursuant to Instruction 2
to Item 601 of Regulation S-K under the Securities Act of
1933, is the 364-day Credit Agreement (the "364-day
Agreement") among TMCC and the banks who are party to the
Three-year Agreement. Also included is a
Schedule identifying the 364-day Agreement and setting
forth the material details in which the 364-day
Agreement differs from the Three-year Agreement. TMCC
agrees to furnish a copy of the 364-day Agreement to
the Securities and Exchange Commission upon request. (13)
10.5(b) Amendment No. 1 dated September 28, 1995 to the
Three-year Agreement. (14)
10.5(c) Amendment No. 1 dated September 28, 1995 to the
364-day Agreement. (15)
- ----------------
(7) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto
Receivables 1995-A Grantor Trust's Current Report on Form 8-K dated
November 10, 1995, Commission File No. 33-96006.
(8) Incorporated herein by reference to Exhibit 10.1 filed with Toyota
Auto Receivables 1995-A Grantor Trust's Current Report on Form 8-K
dated November 10, 1995, Commission File No. 33-96006.
(12) Incorporated herein by reference to Exhibit 10.6 filed with TMCC's
Registration Statement on Form S-1, Commission File No. 33-22440.
(13) Incorporated herein by reference to Exhibit 10.10 filed with TMCC's
Report on Form 10-K for the year ended September 30, 1994,
Commission File No. 1-9961.
(14) Incorporated herein by reference to Exhibit 10.10(a) filed
with TMCC's Report on Form 10-K for the year ended September 30, 1995,
Commission File No. 1-9961.
(15) Incorporated herein by reference to Exhibit 10.10(b) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1995, Commission
File No. 1-9961.
-71-
<PAGE>
EXHIBIT INDEX
Method
Exhibit of
Number Description Filing
- ------- ----------- ------
10.5(d) Amended and Restated Credit Agreement dated
September 24, 1996 to the Three-year Agreement. (17)
10.5(e) Amended and Restated Credit Agreement dated
September 24, 1996 to the 364-day Agreement. (18)
10.5(f) Amended and Restated Credit Agreement dated
September 23, 1997 to the Three-year Agreement. (19)
10.5(g) Amended and Restated Credit Agreement dated
September 23, 1997 to the 364-day Agreement. (20)
10.5(h) Amended and Restated Credit Agreement dated Filed
September 22, 1998 to the 364-day Agreement Herewith
10.6 Toyota Motor Sales, U.S.A., Inc. Supplemental
Executive Retirement Plan. * (9)
10.7 Toyota Motor Sales, U.S.A., Inc. 401(k)
Excess Plan. * (10)
10.8 Amended and Restated Trust and Servicing Agreement
dated as of October 1, 1996 by and among TMCC,
TMTT, Inc., as titling trustee and U.S. Bank National
Association, as trust agent. (21)
12.1 Calculation of ratio of earnings to fixed charges. Filed
Herewith
21.1 TMCC's list of subsidiaries. Filed
Herewith
23.1 Consent of Independent Accountants. Filed
Herewith
27.1 Financial Data Schedule. Filed
Herewith
- ----------------
(9) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's
Report on Form 10-Q for the quarter ended December 31, 1995, Commission
File No. 1-9961.
(10) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's
Report on From 10-Q for the quarter ended December 31, 1995, Commission
File No. 1-9961.
(17) Incorporated herein by reference to Exhibit 10.9(d) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1996, Commission
File No. 1-9961.
(18) Incorporated herein by reference to Exhibit 10.9(e) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1996, Commission
File No. 1-9961.
(19) Incorporated herein by reference to Exhibit 10.5(f) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1997, Commission
File No. 1-9961.
(20) Incorporated herein by reference to Exhibit 10.5(g) filed with TMCC's
Report on Form 10-K for the year ended September 30, 1997, Commission
File No. 1-9961.
(21) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto
Lease Trust 1997-A's Report on Form 8-A dated December 23, 1997,
Commission File No. 333-26717
*- Management contract or compensatory plan or arrangement required to be
filed as an exhibit pursuant to applicable rules of the Securities and
Exchange Commission.
-72-
<PAGE>
EXHIBIT 12.1
TOYOTA MOTOR CREDIT CORPORATION
CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(Dollars in Millions)
<S> <C> <C> <C> <C> <C>
Consolidated income
before income taxes...... $ 251 $ 283 $ 260 $ 300 $ 293
------ ------ ------ ------ ------
Fixed Charges
Interest................. 994 918 820 716 486
Portion of rent expense
representative of the
interest factor (deemed
to be one-third)....... 5 4 4 2 3
------ ------ ------ ------ ------
Total fixed charges......... 999 922 824 718 489
------ ------ ------ ------ ------
Earnings available
for fixed charges........ $1,250 $1,205 $1,084 $1,018 $ 782
====== ====== ====== ====== ======
Ratio of earnings to
fixed charges<F1>........ 1.25 1.31 1.32 1.42 1.60
==== ==== ==== ==== ====
<FN>
- -----------------
<F1> TMCC has guaranteed certain obligations of affiliates and subsidiaries
as discussed in Note 16 of the Consolidated Financial Statements. As of
September 30, 1998, TMCC has not incurred any fixed charges in connection with
such guarantees and no amount is included in any ratio of earnings to fixed
charges. The ratio of earnings to fixed charges for TMS and subsidiaries was
1.99, 1.92, 1.49, 1.74 and 1.90 for the years ended September 30, 1998, 1997,
1996, 1995 and 1994, respectively. The ratio of earnings to fixed charges for
TMMNA and subsidiaries was 78.19 and 65.52 for the years ended September 30,
1998 and 1997, respectively.
</FN>
</TABLE>
<PAGE>
Exhibit 4.3(b)
AMENDMENT NO. 1
TO
SECOND AMENDED AND RESTATED AGENCY AGREEMENT
in respect of
THE TOYOTA MOTOR CREDIT CORPORATION
EURO MEDIUM-TERM NOTE PROGRAM
This Amendment No. 1, dated as of July 24, 1998, is made to the Second Amended
and Restated Agency Agreement, dated as of July 24, 1997 (the "Agreement"),
among Toyota Motor Credit Corporation, as Issuer (the "Company"), The Chase
Manhattan Bank, as Agent (the "Agent"), and Chase Manhattan Bank Luxembourg
S.A., as paying agent (the "Paying Agent") in respect of Toyota Motor Credit
Corporation's Euro Medium-Term Note Program. Except as otherwise defined
herein, capitalized terms used herein shall have the same meanings ascribed to
them in the Agreement.
WHEREAS, the Company, the Agent and the Paying Agent desire to amend the
Agreement to make changes relating to the introduction of Euro as a currency
of the member states participating in the third stage of European economic and
monetary union under the Treaty establishing the European Community, as
amended by the Treaty on European Union (the "Treaty") and to make certain
additional changes to supplement certain provisions of the Agreement in a
manner which shall not adversely affect existing holders of Notes.
NOW, THEREFORE, in consideration of the foregoing and for, other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree to amend the Agreement as follows:
A. Clause 1 of the Agreement (Definitions and Interpretations) is amended as
follows:
1. The definition of "Dealer" is amended by replacing "Swiss Bank
Corporation and UBS Limited" with "and UBS AG, acting through its division
Warburg Dillon Read."
2. The definition of "ECU Settlement Day" is amended by adding "published
by the International Swaps and Derivatives Association, Inc." after "Note."
3. The definition of "Euro" is added as follows: "Euro" means the
currency to be introduced at the start of the third stage of European economic
and monetary union pursuant to the Treaty.
4. The definition of "Procedures Memorandum" is added as follows:
"Procedures Memorandum" means the Operating & Administrative Procedures
Memorandum attached as Appendix D to this Agreement as amended or varied
from time to time by agreement between the parties hereto with written
approval of the Agent.
<PAGE>
5. The definition of "Specified Currency" is amended in its entirety as
follows:
"Specified Currency" means the currency (which expression shall include
European Currency Units ("ECUs"), Euro (once introduced) and other currency
units) in which Notes are denominated and, in the case of Dual Currency Notes,
the currency or Currencies in which payment in respect of the Notes is to be
made.
6. The definition of "TARGET system" is added as follows:
"TARGET system" means the Trans-European Automated Real-time Gross Settlement
Express Transfer System.
B. Clause 8 (Payments) is amended as follows:
1. The last sentence of Subclause 8(1) is replaced by the following:
"As used in this Subclause 8(1), the term "Payment Time" means 2:00 p.m. local
time in the principal financial center of the country of the currency in which
the payment falls is to be made (which in the case of payment of ECU is
Brussels and in the case of payment of Euro is London)."
2. Subclause 8(2)(b) is replaced by the following:
"(b) either (i) in relation to a payment to be made in a Specified Currency
other than ECU or Euro, a day on which commercial banks and foreign exchange
markets settle payments in the principal financial center of the country of
the relevant Specified Currency (if other than London), (ii) in relation to a
payment to made in ECU, an ECU Settlement Day (as defined herein), or (iii) in
relation to a payment to be made in Euro, a day on which the TARGET system (as
defined herein) is open; and"
C. Clause 9 (Denominations and Notifications in Respect of Notes) is amended
as follows:
1. Subclause 9(9)(a) is amended by replacing "appropriate Associated
Press-Dow Jones Telerate Service" with "Dow Jones Markets Limited."
D. The heading for Clause 13, the first and second sentences of Subclause
13(1) and Subclause 13(3) and Subclause 13(5) are amended in their entirety as
follows:
"13. Cancellation, Resale and Reissuance of Notes, Receipts, Coupons and
Talons."
"(1) All Notes which are purchased pursuant to the Conditions by or on behalf
of the Company, together (in the case of Definitive Notes) with all unmatured
Receipts, Coupons or Talons (if any) attached thereto or surrendered
therewith, may, at the option of the Company, either be (i) resold or
reissued, or held by the Company for subsequent resale or reissuance, or (ii)
cancelled in which event such Notes, Receipts and Coupons may not be resold or
reissued. Where any Notes, Receipts, Coupons or Talons are purchased and
cancelled, resold or reissued, or held by the Company for subsequent resale or
reissuance, as aforesaid, the Company shall procure that all relevant details
are promptly given to the Agent and that all Notes, Receipts, Coupons or
Talons cancelled are delivered to the Agent."
<PAGE>
"(3) Subject to being duly notified in due time, the Agent shall give a
certificate to the Company, within three months of the date of purchase and
cancellation or purchase and subsequent resale or reissuance of Notes stating:
(a) the principal amount of Notes so purchased and cancelled, resold
or reissued;
(b) the serial numbers of such Notes; and
(c) the total number by maturity date of the Receipts, Coupons and
Talons (if any) appertaining thereto and surrendered therewith or attached
thereto."
"(5) Without prejudice to the obligations of the Agent pursuant to Subclause
13(2), the Agent shall keep a full and complete record of all Notes, Receipts,
Coupons and Talons (other than serial numbers of Coupons, except those which
have been replaced pursuant to Condition 14) and of all replacement Notes,
Receipts, Coupons or Talons issued in substitution for mutilated, defaced,
destroyed, lost or stolen Notes, Receipts, Coupons or Talons and of all Notes,
Receipts, Coupons or Talons which have been resold or reissued. The Agent
shall at all reasonable times make such record available to the Company and
any person authorized by the Company for inspection and for the taking of
copies thereof or extracts therefrom.
E. The following paragraph is added to Clause 28 before Subclause 28(1):
"For purposes of this Clause 28, the term "outstanding" excludes those Notes
which have been purchased and are being held by the Company for subsequent
resale or reissuance as provided in Condition 5 during the time so held."
F. Clause 33 is added as follows:
"33. Redenomination, Exchange and Consolidation.
(1)Redenomination
Where redenomination ("Redenomination") is specified in the applicable Pricing
Supplement as being applicable, and unless otherwise specified in the
applicable Pricing Supplement, the Company may, without the consent of any
Noteholder, Receiptholder or Couponholder, on giving prior notice to
Euroclear, Cedel Bank and the Agent and at least 30 days' prior notice to
Noteholders as provided in Condition 16, designate a Redenomination Date.
With effect from the Redenomination Date, notwithstanding the other provisions
of the Conditions:
(a) The Notes and Receipts shall (unless already so provided by
mandatory provisions of applicable law) be deemed to be redenominated in Euro
in the denomination of Euro 0.01 with a principal amount for each Note and
Receipt equal to the principal amount of the Note or Receipt in the original
Specified Currency, converted into Euro at the Established Rate, and the
Specified Currency shall be deemed to be Euro; provided that, if the Company
determines, after consultation with the Agent, that the then market practice
in respect of the redenomination into Euro of internationally offered
securities is different from the provisions specified in Condition 17(a)(i),
such provisions shall be deemed to be amended so as to comply with such market
practice and the Company shall promptly notify the Noteholders, the stock
exchange (if any) on which the Notes may be listed and the Agent and Paying
Agent(s) of such deemed amendments.
<PAGE>
(b) If definitive Notes are required to be issued after the
Redenomination Date, they shall be issued at the expense of the Company in the
denominations of Euro 1,000, Euro 10,000 and Euro 100,000 and (but only to the
extent of any remaining amounts less than Euro 1,000 or such smaller
denominations as the Agent may approve) Euro 0.01 and such other denominations
as the Company, after consultation with the Agent, shall determine and notify
to Noteholders.
(c) If definitive Notes have been issued, all unmatured Coupons and
Receipts denominated in the original Specified Currency (whether or not
attached to the Notes) will become void and no payments will be made in
respect of them with effect from the date on which the Company gives notice
(the "Exchange Notice") that Euro-denominated Notes, Receipts and Coupons are
available for exchange (provided that such securities are so available). New
certificates in respect of Euro-denominated Notes, Receipts and Coupons will
be issued in exchange for Notes, Receipts and Coupons in the original
Specified Currency in such manner as the Company, after consultation with the
Agent, may specify and shall be notified to Noteholders in the Exchange
Notice. No Exchange Notice may be given less than 15 days prior to any date
for payment of principal or interest on the Notes.
(d) After the Redenomination Date, all payments in respect of the
Notes, the Receipts and the Coupons (other than, unless the Redenomination
Date is on or after such date as the original Specified Currency ceases to be
a subdivision of the Euro, payments of interest in respect of periods
commencing before the Redenomination Date) will be made solely in Euro as
though references in the Notes, the Receipts and the Coupons to the Specified
Currency were to Euro. Such payments will be made in Euro by credit or
transfer to a Euro account (or any other account to which Euro may be credited
or transferred) specified by the payee or by check; provided, however, that a
check may not be delivered to an address in, and an amount may not be
transferred to an account at a bank located in, the United States of America
or its possessions except as provided in Condition 6(b).
(e) After the Redenomination Date, "Business Day" in relation to any
sum payable in Euro shall mean a day (other than a Saturday or Sunday) on
which commercial banks and foreign exchange markets settle payments in London
and New York and a day on which the TARGET system is open. After the
Redenomination Date, "Payment Business Day" shall mean (A) a "Business Day" as
defined herein and (B) a day (other than a Saturday or Sunday) on which
commercial banks are open for business and foreign exchange markets settle
payments in the relevant place of presentation.
(f) If definitive Notes have been issued, after the Redenomination
Date, the amount of interest due in respect of Notes will be calculated by
reference to the aggregate principal amount of Notes presented (or, as the
case may be, in respect of which Receipts or Coupons are presented) for
payment by the relevant holder and the amount of such payment shall be rounded
down to the nearest Euro 0.01. If the Notes are in global form, after the
Redenomination Date, the amount of interest due in respect of Notes
represented by the global Note will be calculated by reference to the
aggregate principal amount of such Notes and the amount of such payment shall
be rounded down to the nearest Euro 0.01.
<PAGE>
(g) If the Notes are Fixed Rate Notes and interest is required to be
calculated for a period of less than one year, it will be calculated on the
basis of the actual number of days elapsed divided by 365 (or, if any of the
days elapsed fall in a leap year, the sum of (A) the number of those days
falling in a leap year divided by 366 and (B) the number of those days falling
in a non-leap year divided by 365). If the Notes are Floating Rate Notes, the
applicable Pricing Supplement will specify any relevant changes to the
provisions relating to interest.
(2)Exchange
Where exchange ("Exchange") is specified in the applicable Pricing Supplement
as being applicable, and unless otherwise specified in the applicable Pricing
Supplement, the Company may, without the consent of any Noteholder,
Receiptholder or Couponholder, on giving prior notice to Euroclear, Cedel Bank
and the Agent and at least 30 days' prior notice to the Noteholders as
provided in Condition 16, elect that, with effect from the Redenomination Date
specified in the notice, the Notes shall be exchangeable for Notes expressed
to be denominated in Euro in accordance with such arrangements as the Company
may decide, after consultation with the Agent, and as may be specified in the
notice, including arrangements under which Receipts and Coupons unmatured at
the date so specified become void.
(3)Consolidation
Where consolidation ("Consolidation") is specified in the applicable Pricing
Supplement as being applicable, and unless otherwise specified in the
applicable Pricing Supplement, the Company may from time to time, without the
consent of any Noteholder, Receiptholder or Couponholder, on giving not less
than 30 days' prior notice to Noteholders (which notice shall set forth the
manner in which Consolidation shall be effected) consolidate the Notes with
one or more issues of other Notes ("Other Notes") issued by it, whether or not
originally issued in the Specified Currency of the Notes, in Euro or in
another currency that has been replaced by Euro, provided that the Notes and
such Other Notes have been redenominated into Euro (if not originally
denominated in Euro or ECU) and otherwise have, in respect of all periods
subsequent to such Consolidation, the same Conditions and Agent.
The Company may exercise its rights referred to above if it determines, after
consultation with the Agent, that the Notes and Other Notes which it proposes
to consolidate will, with effect from their Consolidation, be cleared and
settled on an interchangeable basis with the same International Securities
Identification Number through each Relevant Clearing System through which the
Notes or the relevant Other Notes were cleared and settled immediately prior
to such Consolidation.
Subject to the provisions of Condition 17(c), the Company may consolidate
Notes and Other Notes, which are listed on different stock exchanges and/or
cleared through different clearing systems, into a single Series of Notes
listed on only one or more of the stock exchanges on which either the Notes or
any of the Other Notes were listed immediately prior to Consolidation, and/or
cleared through only one or more of the clearing systems through which either
the Notes or any of the Other Notes were cleared immediately prior to
Consolidation.
<PAGE>
(4)Amendments and Modifications
The applicable Pricing Supplement in relation to any Notes may specify other
Terms and Conditions which shall, to the extent so specified or to the extent
inconsistent with the provisions herein, replace or modify the provisions for
the purpose of such Notes. In addition, the Company and the Agent may make
any changes, without the consent of, but with notification to (in accordance
with Condition 16 and Condition 17), any Noteholder, Receiptholder or
Couponholder, to this Agreement necessary to implement the provisions of
Condition 17.
Notwithstanding anything to the contrary contained in Condition 17, if the
Company determines, after consultation with the Agent, that the then market
practice in respect of the redenomination into Euro of internationally offered
securities or Euro-denominated internationally offered securities is different
from that specified in Condition 17, the Company may (but shall not be
required to) amend the provisions of Condition 17 and any other provision of
the Conditions, as applicable, so as to comply with such market practice, and
the Company shall promptly notify Noteholders, the stock exchange (if any) on
which the Notes may be listed, the Paying Agents and the Agent of such deemed
amendments. Such changes will not take effect until after they have been
notified to Noteholders in accordance with Condition 16 and Condition 17.
(5)Definitions
"Established Rate" means the rate for the conversion of the Specified Currency
(including compliance with rules relating to roundings in accordance with
applicable European Community regulations) into Euro established by the
Council of the European Union pursuant to Article 109l(4) of the Treaty."
"Redenomination Date" means in the case of interest bearing Notes, any date
for payment of interest under the Notes or in the case of Zero Coupon Notes,
any date, in each case specified by the Company in the notice given to
Noteholders pursuant to paragraph (a), (b), (c) or (d) of Condition 17 and
which falls on or after the start of the third stage of European economic and
monetary union pursuant to the Treaty, or if the country of the Specified
Currency is not one of the countries then participating in such third stage,
which falls on or after such later date as it does so participate and which
falls before the date on which the Specified Currency ceases to be a sub-
division of the Euro.
"Relevant Clearing System" means: (a) Euroclear and Cedel Bank; (b) any
clearing system which is a central securities depositary for the Notes or
relevant Other Notes; or (c) the principal clearing system (if any) in the
country of the original Specified Currency of the Notes or the relevant Other
Notes if the Notes or the relevant Other Notes were clearing and settling in
such clearing system immediately prior to Consolidation.
G. Appendix A (Terms and Conditions of the Notes) is replaced in its entirety
with Appendix A attached hereto.
<PAGE>
H. Appendix C (Form of Calculation Agency Agreement) is amended as follows:
1. The first sentence of Clause A of the form of Calculation Agency
Agreement is amended in its entirety as follows: "The Company has entered
into the Second Amended and Restated Program Agreement with Merrill Lynch
International, Credit Suisse First Boston (Europe) Limited, Goldman Sachs
International, Lehman Brothers International (Europe), Merrill Lynch Finance
SA, J.P. Morgan Securities Ltd., Morgan Stanley & Co. International Limited,
Nomura International plc, Paribas and UBS AG, acting through its division
Warburg Dillon Read, dated as of July 24, 1997, as amended by Amendment No. 1
to the Second Amended and Restated Program Agreement, dated as of July 24,
1998, under which $16,000,000,000 (or its equivalent in other currencies or
currency units) in aggregate principal amount of Notes ("Notes") may be
issued.
2. The first sentence of Clause B of the form of Calculation Agency
Agreement is amended in its entirety as follows:
"The Notes will be issued subject to and with the benefit of the Second
Amended and Restated Agency Agreement, dated as of July 24, 1997 (the
"Original Agreement"), as amended by Amendment No. 1 to the Second Amended and
Restated Agency Agreement, dated as of July 24, 1998 ("Amendment No. 1," and
together with the Original Agreement, the "Agency Agreement") among the
Company, The Chase Manhattan Bank (the "Agent," which expression shall include
its successor or successors for the time being under the Agency Agreement) and
Chase Manhattan Bank Luxembourg S.A. (the "Paying Agent," which expression
shall include its successor or successors for the time being under the Agency
Agreement).
I. Annex A (Settlement Procedures) to Appendix D (Form of Operating and
Administrative Procedures Memorandum) (on page D-5 under "Explanatory Notes to
Settlement Procedures") is amended as follows:
The "Issue Date" must be a Business Day. For the purposes of this Memorandum,
"Business Day" means a day which is both:
a day (other than Saturday or a Sunday) on which commercial banks and
foreign exchange markets settle payments in London; and
(i) in relation to Notes denominated in a Specified Currency other than
ECU or Euro, a day on which commercial banks and foreign exchange markets
settle payments in the principal financial center of the country of the
relevant Specified Currency (if other than London), (ii) in relation to Notes
denominated in ECU, an ECU Settlement Day (as defined in the ISDA Definitions,
as amended and updated from time to time), or (iii) in relation to Notes
denominated in Euro, a day on which the TARGET system is open. Unless
provided in the applicable Pricing Supplement, the principal financial center
of any country shall be as provided in the ISDA Definitions, as amended and
updated from time to time (except in the case of New Zealand and Australia,
where the principal financial center will be as specified in the Pricing
Supplement)."
<PAGE>
J. The first sentence of Annex B (Form of Pricing Supplement) to Appendix D
(Form of Operating and Administrative Procedures Memorandum) is amended in its
entirety as follows:
"This Pricing Supplement relates to the Notes described below and should be
read in conjunction with the Offering Circular dated July 24, 1998 relating to
Toyota Motor Credit Corporation's (the "Company") US $16,000,000,000 Euro
Medium-Term Note Program (the "Program") and all documents incorporated by
reference therein ("Offering Circular")."
K. Items 40 and 42 of Annex B (Form of Pricing Supplement) to Appendix D (Form
of Operating and Administrative Procedures Memorandum) are amended in their
entirety as follows:
40. Whether the Notes will be subject to redenomination, consolidation or
exchange into Euro:
Specify particular provision applicable (provide details if different
from that set out in Condition 17).
42. Additional selling restrictions:
Selling restrictions, including those applicable to the United States and
United Kingdom are set out in the Offering Circular and Appendix B to the
Second Amended and Restated Program Agreement dated July 24, 1997 (the
"Program Agreement"), as amended by Amendment No. 1 to the Program Agreement,
dated July 24, 1998, and the Syndicate Purchase Agreement dated [ ], among the
Managers and the Company.
<PAGE>
L. Items 53(f) and (h) of Annex B (Form of Pricing Supplement) to Appendix D
(Form of Operating and Administrative Procedures Memorandum) are amended in
their entirety as follows:
(f) Responsibility statement for Pricing Supplement, in the required form
duly completed to meet listing requirements on the Paris Bourse:
PERSONNES QUI ASSUMENT
LA RESPONSABILITE DE LA NOTE D'INFORMATION
COMPOSEE DE LA PRESENTE NOTE D'OPERATION (PRICING SUPPLEMENT)
[DE LA NOTE D'INFORMATION AYANT RECU DE LA COB LE
VISA NO [ ] DU [DATE])
ET DU DOCUMENT DE BASE (OFFERING CIRCULAR)
1. Au nom de l'emetteur
A la connaissance de l'emetteur, les donnees de la presente "Note
d'Information" sont conformes a la realite et ne comportent pas d'omission de
nature a en alterer la portee.
Aucun element nouveau, autres que ceux mentionnes dans la presente Note
d'Operation, intervenu depuis.
le 22 juillet 1998, date du visa no P 98- 339o appose par la Commission des
Operations de Bourse sur le Document de Base (constitue du document denomme
"Offering Circular", du rapport annuel de l'emmeteur au 30 septembre, 1997
sous forme de 10K et les rapports trimestriels de l'emmeteur au 31 decembre,
1997 et au 31 mars, 1998 sous forme de l0Q),
le [ ], date du visa no [ ] appose par la Commission des Operations de Bourse
sur la Note d'Information.
n'est susceptible d'affecter de maniere significative la situation financiere
de l'emetteur dans le contexte de la presente emission.
Toyota Motor Credit Corporation
- ------------------------------------------------------------------------------
[Name and title of signatory]
<PAGE>
2. Au nom de la banque presentatrice
A la connaissance de la banque presentatrice, les donnees de la presente Note
d'Information sont conformes a la realite et ne comportent pas d'omission de
nature a en alterer la portee.
[Name of relevant Dealer/lead manager]
- ------------------------------------------------------------------------------
[Name and title of signatory]
(h) The registration and visa numbers allocated by the COB in respect of the
Offering Circular and the Pricing Supplement in the following form:
VISA DE LA COMMISSION DES OPERATIONS DE BOURSE
En vue de la cotation a Paris des obligations, et par application des articles
6 et 7 de l'ordonnance no. 67-833 du 28 septembre 1967, la Commission des
Operations de Bourse a enregistre le Document de Base sous le no P98-339 du 22
juillet 1998 et a appose sur la presente "Note d'Information" la visa no. [ ]
du [date].
M. Annex D (Trading Desk Information) to Appendix D (Form of Operating and
Administrative Procedures Memorandum) is amended in its entirety in the form
of Annex D attached hereto.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 to the
Second Amended and Restated Agency Agreement as of the date above first
written.
The Company
- -----------
TOYOTA MOTOR CREDIT CORPORATION
19001 South Western Avenue FN 17
Torrance, California 90509
Telephone: (310) 787-6195
Telephone: (310) 787-6194
Attention: Corporate Manager
By: /S/ George E. Borst
----------------------------------------
George E. Borst
Senior Vice President and General Manager
<PAGE>
The Agent
- ---------
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E1 9YT
Telephone: 01202 347430
Fax: 01202 347438
Telex: 8954681 CMB G
Attention: Manager, Global Trust Services, Operations
By: /S/ Huw Merriman
--------------------
The Paying Agent
- ----------------
Chase Manhattan Bank Luxembourg S.A.
5 Rue Plaetis
L-2338
Luxembourg
Telephone: 00 352 4626 85236
Fax: 00 352 4626 85380
Telex: 1233 CHASE LU
Attention: Manager, Global Trust Services, Operations
By: /S/ Huw Merriman
-------------------
<PAGE>
APPENDIX A
TERMS AND CONDITIONS OF THE NOTES
---------------------------------
<PAGE>
TERMS AND CONDITIONS OF THE NOTES
THE FOLLOWING ARE THE TERMS AND CONDITIONS OF THE NOTES ISSUED ON OR AFTER THE
DATE OF THIS OFFERING CIRCULAR WHICH (SUBJECT TO COMPLETION AND AMENDMENT AND
TO THE EXTENT APPLICABLE) WILL BE ATTACHED TO OR INCORPORATED BY REFERENCE
INTO EACH GLOBAL NOTE AND WHICH WILL BE INCORPORATED BY REFERENCE OR ENDORSED
UPON EACH DEFINITIVE NOTE. THE APPLICABLE PRICING SUPPLEMENT IN RELATION TO
ANYNOTES MAY SPECIFY OTHER TERMS AND CONDITIONS WHICH SHALL, TO THE EXTENT SO
SPECIFIED OR TO THE EXTENT INCONSISTENT WITH THE FOLLOWING TERMS AND
CONDITIONS,REPLACE OR MODIFY THE FOLLOWING TERMS AND CONDITIONS FOR THE
PURPOSE OF SUCHNOTES.
This Note is one of a Series (as defined below) of Notes (the "Notes,"
which expression shall mean (i) in relation to any Notes represented by a
global Note, units of the lowest Specified Denomination in the Specified
Currency of the relevant Notes, (ii) definitive Notes issued in exchange (or
partial exchange) for a temporary or permanent global Note, and (iii) any
global Note) issued subject to, and with the benefit of, a Second Amended and
Restated Agency Agreement dated as of July 24, 1997, as amended (the "Agency
Agreement"), and made between Toyota Motor Credit Corporation ("TMCC", which
reference does not include the subsidiaries of TMCC) and The Chase Manhattan
Bank, London Office, as issuing agent and (unless specified otherwise in the
applicable Pricing Supplement) principal paying agent and (unless specified
otherwise in the applicable Pricing Supplement) as calculation agent (the
"Agent", which expression shall include any successor agent or any other
calculation agent specified in the applicable Pricing Supplement) and the
other paying agents named therein (together with the Agent, the "Paying
Agents", which expression shall include any additional or successor paying
agents).
Interest-bearing definitive Notes will (unless otherwise indicated in the
applicable Pricing Supplement) have interest coupons ("Coupons") and, if
indicated in the applicable Pricing Supplement, talons for further Coupons
("Talons") attached on issue. Any reference herein to Coupons or coupons
shall, unless the context otherwise requires, be deemed to include a reference
to Talons or talons. Definitive Notes repayable in installments will have
receipts ("Receipts") for the payment of the installments of principal (other
than the final installment) attached on issue.
As used herein, "Series" means all Notes which are denominated in the same
currency and which have the same Maturity Date, Interest/Payment Basis and
interest payment dates (if any) (all as indicated in the applicable Pricing
Supplement) and the terms of which (except for the Issue Date or the Interest
Commencement Date (as the case may be) and/or the Issue Price (as indicated as
aforesaid)) are otherwise identical (including whether or not the Notes are
listed) and the expressions "Notes of the relevant Series" and "holders of
Notes of the relevant Series" and related expressions shall be construed
accordingly. As used herein, "Tranche" means all Notes of the same Series
with the same Issue Date and Interest Commencement Date (if applicable).
If indicated in the applicable Pricing Supplement, TMCC may, from time to
time without the consent of the holders of Notes of a Series, create and issue
further Notes of the same Series.
<PAGE>
The Pricing Supplement applicable to any particular Note or Notes is
attached hereto or endorsed hereon and supplements these Terms and Conditions
and may specify other terms and conditions which shall, to the extent so
specified or to the extent inconsistent with these Terms and Conditions,
replace or modify these Terms and Conditions for the purposes of such Note or
Notes. References herein to the "applicable Pricing Supplement" shall mean
the Pricing Supplement attached hereto or endorsed hereon.
Copies of the Agency Agreement (which contains the form of Pricing
Supplement) and the Pricing Supplement applicable to any particular Note or
Notes (if listed) are available for inspection at the specified offices of the
Agent and each of the other Paying Agents. The holders of the Notes (the
"Noteholders"), which expression shall, in relation to any Notes represented
by a global Note, be construed as provided in Condition 1, the holders of the
Coupons (the "Couponholders") and the holders of Receipts (the
"Receiptholders") are deemed to have notice of, and are entitled to the
benefit of, all the provisions of the Agency Agreement and the applicable
Pricing Supplement, which are binding on them.
A temporary or permanent global Note will be exchangeable in whole, but
not in part, for security printed definitive Notes with, where applicable,
Receipts, Coupons and Talons attached not earlier than the date (the "Exchange
Date") which is 40 days after the date on which the temporary global Note is
issued (provided that certification of non-U.S. beneficial ownership has been
received): (i) at the option of TMCC; (ii) unless stated otherwise in the
applicable Pricing Supplement, at the option of holders of an interest in the
temporary or permanent global Note upon such notice as is specified in the
applicable Pricing Supplement from Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System ("Euroclear") or Cedel
Bank, societe anonyme ("Cedel Bank") (as the case may be) acting on
instructions of the holders of interest in the temporary or permanent global
Note and/or subject to the payment of costs in connection with the printing
and distribution of the definitive Notes, if specified in the applicable
Pricing Supplement; (iii) if, after the occurrence of an Event of Default,
holders representing at least a majority of the outstanding principal amount
of the Notes of a Series, acting together as a single class, advise the Agent
through Euroclear and Cedel Bank that they wish to receive definitive Notes;
or (iv) Euroclear, Cedel Bank and any other relevant clearance system for the
temporary or permanent global Note are all no longer willing or able to
discharge properly their responsibilities with respect to such Notes and the
Agent and TMCC are unable to locate a qualified successor.
Words and expressions defined in the Agency Agreement, defined elsewhere
in the Offering Circular or used in the applicable Pricing Supplement shall
have the same meanings where used in these Terms and Conditions unless the
context otherwise requires or unless otherwise stated.
1. FORM, DENOMINATION AND TITLE
The Notes in this Series are in bearer form and, in the case of definitive
Notes, serially numbered in the Specified Currency and in the Specified
Denomination(s) specified in the applicable Pricing Supplement.
<PAGE>
This Note is a Fixed Rate Note, a Floating Rate Note, a Zero Coupon Note,
a Dual Currency Note or an Indexed Note or any combination of the foregoing,
depending upon the Interest/Payment Basis specified in the applicable Pricing
Supplement. It is also a Partly Paid Note and/or an Indexed Note (where
payment with respect to principal is linked to an Index and/or formula) if, in
each case, the applicable Pricing Supplement so indicates and the appropriate
provisions of these Terms and Conditions will apply accordingly.
Notes in definitive form are issued with Coupons attached, unless they are
Zero Coupon Notes in which case references to interest (other than interest
due after the Maturity Date), Coupons and Couponholders in these Terms and
Conditions are not applicable.
Except as set out below, title to the Notes, Receipts and Coupons will
pass by delivery. TMCC and any Paying Agent may deem and treat the bearer of
any Note, Receipt or Coupon as the absolute owner thereof (whether or not
overdue and notwithstanding any notice of ownership or writing thereon or
notice of any previous loss or theft thereof) for all purposes but, in the
case of any global Note, without prejudice to the provisions set out in the
next succeeding paragraph.
For so long as any of the Notes are represented by a global Note, each
person who is for the time being shown in the records of Euroclear or of Cedel
Bank and any other additional or alternative clearance system, including
Sicovam, as the holder of a particular principal amount of Notes other than a
clearing agency (including Cedel Bank and Euroclear) that is itself an account
holder of Cedel Bank, Euroclear or any other applicable clearing agency for a
Series of Notes (in which regard any certificate or other document issued by
Euroclear or Cedel Bank as to the principal amount of such Notes standing to
the account of any person shall be conclusive and binding for all purposes
except in the case of manifest error) shall be treated by TMCC, the Agent and
any other Paying Agent as the holder of such principal amount of such Notes
for all purposes other than with respect to the payment of principal or
interest on the Notes, the right to which shall be vested, as against TMCC,
the Agent and any other Paying Agent solely in the bearer of the relevant
global Note in accordance with and subject to its terms (and the expressions
"Noteholder" and "holder of Notes" and related expressions shall be construed
accordingly). Notes which are represented by a global Note will be
transferable only in accordance with the rules and procedures for the time
being of Euroclear or of Cedel Bank, as the case may be.
Any reference herein to Euroclear and/or Cedel Bank shall, whenever the
context so permits, be deemed to include a reference to any additional or
alternative clearance system (including, if applicable, Sicovam S.A., and the
INTERMEDIAIRES FINANCIERS HABILITES authorized to maintain accounts therein
(together "Sicovam")) approved by TMCC and the Agent.
If the Specified Currency of this Note is a currency of one of the member
states participating in European economic and monetary union, and if specified
in the applicable Pricing Supplement, this Note shall permit Redenomination,
Exchange and Consolidation (as defined, and in the manner set forth, in
Condition 17 below or in such other manner as set forth in the applicable
Pricing Supplement) at the option of TMCC.
<PAGE>
2. STATUS OF NOTES
The Notes will be unsecured general obligations of TMCC and will rank PARI
PASSU with all other unsecured and unsubordinated indebtedness for borrowed
money of TMCC from time to time outstanding.
3. VALUE AND COMPOSITION OF THE ECU
(A) ECU
If the Notes are denominated in ECU, the value and composition of the ECU
in which the Notes are denominated or, if the Notes are Dual Currency Notes
payable in ECU, the value and composition of the ECU in which the Notes are
payable ("ECU"), will be the same as the value and composition of the European
Currency Unit that is from time to time used as the unit of account of the
European Community (the "EC"). Certain changes as to the nature or composition
of the ECU may be made by the EC in conformity with the provisions of the
Treaty establishing the European Community, as amended by the Treaty on
European Union (the "Treaty"). References herein to the ECU shall be deemed
to be references to the ECU as so changed.
(B) PROVISIONS APPLICABLE TO NOTES DENOMINATED OR PAYABLE IN ECU FROM THE
START OF THE THIRD STAGE OF EUROPEAN ECONOMIC AND MONETARY UNION
Notwithstanding the other provisions of these Terms and Conditions, on and
after the Commencement Date:
(i) all payments in respect of Notes, Receipts and Coupons denominated
in ECU will be made solely in Euro, including payments of interest in respect
of periods commencing before the Commencement Date, as though references in
the Notes to ECU were to Euro;
(ii) payments will be made in Euro by credit or transfer to a Euro
account (or any other account to which Euro may be credited or transferred)
specified by the payee or, at the option of the payee, by a Euro check;
(iii) references in these Terms and Conditions to "ECU Settlement Day"
shall be read as references to any day on which the TARGET System (as defined
in Condition 17) is open;
(iv) if the Notes denominated in ECU are Fixed Rate Notes and interest
for any period ending on or after the Commencement Date is required to be
calculated for a period of less than one year, it will be calculated on the
basis of the actual number of days elapsed divided by 365 (or, if any of the
days elapsed fall in a leap year, the sum of (i) the number of those days
falling in a leap year divided by 366 and (ii) the number of those days
falling in a nonleap year divided by 365);
(v) if the Notes denominated in ECU are Floating Rate Notes the
applicable Pricing Supplement will specify any relevant changes to the
provisions relating to interest; and
<PAGE>
(vi) such other changes (whether or not relating to any of the above
matters) shall be made to these Terms and Conditions as TMCC may decide, after
consultation with the Agent, to conform them to conventions then applicable to
instruments denominated in Euro or to enable the Notes to be consolidated with
one or more issues of other Notes, whether or not originally denominated in
ECU or Euro. Any such other changes will not take effect until after they have
been notified to the Noteholders in accordance with Condition 16.
The applicable Pricing Supplement in relation to any Notes denominated in
ECU may specify other terms and conditions which shall, to the extent so
specified or to the extent inconsistent with the provisions of this Condition
3(b), replace or modify the provisions of this Condition 3(b) for the purpose
of such Notes.
(C) DEFINITIONS
In this Condition, "Commencement Date" means the start of the third stage
of European economic and monetary union pursuant to the Treaty.
4. INTEREST
(A) INTEREST ON FIXED RATE NOTES AND BUSINESS DAY CONVENTION FOR NOTES OTHER
THAN FLOATING RATE NOTES
(i) Each Fixed Rate Note bears interest on its principal amount from (and
including) the Interest Commencement Date which is specified in the applicable
Pricing Supplement at the rate(s) per annum equal to the Fixed Rate(s) of
Interest specified in the applicable Pricing Supplement payable in arrear on
the Fixed Interest Date(s) in each year and on the Maturity Date so specified
if it does not fall on a Fixed Interest Date. The first payment of interest
shall be made on the Fixed Interest Date next following the Interest
Commencement Date and, if the first anniversary of the Interest Commencement
Date is not a Fixed Interest Date, will amount to the Initial Broken Amount
specified in the applicable Pricing Supplement. If the Maturity Date is not a
Fixed Interest Date, interest from (and including) the preceding Fixed
Interest Date (or the Interest Commencement Date) to (but excluding) the
Maturity Date will amount to the Final Broken Amount specified in the
applicable Pricing Supplement. Unless specified otherwise in the applicable
Pricing Supplement, the "Following Business Day Convention" will apply to the
payment of all Notes other than Floating Rate Notes, meaning that if the Fixed
Interest Date or Maturity Date would otherwise fall on a day which is not a
Business Day (as defined in Condition 4(b)(i) below), the related payment of
principal or interest will be made on the next succeeding Business Day as if
made on the date such payment was due. If the "Modified Following Business
Day Convention" is specified in the applicable Pricing Supplement for any Note
(other than a Floating Rate Note), it shall mean that if the Fixed Interest
Date or Maturity Date would otherwise fall on a day which is not a Business
Day (as defined in Condition 4(b)(i) below), the related payment of principal
or interest will be made on the next succeeding Business Day as if made on the
date such payment was due unless it would thereby fall into the next calendar
month in which event the full amount of payment shall be made on the
immediately preceding Business Day. The accrual periods for calculating the
amount of interest due on the Maturity Date and, unless specified otherwise in
the applicable Pricing Supplement, any Fixed Interest Date shall not be
changed.
<PAGE>
(ii) If interest is required to be calculated for a period of less than a
full year, such interest shall be calculated on the basis of a 360-day year
consisting of 12 months of 30 days each and, in the case of an incomplete
month, the number of days elapsed or as otherwise specified in the applicable
Pricing Supplement.
(B) INTEREST ON FLOATING RATE NOTES
(I) INTEREST PAYMENT DATES
Each Floating Rate Note bears interest on its principal amount (or, if it
is a Partly Paid Note, the amount paid up) from (and including) the Interest
Commencement Date specified in the applicable Pricing Supplement and, unless
specified otherwise in the applicable Pricing Supplement, such interest will
be payable in arrears on each interest payment date (each an "Interest Payment
Date") in each year and on the Maturity Date so specified if it does not fall
on an Interest Payment Date. Unless specified otherwise in the applicable
Pricing Supplement, the "Modified Following Business Day Convention with
adjustment for period end dates" will apply to Floating Rate Notes, meaning
that if any Interest Payment Date or the Maturity Date would otherwise fall on
a day which is not a Business Day (as defined below), it shall be postponed to
the next day which is a Business Day unless it would thereby fall into the
next calendar month in which event the Interest Payment Date or the Maturity
Date shall be brought forward to the immediately preceding Business Day and
the accrual periods for calculating the amount of interest due on any Interest
Payment Date (but not the Maturity Date) shall be changed. If the "Following
Business Day Convention with adjustment for period end dates" is specified in
the applicable Pricing Supplement with respect to Floating Rate Notes, it
shall mean that if any Interest Payment Date or Maturity Date would otherwise
fall on a day which is not a Business Day (as defined below), it shall be
postponed to the next day which is a Business Day and the accrual periods for
calculating the amount of interest due on any Interest Payment Date (but not
the Maturity Date) shall be changed. If the accrual periods for calculating
the amount of interest due on any Interest Payment Date are not to be changed
by reason of the fact that an Interest Payment Date falls on a day which is
not a Business Day (as defined below), this will be specified in the Pricing
Supplement by the notation "no adjustment for period end dates." (The number
of months or other period from (and including) the Interest Commencement Date
to (but excluding) the first Interest Payment Date and from (and including)
that and each successive Interest Payment Date thereafter to (but excluding)
the next following Interest Payment Date shall be referred to as an "Interest
Period", which may or may not be the same number of months or other period
throughout the life of the Notes.)
In this Condition 4, "Business Day" means (unless otherwise stated in the
applicable Pricing Supplement) a day which is both:
(A) a day (other than a Saturday or a Sunday) on which commercial banks
and foreign exchange markets settle payments in London and/or any other
location specified in the applicable Pricing Supplement; and
<PAGE>
(B) either (1) in relation to Notes denominated in a Specified Currency
other than ECU or Euro, a day on which commercial banks and foreign exchange
markets settle payments in the principal financial center of the country of
the relevant Specified Currency (if other than London), (2) in relation to
Notes denominated in ECU, an ECU Settlement Date (as defined in the 1991 ISDA
Definitions, as amended and updated as of the Issue Date of this Note,
published by the International Swaps and Derivatives Association, Inc. (the
"ISDA Definitions")) or (3) in relation to Notes denominated in Euro, a day on
which the TARGET system (as defined in Condition 17) is open. Unless
otherwise provided in the applicable Pricing Supplement, the principal
financial center of any country for the purpose of these Terms and Conditions
shall be as provided in the ISDA Definitions (except in the case of New
Zealand and Australia, where the principal financial center will be as
specified in the Pricing Supplement).
(II) RATE OF INTEREST
The Rate of Interest payable from time to time in respect of each Series
of Floating Rate Notes shall be determined in the manner specified in the
applicable Pricing Supplement.
(III) ISDA DETERMINATION
(A) Where ISDA Determination is specified in the applicable Pricing
Supplement as the manner in which the Rate of Interest is to be determined,
the Rate of Interest shall be determined on such dates and at such rates as
would have been determined by TMCC if it had entered into an interest rate
swap transaction governed by an agreement (regardless of any event of default
or termination event thereunder) in the form of the 1992 ISDA Master Agreement
(Multicurrency -- Cross Border) (the "ISDA Agreement") (copyright 1992) and
evidenced by Confirmation (as defined in the ISDA Agreement) incorporating the
ISDA Definitions with the holder of the relevant Note under which:
(1) the manner in which the Rate of Interest is to be determined is the
"Floating Rate Option";
(2) TMCC is the "Floating Rate Payer";
(3) the Agent or other person specified in the applicable Pricing
Supplement is the "Calculation Agent";
(4) the Interest Commencement Date is the "Effective Date";
(5) the aggregate principal amount of the Series is the "Notional
Amount";
(6) the relevant Interest Period is the "Designated Maturity";
(7) the Interest Payment Dates are the "Floating Rate Payer Payment
Dates";
(8) the Margin is the "Spread"; and
(9) all other terms are as specified in the applicable Pricing
Supplement.
<PAGE>
(B) When Condition 4(b)(iii)(A) applies, with respect to each relevant
Interest Payment Date:
(1) the amount of interest determined for such Interest Payment Date
shall be the Interest Amount for the relevant Interest Period for the purposes
of these Terms and Conditions as though calculated under Condition 4(b)(vi)
below; and
(2) the Rate of Interest for such Interest Period shall be the Floating
Rate (as defined in the ISDA Definitions) determined by the Agent (or such
other agent specified in the applicable Pricing Supplement) in accordance with
Condition 4(b)(iii)(A), plus or minus (as indicated in the applicable Pricing
Supplement), the applicable Margin (if any).
(IV) SCREEN DETERMINATION
Screen Rate Determination: Where Screen Rate Determination is specified in
the applicable Pricing Supplement as the manner in which the Rate of Interest
is to be determined, the Rate of Interest for each Interest Period will be
either:
(x) the quotation; or
(y) the arithmetic mean (rounded, if necessary, to the fourth
decimal place with 0.00005 being rounded upwards) of the offered quotations,
(expressed as a percentage rate per annum), for deposits in the Specified
Currency for that Interest Period which appears or appear, as the case may be,
on the appropriate page of the Screen as at 11:00 a.m. (London time) on the
Interest Determination Date (as defined below) in question plus or minus (as
specified in the applicable Pricing Supplement) the Margin (if any), all as
determined by the Agent;
(A) if, in the case of (x) above, no such rate appears or, in the case of
(y) above, fewer than two of such offered rates appear at such time or if the
offered rate or rates which appears or appear, as the case may be, as at such
time do not apply to a period of a duration equal to the relevant Interest
Period, the Rate of Interest for such Interest Period shall, subject as
provided below and except as otherwise indicated in the applicable Pricing
Supplement, be the arithmetic mean (rounded, if necessary, to the fourth
decimal place with 0.00005 being rounded upwards) of the offered quotations
(expressed as a percentage rate per annum), of which the Agent is advised by
all Reference Banks (as defined below) as at 11:00 a.m. (London time) on the
Interest Determination Date plus or minus (as specified in the applicable
Pricing Supplement) the Margin (if any), all as determined by the Agent;
(B) except as otherwise indicated in the applicable Pricing Supplement, if
on any Interest Determination Date to which Condition 4(b)(iv)(A) applies two
or three only of the Reference Banks advise the Agent of such offered
quotations, the Rate of Interest for the next Interest Period shall, subject
as provided below, be determined as in Condition 4(b)(iv)(A) on the basis of
the rates of those Reference Banks advising such offered quotations;
<PAGE>
(C) if on any Interest Determination Date to which Condition 4(b)(iv)(A)
applies one only or none of the Reference Banks advises the Agent of such
rates, the Rate of Interest for the next Interest Period shall, subject as
provided below and except as otherwise indicated in the applicable Pricing
Supplement, be whichever is the higher of:
(1) the Rate of Interest in effect for the last preceding Interest
Period to which Condition 4(b)(iv)(A) shall have applied (plus or minus (as
specified in the applicable Pricing Supplement), where a different Margin is
to be applied to the next Interest Period than that which applied to the last
preceding Interest Period, the Margin relating to the next Interest Period in
place of the Margin relating to the last preceding Interest Period); or
(2) the reserve interest rate (the "Reserve Interest Rate") which shall
be the rate per annum which the Agent determines to be either (x) the
arithmetic mean (rounded, if necessary, to the fourth decimal place with
0.00005 being rounded upwards) of the lending rates for the Specified Currency
which banks selected by the Agent in the principal financial center of the
country of the Specified Currency (which, if Australian dollars, shall be
Sydney, if New Zealand dollars, shall be Wellington and if Euro, shall be
London) are quoting on the relevant Interest Determination Date for the next
Interest Period to the Reference Banks or those of them (being at least two in
number) to which such quotations are, in the opinion of the Agent, being so
made plus or minus (as specified in the applicable Pricing Supplement) the
Margin (if any), or (y) in the event that the Agent can determine no such
arithmetic mean, the lowest lending rate for the Specified Currency which
banks selected by the Agent in the principal financial center of the country
of the Specified Currency (which, if Australian dollars, shall be Sydney, if
New Zealand dollars, shall be Wellington and if Euro, shall be London) are
quoting on such Interest Determination Date to leading European banks for the
next Interest Period plus or minus (as specified in the applicable Pricing
Supplement) the Margin (if any), provided that if the banks selected as
aforesaid by the Agent are not quoting as mentioned above, the Rate of
Interest shall be the Rate of Interest specified in (1) above;
(D) the expression "the appropriate page of the Screen" means such page,
whatever its designation, on which London Interbank Offered Rates or, if there
is only one such rate, that rate for deposits in the Specified Currency of
prime banks that are for the time being displayed on the Reuters Monitor Money
Rates Service or Dow Jones Markets Limited or other such service, as specified
in the applicable Pricing Supplement;
(E) unless otherwise specified in the applicable Pricing Supplement, the
Reference Banks will be the principal London offices of The Chase Manhattan
Bank, National Westminster Bank PLC, UBS AG and The Bank of Tokyo, Ltd. TMCC
shall procure that, so long as any Floating Rate Note to which Condition
4(b)(iv)(A) is applicable remains outstanding, in the case of any bank being
unable or unwilling to continue to act as a Reference Bank, TMCC shall specify
the London office of some other leading bank engaged in the Eurodollar market
to act as such in its place;
<PAGE>
(F) the expression "Interest Determination Date" means, unless otherwise
specified in the applicable Pricing Supplement, (x) other than in the case of
Condition 4(b)(iv)(A), with respect to Notes denominated in any Specified
Currency other than Sterling, the second Banking Day in London prior to the
commencement of the relevant Interest Period and, in the case of Condition
4(b)(iv)(A), the second Banking Day in the principal financial center of the
country of the Specified Currency (which, if Australian dollars, shall be
Sydney, if New Zealand dollars, shall be Wellington and if Euro, shall be
London) prior to the commencement of the relevant Interest Period and (y) with
respect to Notes denominated in Sterling, the first Banking Day in London of
the relevant Interest Period; and
(G) the expression "Banking Day" means, in respect of any place, any day
on which commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) in that place or, as the case may be,
as indicated in the applicable Pricing Supplement.
(V) MINIMUM AND/OR MAXIMUM RATE OF INTEREST
If the applicable Pricing Supplement specifies a minimum Rate of Interest
for any Interest Period, then in no event shall the Rate of Interest for such
period be less than such minimum Rate of Interest. If the applicable Pricing
Supplement specifies a maximum Rate of Interest for any Interest Period, then
in no event shall the Rate of Interest for such Interest Period be greater
than such maximum Rate of Interest.
(VI) DETERMINATION OF RATE OF INTEREST AND CALCULATION OF INTEREST AMOUNT
The Agent will, at or as soon as practicable after each time at which the
Rate of Interest is to be determined, determine the Rate of Interest (subject
to any minimum or maximum Rate of Interest specified in the applicable Pricing
Supplement) and calculate the amount of interest (the "Interest Amount")
payable on the Floating Rate Notes in respect of each Specified Denomination
for the relevant Interest Period. Each Interest Amount shall be calculated by
applying the Rate of Interest to the Specified Denomination, multiplying such
product by the actual number of days in the Interest Period concerned divided
by 360 (or 365/366 in the case of Floating Rate Notes denominated in
Sterling), or such other denominator determined by the Agent to be customary
for such calculation or otherwise specified in the applicable Pricing
Supplement, and rounding the result and figure to the nearest cent (or its
approximate equivalent in the relevant other Specified Currency), half a cent
(or its approximate equivalent in the relevant other Specified Currency) being
rounded upwards. Without prejudice to subparagraph (viii) below, the
determination of the Rate of Interest and calculation of each Interest Amount
by the Agent shall (in the absence of manifest error) be binding on all
parties.
<PAGE>
(VII) NOTIFICATION OF RATE OF INTEREST AND INTEREST AMOUNT
The Agent will notify or cause to be notified TMCC and any stock exchange
on which the relevant Floating Rate Notes are listed of the Rate of Interest
and each Interest Amount for each Interest Period and the relevant Interest
Payment Date and will cause the same to be published in accordance with
Condition 16 as soon as possible after their determination but in no event
later than the fourth London Business Day thereafter. Each Interest Amount
and Interest Payment Date so notified may subsequently be amended (or
appropriate alternative arrangements made by way of adjustment) without
publication as aforesaid in the event of an extension or shortening of the
Interest Period in accordance with the provisions hereof. Each stock exchange
on which the relevant Floating Rate Notes are for the time being listed will
be promptly notified of any such amendment. For the purposes of this
subparagraph (vii), the expression "London Business Day" means a day (other
than a Saturday or a Sunday) on which banks and foreign exchange markets are
open for business in London.
(VIII) CERTIFICATES TO BE FINAL
All certificates, communications, opinions, determinations, calculations,
quotations and decisions given, expressed, made or obtained for the purposes
of the provisions of this paragraph (b), by the Agent, shall (in the absence
of manifest error) be binding on TMCC, the Agent, the other Paying Agents and
all Noteholders, Receiptholders and Couponholders and (in the absence as
aforesaid) no liability to TMCC, the Noteholders, the Receiptholders or the
Couponholders shall attach to the Agent in connection with the exercise or
non-exercise by it of its powers, duties and discretions pursuant to such
provisions.
(IX) LIMITATIONS ON INTEREST
In addition to any maximum Rate of Interest which may be applicable to any
Floating Rate Note pursuant to Condition 4(b)(v) above, the interest rate on
Floating Rate Notes shall in no event be higher than the maximum rate
permitted by New York law, as the same may be modified by United States law of
general application.
(C) INDEXED NOTES AND DUAL CURRENCY NOTES
In the case of Indexed Notes or Dual Currency Notes, if the Rate of
Interest or amount of interest fails to be determined by reference to an index
and/or a formula or, as the case may be, an exchange rate, such Rate of
Interest or amount of interest payable shall be determined in the manner
specified in the applicable Pricing Supplement.
(D) ZERO COUPON NOTES
When a Zero Coupon Note becomes due and repayable prior to the Maturity
Date and is not paid when due, the amount due and repayable shall be the
Amortized Face Amount of such Note as determined in accordance with Condition
5(f)(iii). As from the Maturity Date, any overdue principal of such Note
shall bear interest at a rate per annum equal to the Accrual Yield set forth
in the applicable Pricing Supplement.
<PAGE>
(E) PARTLY PAID NOTES
In the case of Partly Paid Notes (other than Partly Paid Notes which are
Zero Coupon Notes), interest will accrue as aforesaid on the paid up principal
amount of such Notes and otherwise as specified in the applicable Pricing
Supplement.
(F) ACCRUAL OF INTEREST
Each Note (or in the case of the redemption in part only of a Note, such
part to be redeemed) will cease to bear interest (if any) from the due date
for its redemption unless, upon due presentation thereof, payment of principal
is improperly withheld or refused. In such event, interest will continue to
accrue (as well after as before judgment) until whichever is the earlier of
(i) the day on which all sums due in respect of such Note up to that day are
received by or on behalf of the holder of such Note; and (ii) the day on which
the Agent has notified the holder thereof (either in accordance with Condition
16 or individually) of receipt of all sums due in respect thereof up to that
date.
5. REDEMPTION AND PURCHASE
(A) AT MATURITY
Unless previously redeemed or purchased and cancelled as specified below,
Notes will be redeemed by TMCC at their Final Redemption Amount in the
relevant Specified Currency on the Maturity Date specified in the applicable
Pricing Supplement.
(B) REDEMPTION FOR TAX REASONS
TMCC may redeem the Notes of this Series as a whole but not in part at any
time at their Early Redemption Amount, together, if appropriate, with accrued
interest to but excluding the date fixed for redemption, if TMCC shall
determine that as a result of any change in or amendment to the laws (or any
regulations or rulings promulgated thereunder) of the United States of America
or of any political subdivision or taxing authority thereof or therein
affecting taxation, or any change in application or official interpretation of
such laws, regulations or rulings, which amendment or change is effective on
or after the latest Issue Date of the Notes of this Series, TMCC would be
required to pay Additional Amounts, as provided in Condition 9, on the
occasion of the next payment due in respect of the Notes of this Series.
The Notes of this Series are also subject to redemption as a whole but not
in part in the other circumstances described in Condition 9.
Notice of intention to redeem Notes will be given at least once in
accordance with Condition 16 not less than 30 days nor more than 60 days prior
to the date fixed for redemption, provided that no such notice of redemption
shall be given earlier than 90 days prior to the effective date of such change
or amendment and that at the time notice of such redemption is given, such
obligation to pay such Additional Amounts remains in effect. From and after
any redemption date, if monies for the redemption of Notes shall have been
made available for redemption on such redemption date, such Notes shall cease
to bear interest, if applicable, and the only right of the holders of such
Notes and any Receipts or Coupons appertaining thereto shall be to receive
payment of the Early Redemption Amount and, if appropriate, all unpaid
interest accrued to such redemption date.
<PAGE>
(C) PRICING SUPPLEMENT
The Pricing Supplement applicable to the Notes of this Series shall
indicate either:
(i) that the Notes of this Series cannot be redeemed prior to their
Maturity Date (except as otherwise provided in paragraph (b) above and in
Condition 13); or
(ii) that such Notes will be redeemable at the option of TMCC and/or the
holders of the Notes prior to such Maturity Date in accordance with the
provisions of paragraphs (d) and/or (e) below on the date or dates and at the
amount or amounts indicated in the applicable Pricing Supplement.
(D) REDEMPTION AT THE OPTION OF TMCC
If so specified in the applicable Pricing Supplement, TMCC may, having
given:
(i) not more than 60 nor less than 30 days notice to the holders of the
Notes of this Series in accordance with Condition 16, or such other notice as
is specified in the applicable Pricing Supplement; and
(ii) not less than 15 days before the giving of the notice referred to in
(i) (or such other notice as is specified in the applicable Pricing
Supplement), notice to the Agent; (which notice shall be irrevocable), repay
all or some only of the Notes of this Series then outstanding on the Optional
Redemption Date(s) and at the Optional Redemption Amount(s) indicated in the
applicable Pricing Supplement together, if appropriate, with accrued interest.
In the event of a redemption of some only of such Notes of this Series, such
redemption must be for an amount being the Minimum Redemption Amount or a
Higher Redemption Amount, as indicated in the applicable Pricing Supplement.
In the case of a partial redemption of definitive Notes of this Series, the
Notes of this Series to be repaid will be selected individually by lot not
more than 60 days prior to the date fixed for redemption and a list of the
Notes of this Series called for redemption will be published in accordance
with Condition 16 not less than 30 days prior to such date. In the case of a
partial redemption of Notes which are represented by a global Note, the
relevant Notes will be redeemed in accordance with the rules of Euroclear
and/or Cedel Bank. Notes denominated in Sterling or French Franc Notes may not
be redeemed pursuant to this paragraph prior to one year from the Issue Date.
Notes denominated in Deutsche Marks may not be redeemed pursuant to this
paragraph prior to two years from the Issue Date.
<PAGE>
(E) REDEMPTION AT THE OPTION OF THE NOTEHOLDERS
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to repayment at the option of the Noteholders. Notes
denominated in Sterling or French Franc Notes may not be redeemed pursuant to
this paragraph prior to one year from the Issue Date. Notes denominated in
Deutsche Marks may not be redeemed pursuant to this paragraph prior to two
years from the Issue Date.
(F) EARLY REDEMPTION AMOUNTS
For the purposes of paragraph (b) above and Condition 13, Notes will be
redeemed at an amount (the "Early Redemption Amount") calculated as follows:
(i) in the case of Notes with a Final Redemption Amount equal to the
Issue Price, at the Final Redemption Amount thereof; or
(ii) in the case of Notes (other than Zero Coupon Notes) with a Final
Redemption Amount which is or may be greater or less than the Issue Price or
which is payable in a Specified Currency other than that in which the Notes
are denominated, at the amount set out in the applicable Pricing Supplement,
or if no such amount or manner is set out in the applicable Pricing
Supplement, at their principal amount; or
(iii) in the case of Zero Coupon Notes, at an amount (the "Amortized Face
Amount") equal to:
(A) the sum of (x) the Reference Price specified in the applicable
Pricing Supplement and (y) the product of the Accrual Yield specified in the
applicable Pricing Supplement (compounded annually) being applied to the
Reference Price from (and including) the Issue Date to (but excluding) the
date fixed for redemption or (as the case may be) the date upon which such
Note becomes due and repayable; or
(B) if the amount payable in respect of any Zero Coupon Note upon
redemption of such Zero Coupon Note pursuant to paragraph (b) above or upon
its becoming due and repayable as provided in Condition 13 is not paid or
available for payment when due, the amount due and repayable in respect of
such Zero Coupon Note shall be the Amortized Face Amount of such Zero Coupon
Note calculated as provided above as though the references in sub-paragraph
(A) to the date fixed for redemption or the date upon which the Zero Coupon
Note becomes due and repayable were replaced by references to the date (the
"Reference Date") which is the earlier of:
(1) the date on which all amounts due in respect of the Note have
been paid; and
(2) the date on which the full amount of the moneys repayable has
been received by the Agent and notice to that effect has been given in
accordance with Condition 16.
<PAGE>
The calculation of the Amortized Face Amount in accordance with this sub-
paragraph (B) will continue to be made, after as well as before judgment,
until the Reference Date unless the Reference Date falls on or after the
Maturity Date, in which case the amount due and repayable shall be the
principal amount of such Note together with interest at a rate per annum equal
to the Accrual Yield. Unless specified otherwise in the applicable Pricing
Supplement, where any such calculation is to be made for a period of less than
a full year, it shall be made on the basis of a 360-day year consisting of 12
months of 30 days each (or 365/366 days in the case of Notes denominated in
Sterling) and, in the case of an incomplete month, the number of days elapsed.
(G) INSTALLMENTS
Any Note which is repayable in installments will be redeemed in the
Installment Amounts and on the Installment Dates specified in the applicable
Pricing Supplement.
(H) PARTLY PAID NOTES
If the Notes are Partly Paid Notes, they will be redeemed, whether at
maturity, early redemption or otherwise in accordance with the provisions of
this Condition 5 as amended or varied by the applicable Pricing Supplement.
(I) PURCHASES
TMCC may at any time purchase Notes of this Series (provided that, in the
case of definitive Notes, all unmatured Receipts and Coupons appertaining
thereto are surrendered therewith) in the open market at any price. If
purchases are made by tender, tenders must be available to all holders of
Notes of this Series alike.
(J) CANCELLATION, RESALE OR REISSUANCE AT THE OPTION OF TMCC
All Notes redeemed or purchased as aforesaid, together with all unmatured
Receipts and Coupons attached thereto or surrendered or purchased therewith,
may, at the option of TMCC, either be (i) resold or reissued, or held by TMCC
for subsequent resale or reissuance, or (ii) cancelled in which event such
Notes, Receipts and Coupons may not be resold or reissued.
6. PAYMENTS
(A) METHOD OF PAYMENT
Subject as provided below, payments in a currency other than ECU or Euro
will be made by transfer to an account in the Specified Currency (which, in
the case of a payment in Yen to a non-resident of Japan, shall be a non-
resident account) maintained by the payee with, or by a check in the Specified
Currency drawn on, a bank (which, in the case of a payment in Yen to a non-
resident of Japan, shall be an authorized foreign exchange bank) in the
principal financial center of the country of such Specified Currency (which,
if Australian dollars, shall be Sydney and if New Zealand dollars, shall be
Wellington).
<PAGE>
Payments in ECU will be made by credit or transfer to an ECU account
specified by the payee. Payments in Euro will be made by credit or transfer to
a Euro account in London (or any other account to which Euro may be credited
or transferred) specified by the payee or by check.
Notwithstanding the above provisions of this Condition 6(a), a check may
not be delivered to an address in, and an amount may not be transferred to an
account at a bank located in, the United States of America or its possessions
by any office or agency of TMCC, the Agent or any Paying Agent, except as
provided in Condition 6(b). Payments will be subject in all cases to any
fiscal or other laws and regulations applicable thereto in the place of
payment, but without prejudice to the provisions of Condition 9.
(B) PRESENTATION OF NOTES, RECEIPTS, COUPONS AND TALONS
Payments of principal in respect of definitive Notes will (subject as
provided below) be made in the Specified Currency against surrender of
definitive Notes and payments of interest in respect of the definitive Notes
will (subject as provided below) be made in the Specified Currency against
surrender of Coupons, in each case at the specified office of any Paying Agent
outside the United States of America and its possessions.
In the case of definitive Notes, payments of principal with respect to
installments (if any), other than the final installment, will (subject as
provided below) be made against presentation and surrender of the relevant
Receipt. Each Receipt must be presented for payment of the relevant
installment together with the relevant definitive Note against which the
amount will be payable with respect to that installment. If any definitive
Note is redeemed or becomes repayable prior to the stated Maturity Date,
principal will be payable on surrender of such definitive Note together with
all unmatured Receipts appertaining thereto. Receipts presented without the
definitive Note to which they appertain and unmatured Receipts do not
constitute valid obligations of TMCC.
Upon the date on which any Fixed Rate Notes in definitive form (other than
Dual Currency Notes or Indexed Notes) become due and repayable, such Notes
should be presented for payment together with all unmatured Coupons
appertaining thereto failing which the amount of any missing unmatured Coupon
(or, in the case of payment not being made in full, the same proportion of the
aggregate amount of such missing unmatured Coupon as the sum so paid bears to
the sum due) will be deducted from the sum due for payment. Unless otherwise
specified in the applicable Pricing Supplement, each amount of principal so
deducted will be paid in the manner mentioned above against surrender of the
related missing Coupon at any time before the expiry of five years after the
Relevant Date (as defined in Condition 15) in respect of such principal
(whether or not such Coupon would otherwise have become void under Condition
15). Upon any Fixed Rate Note becoming due and repayable prior to its Maturity
Date, all unmatured Talons (if any) appertaining thereto will become void and
no further Coupons will be issued in respect thereof.
Upon the date on which any Floating Rate Note, Dual Currency Note or
Indexed Note in definitive form becomes due and repayable, all unmatured
Coupons and Talons (if any) relating thereto (whether or not attached) shall
become void and no payment shall be made in respect thereof.
<PAGE>
If the due date for redemption of any Note in definitive form is not a
Fixed Interest Date or an Interest Payment Date, interest (if any) accrued
with respect to such Note from and including the preceding Fixed Interest Date
or Interest Payment Date or, as the case may be, the Interest Commencement
Date shall be payable only against surrender of the relevant definitive Note.
Payments of principal and interest (if any) in respect of Notes of this
Series represented by any global Note will (subject as provided below) be made
in the manner specified above (except in the case of Notes denominated or
payable in ECU, when payments will be made as provided in Condition 6(c)) and
otherwise in the manner specified in the relevant global Note against
presentation or surrender, as the case may be, of such global Note at the
specified office of the Agent. A record of each payment made against
presentation or surrender of such global Note, distinguishing between any
payment of principal and any payment of interest, will be made on such global
Note by the Agent and such record shall be prima facie evidence that the
payment in question has been made.
The holder of the relevant global Note shall be the only person entitled
to receive payments in respect of Notes represented by such global Note and
TMCC will be discharged by payment to, or to the order of, the holder of such
global Note with respect to each amount so paid. Each of the persons shown in
the records of Euroclear or Cedel Bank as the holder of a particular principal
amount of Notes must look solely to Euroclear and/or Cedel Bank, as the case
may be, for his share of each payment so made by TMCC to, or to the order of,
the holder of the relevant global Note. No person other than the holder of
the relevant global Note shall have any claim against TMCC in respect of
payments due on that global Note.
Notwithstanding the foregoing, payments in respect of the Notes
denominated in U.S. dollars will only be made at the specified office of a
Paying Agent in the United States (which expression, as used herein, means the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction)
if:
(i) TMCC has appointed Paying Agents with specified offices outside
the United States with the reasonable expectation that such Paying Agents
would be able to make payment at such specified offices outside the United
States of the full amount owing in respect of the Notes in the manner provided
above when due;
(ii) payment of the full amount owing in respect of the Notes at such
specified offices outside the United States is illegal or effectively
precluded by exchange controls or other similar restrictions; and
(iii) such payment is then permitted under United States law without
involving, in the opinion of TMCC, adverse tax consequences to TMCC.
<PAGE>
(C) PAYMENT IN A COMPONENT CURRENCY
If any payment of principal or interest in respect of a Note, Receipt or
Coupon is to be made in ECU and, on the relevant due date, the ECU is neither
used as the unit of account of the EC nor as the currency of the European
Union, the Agent shall, without liability on its part and without having
regard to the interests of individual Noteholders, Receiptholders or
Couponholders and after consultation with TMCC if practicable, choose a
currency which was a component of the ECU when the ECU was most recently used
as the unit of account of the EC (the "Chosen Currency") in which all payments
due on that due date with respect to such Notes, Receipts and Coupons shall be
made. Notice of the Chosen Currency selected by the Agent shall, where
practicable, be published in accordance with Condition 16. The amount of each
payment in such Chosen Currency shall be computed on the basis of the
equivalent of the ECU in that currency, determined as set out in this
paragraph (c), as of the fourth London Business Day (as defined in Condition
4(b)(vii)) prior to the date on which such payment is due.
Without prejudice to the preceding paragraph, on the first London
Business Day from which the ECU ceases to be used as the unit of account of
the EC or as the currency of the European Union, the Agent shall, without
liability on its part and without having regard to the interests of individual
Noteholders, Receiptholders or Couponholders and after consultation with TMCC
if practicable, choose a currency which was a component of the ECU when the
ECU was most recently used as the unit of account of the EC (also, the "Chosen
Currency") in which all payments with respect to Notes, Receipts and Coupons
having a due date prior thereto but not yet presented for payment are to be
made. The amount of each payment in such Chosen Currency shall be computed on
the basis of the equivalent of the ECU in that currency, determined as set out
in this paragraph (c), as of such first London Business Day.
The equivalent of the ECU in the relevant Chosen Currency as of any date
(the "Day of Valuation") shall be determined on the following basis by the
Agent. The component currencies of the ECU for this purpose (the
"Components") shall be the currency amounts which were components of the ECU
as of the last date on which the ECU was used as a unit of account of the EC.
The equivalent of the ECU in the Chosen Currency shall be calculated by,
first, aggregating the U.S. dollar equivalents of the Components, and then,
using the rate used for determining the U.S. dollar equivalents of the
Components in the Chosen Currency as set forth below, calculating the
equivalent in the Chosen Currency of such aggregate amount in U.S. dollars.
The U.S. dollar equivalent of each of the Components shall be determined
by the Agent on the basis of the middle spot delivery quotations prevailing at
11:00 a.m. (London time) on the Day of Valuation, as obtained by the Agent
from one or more leading banks as selected by the Agent in the country of
issue of the Component in question.
<PAGE>
If the official unit of any Component is altered by way of combination or
subdivision, the number of units of that Component shall be divided or
multiplied in the same proportion. If two or more Components are consolidated
into a single currency, the amounts of those Components shall be replaced by
an amount in such single currency equal to the sum of the amounts of the
consolidated Components expressed in such single currency. If any Component
is divided into two or more currencies, the amount of that Component shall be
replaced by amounts of such two or more currencies each of which shall be
equal to the amount of the former Component divided by the number of
currencies into which that currency was divided.
If no direct quotations are available for a Component as of a Day of
Valuation from any of the banks selected by the Agent for this purpose because
foreign exchange markets are closed in the country of issue of that currency
or for any other reason, the most recent direct quotations for that currency
obtainable by the Agent shall be used in computing the equivalents of the ECU
on such Day of Valuation; provided, however, that such most recent quotations
may be used only if they were prevailing in the country of issue of such
Component not more than two London Business Days before such Day of Valuation.
If the most recent quotations obtained by the Agent are those which were so
prevailing more than two London Business Days before such Day of Valuation,
the Agent shall determine the U.S. dollar equivalent of such Component on the
basis of cross rates derived from the middle spot delivery quotations for such
Component and for the U.S. dollar prevailing at 11:00 a.m. (London time) on
such Day of Valuation, as obtained by the Agent from one or more leading
banks, as selected by the Agent, in a country other than the country of issue
of such Component. If such most recent quotations obtained by the Agent are
those which were so prevailing not more than two London Business Days before
such Day of Valuation, the Agent shall determine the U.S. dollar equivalent of
such Component on the basis of such cross rates if the Agent judges that the
equivalent so calculated is more representative than the U.S. dollar
equivalent calculated on the basis of such most recent direct quotations.
Unless otherwise determined by the Agent, if there is more than one market for
dealing in any Component by reason of foreign exchange regulations or for any
other reason, the market to be referred to in respect of such currency shall
be that upon which a non-resident issuer of securities denominated in such
currency would purchase such currency in order to make payments in respect of
such securities.
All choices and determinations made by the Agent for the purposes of this
paragraph (c) shall be at its sole discretion and without having regard to
individual Noteholders, Receiptholders or Couponholders (after consultation
with TMCC if practicable) and shall, in the absence of manifest error, be
conclusive for all purposes and binding on TMCC and all Noteholders,
Receiptholders and Couponholders.
Whenever a payment is to be made in a Chosen Currency as provided in this
paragraph (c), such Chosen Currency shall be deemed to be the Specified
Currency for the purposes of the other provisions of this Condition 6.
Notwithstanding the foregoing, from the start of the third stage of
European economic and monetary union, all payments in respect of Notes
denominated or payable in ECU will be payable in Euro at the exchange rate
then established in accordance with the Treaty. This Condition 6(c) will not
result in a payment in a Chosen Currency in such circumstances.
<PAGE>
(D) PAYMENT BUSINESS DAY
Unless specified otherwise in the applicable Pricing Supplement, if the
date for payment of any amount in respect of any Note, Receipt or Coupon is
not a Payment Business Day in a place of presentation, the holder thereof
shall not be entitled to payment until the next following Payment Business Day
in the relevant place and shall not be entitled to further interest or other
payment in respect of such delay. For these purposes, unless otherwise
specified in the applicable Pricing Supplement, "Payment Business Day" means
any day which is (i) a day (other than a Saturday or Sunday) on which
commercial banks are open for business and foreign exchange markets settle
payments in the relevant place of presentation; (ii) a Business Day as defined
in Condition 4; (iii) in relation to Notes denominated or payable in ECU, an
ECU Settlement Day; and (iv) in relation to Notes denominated in Euro, a day
on which the TARGET system (as defined in Condition 17) is open.
(E) INTERPRETATION OF PRINCIPAL AND INTEREST
Any reference in these Terms and Conditions to principal in respect of the
Notes shall be deemed to include, as applicable:
(i) any Additional Amounts which may be payable under Condition 9 in
respect of principal;
(ii) the Final Redemption Amount of the Notes;
(iii) the Early Redemption Amount of the Notes;
(iv) in relation to Notes redeemable in installments, the Installment
Amounts;
(v) any premium and any other amounts which may be payable under or in
respect of the Notes;
(vi) in relation to Zero Coupon Notes, the Amortized Face Amount; and
(vii) the Optional Redemption Amount(s) (if any) of the Notes
Any reference in these Terms and Conditions to interest in respect of the
Notes shall be deemed to include, as applicable, any Additional Amounts which
may be payable under Condition 9, except as provided in clause (i) above.
<PAGE>
7. AGENT AND PAYING AGENTS
The names of the initial Agent and the other initial Paying Agents and
their initial specified offices are set out on the inside back cover page of
the Offering Circular. In acting under the Agency Agreement, the Agent and the
Paying Agents will act solely as agents of TMCC and do not assume any
obligations or relationships of agency or trust to or with the Noteholders,
Receiptholders or Couponholders, except that (without affecting the
obligations of TMCC to the Noteholders, Receiptholders and Couponholders to
repay Notes and pay interest thereon) funds received by the Agent for the
payment of the principal of or interest on the Notes shall be held in trust by
it for the Noteholders and/or Receiptholders and/or Couponholders until the
expiration of the relevant period of prescription under Condition 15. TMCC
agrees to perform and observe the obligations imposed upon it under the Agency
Agreement and to use its best efforts to cause the Agent and the Paying Agents
to perform and observe the obligations imposed upon them under the Agency
Agreement. The Agency Agreement contains provisions for the indemnification
of the Agent and the Paying Agents and for relief from responsibility in
certain circumstances, and entitles any of them to enter into business
transactions with TMCC without being liable to account to the Noteholders,
Receiptholders or the Couponholders for any resulting profit.
TMCC is entitled to vary or terminate the appointment of any Paying Agent
or any other paying agent appointed under the terms of the Agency Agreement
and/or appoint additional or other paying agents and/or approve any change in
the specified office through which any paying agent acts, provided that:
(i) so long as the Notes of this Series are listed on any stock
exchange, there will at all times be a Paying Agent with a specified office in
each location required by the rules and regulations of the relevant stock
exchange;
(ii) there will at all times be a Paying Agent with a specified office
in a city approved by the Agent in continental Europe; and
(iii) there will at all times be an Agent.
In addition, with respect to Notes denominated in U.S. dollars, TMCC shall
forthwith appoint a Paying Agent having a specified office in New York City in
the circumstances described in the final paragraph of Condition 6(b). Any
variation, termination, appointment or change shall only take effect (other
than in the case of insolvency, when it shall be of immediate effect) after
not less than 30 nor more than 45 days prior notice thereof shall have been
given to the Agent and the Noteholders in accordance with Condition 16.
<PAGE>
8. EXCHANGE OF TALONS
On and after the Fixed Interest Date or the Interest Payment Date, as
appropriate, on which the final Coupon comprised in any Coupon sheet matures,
the Talon (if any) forming part of such Coupon sheet may be surrendered at the
specified office of the Agent or any other Paying Agent in exchange for a
further Coupon sheet including (if such further Coupon sheet does not include
Coupons to, and including, the final date for the payment of interest due in
respect of the Note to which it appertains) a further Talon, subject to the
provisions of Condition 15. Each Talon shall, for the purposes of these Terms
and Conditions, be deemed to mature on the Fixed Interest Date or the Interest
Payment Date (as the case may be) on which the final Coupon comprised in the
relative Coupon sheet matures.
9. PAYMENT OF ADDITIONAL AMOUNTS
TMCC will, subject to certain limitations and exceptions (set forth
below), pay to a Noteholder, Receiptholder or Couponholder who is a United
States Alien (as defined below) such amounts ("Additional Amounts") as may be
necessary so that every net payment of principal or interest in respect of the
Notes, Receipts or Coupons, after deduction or withholding for or on account
of any present or future tax, assessment or other governmental charge imposed
upon such Noteholder, Receiptholder or Couponholder, or by reason of the
making of such payment, by the United States or any political subdivision or
taxing authority thereof or therein, will not be less than the amount provided
for in the Notes, Receipts or Coupons. However, TMCC shall not be required to
make any payment of Additional Amounts for or on account of:
(a) any tax, assessment or other governmental charge which would not
have been imposed but for (i) the existence of any present or former
connection between such Noteholder, Receiptholder or Couponholder (or between
a fiduciary, settlor, beneficiary, member or shareholder of, or possessor of a
power over, such Noteholder, Receiptholder or Couponholder, if such
Noteholder, Receiptholder or Couponholder is an estate, trust, partnership or
corporation) and the United States, including, without limitation, such
Noteholder, Receiptholder or Couponholder (or such fiduciary, settlor,
beneficiary, member, shareholder or possessor) being or having been a citizen
or resident thereof or being or having been present or engaged in trade or
business therein or having or having had a permanent establishment therein, or
(ii) such Noteholder's, Receiptholder's or Couponholder's past or present
status as a personal holding company, foreign personal holding company or
controlled foreign corporation or a private foundation (as those terms are
defined for United States tax purposes) or as a corporation which accumulates
earnings to avoid United States federal income tax;
(b) any estate, inheritance, gift, sales, transfer, personal property
or similar tax, assessment or other governmental charge;
(c) any tax, assessment or other governmental charge that would not
have been so imposed but for the presentation of a Note, Receipt or Coupon for
payment on a date more than 15 days after the date on which such payment
became due and payable or the date on which payment thereof is duly provided
for, whichever occurs later;
(d) any tax, assessment or other governmental charge which is payable
otherwise than by withholding from payments of principal or interest in
respect of the Notes, Receipts or Coupons;
<PAGE>
(e) any tax, assessment or other governmental charge imposed on
interest received by (i) a 10% shareholder of TMCC within the meaning of
Internal Revenue Code Section 871(h)(3)(b) or Section 881(c)(3)(b) or (ii) a
bank extending credit pursuant to a loan agreement entered into in the
ordinary course of its trade or business;
(f) any tax, assessment or other governmental charge required to be
withheld by any Paying Agent from any payment of principal or interest in
respect of any Note, Receipt or Coupon, if such payment can be made without
such withholding by any other Paying Agent with respect to the Notes in a
Western European city;
(g) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with certification,
information of other reporting requirements concerning the nationality,
residence, identity or connection with the United States of the Noteholder,
Receiptholder or Couponholder or of the beneficial owner of such Note, Receipt
or Coupon, if such compliance is required by statute or by regulation of the
United States Treasury Department as a precondition to relief or exemption
from such tax, assessment or other governmental charge; or
(h) any combination of items (a), (b), (c), (d), (e), (f) and (g);
nor shall Additional Amounts be paid to any Noteholder, Receiptholder or
Couponholder who is a fiduciary or partnership or other than the sole
beneficial owner of the Note, Receipt or Coupon to the extent a beneficiary or
settlor with respect to such fiduciary or a member of such partnership or a
beneficial owner of the Note, Receipt or Coupon would not have been entitled
to payment of the Additional Amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the Note, Receipt or Coupon.
The term "United States Alien" means any corporation, individual,
fiduciary or partnership that for United States federal income tax purposes is
a foreign corporation, nonresident alien individual, nonresident alien
fiduciary of a foreign estate or trust, or foreign partnership one or more
members of which is a foreign corporation, nonresident alien individual or
nonresident alien fiduciary of a foreign estate or trust.
<PAGE>
If TMCC shall determine that any payment made outside the United States by
TMCC or any of its Paying Agents of the full amount of the next scheduled
payment of either principal or interest due in respect of any Note, Receipt or
Coupon of this Series would, under any present or future laws or regulations
of the United States affecting taxation or otherwise, be subject to any
certification, information or other reporting requirements of any kind, the
effect of which requirements is the disclosure to TMCC, any of its Paying
Agents or any governmental authority of the nationality, residence or identity
(as distinguished from status as a United States Alien) of a beneficial owner
of such Note, Receipt or Coupon who is a United States Alien (other than such
requirements which (i) would not be applicable to a payment made to a
custodian, nominee or other agent of the beneficial owner, or which can be
satisfied by such a custodian, nominee or other agent certifying to the effect
that such beneficial owner is a United States Alien; provided, however, in
each case that payment by such custodian, nominee or agent to such beneficial
owner is not otherwise subject to any requirements referred to in this
sentence, (ii) are applicable only to payment by a custodian, nominee or other
agent of the beneficial owner to or on behalf of such beneficial owner, or
(iii) would not be applicable to a payment made by any other paying agent of
TMCC), TMCC shall redeem the Notes of this Series as a whole but not in part
at a redemption price equal to the Early Redemption Amount together, if
appropriate, with accrued interest to, but excluding, the date fixed for
redemption, such redemption to take place on such date not later than one year
after the publication of notice of such determination. If TMCC becomes aware
of an event that might give rise to such certification, information or other
reporting requirements, TMCC shall, as soon as practicable, solicit advice of
independent counsel selected by TMCC to establish whether such certification,
information or other reporting requirements will apply and, if such
requirements will apply, TMCC shall give prompt notice of such determination
(a "Tax Notice") in accordance with Condition 16 stating in such notice the
effective date of such certification, information or other reporting
requirements and, if applicable, the date by which the redemption shall take
place. Notwithstanding the foregoing, TMCC shall not redeem Notes if TMCC
shall subsequently determine not less than 30 days prior to the date fixed for
redemption that subsequent payments would not be subject to any such
requirements, in which case TMCC shall give prompt notice of such
determination in accordance with Condition 16 and any earlier redemption
notice shall thereby be revoked and of no further effect.
<PAGE>
Notwithstanding the foregoing, if and so long as the certification,
information or other reporting requirements referred to in the preceding
paragraph would be fully satisfied by payment of a backup withholding tax or
similar charge, TMCC may elect prior to publication of the Tax Notice to have
the provisions described in this paragraph apply in lieu of the provisions
described in the preceding paragraph, in which case the Tax Notice shall state
the effective date of such certification, information or reporting
requirements and that TMCC has elected to pay Additional Amounts rather than
redeem the Notes. In such event, TMCC will pay as Additional Amounts such
amounts as may be necessary so that every net payment made following the
effective date of such certification, information or reporting requirements
outside the United States by TMCC or any of its Paying Agents of principal or
interest due in respect of a Note, Receipt or Coupon to a holder who certifies
to the effect that the beneficial owner of such Note, Receipt or Coupon is a
United States Alien (provided that such certification shall not have the
effect of communicating to TMCC or any of its Paying Agents or any
governmental authority the nationality, residence or identity of such
beneficial owner) after deduction or withholding for or on account of such
backup withholding tax or similar charge (other than a backup withholding tax
or similar charge which (i) is imposed as a result of certification,
information or other reporting requirements referred to in the second
parenthetical clause of the first sentence of the preceding paragraph, or (ii)
is imposed as a result of the fact that TMCC or any of its Paying Agents has
actual knowledge that the holder or beneficial owner of such Note, Receipt or
Coupon is not a United States Alien but is within the category of persons,
corporations or other entities described in clause (a)(i) of the third
preceding paragraph, or (iii) is imposed as a result of presentation of such
Note, Receipt or Coupon for payment more than 15 days after the date on which
such payment becomes due and payable or on which payment thereof is duly
provided for, whichever occurs later), will not be less than the amount
provided for in such Note, such Receipt or such Coupon to be then due and
payable. In the event TMCC elects to pay such Additional Amounts, TMCC will
have the right, at its sole option, at any time, to redeem the Notes of this
Series, as a whole but not in part at a redemption price equal to their Early
Redemption Amount, together, if appropriate, with accrued interest to the date
fixed for redemption including any Additional Amounts required to be paid
under this paragraph. If TMCC has made the determination described in the
preceding paragraph with respect to certification, information or other
reporting requirements applicable to interest only and subsequently makes a
determination in the manner and of the nature referred to in such preceding
paragraph with respect to such requirements applicable to principal, TMCC will
redeem the Notes of this Series in the manner and on the terms described in
the preceding paragraph (except as provided below), unless TMCC elects to have
the provisions of this paragraph apply rather than the provisions of the
immediately preceding paragraph. If in such circumstances the Notes are to be
redeemed, TMCC will be obligated to pay Additional Amounts with respect to
interest, if any, accrued to the date of redemption. If TMCC has made the
determination described in the preceding paragraph and subsequently makes a
determination in the manner and of the nature referred to in such preceding
paragraph that the level of withholding applicable to principal or interest
has been increased, TMCC will redeem the Notes of this Series in the manner
and on the terms described in the preceding paragraph (except as provided
below), unless TMCC elects to have the provisions of this paragraph apply
rather than the provisions of the immediately preceding paragraph. If in such
circumstances the Notes are to be redeemed, TMCC will be obligated to pay
Additional Amounts with respect to the original level of withholding on
principal and interest, if any, accrued to the date of redemption.
<PAGE>
10. NEGATIVE PLEDGE
The Notes will not be secured by any mortgage, pledge or other lien. TMCC
shall not pledge or otherwise subject to any lien any property or assets of
TMCC unless the Notes are secured by such pledge or lien equally and ratably
with all other obligations secured thereby so long as such obligations shall
be so secured; provided, however, that such covenant will not apply to liens
securing obligations which do not in the aggregate at any one time outstanding
exceed 5% of Consolidated Net Tangible Assets (as defined below) of TMCC and
its consolidated subsidiaries and also will not apply to:
(a) the pledge of any assets of TMCC to secure any financing by TMCC
of the exporting of goods to or between, or the marketing thereof in,
countries other than the United States in connection with which TMCC reserves
the right, in accordance with customary and established banking practice, to
deposit, or otherwise subject to a lien, cash, securities or receivables, for
the purpose of securing banking accommodations or as the basis for the
issuance of bankers' acceptances or in aid of other similar borrowing
arrangements;
(b) the pledge of receivables payable in currencies other than United
States dollars to secure borrowings in countries other than the United States;
(c) any deposit of assets of TMCC with any surety company or clerk of
any court, or in escrow, as collateral in connection with, or in lieu of, any
bond on appeal by TMCC from any judgment or decree against it, or in
connection with other proceedings in actions at law or in equity by or against
TMCC or in favor of any governmental bodies to secure progress, advance or
other payments in the ordinary course of TMCC's business;
(d) any lien or charge on any property of TMCC, tangible or
intangible, real or personal, existing at the time of acquisition or
construction of such property (including acquisition through merger or
consolidation) or given to secure the payment of all or any part of the
purchase or construction price thereof or to secure any indebtedness incurred
prior to, at the time of, or within one year after, the acquisition or
completion of construction thereof for the purpose of financing all or any
part of the purchase or construction price thereof;
(e) any lien in favor of the United States of America or any state
thereof or the District of Columbia, or any agency, department or other
instrumentality thereof, to secure progress, advance or other payments
pursuant to any contract or provisions of any statute;
(f) any lien securing the performance of any contract or undertaking
not directly or indirectly in connection with the borrowing of money,
obtaining of advances or credit or the securing of debt, if made and
continuing in the ordinary course of business;
(g) any lien to secure non-recourse obligations in connection with
TMCC's engaging in leveraged or single-investor lease transactions; and
(h) any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any lien, charge or pledge
referred to in clauses (a) through (g) above; provided, however, that the
amount of any and all obligations and indebtedness secured thereby will not
exceed the amount thereof so secured immediately prior to the time of such
extension, renewal or replacement, and that such extension, renewal or
replacement will be limited to all or a part of the property which secured the
charge or lien so extended, renewed or replaced (plus improvements on such
property).
<PAGE>
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) after deducting
therefrom (i) all current liabilities and (ii) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles of TMCC and its consolidated subsidiaries, all as set forth on the
most recent balance sheet of TMCC and its consolidated subsidiaries prepared
in accordance with generally accepted accounting principles as practiced in
the United States.
11. CONSOLIDATION OR MERGER
TMCC may consolidate with, or sell, lease or convey all or substantially
all of its assets as an entirety to, or merge with or into any other
corporation provided that in any such case, (i) either TMCC shall be the
continuing corporation, or the successor corporation shall be a corporation
organized and existing under the laws of the United States of America or any
state thereof and such successor corporation shall expressly assume the due
and punctual payment of the principal of and interest (including Additional
Amounts as provided in Condition 9) on all the Notes, Receipts and Coupons,
according to their tenor, and the due and punctual performance and observance
of all of the covenants and conditions of this Note to be performed by TMCC by
an amendment to the Agency Agreement executed by such successor corporation,
TMCC and the Agent, and (ii) immediately after giving effect to such
transaction, no Event of Default under Condition 13, and no event which, with
notice or lapse of time or both, would become such an Event of Default shall
have happened and be continuing. In case of any such consolidation, merger,
sale, lease or conveyance and upon any such assumption by the successor
corporation, such successor corporation shall succeed to and be substituted
for TMCC, with the same effect as if it had been named herein as TMCC, and the
predecessor corporation, except in the event of a conveyance by way of lease,
shall be relieved of any further obligation under this Note and the Agency
Agreement.
12. MEETINGS, MODIFICATIONS AND WAIVERS
The Agency Agreement contains provisions which, unless otherwise provided
in the Pricing Supplement, are binding on TMCC, the Noteholders, the
Receiptholders and the Couponholders, for convening meetings of holders of
Notes, Receipts and Coupons to consider matters affecting their interests,
including the modification or waiver of the Terms and Conditions applicable to
the Notes.
<PAGE>
The Agency Agreement, the Notes and any Receipts and Coupons attached to
the Notes may be amended by TMCC (and, in the case of the Agency Agreement,
the Agent) (i) for the purpose of curing any ambiguity, or for curing,
correcting or supplementing any defective provision contained therein, or to
evidence the succession of another corporation to TMCC as provided in
Condition 11, (ii) to make any further modifications of the terms of the
Agency Agreement necessary or desirable to allow for the issuance of any
additional Notes (which modifications shall not be materially adverse to
holders of outstanding Notes) or (iii) in any manner which TMCC (and, in the
case of the Agency Agreement, the Agent) may deem necessary or desirable and
which shall not materially adversely affect the interests of the holders of
the Notes, Receipts and Coupons, to all of which each holder of Notes,
Receipts and Coupons shall, by acceptance thereof, consent. In addition, with
the written consent of the holders of not less than a majority in aggregate
principal amount of the Notes then outstanding affected thereby, or by a
resolution adopted by a majority in aggregate principal amount of such
outstanding Notes affected thereby present or represented at a meeting of such
holders at which a quorum is present, as provided in the Agency Agreement
(provided that such resolution shall be approved by the holders of not less
than 25 percent of the aggregate principal amount of Notes affected thereby
then outstanding), TMCC and the Agent may from time to time and at any time
enter into agreements modifying or amending the Agency Agreement or the terms
and conditions of the Notes, Receipts and Coupons for the purpose of adding
any provisions to or changing in any manner or eliminating any provisions of
the Agency Agreement or of modifying in any manner the rights of the holders
of Notes, Receipts and Coupons; provided, however, that no such agreement
shall, without the consent or the affirmative vote of the holder of each Note
affected thereby, (i) change the stated maturity of the principal of or any
installment of interest on any Note, (ii) reduce the principal amount of or
interest on any Note, (iii) change the obligation of TMCC to pay Additional
Amounts as provided in Condition 9, (iv) reduce the percentage in principal
amount of outstanding Notes the consent of the holders of which is necessary
to modify or amend the Agency Agreement or the terms and conditions of the
Notes or to waive any future compliance or past default, or (v) reduce the
percentage in principal amount of outstanding Notes the consent of the holders
of which is required at any meeting of holders of Notes at which a resolution
is adopted. The quorum at any meeting called to adopt a resolution will be
persons holding or representing a majority in aggregate principal amount of
the Notes at the time outstanding affected thereby and at any adjourned
meeting will be one or more persons holding or representing 25 percent in
aggregate principal amount of such Notes at the time outstanding affected
thereby. Any instrument given by or on behalf of any holder of a Note in
connection with any consent to any such modification, amendment or waiver will
be irrevocable once given and will be conclusive and binding on all subsequent
holders of such Note. Any modifications, amendments or waivers to the Agency
Agreement or to the terms and conditions of the Notes, Receipts and Coupons
will be conclusive and binding on all holders of Notes, Receipts and Coupons,
whether or not they have given such consent or were present at any meeting,
and whether or not notation of such modifications, amendments or waivers is
made upon the Notes, Receipts and Coupons. It shall not be necessary for the
consent of the holders of Notes under this Condition 12 to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent shall approve the substance thereof.
Notes authenticated and delivered after the execution of any amendment to
the Agency Agreement, Notes, Receipts or Coupons may bear a notation in form
approved by the Agent as to any matter provided for in such amendment to the
Agency Agreement.
<PAGE>
New Notes so modified as to conform, in the opinion of the Agent and TMCC,
to any modification contained in any such amendment may be prepared by TMCC,
authenticated by the Agent and delivered in exchange for the Notes then
outstanding.
For the purposes of this Condition 12 and Condition 13 below, the term
"outstanding" means, in relation to the Notes, all Notes issued under the
Agency Agreement other than (i) those which have been redeemed in full in
accordance with the Agency Agreement or these Terms and Conditions, (ii) those
in respect of which the date for redemption in accordance with these Terms and
Conditions has occurred and the redemption moneys therefor (including all
interest (if any) accrued thereon to the date for such redemption and any
interest (if any) payable under these Terms and Conditions after such date)
have been duly paid to the Agent as provided in the Agency Agreement (and,
where appropriate, notice has been given to the Noteholders in accordance with
Condition 16) and remain available for payment against presentation of the
Notes, (iii) those which have become void under Condition 15, (iv) those which
have been purchased and cancelled as provided in Condition 5, and those which
have been purchased and are being held by TMCC for subsequent resale or
reissuance as provided in Condition 5 during the time so held, (v) those
mutilated or defaced notes which have been surrendered in exchange for
replacement Notes pursuant to Condition 14, (vi) (for the purposes only of
determining how many Notes are outstanding and without prejudice to their
status for any other purpose) those Notes alleged to have been lost, stolen or
destroyed and in respect of which replacement Notes have been issued pursuant
to Condition 14 and (vii) temporary global Notes to the extent that they shall
have been duly exchanged in whole for permanent global Notes or definitive
Notes and permanent global Notes to the extent that they shall have been duly
exchanged in whole for definitive Notes, in each case pursuant to their
respective provisions.
13. DEFAULT AND ACCELERATION
(a) In the event that (each an "Event of Default"):
(i) default shall be made in the payment when due of any installment
of interest or any Additional Amounts on any of the Notes continued for a
period of 30 days after the date when due; or
(ii) default shall be made for more than three days in the payment
when due of the principal of any Note (whether at maturity or upon redemption
or otherwise); or
(iii) default in the deposit of any sinking fund payment with respect
to any Note when and as due; or
(iv) TMCC shall fail to perform or observe any other term, covenant or
agreement contained in the Terms and Conditions applicable to any of the Notes
or in the Agency Agreement for a period of 60 days after the date on which
written notice of such failure, requiring TMCC to remedy the same, first shall
have been given to the Agent and TMCC by the holders of at least 25 percent in
aggregate principal amount of the Notes then outstanding; or
(v) there is an acceleration of, or failure to pay when due and
payable, any indebtedness for money borrowed of TMCC exceeding $10,000,000 and
such acceleration is not rescinded or annulled, or such indebtedness is not
discharged, within 10 days after written notice thereof has first been given
to TMCC and the Agent by the holders of not less than 10 percent in aggregate
principal amount of Notes then outstanding; or
<PAGE>
(vi) the entry by a court having competent jurisdiction of (a) a decree
or order granting relief in respect of TMCC in an involuntary proceeding under
any applicable bankruptcy, insolvency, reorganization or other similar law and
such decree or order shall remain unstayed and in effect for a period of 60
consecutive days; or (b) a decree or order adjudging TMCC to be insolvent, or
approving a petition seeking reorganization, arrangement, adjustment or
composition of TMCC and such decree or order shall remain unstayed and in
effect for a period of 60 consecutive days; or (c) a final and non-appealable
order appointing a custodian, receiver, liquidator, assignee, trustee or other
similar official of TMCC or of any substantial part of the property of TMCC,
or ordering up the winding up or liquidation of the offices of TMCC; or
(vii) the commencement by TMCC of a voluntary proceeding under any
applicable bankruptcy, insolvency, reorganization or other similar law or of a
voluntary proceeding seeking to be adjudicated insolvent or the consent of
TMCC to the entry of a decree or order for relief in an involuntary proceeding
under any applicable bankruptcy, insolvency, reorganization or other similar
law or to the commencement of any insolvency proceedings against it, or the
filing by TMCC of a petition or answer or consent seeking reorganization or
relief under any applicable law, or the consent by TMCC to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or similar official of TMCC or any
substantial part of the property of TMCC or the making by TMCC of an
assignment for the benefit of creditors, or the taking of corporate action by
TMCC in furtherance of any such action; then the holder of any Note may, at
its option, declare the principal of such Note and the interest, if any,
accrued thereon to be due and payable immediately by written notice to TMCC
and the Agent at its main office in London, and unless all such defaults shall
have been cured by TMCC prior to receipt of such written notice, the principal
of such Note and the interest, if any, accrued thereon shall become and be
immediately due and payable.
At any time after such a declaration of acceleration with respect to the
Notes has been made and before a judgment or decree for payment of the money
due with respect to any Note has been obtained by any Noteholder, such
declaration and its consequences may be rescinded and annulled upon the
written consent of holders of a majority in aggregate principal amount of the
Notes then outstanding, or by resolution adopted by a majority in aggregate
principal amount of the Notes present or represented at a meeting of holders
of the Notes at which a quorum is present, as provided in the Agency
Agreement, if:
(1) TMCC has paid or deposited with the Agent a sum sufficient to pay
(A) all overdue installments of interest on the Notes, and
(B) the principal of Notes which has become due otherwise than by such
declaration of acceleration; and
(2) all Events of Default with respect to the Notes, other than the non-
payment of the principal of such Notes which has become due solely by such
declaration of acceleration, have been cured or waived as provided in
paragraph (b) below.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
<PAGE>
(b) Any Events of Default by TMCC, other than the events described in
paragraph (a)(i) or (a)(ii) above or in respect of a covenant or provision
which cannot be modified and amended without the written consent of the
holders of all outstanding Notes, may be waived by the written consent of
holders of a majority in aggregate principal amount of the Notes then
outstanding affected thereby, or by resolution adopted by the holders of a
majority in aggregate principal amount of such Notes then outstanding present
or represented at a meeting of holders of the Notes affected thereby at which
a quorum is present, as provided in the Agency Agreement.
14. REPLACEMENT OF NOTES, RECEIPTS, COUPONS AND TALONS
Should any Note, Receipt, Coupon or Talon be mutilated, defaced or
destroyed or be lost or stolen, it may be replaced at the specified office of
the Agent in London (or such other place outside the United States as may be
notified to the Noteholders), in accordance with all applicable laws and
regulations, upon payment by the claimant of the expenses incurred by TMCC and
the Agent in connection therewith and on such terms as to evidence, indemnity,
security or otherwise as TMCC and the Agent may require. Mutilated or defaced
Notes, Receipts, Coupons or Talons must be surrendered before replacements
will be issued.
15. PRESCRIPTION
Unless provided otherwise in the applicable Pricing Supplement, the Notes,
Receipts and Coupons will become void unless presented for payment within a
period of five years from the Relevant Date (as defined below) relating
thereto. Any moneys paid by TMCC to the Agent for the payment of principal or
interest in respect of the Notes and remaining unclaimed for a period of one
year shall forthwith be repaid to TMCC and holders shall thereafter look only
to TMCC for payment thereof. All liability with respect thereto shall cease
when the Notes, Receipts and Coupons become void.
As used herein, the "Relevant Date" means:
(A) the date on which such payment first becomes due; or
(B) if the full amount of the moneys payable has not been received by the
Agent on or prior to such due date, the date on which the full amount of such
moneys having been so received, notice to that effect shall have been given to
the Noteholders in accordance with Condition 16.
16. NOTICES
All notices regarding the Notes shall be published in one leading English
language daily newspaper with circulation in London (which is expected to be
the FINANCIAL TIMES in London) or, if this is not practicable, one other such
English language newspaper as TMCC, in consultation with the Agent, shall
decide. In addition, with respect to any Notes quoted on the Paris BOURSE,
and so long as that exchange so requires, any notice to the holder of such
Notes or the Coupons relating thereto will be validly given if published in a
daily newspaper of general circulation in Paris (which is expected to be LES
ECHOS), or if this is not practicable, in a newspaper of general circulation
in France as determined by TMCC, in consultation with the Agent. TMCC shall
also ensure that notices are duly published in a manner which complies with
the rules and regulations of any stock exchange on which the Notes are for the
time being listed. Any such notice shall be deemed to have been given on the
date of the first publication.
<PAGE>
Except in the case of Paris BOURSE listed Notes, until such time as any
definitive Notes are issued, there may, so long as the global Notes for this
Series are held in their entirety on behalf of Euroclear and Cedel Bank, be
substituted for such publication in such newspaper the delivery of the
relevant notice to Euroclear and Cedel Bank for communication by them to the
holders of the Notes of this Series. Any such notice shall be deemed to have
been given to the holders of the Notes of this Series on the seventh day after
the day on which the said notice was given to Euroclear and Cedel Bank, or on
such other day as is specified in the applicable Pricing Supplement.
Notices to be given by any holder of the Notes of this Series shall be in
writing and given by lodging the same, together with the relevant Note or
Notes, with the Agent. While any of the Notes of this Series are represented
by a global Note, such notice may be given by any holder of a Note of this
Series to the Agent via Euroclear and/or Cedel Bank, as the case may be, in
such manner as the Agent and Euroclear and/or Cedel Bank, as the case may be,
may approve for this purpose.
17. REDENOMINATION, EXCHANGE AND CONSOLIDATION
(A) REDENOMINATION
Where redenomination ("Redenomination") is specified in the applicable
Pricing Supplement as being applicable, and unless otherwise specified in the
applicable Pricing Supplement, TMCC may, without the consent of any
Noteholder, Receiptholder or Couponholder, on giving prior notice to
Euroclear, Cedel Bank and the Agent and at least 30 days' prior notice to
Noteholders as provided in Condition 16 above, designate a Redenomination
Date. With effect from the Redenomination Date, notwithstanding the other
provisions of these Terms and Conditions:
(i) The Notes and Receipts shall (unless already so provided by
mandatory provisions of applicable law) be deemed to be redenominated in Euro
in the denomination of Euro 0.01 with a principal amount for each Note and
Receipt equal to the principal amount of the Note or Receipt in the original
Specified Currency, converted into Euro at the Established Rate, and the
Specified Currency shall be deemed to be Euro: provided that, if TMCC
determines, after consultation with the Agent, that the then market practice
in respect of the redenomination into Euro of internationally offered
securities is different from the provisions specified above in this Condition
17(a)(i), such provisions shall be deemed to be amended so as to comply with
such market practice and TMCC shall promptly notify the Noteholders, the stock
exchange (if any) on which the Notes may be listed and the Agent and Paying
Agents of such deemed amendments.
(ii) If definitive Notes are required to be issued after the
Redenomination Date, they shall be issued at the expense of TMCC in the
denominations of Euro 1,000, Euro 10,000 and Euro 100,000 and (but only to the
extent of any remaining amounts less than Euro 1,000 or such smaller
denominations as the Agent may approve) Euro 0.01 and such other denominations
as TMCC, after consultation with the Agent, shall determine and notify to
Noteholders.
<PAGE>
(iii) If definitive Notes have been issued, all unmatured Coupons and
Receipts denominated in the original Specified Currency (whether or not
attached to the Notes) will become void and no payments will be made in
respect of them with effect from the date on which TMCC gives notice (the
"Exchange Notice") that Euro-denominated Notes, Receipts and Coupons are
available for exchange (provided that such securities are so available). New
certificates in respect of Euro-denominated Notes, Receipts and Coupons will
be issued in exchange for Notes, Receipts and Coupons in the original
Specified Currency in such manner as TMCC, after consultation with the Agent,
may specify and shall be notified to Noteholders in the Exchange Notice. No
Exchange Notice may be given less than 15 days prior to any date for payment
of principal or interest on the Notes.
(iv) After the Redenomination Date, all payments in respect of the
Notes, the Receipts and the Coupons (other than, unless the Redenomination
Date is on or after such date as the original Specified Currency ceases to be
a subdivision of the Euro, payments of interest in respect of periods
commencing before the Redenomination Date) will be made solely in Euro as
though references in the Notes, the Receipts and the Coupons to the Specified
Currency were to Euro. Such payments will be made in Euro by credit or
transfer to a Euro account (or any other account to which Euro may be credited
or transferred) specified by the payee or by check; provided, however, that a
check may not be delivered to an address in, and an amount may not be
transferred to an account at a bank located in, the United States of America
or its possessions except as provided in Condition 6(b) above.
(v) After the Redenomination Date, "Business Day" in relation to any
sum payable in Euro shall mean a day (other than a Saturday or Sunday) on
which commercial banks and foreign exchange markets settle payments in London
and New York and a day on which the TARGET system is open. After the
Redenomination Date, "Payment Business Day" shall mean (A) a "Business Day" as
defined in this Condition 17(a)(v) and (B) a day (other than a Saturday or
Sunday) on which commercial banks are open for business and foreign exchange
markets settle payments in the relevant place of presentation.
(vi) If definitive Notes have been issued, after the Redenomination
Date, the amount of interest due in respect of Notes will be calculated by
reference to the aggregate principal amount of Notes presented (or, as the
case may be, in respect of which Receipts or Coupons are presented) for
payment by the relevant holder and the amount of such payment shall be rounded
down to the nearest Euro 0.01. If the Notes are in global form, after the
Redenomination Date, the amount of interest due in respect of Notes
represented by the global Note will be calculated by reference to the
aggregate principal amount of such Notes and the amount of such payment all be
rounded down to the nearest Euro 0.01.
(vii) If the Notes are Fixed Rate Notes and interest is required to be
calculated for a period of less than one year, it will be calculated on the
basis of the actual number of days elapsed divided by 365 (or, if any of the
days elapsed fall in a leap year, the sum of (A) the number of those days
falling in a leap year divided by 366 and (B) the number of those days falling
in a non-leap year divided by 365). If the Notes are Floating Rate Notes, the
applicable Pricing Supplement will specify any relevant changes to the
provisions relating to interest.
<PAGE>
(B) EXCHANGE
Where exchange ("Exchange") is specified in the applicable Pricing
Supplement as being applicable, and unless otherwise specified in the
applicable Pricing Supplement, TMCC may, without the consent of any
Noteholder, Receiptholder or Couponholder, on giving prior notice to
Euroclear, Cedel Bank and the Agent and at least 30 days' prior notice to the
Noteholders as provided in Condition 16 above, elect that, with effect from
the Redenomination Date specified in the notice, the Notes shall be
exchangeable for Notes expressed to be denominated in Euro in accordance with
such arrangements as TMCC may decide, after consultation with the Agent, and
as may be specified in the notice, including arrangements under which Receipts
and Coupons unmatured at the date so specified become void.
(C) CONSOLIDATION
Where consolidation ("Consolidation") is specified in the applicable
Pricing Supplement as being applicable, and unless otherwise specified in the
applicable Pricing Supplement, TMCC may from time to time, without the consent
of any Noteholder, Receiptholder or Couponholder, on giving not less than 30
days' prior notice to Noteholders (which notice shall set forth the manner in
which Consolidation shall be effected), consolidate the Notes with one or more
issues of other Notes ("Other Notes") issued by it, whether or not originally
issued in the Specified Currency of the Notes, in Euro or in another currency
that has been replaced by Euro, provided that the Notes and such Other Notes
have been redenominated into Euro (if not originally denominated in Euro or
ECU) and otherwise have, in respect of all periods subsequent to such
Consolidation, the same Terms and Conditions and Agent.
TMCC may exercise its rights referred to above in this Condition 17(c) if
it determines, after consultation with the Agent, that the Notes and Other
Notes which it proposes to consolidate will, with effect from their
Consolidation, be cleared and settled on an interchangeable basis with the
same International Securities Identification Number through each Relevant
Clearing System through which the Notes or the relevant Other Notes were
cleared and settled immediately prior to such Consolidation.
Subject to the provisions of this Condition 17(c), TMCC may consolidate
Notes and Other Notes, which are listed on different stock exchanges and/or
cleared through different clearing systems, into a single Series of Notes
listed on only one or more of the stock exchanges on which either the Notes or
any of the Other Notes were listed immediately prior to Consolidation, and/or
cleared through only one or more of the clearing systems through which either
the Notes or any of the Other Notes were cleared immediately prior to
Consolidation.
(D) AMENDMENTS AND MODIFICATIONS
The applicable Pricing Supplement in relation to any Notes may specify
other terms and conditions which shall, to the extent so specified or to the
extent inconsistent with the provisions of this Condition 17, replace or
modify the provisions of this Condition 17 for the purpose of such Notes. In
addition, TMCC and the Agent may make any changes, without the consent of, but
with notification to (in accordance with Condition 16 above and this Condition
17), any Noteholder, Receiptholder or Couponholder, to the Agency Agreement
necessary to implement the provisions of this Condition 17.
<PAGE>
Notwithstanding anything to the contrary contained in this Condition 17,
if TMCC determines, after consultation with the Agent, that the then market
practice in respect of the redenomination into Euro of internationally offered
securities or Euro-denominated internationally offered securities is different
from that specified in this Condition 17, TMCC may (but shall not be required
to) amend the provisions of this Condition 17 and any other provision of these
Terms and Conditions, as applicable, so as to comply with such market
practice, and TMCC shall promptly notify Noteholders, the stock exchange (if
any) on which the Notes may be listed, the Paying Agents and the Agent of such
deemed amendments. Such changes will not take effect until after they have
been notified to Noteholders in accordance with Condition 16 above and this
Condition 17.
(E) DEFINITIONS
In this Condition 17, the following expressions have the following
meanings:
"Established Rate" means the rate for the conversion of the Specified
Currency (including compliance with rules relating to roundings in accordance
with applicable European Community regulations) into Euro established by the
Council of the European Union pursuant to Article 109L(4) of the Treaty.
"Euro" means the currency to be introduced at the start of the third stage
of European economic and monetary union pursuant to the Treaty.
"Redenomination Date" means in the case of interest bearing Notes any date
for payment of interest under the Notes or in the case of Zero Coupon Notes
any date, in each case specified by TMCC in the notice given to the
Noteholders pursuant to paragraph (a), (b), (c) or (d) of this Condition 17
and which falls on or after the start of the third stage of European economic
and monetary union pursuant to the Treaty or, if the country of the Specified
Currency is not one of the countries then participating in such third stage,
which falls on or after such later date as it does so participate and which
falls before the date on which the Specified Currency ceases to be a sub-
division of the Euro.
"Relevant Clearing System" means:
(A) Morgan Guaranty Trust Company of New York, Brussels office, as
operator of the Euroclear System and Cedel Bank, societe anonyme;
(B) any clearing system which is a central securities depositary for the
Notes or relevant Other Notes; or
(C) the principal clearing system (if any) in the country of the original
Specified Currency of the Notes or the relevant Other Notes if the Notes or
the relevant Other Notes were clearing and settling in such clearing system
immediately prior to Consolidation.
"TARGET system" means the Trans-European Automated Real-time Gross
Settlement Express Transfer System.
18. GOVERNING LAW
The Agency Agreement and the Notes, the Receipts and the Coupons are
governed by, and shall be construed in accordance with, the laws of the State
of New York, United States of America, applicable to agreements made and to be
performed wholly within such jurisdiction.
<PAGE>
ANNEX D
TRADING DESK INFORMATION
The Company
TOYOTA MOTOR CREDIT CORPORATION
19001 South Western Avenue FN17
Torrance, California 90509
Telephone No: (310) 787-6195; Fax No: (310) 787-6194
Attention: Corporate Treasury Manager
The Dealers
PARIBAS GOLDMAN SACHS
10 Harewood Avenue INTERNATIONAL
London NW1 6AA Peterborough Court
Telephone: 0171 595 2000 133 Fleet Street
Telefax: 0171 595 2555 London EC4A 2BB
Attn: Euro Medium Term Note Desk Telephone: 0171 744 1000
Telefax: 0171 774 4123
Attn: Euro Medium Term Note Desk
LEHMAN BROTHERS MERRILL LYNCH
INTERNATIONAL (EUROPE) INTERNATIONAL
One Broadgate Ropemaker Place
London EC2M 7HA 25 Ropemaker Street
Telephone: 0171 256 8256 London EC2Y 9LY
Telefax: 0171 260 2359 Telephone: 0171 867 3995
Attn: MTN Trading Desk TeleFax: 0171 867 4327
Attn: EMTN Trading and
Distribution Desk
NOMURA INTERNATIONAL UBS AG
PLC 1 Finsbury Avenue
Nomura House London EC2M 2PP
1 St. Martin'sle-Grand Telephone: 0171 711 2479
London EC1A 4NP Telefax: 0171 711 2411
Telephone: 0171 236 8056 Attn: MTN Group
Telefax: 0171 521 2616
Attn: MTN Trading
CREDIT SUISSE FIRST BOSTON MERRILL LYNCH FlNANCE SA
(EUROPE) LIMITED 112 avenue Kleber
One Cabot Square Cedex 16
Canary Wharf 75761 Paris France
London E14 4QJ Telephone: 331 5365 5910
Telephone: 0171 888 4021 Telefax: 331 5365 5610
Telefax: 0171 888 3719 Attn: EMTN Trading and
Attn: MTN Trading Desk Distribution Desk
J.P. MORGAN SECURITIES LTD MORGAN STANLEY & CO.
60 Victoria Embankment INTERNATIONAL LIMITED
London EC4Y 0JP 25 Cabot Square
Telephone: 0171 779 3469 Canary Wharf
Telefax: 0171 325 8225 London E14 4QA
Attn: Euro Medium Term Note Desk Telephone: 0171 425 7730
Telefax: 0171 425 4397
Attn: Head of Transaction
Management Group
<PAGE>
Exhibit 10.5 (h)
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 22, 1998 among
TOYOTA MOTOR CREDIT CORPORATION (the "Borrower"), the BANKS listed on the
signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW
YORK, as Agent (the "Agent").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into a 364-Day Credit
Agreement dated as of September 29, 1994 and amended and restated as of
September 23, 1997 (the "Agreement");
WHEREAS, no Loans are outstanding under the Agreement at the date hereof; and
WHEREAS, the parties hereto desire to amend the Agreement as set forth herein
and to restate the Agreement in its entirety to read as set forth in the
Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have
the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to the
Agreement as amended hereby. The term "Note" defined in the Agreement shall
include from and after the date hereof each of the New Notes as defined
below.
SECTION 2. Amendment of the Agreement.
(a) Each reference to "1996" in the definition of "Borrower's 1996
Form 10-K" and in Section 4.04(a) is changed to "1997".
(b) Each reference to "1997" in the definition of "Borrower's
Latest Form 10-Q" and in Sections 4.04(b) and (c) is changed to "1998".
(c) The date "September 22, 1998" appearing in the definition of
"Termination Date" is changed to "September 21, 1999".
(d) The definition of "CD Margin" in Section 2.07(b) is amended to
read as follows:
"CD Margin" means 0.235% per annum.
(e) The definition of "Euro-Dollar Margin" in Section 2.07(c) is
amended to read as follows:
"Euro-Dollar Margin" means 0.11% per annum.
(f) The first sentence of Section 2.08 is amended in its entirety
to read as follows:
The Borrower shall pay to the Agent for the account of the
Banks ratably a facility fee at the rate of 0.04% per annum.
<PAGE>
SECTION 3. Changes in Commitments. The aggregate amount of the Commitments is
increased to $2,000,000,000. With effect from and including the date this
Amended and Restated Credit Agreement becomes effective in accordance with
Section 6 hereof, (a) each Person listed on the signature pages hereof which
is not a party to the Agreement (a "New Bank") shall each become a Bank party
to the Agreement and (b) the Commitment of each Bank shall be the amount set
forth opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Section 2.09 of the
Agreement. Any Bank whose commitment is changed to zero shall upon such
effectiveness cease to be a Bank party to the Agreement, and all accrued fees
and other amounts payable under the Agreement for the account of such Bank
shall be due and payable on such date; provided that the provisions of
Section 9.03 of the Agreement shall continue to inure to the benefit of each
such Bank.
SECTION 4. Representations and Warranties. The Borrower hereby represents and
warrants that as of the date hereof and after giving effect hereto:
(a) no Default has occurred and is continuing; and
(b) each representation and warranty of the Borrower set forth in
the Agreement after giving effect to this Amended and Restated Credit
Agreement is true and correct as though made on and as of such date.
SECTION 5. Governing Law. This Amended and Restated Credit Agreement shall be
governed by and construed in accordance with the laws of the State of New
York.
SECTION 6. Counterparts; Effectiveness. This Amended and Restated Credit
Agreement may be signed in any number of counterparts, each of which shall be
an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Amended and Restated Credit Agreement
shall become effective as of the date hereof when the Agent shall have
received (i) duly executed counterparts hereof signed by the Borrower and the
Banks (or, in the case of any party as to which an executed counterpart shall
not have been received, the Agent shall have received telegraphic, telex or
other written confirmation from such party of execution of a counterpart
hereof by such party), (ii) a duly executed Note for each of the New Banks (a
"New Note") dated on or before the date of effectiveness hereof and otherwise
in compliance with Section 2.05 of the Agreement, and (iii) an opinion of the
General Counsel of the Borrower (or such other counsel for the Borrower as
may be acceptable to the Agent) substantially in the form of Exhibit E to the
Agreement with reference to this Amended and Restated Credit Agreement and
the Agreement as amended and restated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and Restated
Credit Agreement to be duly executed as of the date first above written.
TOYOTA MOTOR CREDIT CORPORATION
By: /S/ George E. Borst
---------------------------
Title: Senior Vice President &
General Manager
<PAGE>
Commitments
- ------------
$195,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By: /S/ Robert Bottamedi
---------------------------
Title: Vice President
$195,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /S/ Carolee Furukawa
---------------------------
Title: Vice President
$195,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD.
LOS ANGELES BRANCH
By: /S/ Masato Sekino
---------------------------
Title: Deputy General Manager
$195,000,000 THE CHASE MANHATTAN BANK
By: /S/ Frances Bonham
---------------------------
Title: Managing Director
$195,000,000 CITICORP USA, INC.
By: /S/ Brian Ike
---------------------------
Title: Attorney-in-fact
$195,000,000 CREDIT SUISSE FIRST BOSTON
By: /S/ James P. Moran
---------------------------
Title: Director
By: /S/ William S. Lutkins
---------------------------
Title: Vice President
<PAGE>
$140,000,000 UBS AG, STAMFORD BRANCH
By: /S/ James J. Diaz
---------------------------
Title: Executive Director Loan
Portfolio Support, US
By: /S/ Dorothy McKinley
---------------------------
Title: Associate Director Loan
Portfolio Support, US
$100,000,000 ABN AMRO BANK, N.V., LOS ANGELES
INTERNATIONAL BRANCH
By: /S/ Judith M. Bresnen
---------------------------
Title: Vice President
By: /S/ Catheryn N. Fuller
---------------------------
Title: Senior Vice President
Branch Manager
$100,000,000 PARIBAS
By: /S/ Brian F. Hewett
---------------------------
Title: Vice President
By: /S/ Karen E. Coons
---------------------------
Title: Vice President
$100,000,000 BARCLAYS BANK PLC
By: /S/ L. Peter Yetman
---------------------------
Title: Associate Director
<PAGE>
$100,000,000 BBL INTERNATIONAL (U.K.) LTD.
By: /S/ M.C. Swinnen
---------------------------
Title: Authorized Signatory
By: /S/ C. Wright
---------------------------
Title: Authorized Signatory
$100,000,000 MELLON BANK, N.A.
By: /S/ Gill S. Realon
---------------------------
Title: Vice President
$70,000,000 DEUTSCHE BANK AG, NEW YORK
BRANCH / CAYMAN ISLANDS BRANCH
By: /S/ Wolf A. Kluge
---------------------------
Title: Vice President
By: /S/ Stefan Hafke
---------------------------
Title: Assistant Vice President
$40,000,000 THE SAKURA BANK, LIMITED
LOS ANGELES AGENCY
By: /S/ Tadashi Kawai
---------------------------
Title: Senior Vice President
$40,000,000 THE SANWA BANK, LIMITED
LOS ANGELES BRANCH
By: /S/ Zenichi Muramoto
---------------------------
Title: Senior Vice President
<PAGE>
$40,000,000 THE TOKAI BANK, LIMITED,
LOS ANGELES AGENCY
By: /S/ Satoru Kojima
---------------------------
Title: Assistant General Manager
$0 THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED LOS ANGELES AGENCY
By: /S/ Masahiro Yoshioka
---------------------------
Title: Deputy General Manager
- -----------------
Total Commitments
$2,000,000,000
=================
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By: /S/ Robert Bottamedi
---------------------------
Title: Vice President
<PAGE>
EXHIBIT 21.1
TOYOTA MOTOR CREDIT CORPORATION
LIST OF SUBSIDIARIES
State of
Subsidiary Incorporation
- ---------- -------------
Toyota Motor Insurance Services, Inc. California
Toyota Motor Insurance Company Iowa
Toyota Motor Life Insurance Company Iowa
Toyota Motor Insurance Corporation of Vermont Vermont
Toyota Motor Insurance Agency of Ohio, Inc. Ohio
Toyota Motor Insurance Services of Kentucky, Inc. Kentucky
Toyota Motor Insurance Agency of Massachusetts, Inc. Massachusetts
Toyota Motor Insurance Services of Rhode Island, Inc. Rhode Island
Toyota Motor Insurance Services of Wyoming, Inc. Wyoming
Toyota Motor Credit Receivables Corporation California
Toyota Credit De Puerto Rico Corp. California
Toyota Leasing, Inc. California
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Nos. 33-52359
and 333-26717) of Toyota Motor Credit Corporation of our report dated
October 30, 1998 appearing on page 29 of this Form 10-K.
/S/ PRICEWATERHOUSECOOPERS LLP
Los Angeles, California
December 22, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOYOTA MOTOR
CREDIT CORPORATION'S SEPTEMBER 30, 1998 FINANCIAL STATEMENTS AND NOTES THERETO
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<CASH> 156
<SECURITIES> 435
<RECEIVABLES> 21,506<F1>
<ALLOWANCES> 220
<INVENTORY> 0
<CURRENT-ASSETS> 0<F2>
<PP&E> 0
<DEPRECIATION> 0<F3>
<TOTAL-ASSETS> 23,225
<CURRENT-LIABILITIES> 0<F2>
<BONDS> 17,597
0
0
<COMMON> 915
<OTHER-SE> 1,316
<TOTAL-LIABILITY-AND-EQUITY> 23,225
<SALES> 0
<TOTAL-REVENUES> 3,431
<CGS> 0
<TOTAL-COSTS> 2,675<F3>
<OTHER-EXPENSES> 378
<LOSS-PROVISION> 127
<INTEREST-EXPENSE> 0<F3>
<INCOME-PRETAX> 251
<INCOME-TAX> 107
<INCOME-CONTINUING> 144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 144
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Receivables include Investments in Operationg Leases net of Accumulated
Depreciation and Finance Receivables net of Unearned Income.
<F2>Toyota Motor Credit Corporation's Balance Sheet is not classified into Current
and Long-Term Assets and Liabilities.
<F3>Total Costs includes Interest Expense and Depreciation on Leases.
</FN>
</TABLE>
