-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NXlZhLulWETPP+79bYJ4bVH8nJrlHjqxvNnD/BHR6UMiX0xTl1bDixap2iIeOAiV umV9mXxxdzg7mAZXJuIIQg== 0000834071-96-000053.txt : 19961225 0000834071-96-000053.hdr.sgml : 19961225 ACCESSION NUMBER: 0000834071-96-000053 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961224 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: TOYOTA MOTOR CREDIT CORP CENTRAL INDEX KEY: 0000834071 STANDARD INDUSTRIAL CLASSIFICATION: PERSONAL CREDIT INSTITUTIONS [6141] IRS NUMBER: 953775816 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09961 FILM NUMBER: 96685386 BUSINESS ADDRESS: STREET 1: 19001 S WESTERN AVE STREET 2: PO BOX 2958 FN12 CITY: TORRANCE STATE: CA ZIP: 90509-2958 BUSINESS PHONE: 3107873848 MAIL ADDRESS: STREET 1: 19001 S WESTERN AVE CITY: TORRANCE STATE: CA ZIP: 90509 10-K 1 SEPTEMBER 30, 1996 ANNUAL REPORT ON FORM 10-K 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, 1996 ------------------ 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 -------- -------- Commission file number 1-9961 ---------- TOYOTA MOTOR CREDIT CORPORATION - --------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) California 95-3775816 - ---------------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 19001 S. Western Avenue Torrance, California 90509 - ---------------------------------------- ----------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (310) 787-1310 ----------------------- Securities registered pursuant to section 12(b) of the Act: Name of each exchange Title of each class on which registered ------------------- ----------------------- 7.55% Fixed Rate Medium-Term Notes due January 30, 1997 New York Stock Exchange - ---------------------------------------- ----------------------- 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 --- --- 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, 1996, 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. -1- PART I ITEM 1. BUSINESS. General Toyota Motor Credit Corporation ("TMCC") is a wholly-owned subsidiary of Toyota Motor Sales, USA, Inc. ("TMS") which 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). TMCC has six wholly-owned subsidiaries, four of which are engaged in the insurance business, one limited purpose subsidiary formed primarily to acquire and securitize retail finance receivables and one newly formed corporation, 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 the Commonwealth of Puerto Rico. See Item 14, Exhibit 21.1. TMCC and its subsidiaries are collectively referred to as the "Company". 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 and TMS (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 will make necessary equity contributions or provide other financial assistance TMS deems appropriate to ensure that TMCC maintains a minimum coverage on fixed charges of 1.10 times such fixed charges in any fiscal quarter; the Operating Agreement was amended on May 14, 1996 to reduce the minimum fixed charge coverage ratio from 1.25 to 1.10. The Operating Agreement does not constitute a guarantee by TMS 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. Retail Leasing TMCC purchases primarily new and used vehicle lease contracts originated by Toyota and Lexus dealers. 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 -2- 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. TMCC requires lessees to carry fire, theft, collision and liability insurance on leased vehicles covering the interests of both TMCC and the lessee. In recent years, TMS has sponsored special lease programs by supporting reduced lease rates. Leasing revenues contributed 82%, 78% and 71% to total financing revenues for the fiscal years ended September 30, 1996, 1995 and 1994, respectively. Retail Financing TMCC purchases primarily new and used vehicle installment contracts from Toyota and Lexus dealers. These obligations 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. In recent years, TMS has sponsored special retail programs by supporting reduced interest rates. Retail financing revenues contributed 14%, 18% and 24% to total financing revenues for the fiscal years ended September 30, 1996, 1995 and 1994, respectively. A summary of vehicle retail leasing and financing activity follows:
Years Ended September 30, ------------------------------------------------- 1996 1995 1994 1993 1992 --------- -------- -------- -------- -------- Contract volume: New vehicles......... 430,000 303,000 350,000 256,000 237,000 Used vehicles*....... 75,000 46,000 64,000 56,000 56,000 --------- -------- -------- -------- -------- Total............. 505,000 349,000 414,000 312,000 293,000 ========= ======== ======== ======== ======== Average amount financed: New vehicles......... $21,100 $21,000 $19,900 $17,900 $16,700 Used vehicles*....... $14,400 $14,000 $12,600 $10,400 $9,400 Outstanding portfolio at period end ($Millions): New vehicles...... $15,741 $12,852 $11,603 $8,167 $6,910 Used vehicles*.... $1,270 $942 $1,128 $877 $837 Number of accounts 1,069,000 946,000 929,000 750,000 735,000 *Used vehicle data reflects primarily financing activity.
Finance receivables sold ($1.1 billion as of September 30, 1996) which TMCC continues to service are excluded from the above table. -3- Wholesale Financing TMCC provides wholesale financing primarily to qualified Toyota and Lexus dealers to finance inventories of new and used Toyota and Lexus vehicles. TMCC acquires security interests in vehicles financed at wholesale, and substantially all such financings are backed by corporate or individual guarantees from or on behalf of participating dealers. In the event of dealer default, TMCC has the right to liquidate any assets acquired and seek legal remedies pursuant to the guarantees. Pursuant to the Operating Agreement, TMS will arrange for the repurchase of new Toyota and Lexus vehicles financed at wholesale by TMCC at the aggregate cost financed in the event of dealer default. A summary of vehicle wholesale financing activity follows:
Years Ended September 30, ------------------------------------------------ 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- Dealer loans ($Millions)....... $8,017 $7,626 $7,055 $6,378 $4,903 Dealer repayments ($Millions).. $8,221 $7,444 $7,032 $6,152 $4,745 Outstanding portfolio at period end ($Millions)...... $668 $886 $727 $703 $486 Average amount financed per vehicle................. $19,926 $18,999 $17,530 $16,500 $15,400
TMCC also makes term loans to dealers for business acquisitions, facilities refurbishing, real estate purchases and working capital. 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 4%, 4% and 5% to total financing revenues for the fiscal years ended September 30, 1996, 1995 and 1994, respectively. Insurance TMCC's 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. Servicing TMCC services retail installment obligations which have been sold to third parties through its asset-backed securities program. 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. Debt issuances have generally been in the form of commercial paper, United States and Euro medium-term notes, Eurobonds and to a lesser extent, the sale of retail finance receivables. -4- The Company uses a variety of derivative financial instruments to manage interest rate and foreign exchange exposures. The derivative instruments utilized include cross currency and interest rate swap agreements, indexed note swaps 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. TMCC's strategy is to supplement, with competitive financing 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 the 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 is unable to pass on the increased interest costs to its customers. The Company's operations are also subject to regulation under federal and state consumer protection statutes. The Company continually reviews its operations to comply with applicable law. Future administrative rulings, judicial decisions and legislation in this area may require modification of the Company's business practices and documentation. Employee Relations At November 30, 1996, the Company had approximately 2,090 full-time employees. The Company considers its employee relations to be satisfactory. -5- Toyota Motor Sales, U.S.A., Inc. TMS was established in 1957 and as of September 30, 1996 is a wholly-owned subsidiary of Toyota Motor North America, Inc. ("TMA"). 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. Through September 30, 1996, TMS manufactured certain automobiles through Toyota Motor Manufacturing, U.S.A., Inc., and manufactured trucks through Toyota Auto Body Corporation, Inc. ("TABC"), a wholly owned subsidiary. Effective October 1, 1996, Toyota Motor Manufacturing North America, Inc. ("TMMNA") was established to serve as the holding company for all manufacturing operations in the United States and to coordinate and support numerous manufacturing related administrative functions previously carried out independently by various Toyota entities in North America and by Toyota Motor Corporation ("TMC") in Japan. Both TMMNA and TMS are wholly- owned subsidiaries of TMA, a holding company owned 100% by TMC which was established on September 3, 1996. TMS's corporate headquarters are in Torrance, California, and TMS has port facilities, regional sales offices and parts distribution centers at other locations in the United States. Toyota vehicles are distributed throughout the United States in twelve regions, ten of which are operated by or through TMS. The remaining two regions are serviced by private distributors which purchase directly from TMS and distribute to Toyota dealers within their respective regions. For the year ended September 30, 1996, these two distributors, Gulf States Toyota, Inc. of Houston, Texas and Southeast Toyota Distributors, Inc. of Deerfield Beach, Florida, accounted for approximately 32% 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, 1996, TMS sold approximately 1,109,000 automobiles and light trucks in the United States (excluding Hawaii), of which approximately 682,000 were manufactured in the United States; TMS exported approximately 62,000 automobiles. TMS sales represented approximately 27% of TMC's worldwide sales volume for the year ended March 31, 1996. For the years ended September 30, 1996 and 1995, Toyota and Lexus vehicles accounted for approximately 7.5% and 7.2%, respectively, of all retail automobile and light truck sales in the United States. Total revenues for TMS for the fiscal years ended September 30, 1996, 1995 and 1994, aggregated approximately $27.5 billion, $26.2 billion and $23.3 billion, respectively, of which approximately $24.4 billion, $23.7 billion and $21.5 billion, respectively, were attributable to revenues other than those associated with financial services. At September 30, 1996, 1995 and 1994, TMS had total assets of approximately $25.1 billion, $21.1 billion and $19.5 billion, respectively, and net worth in excess of $4.7 billion, $4.6 billion and $4.3 billion, respectively. TMS had net income of $229 million for the fiscal year ended September 30, 1996 and net income in excess of $250 million for the fiscal years ended September 30, 1995 and 1994. -6- ITEM 2. PROPERTIES. The headquarters of the Company are located in Torrance, California with 34 branch offices located in cities throughout the United States and one branch office located in the Commonwealth of Puerto Rico. All premises are occupied under lease. ITEM 3. LEGAL PROCEEDINGS. Various claims and actions are pending against TMCC and its subsidiaries with respect to financing activities, taxes and other matters arising from the ordinary course of business. Certain of these actions are or purport to be class action suits, seeking sizeable damages. 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, 1996 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. -7- ITEM 6. SELECTED FINANCIAL DATA. The selected consolidated financial data set forth below were derived from the audited consolidated financial statements of the Company. Certain prior period amounts have been reclassified to conform with the current period presentation.
Years Ended September 30, -------------------------------------- 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------ (Dollars in Millions) INCOME STATEMENT DATA Financing Revenues: Leasing........................... $2,454 $1,904 $1,230 $ 747 $ 447 Retail financing.................. 415 431 413 468 485 Wholesale and other dealer financing............... 109 121 86 80 65 ------ ------ ------ ------ ------ Total financing revenues.......... 2,978 2,456 1,729 1,295 997 Depreciation on operating leases.. 1,626 1,232 735 381 178 Interest expense.................. 820 716 486 454 450 ------ ------ ------ ------ ------ Net financing revenues............ 532 508 508 460 369 Other revenues.................... 136 113 95 80 53 ------ ------ ------ ------ ------ Net financing revenues and other revenues............. 668 621 603 540 422 ------ ------ ------ ------ ------ Expenses: Operating and administrative...... 293 255 232 225 179 Provision for credit losses....... 115 66 78 60 68 ------ ------ ------ ------ ------ Total expenses.................... 408 321 310 285 247 ------ ------ ------ ------ ------ Income before income taxes........ 260 300 293 255 175 Provision for income taxes........ 108 117 118 97 68 ------ ------ ------ ------ ------ Net Income........................ $ 152 $ 183 $ 175 $ 158 $ 107 ====== ====== ====== ====== ======
- ----------------- (Table Continued) -8-
September 30, ----------------------------------------------- 1996 1995 1994 1993 1992 ------- ------- ------- ------- ------- (Dollars in Millions) BALANCE SHEET DATA Investments in operating leases, net............ $10,831 $8,148 $6,215 $3,050 $1,699 Finance receivables, net.. $7,463 $7,227 $7,834 $7,226 $6,998 Total assets.............. $19,308 $16,225 $14,791 $11,179 $9,459 Notes and loans payable... $15,014 $12,696 $11,833 $8,833 $7,705 Capital stock......... $915 $865 $865 $680 $630 Retained earnings..... $998 $844 $662 $487 $329 RATIO OF EARNINGS TO FIXED CHARGES...... 1.32 1.42 1.60 1.56 1.39 - ---------------- $10,000 par value per share. The Company has paid no dividends to date. The ratio of earnings to fixed charges was computed by dividing (i) the sum of income before income taxes and fixed charges by (ii) fixed charges. Fixed charges consist primarily of interest expense net of the effect of noninterest-bearing advances. The ratio of earnings to fixed charges for TMS and subsidiaries was 1.49, 1.74, 1.90, 2.07 and 1.83 for the years ended September 30, 1996, 1995, 1994, 1993 and 1992, respectively. In March 1987, TMCC guaranteed payments of principal and interest on $58 million principal amount of bonds issued in connection with the Kentucky manufacturing facility of an affiliate. As of September 30, 1996, TMCC has not incurred any fixed charges in connection with such guarantee and no amount is included in any ratio of earnings to fixed charges.
-9- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Financial Condition and Results of Operations The composition of TMCC's net earning assets as of the balance sheet dates reported herein and TMCC's vehicle lease and retail contract volumes and finance penetration for the fiscal years ended September 30, 1996, 1995 and 1994 are summarized below:
September 30, September 30, 1996 1995 ------------- ------------- (Dollars in Millions) Lease earning assets, net................ $12,194 $ 9,533 Retail finance receivables, net.......... 5,288 4,784 Wholesale receivables and other dealer loans.......................... 1,015 1,229 Allowance for credit losses.............. (203) (171) ------- ------- Total earning assets, net............ $18,294 $15,375 ======= =======
Years Ended September 30, ----------------------------- 1996 1995 1994 ------- ------- ------- Contract volume: Vehicle lease contracts............... 276,000 179,000 204,000 Vehicle retail installment contracts.. 229,000 170,000 210,000 ------- ------- ------- Total.................................... 505,000 349,000 414,000 ======= ======= ======= Finance penetration...................... 41.2% 31.8% 36.7%
TMCC's net earning assets as of September 30, 1996 increased from September 30, 1995 primarily due to growth in lease earning assets. Lease earning assets, consisting of investments in operating leases, net of accumulated depreciation, and lease finance receivables, net of unearned income, increased in fiscal 1996 from fiscal 1995 due to higher lease volume attributable to special lease programs sponsored by TMS and the increased acceptance of leasing by retail consumers. TMS sponsors special lease and retail programs which allow TMCC to offer reduced monthly payments on certain Toyota and Lexus new vehicles and Toyota industrial equipment to qualified lease and retail customers. Support amounts -10- received from TMS 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 programs totaled $174 million, $134 million and $54 million for fiscal years 1996, 1995 and 1994, respectively. TMCC is subject to residual value risk related to all outstanding lease contracts. TMCC's residual value risk is a function of the number of off- lease vehicles returned for disposition, and the difference between the amount of disposition proceeds and the estimated residual value on returned vehicles. Residual value losses incurred by TMCC in each of the three years ended September 30, 1996, 1995 and 1994 have not had a material adverse impact on operations. TMCC actively manages disposition of its lease vehicles by working with lessees, dealers and auctions through end-of-lease-term remarketing programs. In addition, returned lease vehicles are inspected and lessees are charged for excess wear and tear, excess mileage and any damage to the vehicles. Unguaranteed residual values related to outstanding lease contracts totaled approximately $8.8 billion and $6.6 billion at September 30, 1996 and 1995, respectively. The percentage of lease vehicles returned to TMCC which were originally scheduled to mature in the following periods were 14%, 11% and 12% for fiscal 1996, 1995 and 1994, respectively. As the lease portfolio matures, the Company anticipates that the level of vehicle lease returns will increase; however, the Company believes that its lease earning assets are recorded at net realizable value. Retail finance receivables, net of unearned income, increased in fiscal 1996 from fiscal 1995 due to higher contract volume reflecting increased special retail programs sponsored by TMS as well as increased average advances per retail contract. TMCC's finance penetration represents the percentage of new Toyota and Lexus vehicle deliveries (excluding fleet) in the United States (excluding Hawaii) leased or financed by TMCC. Increased penetration for fiscal 1996 as compared with fiscal 1995 reflects increased volume primarily attributable to a higher level of TMS sponsored special lease programs. The decline in finance penetration from fiscal 1994 to 1995 reflects reduced contract volumes attributable primarily to lower levels of TMS sponsored special lease programs in fiscal 1995 as well as increased competition in retail financing. TMCC's total financing revenues increased 21% in fiscal 1996 and 42% in fiscal 1995. The increase in fiscal 1996 reflects growth in operating lease revenues due to continued growth in market acceptability of leasing as well as TMS sponsored special lease programs, partially offset by reduced retail financing and wholesale revenues. Retail financing revenues declined as a result of reduced average retail receivables outstanding in fiscal 1996 as compared with fiscal 1995 due to the sale of retail receivables in September 1995 and July 1996. Decline in wholesale revenues reflects reduced financing rates as well as increased turnover of units financed. The increase in fiscal 1995 revenues reflects primarily growth in operating lease revenues as well as growth in retail financing and wholesale revenues. -11- Depreciation expense increased 32% and 68% in fiscal 1996 and 1995, respectively, primarily as a result of the growth in investments in operating leases. Interest expense increased 15% and 47% in fiscal 1996 and 1995, respectively. The increases in fiscal 1996 and 1995 reflect higher average borrowings outstanding required to fund the growth in earning assets and an increase in the average cost of borrowings. The weighted average cost of borrowings was 5.90%, 5.78% and 4.94% for the years ended September 30, 1996, 1995 and 1994, respectively. Other revenues increased 20% and 19% in fiscal 1996 and 1995, respectively. The increases in other revenues for fiscal 1996 and 1995 reflect growth in the Company's insurance operations and increased servicing and other income related to retail receivables sold. Operating and administrative expenses increased 15% and 10% in fiscal 1996 and 1995, 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. -12- The provision for credit losses increased 74% and decreased 15% during fiscal 1996 and fiscal 1995, respectively. The increase in fiscal 1996 was primarily related to the substantial growth in earning assets as well as less favorable credit loss experience. The decrease in fiscal 1995 reflects a decline in the level of earning asset growth and a reduction in allowance levels due to changes in the mix of earning assets and TMCC's favorable credit loss experience. TMCC will continue to monitor loss levels and place emphasis on its credit loss exposure. An analysis of credit losses and the related allowance follows (certain prior period amounts have been reclassified to conform with the current period presentation):
Years ended September 30, ------------------------------------ 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- (Dollars in Millions) Allowance for credit losses at beginning of period......... $171 $164 $121 $107 $ 89 Provision for credit losses....... 115 66 78 60 68 Charge-offs, net of recoveries.... (83) (59) (35) (46) (50) ---- ---- ---- ---- ---- Allowance for credit losses at end of period............... $203 $171 $164 $121 $107 ==== ==== ==== ==== ==== Allowance as a percent of net investments in operating leases and net receivables outstanding.................... 1.10% 1.10% 1.15% 1.16% 1.22% Losses as a percent of average net investments in operating leases and average gross receivables outstanding........ .47% .38% .27% .42% .56% Aggregate balances at end of period for lease rentals and installments 60 or more days past due.......... $29 $20 $15 $16 $23 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.................... .15% .12% .10% .14% .23%
-13- 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. Debt issuances have generally been in the form of commercial paper, United States and Euro medium-term notes ("MTNs"), Eurobonds and to a lesser extent, the sale of retail finance receivables in the asset- backed securities market. On occasion, this funding has been supplemented by loans and equity contributions from TMS. Commercial paper issuances are utilized to meet short-term funding needs. Commercial paper outstanding under TMCC's commercial paper program ranged from approximately $1.1 billion to $3.2 billion during fiscal 1996. For additional liquidity purposes, TMCC maintains syndicated bank credit facilities with certain banks which aggregated $2.0 billion at September 30, 1996. No loans were outstanding under any of these bank credit facilities during fiscal 1996. TMCC also maintains, along with TMS, uncommitted, unsecured lines of credit with banks totaling $250 million to facilitate the issuance of letters of credit. At September 30, 1996, TMCC had issued approximately $44 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. United States and Euro MTNs with original maturities ranging from one to eleven years have provided TMCC with a significant source of funding. During fiscal 1996, TMCC issued approximately $4.7 billion of MTNs of which approximately $4.1 billion had original maturities of more than one year. TMCC had approximately $10.1 billion of MTNs outstanding at September 30, 1996 including the effect of foreign currency translations at September 30, 1996 spot exchange rates; approximately $4.0 billion of the $10.1 billion in MTNs was denominated in foreign currencies. In addition to MTNs, TMCC had approximately $2.6 billion of debt securities outstanding issued principally in the form of Eurobonds in the international capital markets at September 30, 1996, including the effect of foreign currency translations at September 30, 1996 spot exchange rates; approximately $2.1 billion of the $2.6 billion in debt securities was denominated in foreign currencies. TMCC anticipates continued use of MTNs in both the United States and international capital markets. At November 30, 1996, approximately $780 million was available for issuance under TMCC's United States public MTN program, none of which was committed for issue by the Company. The maximum aggregate principal amount authorized to be outstanding at any time under TMCC's Euro MTN program is $12.0 billion, which was increased in July 1996 from the prior maximum of $9.5 billion. Approximately $2.3 billion was available for issuance under the Euro MTN program as of November 30, 1996, of which the Company has committed to issue approximately $250 million. 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, approximately $700 million of securities registered with the Securities and Exchange Commission, excluding MTNs, were available for issuance at November 30, 1996. In July 1996, TMCC's shelf registration statement relating to $1.5 billion of asset-backed notes and certificates was declared effective by the SEC. On July 24, 1996, TMCC received proceeds of approximately $754 million from the -14- sale of a pool of retail receivables and the related offering of certificates backed by such receivables. Approximately $750 million under the shelf registration remains available for issuance as of November 30, 1996. The Company's sale of finance receivables is discussed in Note 6 of the Notes to the Consolidated Financial Statements. On October 1, 1996 Toyota Lease Trust ("TLT") was created as a Delaware business trust for the purpose of titling leases, originated in certain states, in connection with development of a lease securitization program. TMCC anticipates its first lease securitization to occur in fiscal 1997. TMCC utilizes a variety of interest rate and currency derivative financial instruments to manage interest rate and foreign exchange exposures. The derivative instruments utilized 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. Derivative financial instruments utilized 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. Market risk is limited to interest rate risk as foreign currency denominated instruments are entirely hedged. 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 derivatives and option-based products. The total notional amount of TMCC's derivative financial instruments at September 30, 1996 and 1995 was $20.5 billion and $17.4 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. Descriptions of derivative instruments utilized and risk management procedures as well as a reconciliation of the Company's derivative activities for the years ended September 30, 1996 and 1995 are included in Note 11 of the Notes to the Consolidated Financial Statements. On occasion, TMS has made equity contributions to maintain TMCC's equity capitalization at certain levels. During the year ended September 30, 1996, TMS made an equity contribution to TMCC by purchasing, at par value, newly issued shares of TMCC's capital stock in the amount of $50 million. No equity contributions were made during fiscal 1995. Also, on occasion, TMS makes interest-bearing loans to TMCC. There were no loans from TMS during fiscal 1996. 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 $13.6 billion and $11.9 billion during fiscal 1996 and 1995, respectively, was used to purchase additional investments in operating leases and finance receivables, totaling $19.2 billion and $15.1 billion during fiscal 1996 and 1995, respectively. Investing activities resulted in a net use of cash of $4.8 billion and $2.7 billion in fiscal 1996 and 1995, respectively, as the purchase of -15- additional earning assets, primarily investments in operating leases, exceeded cash provided by the liquidation of earning assets. Net cash provided by operating activities totaled $2.3 billion and $2.0 billion during fiscal 1996 and 1995, respectively, and net cash provided by financing activities totaled $2.6 billion and $0.7 billion, during fiscal 1996 and 1995, respectively. The Company believes that cash provided by operating and investing activities as well as access to domestic and international capital markets and issuance of commercial paper will provide sufficient liquidity to meet its future funding requirements. 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: potential adverse effect on the Company's operations as a result of governmental regulations; that the Company considers its employee relations to be satisfactory; the level of lease vehicle returns; that the lease earning assets on the Company's books are recorded at net realizable value; 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; the Company's continued use of MTNs in the United States and the international capital markets; that the first lease securitization is expected in fiscal 1997; the sufficiency of the Company's cash provided by operating, investing and financing activities for the Company's future liquidity and capital resource needs. 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; 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; increased costs associated with the Company's debt funding efforts; 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. Recently Enacted Accounting Standards In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("Statement No. 121"). Statement No. 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles and goodwill related to those assets to be held and used and long-lived assets and certain identifiable intangibles to be disposed of. Statement No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In addition, -16- Statement No. 121 requires that certain long-lived assets and intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. Statement No. 121 is effective for fiscal years beginning after December 15, 1995. The Company has not determined the impact that the adoption of this accounting standard will have on its financial position or results of operations. The Company plans to adopt Statement No. 121 in the first interim period of fiscal 1997. In June 1996, the Financial Accounting Standard Board issued Statement of Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996. The Company will adopt this Standard during fiscal 1997, as required. Adoption of this Standard is not expected to have a material impact on the Company's results of operations and financial position. -17- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL STATEMENTS Page ------- Report of Independent Accountants................................ 19 Consolidated Balance Sheet at September 30, 1996 and 1995........ 20 Consolidated Statement of Income for the years ended September 30, 1996, 1995 and 1994................. 21 Consolidated Statement of Shareholder's Equity for the years ended September 30, 1996, 1995 and 1994............. 22 Consolidated Statement of Cash Flows for the years ended September 30, 1996, 1995 and 1994................. 23 Notes to Consolidated Financial Statements....................... 24 - 50 All schedules have been omitted because they are not required, not applicable, or the information has been included elsewhere. -18- 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, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1996, 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/ PRICE WATERHOUSE LLP Los Angeles, California October 31, 1996 -19- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED BALANCE SHEET (Dollars in Millions)
September 30, ----------------------- 1996 1995 -------- -------- ASSETS ------ Cash and cash equivalents................. $ 170 $ 101 Investments in marketable securities...... 325 169 Investments in operating leases, net...... 10,831 8,148 Finance receivables, net.................. 7,463 7,227 Receivable from Parent.................... 78 58 Other receivables......................... 193 350 Deferred charges.......................... 131 85 Income taxes receivable................... - 6 Other assets.............................. 117 81 ------- ------- Total Assets..................... $19,308 $16,225 ======= ======= LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Notes and loans payable................... $15,014 $12,696 Accrued interest.......................... 226 190 Accounts payable and accrued expenses..... 474 298 Deposits.................................. 248 200 Income taxes payable...................... 16 - Deferred income........................... 612 505 Deferred income taxes..................... 805 627 ------- ------- Total Liabilities................... 17,395 14,516 ------- ------- Commitments and Contingencies Shareholder's Equity: Capital stock, $l0,000 par value (100,000 shares authorized; issued and outstanding 91,500 in 1996 and 86,500 in 1995)..................... 915 865 Retained earnings...................... 998 844 ------- ------- Total Shareholder's Equity.......... 1,913 1,709 ------- ------- Total Liabilities and Shareholder's Equity............. $19,308 $16,225 ======= =======
See Accompanying Notes to Consolidated Financial Statements. -20- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF INCOME (Dollars in Millions)
Years ended September 30, ---------------------------------- 1996 1995 1994 ------ ------ ------ Financing Revenues: Leasing................................. $2,454 $1,904 $1,230 Retail financing........................ 415 431 413 Wholesale and other dealer financing.... 109 121 86 ------ ------ ------ Total financing revenues................... 2,978 2,456 1,729 Depreciation on operating leases........ 1,626 1,232 735 Interest expense........................ 820 716 486 ------ ------ ------ Net financing revenues..................... 532 508 508 Other revenues............................. 136 113 95 ------ ------ ------ Net financing revenues and other revenues.. 668 621 603 ------ ------ ------ Expenses: Operating and administrative............ 293 255 232 Provision for credit losses............. 115 66 78 ------ ------ ------ Total expenses............................. 408 321 310 ------ ------ ------ Income before income taxes................. 260 300 293 Provision for income taxes................. 108 117 118 ------ ------ ------ Net Income................................. $ 152 $ 183 $ 175 ====== ====== ======
See Accompanying Notes to Consolidated Financial Statements. -21- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF SHAREHOLDER'S EQUITY (Dollars in Millions)
Capital Retained Stock Earnings Total ------- -------- ------- Balance at September 30, 1993.......... $680 $487 $1,167 Issuance of capital stock.............. 185 - 185 Net income in 1994..................... - 175 175 ---- ---- ------ Balance at September 30, l994.......... 865 662 1,527 Net income in 1995..................... - 183 183 Net unrealized holding loss on marketable securities............... - (1) (1) ---- ---- ------ Balance at September 30, 1995.......... 865 844 1,709 Issuance of capital stock.............. 50 - 50 Net income in 1996..................... - 152 152 Net unrealized holding gain on marketable securities............... - 2 2 ---- ---- ------ Balance at September 30, 1996.......... $915 $998 $1,913 ==== ==== ======
See Accompanying Notes to Consolidated Financial Statements. -22- TOYOTA MOTOR CREDIT CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Dollars in Millions)
Years ended September 30, --------------------------------- 1996 1995 1994 ------ ------ ------ Cash flows from operating activities: Net income.......................................... $ 152 $ 183 $ 175 ------ ------ ------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization.................. 1,646 1,286 743 Provision for credit losses.................... 115 66 78 Gain from sale of finance receivables, net..... (15) (11) - Increase in accrued interest................... 36 34 8 Increase in deferred income taxes.............. 178 241 108 (Increase) decrease in other assets............ (70) 97 328 Increase in other liabilities.................. 220 99 220 ------ ------ ------ Total adjustments................................... 2,110 1,812 1,485 ------ ------ ------ Net cash provided by operating activities.............. 2,262 1,995 1,660 ------ ------ ------ Cash flows from investing activities: Addition to investments in marketable securities....................................... (199) (90) (86) Disposition of investments in marketable securities....................................... 45 24 120 Purchase of finance receivables..................... (13,136) (11,005) (10,868) Liquidation of finance receivables.................. 11,949 10,913 10,224 Proceeds from sale of finance receivables........... 905 650 - Addition to investments in operating leases......... (6,081) (4,123) (4,468) Disposition of investments in operating leases...... 1,718 927 525 ------ ------ ------ Net cash used in investing activities.................. (4,799) (2,704) (4,553) ------ ------ ------ Cash flows from financing activities: Proceeds from issuance of capital stock............. 50 - 185 Proceeds from issuance of notes and loans payable... 5,894 5,733 5,150 Payments on notes and loans payable................. (4,587) (4,989) (2,955) Net increase (decrease) in commercial paper, with original maturities less than 90 days....... 1,249 (62) 582 ------ ------ ------ Net cash provided by financing activities.............. 2,606 682 2,962 ------ ------ ------ Net increase (decrease) in cash and cash equivalents... 69 (27) 69 Cash and cash equivalents at the beginning of the period....................................... 101 128 59 ------ ------ ------ Cash and cash equivalents at the end of the period.............................................. $ 170 $ 101 $ 128 ====== ====== ====== Supplemental disclosures: Interest paid....................................... $778 $643 $475 Income taxes paid................................... $3 $2 $64
See Accompanying Notes to Consolidated Financial Statements. -23- 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). 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. TMC restructured its North American organizations with the establishment of Toyota Motor Manufacturing North America, Inc. ("TMMNA") on October 1, 1996. TMMNA functions to coordinate and support numerous manufacturing related administrative functions previously carried out independently by various Toyota entities in North America and by TMC in Japan. Both TMMNA and TMS are wholly-owned subsidiaries of Toyota Motor North America, Inc., a holding company owned 100% by TMC which was established on September 3, 1996. TMCC has six wholly-owned subsidiaries, Toyota Motor Insurance Services, Inc. ("TMIS"), Toyota Motor Insurance Corporation of Vermont ("TMICV"), Toyota Motor Insurance Company ("TMIC"), Toyota Motor Life Insurance Company ("TLIC"), Toyota Motor Credit Receivables Corporation ("TMCRC") and Toyota Credit De Puerto Rico Corp. ("TCPR"). TMCC and its wholly-owned subsidiaries are collectively referred to as the "Company". 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, was formed in June 1993 primarily to acquire retail finance receivables from TMCC for the purpose of securitizing such receivables. 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. 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. -24- 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. Revenue Recognition ------------------- Revenue from retail financing contracts and finance leases is recognized using the effective yield method. Revenue from operating leases is recognized on a straight-line basis over the lease term. 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 shareholder's equity, net of applicable taxes. Realized investment gains and losses, which are determined on the specific identification method, are reflected in income. -25- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (Continued) - --------------------------------------------------- Investments in Operating Leases ------------------------------- TMCC acquires retail leases from Toyota and Lexus vehicle and Toyota industrial equipment dealers. TMCC is also the lessor on certain property that it acquires directly. Investments in operating leases are recorded at cost and depreciated, primarily on a straight-line basis, over the lease term to the estimated residual value. Gains or losses on disposal and adjustments to the residual value of underlying assets are also included in Depreciation Expense. Allowance for Credit Losses --------------------------- Allowances for credit losses are established during the period in which receivables are acquired and are maintained in amounts considered by management to be appropriate in relation to receivables outstanding based upon historical loss experience and other factors. 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 carrying cost of repossessed collateral is charged to the allowance. Recoveries are credited to the allowance for credit losses. 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. 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 is recorded in Accounts Payable and Accrued Expenses. Commission and fee income are recognized in relation to the level of services performed. -26- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (Continued) - --------------------------------------------------- Interest Rate Swap Agreements ----------------------------- TMCC utilizes interest rate swap agreements in managing its exposure to interest rate risk. 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 as an adjustment to Interest Expense over the term of the agreements. Cross Currency Interest Rate Swap Agreements -------------------------------------------- TMCC's senior debt issued in foreign currencies is 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 principal and interest obligations. TMCC's foreign currency debt is translated into U.S. dollars in the financial statements at the various foreign currency spot exchange rates in effect at the balance sheet date. The receivables or payables, reflecting the differences between the September 30, 1996 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. 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 income statement. 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 is provided on a separate return basis. Prior to October 1, 1994, for states where a combined or consolidated income tax return was filed, state income taxes were allocated to the Company by TMS based upon the Company's apportionment factors and income in those states. There was no material effect to the financial position or results of operations as a result of the change in the method of allocating state income taxes. -27- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 2 - Summary of Significant Accounting Policies (continued) - --------------------------------------------------- Reclassifications ----------------- Certain 1995 and 1994 accounts have been reclassified to conform with the 1996 presentation. Note 3 - Investments in Marketable Securities - --------------------------------------------- Effective October 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("Statement No. 115"). Statement No. 115 addresses the accounting and reporting for investments in all debt securities and for investments in equity securities that have readily determinable fair values. The fair value of securities was estimated using quoted market prices or discounted cash flow analysis. The estimated fair value and amortized cost of investments in marketable securities are as follows:
September 30, 1996 -------------------------------- Fair Gross Cost Value Unrealized Gains ---- ----- ---------------- (Dollars in Millions) Available-for-sale securities: Equity securities................... $133 $135 $2 Asset-backed securities............. 177 177 - U.S. debt securities................ 2 2 - ---- ---- ----- Total available-for-sale securities.... 312 314 $2 ===== Excess of fair value over cost...... 2 - ---- ---- Available-for-sale securities.......... 314 314 Held-to-maturity securities: U.S. debt securities................ 11 11 ---- ---- Total marketable securities...... $325 $325 ==== ====
-28- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Investments in Marketable Securities (Continued) - ---------------------------------------------
September 30, 1995 ------------------------------------- Gross Unrealized Fair ----------------- Cost Value Gains Losses -------- ------ ----- -------- (Dollars in Millions) Available-for-sale securities: Equity securities................... $115 $114 $1 $(2) Mortgage-backed securities.......... 33 33 - - U.S. debt securities................ 12 12 - - ---- ---- ----- --- Total available-for-sale securities.... 160 159 $1 $(2) ===== === Excess of cost over fair value...... (1) - ---- ---- Available-for-sale securities.......... 159 159 Held-to-maturity securities: U.S. debt securities................ 10 10 ---- ---- Total marketable securities...... $169 $169 ==== ====
The contractual maturities of investments in marketable securities at September 30, 1996 are as follows:
Available-for-Sale Held-to-Maturity Securities Securities ------------------ ---------------- Fair Fair Cost Value Cost Value ---- ----- ---- ------- (Dollars in Millions) Within one year..................... $ - $ - $ 2 $ 2 After one year through five years... 2 2 9 9 Mutual funds........................ 133 135 - - Asset-backed securities............. 177 177 - - ---- ---- --- --- Total............................ $312 $314 $11 $11 ==== ==== === ===
The proceeds from sales of available-for-sale securities were $3 million and $7 million for the years ended September 30, 1996 and 1995, respectively. Realized gains and losses on sales of available-for-sale securities were immaterial for the years ended September 30, 1996 and 1995. -29- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Investments in Operating Leases - ---------------------------------------- Investments in operating leases, net consisted of the following:
September 30, ---------------------- 1996 1995 ------- ------ (Dollars in Millions) Vehicles................................. $13,252 $9,864 Equipment and other...................... 268 201 ------- ------ 13,520 10,065 Accumulated depreciation................. (2,582) (1,838) Allowance for credit losses.............. (107) (79) ------- ------ Investments in operating leases, net.. $10,831 $8,148 ======= ======
Rental income from operating leases was $2,292 million, $1,734 million and $1,056 million for the years ended September 30, 1996, 1995 and 1994, respectively. Future minimum rentals on operating leases are as follows: years ending September 30, 1997 - $2,055 million; 1998 - $1,274 million; 1999 - $461 million; 2000 - $38 million; and 2001 - $3 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:
September 30, --------------------- 1996 1995 ------ ------ (Dollars in Millions) Retail............................... $5,501 $5,050 Finance leases....................... 1,525 1,567 Wholesale and other dealer loans..... 1,015 1,229 ------ ------ 8,041 7,846 Unearned income...................... (482) (527) Allowance for credit losses.......... (96) (92) ------ ------ Finance receivables, net.......... $7,463 $7,227 ====== ======
-30- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 - Finance Receivables (Continued) - ---------------------------- Contractual maturities at September 30, 1996 are as follows:
Due in the Wholesale Years Ending and Other September 30, Retail Dealer Loans ------------- ------ ------------ (Dollars in Millions) 1997.................. $2,043 $ 814 1998.................. 1,373 63 1999.................. 1,068 36 2000.................. 747 43 2001.................. 260 47 Thereafter............ 10 12 ------ ------ Total.............. $5,501 $1,015 ====== ======
Finance leases, net consisted of the following:
September 30, --------------------- 1996 1995 ------- ------- (Dollars in Millions) Minimum lease payments.................. $ 867 $ 894 Estimated unguaranteed residual values.. 658 673 ------ ------ Finance leases....................... 1,525 1,567 Unearned income......................... (270) (261) Allowance for credit losses............. (19) (17) ------ ------ Finance leases, net.................. $1,236 $1,289 ====== ======
The aggregate balances related to finance receivables 60 or more days past due totaled $20 million and $16 million at September 30, 1996 and 1995, respectively. Future minimum finance lease payments for each of the five succeeding years ending September 30, are: 1997 - $309 million; 1998 - $231 million; 1999 - $178 million; 2000 - $118 million and 2001 - $31 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. -31- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 - Sale of Finance Receivables - ------------------------------------ In June 1996, the Financial Accounting Standard Board issued Statement of Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities", effective for transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996. The Company will adopt this Standard during fiscal 1997, as required. Adoption of this Standard is not expected to have a material impact on the Company's results of operations and financial position. In the fourth quarters of fiscal 1996 and 1995, the Company sold retail finance receivables aggregating $782 million and $679 million, respectively, subject to certain limited recourse provisions. In each case, TMCC sold its receivables to TMCRC which in turn sold them to a trust; TMCC remains as servicer and is paid a servicing fee. In a subordinated capacity, TMCRC retains excess servicing cash flows, certain cash deposits and, in connection with the fiscal 1993 sale of finance receivables, a limited interest in the trust. TMCRC's subordinated interests in excess servicing cash flows, cash deposits, limited interest in the 1993 trust and other related amounts are held as restricted assets which are subject to limited recourse provisions. These restricted assets are not available to satisfy any obligations of TMCC. Following is a summary of amounts included in Other Receivables:
September 30, --------------------- 1996 1995 ---- ---- (Dollars in Millions) Excess servicing....................... $34 $32 Other restricted amounts: Cash deposits....................... 20 14 Limited interest in trust........... 2 7 Allowance for estimated credit losses on sold receivables.......... (5) (4) --- --- Total............................ $51 $49 === ===
The pretax gain resulting from the sale of finance receivables totaled $15 million and $11 million in fiscal 1996 and 1995, respectively, after providing for an allowance for estimated credit losses. In addition to the above described transactions, in August 1996 TMCC sold approximately $150 million of retail finance receivables to World Omni Retail Funding Inc. in exchange for an interest bearing certificate secured by a 100% interest in the same receivables. The outstanding balance of the sold finance receivables which TMCC continues to service at September 30, 1996 and 1995 totaled $1.1 billion and $762 million, respectively. -32- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7 - Allowance for Credit Losses - ------------------------------------ An analysis of the allowance for credit losses follows:
Years ended September 30, ------------------------- 1996 1995 1994 ---- ---- ---- (Dollars in Millions) Allowance for credit losses at beginning of period......... $171 $164 $121 Provision for credit losses....... 115 66 78 Charge-offs, net of recoveries.... (83) (59) (35) ---- ---- ---- Allowance for credit losses at end of period............... $203 $171 $164 ==== ==== ====
Effective October 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("Statement No. 114") and its amendment Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income Recognition and Disclosures" ("Statement No. 118"). The Statements apply to loans individually evaluated for impairment and do not apply to portfolios of small dollar homogenous loans, such as retail finance receivables, which are collectively evaluated for impairment. The amount of impaired loans and related allowance for credit losses as of September 30, 1996 is not material. -33- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 8 - Transactions with Parent - --------------------------------- 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. To maintain TMCC's minimum coverage pursuant to the Operating Agreement, TMS has made noninterest- bearing advances and income maintenance payments to TMCC though no such advances were made in fiscal 1996, 1995 or 1994. 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. 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 $12 million, $8 million and $7 million for the years ended September 30, 1996, 1995 and 1994, respectively. TMS sponsors special retail and lease programs offered by TMCC; for the years ended September 30, 1996, 1995 and 1994, TMCC recognized revenue of $174 million, $134 million and $54 million, respectively, related to TMS sponsored programs. TMCC has an arrangement to borrow and invest funds with TMS at short term market rates. For the year ended September 30, 1996, TMCC had no borrowings from TMS. For the years ended September 30, 1995 and 1994, the highest amounts of borrowings from TMS were $34 million and $161 million, respectively; interest charges related to these borrowings were immaterial. The Operating Agreement provides that borrowings from TMS are subordinated to all other indebtedness of TMCC. For the years September 30, 1996, 1995 and 1994, the highest amounts of funds invested with TMS were $224 million, $603 million and $326 million, respectively; interest earned on these investments totaled $5 million, $16 million and $5 million for the years ended September 30, 1996, 1995 and 1994, respectively. 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, 1996, 1995 and 1994. TMCC leases a corporate aircraft to TMS and provides wholesale financing for a TMS affiliate; for each of the years ended September 30, 1996, 1995 and 1994, TMCC recognized revenue of $3 million related to these arrangements. 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, 1996, 1995 and 1994 totaled $7 million, $4 million and $7 million, respectively. -34- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Notes and Loans Payable - -------------------------------- Notes and loans payable at September 30, 1996 and 1995, which consisted of senior debt, included the following:
September 30, ---------------------- 1996 1995 ------- ------- (Dollars in Millions) Commercial paper, net................... $ 2,360 $ 1,442 ------- ------- Other senior debt, due in the years ending September 30,: 1996.............................. - 3,252 1997.............................. 3,211 2,722 1998.............................. 2,760 2,371 1999.............................. 1,384 529 2000.............................. 2,137 1,723 2001.............................. 2,216 330 Thereafter........................ 864 281 ------- ------- 12,572 11,208 Unamortized premium..................... 82 46 ------- ------- Total other senior debt........... 12,654 11,254 ------- ------- Notes and loans payable........ $15,014 $12,696 ======= =======
Short-term borrowings include commercial paper and certain medium-term notes ("MTNs"). The weighted average remaining term of commercial paper was 31 days and 27 days at September 30, 1996 and 1995, respectively. The weighted average interest rate on commercial paper was 5.41% and 6.53% at September 30, 1996 and 1995, respectively. Short-term MTNs with original terms of one year or less, included in other senior debt, were $559 million and $444 million at September 30, 1996 and 1995, respectively. The weighted average interest rate on these short-term MTNs was 5.19% and 5.86% at September 30, 1996 and 1995, respectively, including the effect of interest rate swap agreements. The weighted average interest rate on other senior debt was 5.98% and 5.75% at September 30, 1996 and 1995, 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, 1996 and 1995, some of which are floating rates that reset daily. Approximately 24% of other senior debt at September 30, 1996 had interest rates, including the effect of interest rate swap agreements, that were fixed for a period of more than one year. The weighted -35- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Notes and Loans Payable (Continued) - -------------------------------- average of these fixed interest rates was 5.83% at September 30, 1996. Approximately 49% of other senior debt at September 30, 1996 had floating interest rates that were covered by option-based products. The weighted average strike rate on these option-based products was 6.18% at September 30, 1996. TMCC manages interest rate risk via continuous adjustment of the mix of fixed and floating rate debt through use of interest rate swap agreements and option-based products. Included in Notes and Loans Payable at September 30, 1996 and 1995 were unsecured notes denominated in various foreign currencies as follows:
September 30, ---------------------------- 1996 1995 ----------- ----------- Australian dollars.................. 250 million 250 million British pound sterling.............. 150 million - Canadian dollars.................... 300 million 775 billion Dutch guilders...................... 555 million 555 million European currency units............. - 45 million French francs....................... 3 billion 1 billion German deutsche marks............... 1 billion 760 million Hong Kong dollars................... 150 million 150 million Italian lire........................ 493 billion 470 billion Japanese yen........................ 198 billion 218 billion New Zealand dollar.................. 100 million - South African rand.................. 250 million - Swedish kronor...................... 670 million 110 million Swiss francs........................ 2 billion 1 billion
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 $6.2 billion. 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, 1996. The receivables or payables arising as a result of the differences between the September 30, 1996 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 $171 million at September 30, 1996. -36- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Fair Value of Financial Instruments - --------------------------------------------- In accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosures about Fair Value of Financial Instruments" and its amendment, Statement of Financial Accounting Standards No. 119, "Disclosure about Derivative Financial Instruments and Fair Value of Financial Instruments", the Company has provided the estimated fair value of financial instruments using available market information at September 30, 1996 and 1995, and 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 may 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, 1996 and 1995 are as follows:
September 30, --------------------------------------------------- 1996 1995 ------------------------ ------------------------ Carrying Fair Carrying Fair Amount Value Amount Value ----------- ---------- ----------- ---------- (Dollars in Millions) Balance sheet financial instruments: Assets: Cash and cash equivalents......... $170 $170 $101 $101 Investments in marketable securities..................... $325 $325 $169 $169 Retail finance receivables, net... $6,228 $6,121 $5,938 $6,003 Other receivables................. $77 $79 $70 $71 Receivables from cross currency interest rate swap agreements.. $116 $152 $280 $426 Liabilities: Notes and loans payable........... $15,014 $15,398 $12,696 $12,736 Payables from cross currency interest rate swap agreements.. $287 $108 $154 $65
-37- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Fair Value of Financial Instruments (Continued) - ---------------------------------------------
September 30, --------------------------------------------------- 1996 1995 ------------------------ ------------------------ Contract or Unrealized Contract or Unrealized Notional Gains/ Notional Gains/ Amount (Losses) Amount (Losses) ----------- ---------- ----------- ---------- (Dollars in Millions) Off-balance sheet financial instruments: Cross currency interest rate swap agreements................ $5,642 $72 $4,804 $342 Interest rate swap agreements..... $6,759 $37 $7,049 $29 Option-based products............. $6,220 $26 $3,820 $(1) Indexed note swap agreements...... $1,924 $(37) $1,721 $11
The fair value estimates presented herein are based on information available to management as of September 30, 1996 and 1995. 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, 1996 and 1995 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. -38- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Fair Value of Financial Instruments (Continued) - --------------------------------------------- Retail Finance Receivables -------------------------- The carrying amounts of $900 million and $1.1 billion of variable rate finance receivables at September 30, 1996 and 1995, 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 made as of September 30, 1996 and 1995. Other Receivables ----------------- The carrying amount and fair value of other receivables are presented separately from the receivables arising from cross currency interest rate swap agreements. The fair value of amounts associated with the sale of finance receivables was estimated by discounting expected cash flows using quoted market interest rates as of September 30, 1996 and 1995. The carrying amount of the remaining other receivables 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 made as of September 30, 1996 and 1995. The carrying amount of commercial paper was assumed to approximate fair value due to the short maturity of these instruments. -39- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 10 - Fair Value of Financial Instruments (Continued) - --------------------------------------------- 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 over the remaining term of the agreements using quoted market exchange rates and quoted market interest rates as of September 30, 1996 and 1995. 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, 1996 and 1995. Option-based Products ----------------------- The estimated fair value of TMCC's outstanding option based products was derived by discounting expected cash flows over the remaining term of the instruments using market exchange rates and market interest rates as of September 30, 1996 and 1995. 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, 1996 and 1995. Note 11 - 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 $1,119 million and $773 million at September 30, 1996 and 1995, 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. -40- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Derivative Financial Instruments -------------------------------- TMCC utilizes 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 instruments for trading purposes. A reconciliation of the activity of TMCC's derivative financial instruments for the years ended September 30, 1996 and 1995 is as follows:
September 30, ----------------------------------------------------------- Cross Currency Interest Interest Indexed Rate Swap Rate Swap Option-based Note Swap Agreements Agreements Products Agreements ------------ ------------ ------------- ------------ 1996 1995 1996 1995 1996 1995 1996 1995 ---- ---- ---- ---- ---- ---- ---- ---- (Dollars in Billions) Beginning Notional Amount $4.8 $4.0 $7.1 $7.6 $3.8 $0.5 $1.7 $2.4 Add: New agreements........ 1.7 1.6 3.1 1.9 3.4 3.3 1.2 0.5 Less: Expired agreements.... 0.9 0.8 3.4 2.4 1.0 - 1.0 1.2 ---- ---- ---- ---- ---- ---- ---- ---- Ending Notional Amount... $5.6 $4.8 $6.8 $7.1 $6.2 $3.8 $1.9 $1.7 ==== ==== ==== ==== ==== ==== ==== ====
-41- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Interest Rate Risk Management ----------------------------- TMCC utilizes 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 the interest rate swap agreements ranged from one to ten years at September 30, 1996. TMCC also utilizes 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 and to a lesser extent corridor 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 49% of TMCC's other senior debt at September 30, 1996 had floating interest rates that were covered by option-based products which had an average strike rate of 6.18%. 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 the option-based products ranged from two to three years at September 30, 1996. -42- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Interest Rate Risk Management (Continued) ----------------------------- The aggregate notional amounts of interest rate swap agreements and option-based products outstanding at September 30, 1996 and 1995 were as follows:
September 30, --------------------- 1996 1995 ---- ---- (Dollars in Billions) Fixed rate swaps............................... $2.3 $4.2 Floating rate swaps............................ 3.1 1.3 Basis swaps.................................... 1.4 1.6 ---- ---- Total interest rate swap agreements........ $6.8 $7.1 ==== ==== Option-based products.......................... $6.2 $3.8 ==== ====
TMCC utilizes 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, 1996, TMCC was the counterparty to $1.9 billion of indexed note swap agreements, of which $0.6 billion was denominated in foreign currencies and $1.3 billion was denominated in U.S. dollars. At September 30, 1995, TMCC was the counterparty to $1.7 billion of indexed note swap agreements, of which $0.7 billion was denominated in foreign currencies and $1.0 billion was denominated in U.S. dollars. The original maturities of the indexed note swap agreements ranged from one to eleven years at September 30, 1996. 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. -43- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Foreign Exchange Risk Management -------------------------------- TMCC utilizes 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, 1996 and 1995 were $5.6 billion and $4.8 billion, respectively. The original maturities of the cross currency interest rate swap agreements ranged from one to ten years at September 30, 1996. 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, 1996, approximately 80% 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, 1996; TMCC has not experienced any counterparty default during the three years ended September 30, 1996. 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, 1996 reduced by the effects of master netting agreements. The credit exposure of TMCC's derivative financial instruments at September 30, 1996 was $205 million on an aggregate notional amount of $20.5 billion. -44- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 11 - Financial Instruments with Off-Balance Sheet Risk (Continued) - ----------------------------------------------------------- Market Risk ----------- TMCC's loan and lease portfolios consist of a series of contractually defined cash flows over the life of the portfolios. The value to TMCC of the cash flows changes as market interest rates change. TMCC's asset portfolios are funded by various debt instruments whose cash flows are modified or hedged by a variety of derivative and option- based products. The value of TMCC's liability and derivative cash flows also change as market interest rates change. TMCC uses a value-at-risk methodology, in connection with other management tools, to assess the interest rate risk of aggregated loan and lease assets and financial liabilities, including derivatives and option based products. TMCC is not subject to currency exchange rate risk as foreign currency denominated instruments are entirely hedged. Value-at-risk represents the potential losses for a portfolio from adverse changes in market factors for a specified period of time and level of confidence. TMCC estimates value-at-risk using historical interest rate volatilities for the past two years. The value at risk of TMCC's portfolio as of September 30, 1996, measured as the potential 30 day loss in value from assumed adverse changes in interest rates that are estimated to cover 90% of likely market movements, totals $45.6 million on a mean portfolio value of $3.8 billion; alternatively, the value at risk represents 1.2% of the mean portfolio value. As of September 30, 1996, 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 .30%, from 5.80% to an estimated 6.10% at September 30, 1996. 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 .43%, from 5.80% to an estimated 5.37% at September 30, 1996. -45- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 12 - 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 the years ended September 30, 1996, 1995 and 1994, the Company's pension expense was $4 million, $2 million and $3 million, respectively. At September 30, 1996, 1995 and 1994, 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. Effective October 1, 1994, the Company adopted Statement of Financial Accounting Standards No. 112, "Employers' Accounting for Postemployment Benefits" ("Statement No. 112"). Statement No. 112 requires accrual, during the years that the employee renders the necessary service or when it is probable that a liability has been incurred, of the expected cost of providing postemployment benefits to former or inactive employees, their beneficiaries, and covered dependents after employment but before retirement. This method differs from the Company's previous practice of accounting for these benefits on a cash basis. The cumulative effect of the change in accounting principle was not material to the Company's financial position or results of operations. -46- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13 - Provision for Income Taxes - ------------------------------------ The provision for income taxes consisted of the following:
Years ended September 30, -------------------------- 1996 1995 1994 ---- ---- ---- (Dollars in Millions) Current Federal........................... $(47) $(97) $ 6 State............................. (23) (27) 4 ---- ---- ---- Total current ................. (70) (124) 10 ---- ---- ---- Deferred Federal........................... 129 173 86 State............................. 49 68 22 ---- ---- ---- Total deferred................. 178 241 108 ---- ---- ---- Provision for income taxes.. $108 $117 $118 ==== ==== ====
The deferred income tax liabilities by jurisdictions are as follows:
September 30, --------------------- 1996 1995 ---- ---- (Dollars in Millions) Federal........................................ $643 $513 State.......................................... 162 114 ---- ---- Net deferred income tax liability........... $805 $627 ==== ====
-47- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13 - Provision for Income Taxes (Continued) - ------------------------------------ The Company's deferred tax assets and liabilities consisted of the following:
September 30, --------------------- 1996 1995 ----- ----- (Dollars in Millions) Assets: Alternative minimum tax..................... $ 436 $ 339 Provision for losses........................ 116 87 Deferred administrative fees................ 54 47 NOL carryforwards........................... 49 22 Deferred acquisition costs.................. 12 14 Unearned insurance premiums................. 4 4 Revenue recognition......................... 2 2 Other....................................... 3 3 ----- ----- Deferred tax assets...................... 676 518 ----- ----- Liabilities: Lease transactions.......................... 1,330 1,049 State taxes................................. 151 96 ----- ----- Deferred tax liabilities................. 1,481 1,145 ----- ----- Net deferred income tax liability..... $ 805 $ 627 ===== =====
TMCC has state tax net operating loss carryforwards of $609 million which expire beginning in fiscal 1997 through 2009. -48- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 13 - Provision for Income Taxes (Continued) - ------------------------------------ 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:
Years ended September 30, ------------------------- 1996 1995 1994 ---- ---- ---- (Dollars in Millions) Provision for income taxes at federal statutory tax rate......... $ 91 $105 $103 State and local taxes (net of federal tax benefit)............... 17 26 17 Other, including changes in applicable state tax rates......... - (14) (2) ---- ---- ---- Provision for income taxes......... $108 $117 $118 ==== ==== ==== Effective tax rate.................... 41.52% 39.12% 40.24%
Note 14 - Lines of Credit/Standby Letters of Credit - --------------------------------------------------- To support its commercial paper program, TMCC maintains syndicated bank credit facilities with certain banks which aggregated $2.0 billion at September 30, 1996, compared to $1.5 billion as of September 30, 1995. No loans were outstanding under any of these bank credit facilities as of September 30, 1996 or 1995. To facilitate and maintain letters of credit, TMCC maintains, along with TMS, uncommitted, unsecured lines of credit with banks totaling $250 million as of September 30, 1996. Approximately $44 million in letters of credit had been issued, primarily related to the Company's insurance operations as of September 30, 1996, compared to $86 million as of September 30, 1995. The letters of credit for the insurance companies are used to satisfy requirements of certain insurance carriers and state insurance regulatory agencies. -49- TOYOTA MOTOR CREDIT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 15 - Commitments and Contingent Liabilities - ------------------------------------------------ At September 30, 1996, the Company was a lessee under lease agreements for facilities with minimum future commitments as follows: years ending September 30, 1997 - $9 million; 1998 - $8 million; 1999 - $6 million; 2000 - $4 million; 2001 - $3 million; thereafter - $3 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. 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, 1996 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. Note 16 - Selected Quarterly Financial Data (Unaudited) - -------------------------------------------------------
Total Depreciation Financing Interest on Operating Net Revenues Expense Leases Income ---------- -------- ------------ -------- (Dollars in Millions) Year Ended September 30, 1996: First quarter.............. $ 688 $193 $ 370 $ 41 Second quarter............. 724 196 394 36 Third quarter.............. 768 210 416 40 Fourth quarter............. 798 221 446 35 ------ ---- ------ ---- Total................... $2,978 $820 $1,626 $152 ====== ==== ====== ==== Year Ended September 30, 1995: First quarter.............. $ 564 $161 $ 277 $ 44 Second quarter............. 601 175 298 45 Third quarter.............. 630 189 313 46 Fourth quarter............. 661 191 344 48 ------ ---- ------ ---- Total................... $2,456 $716 $1,232 $183 ====== ==== ====== ====
-50- ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There is nothing to report with regard to this item. -51- 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, 1996. Name Age Position ---- --- -------- Yoshio Ishizaka........... 56 Director and President, TMCC; Director and President, TMS; Director, TMC Nobu Shigemi.............. 52 Director, Senior Vice President and Treasurer, TMCC; Group Vice President, TMS Douglas West.............. 51 Director, Senior Vice President and Secretary, TMCC; Senior Vice President and Secretary, TMS Wolfgang Jahn............. 58 Director, Senior Vice President and General Manager, TMCC; Group Vice President, TMS Robert Pitts.............. 48 Director and Assistant Secretary, TMCC; Group Vice President, TMS Yale Gieszl............... 54 Director, TMCC; Director and Executive Vice President, TMS Takashi Nishiyama......... 54 Director, TMCC; Senior Vice President and Treasurer, TMS Ryuji Araki............... 56 Director, TMCC; Director, TMC 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. 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. -52- Mr. West was named Director, Senior Vice President and Secretary of TMCC and Senior Vice President and Secretary of TMS in June 1996. 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. Jahn was named Director and Group Vice President of TMCC in April 1993. In December 1994, Mr. Jahn was also named General Manager of TMCC and Group Vice President of TMS and, in July 1995, Senior Vice President of TMCC. From January 1985 to March 1993, he was a Vice President of TMCC, and from September 1988 to March 1993, he was also the Assistant Secretary of TMCC. From January 1987 to March 1993, he held the position of Vice President of TMS. Mr. Jahn has been employed with TMS and TMCC, in various positions, since 1973. Mr. Pitts was named Director and Assistant Secretary of TMCC and Group Vice President of TMS in April 1993. 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. Nishiyama was named Director of TMCC and Senior Vice President and Treasurer of TMS in January 1994. From February 1989 to December 1993, he was General Manager of the Europe and Africa Project Division of TMC. From February 1986 to January 1989, he was Executive Vice President of Salvador Caetano S.A. Portugal. Mr. Nishiyama has been employed with TMC, in various positions, since 1965. Mr. Araki was named Director of TMCC in September 1995. He has served on TMC's Board of Directors since September 1992. Mr. Araki has been employed with TMC, in various positions, since 1962. 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 $100,000, for services rendered in all capacities to the Company for the fiscal years ended September 30, 1996, 1995 and 1994. -53-
Annual Compensation -------------------------------------------- Other Annual Name and Fiscal Compensation All Principal Position Year Salary ($) Bonus ($) ($) Other ($) - --------------------- ------ ---------- --------- ------------ ------------- Wolfgang Jahn 1996 $233,100 $94,500 $8,500 Principal Executive 1995 $213,800 $98,700 $6,000 Officer 1994 $199,800 $91,300 $7,000 Nobu Shigemi 1996 $316,000 $50,900 $51,700 Senior Vice President 1995 $199,000 $40,500 $47,300 - ------------ The amounts in this column represent housing allowances and relocation costs. 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.
Employee Benefit Plan 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. -54- 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. Jahn. 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 25), 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. 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.
Annual Benefits for Final Average Years of Credited Service Annual -------------------------------------- Compensation 15 20 25 ------------- -------- -------- -------- $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
Mr. Jahn is a participant in the TMS Pension Plan and the TMS SERP and has 23 years of total credited service as of September 30, 1996, 7 years of which have been allocated to the Company. Based upon years of credited service -55- allocable to the Company, Mr. Jahn would be entitled to receive and the Company would be required to pay approximately $26,000 in annual pension benefits when Mr. Jahn reaches age 62. Mr. Jahn would also be entitled to receive pension benefits from TMS based upon services to and compensation by TMS. Compensation of Directors No fees are paid to members of the Board of Directors of TMCC 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. -56- 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 are included in Note 8 of the Notes to the Consolidated Financial Statements. -57- 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 18. (2)Exhibits The exhibits listed on the accompanying Exhibit Index, starting on page 60, are filed as part of, or incorporated by reference into, this Report. (b)Reports on Form 8-K There were no reports on Form 8-K filed by the registrant during the quarter ended September 30, 1996. -58- 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 23rd day of December, 1996. TOYOTA MOTOR CREDIT CORPORATION By /S/ WOLFGANG JAHN ------------------------------ Wolfgang Jahn 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 23rd day of December, 1996. Signature Title --------- ----- Senior Vice President and General Manager and Director /S/ WOLFGANG JAHN (Principal Executive Officer) - ------------------------------------ Wolfgang Jahn Senior Vice President/ Treasurer and Director /S/ NOBU SHIGEMI (Principal Financial Officer) - ------------------------------------ Nobu Shigemi Vice President - Finance and Administration /S/ PATRICK BREENE (Principal Accounting Officer) - ------------------------------------ Patrick Breene /S/ YOSHIO ISHIZAKA Director - ------------------------------------ Yoshio Ishizaka /S/ DOUG WEST Director - ------------------------------------ Doug West /S/ TAKASHI NISHIYAMA Director - ------------------------------------ Takashi Nishiyama -59- 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. (11) 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. (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. (4) Incorporated herein by reference to Exhibit 4.1(a), filed with TMCC's Registration Statement on Form S-3, File No. 33-52359. (11) 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. -60- 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) Amended and Restated Agency Agreement dated as of July 28, 1994, among TMCC, The Chase Manhattan Bank, N.A. and Chase Manhattan Bank Luxembourg S.A. (12) 4.3(b) Amendment No. 1 dated July 27, 1995 to the Amended and Restated Agency Agreement among TMCC, The Chase Manhattan Bank, N.A. and Chase Manhattan Bank Luxembourg S.A. (15) 4.3(c) Amendment No. 2 dated July 19, 1996 to the Amended Filed and Restated Agency Agreement among TMCC, The Chase Herewith Manhattan Bank, N.A. and Chase Manhattan Bank Luxembourg S.A. 4.4 TMCC has outstanding certain long-term debt as set forth in Note 9 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. (24) 10.1(b) Amendment No. 1 to Operating Agreement dated May 14, 1996 between TMCC and TMS. (18) - ----------------- (5) Incorporated herein by reference to Exhibit 4.1 filed with TMCC's Current Report on Form 8-K dated October 16, 1991. (12) Incorporated herein by reference to Exhibit 4.4(a) filed with TMCC's Report on Form 10-K for the year ended September 30, 1994. (15) Incorporated herein by reference to Exhibit 4.4(b) filed with TMCC's Report on Form 10-K for the year ended September 30, 1995. (18) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Report on Form 10-Q for the quarter ended March 31, 1996. (24) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Registration Statement on Form S-1, File No. 33-22440. -61- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- ------ 10.2(a) Financial Service Agreement dated December 21, 1984 between TMCC and World Omni Financial Corporation, as amended June 6, 1988. (25) 10.2(b) Addendum to Financial Services Agreement dated January 1, 1991, between TMCC and World Omni Financial Corporation. (6) 10.2(c) Amendment to Financial Services Agreement dated March 1, 1992, between TMCC and World Omni Financial Corporation. (7) 10.2(d) Amendment to Financial Services Agreement dated March 1, 1994, between TMCC and World Omni Financial Corporation. (19) 10.2(e) Termination of Financial Services Agreement dated Filed August 29, 1996 between TMCC and World Omni Financial Herewith Corporation. 10.3 Form of Pooling and Servicing Agreement among TMCRC, as Seller, TMCC, as Servicer, and the Chase Manhattan Bank N.A., as Trustee (including forms of Class A and Class B Certificates). (8) 10.4 Form of Standard Terms and Conditions of Pooling and Servicing Agreement. (9) 10.5 Form of Receivables Purchase Agreement. (10) - ---------------- (6) Incorporated herein by reference to Exhibit 10.2(a) filed with TMCC's Report on Form 10-K for the year ended September 30, 1991. (7) Incorporated herein by reference to Exhibit 10.2(b) filed with TMCC's Report on Form 10-K for the year ended September 30, 1992. (8) Incorporated herein by reference to Exhibit 4.1 filed with Toyota Auto Receivables 1993-A Grantor Trust's Registration Statement on Form S-1, File No. 33-65348. (9) Incorporated herein by reference to Exhibit 4.2 filed with Toyota Auto Receivables 1993-A Grantor Trust's Registration Statement on Form S-1, File No. 33-65348. (10) Incorporated herein by reference to Exhibit 10.1 filed with Toyota Auto Receivables 1993-A Grantor Trust's Registration Statement on Form S-1, File No. 33-65348. (19) Incorporated herein by reference to Exhibit 10.2(c) filed with TMCC's Report on Form 10-K for the year ended September 30, 1994. (25) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's Registration Statement on Form S-1, File No. 33-22440. -62- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- ------ 10.6 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. (13) 10.7 Receivables Purchase Agreement dated as of September 1, 1995 between TMCC, as Seller, and TMCRC Corporation, as Purchaser. (14) 10.8 Form of Indemnification Agreement between TMCC and its directors and officers. (20) 10.9(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. Filed herewith 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. (21) 10.9(b) Amendment No. 1 dated September 28, 1995 to the Three-year Agreement. (22) 10.9(c) Amendment No. 1 dated September 28, 1995 to the 364-day Agreement. (23) - ---------------- (13) 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, File No. 33-96006. (14) 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, File No. 33-96006. (20) Incorporated herein by reference to Exhibit 10.6 filed with TMCC's Registration Statement on Form S-1, File No. 33-22440. (21) Incorporated herein by reference to Exhibit 10.10 filed with TMCC's Report on Form 10-K for the year ended September 30, 1994. (22) 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. (23) 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. -63- EXHIBIT INDEX Method Exhibit of Number Description Filing - ------- ----------- ------ 10.9(d) Amendment No. 2 dated September 24, 1996 to the Three- Filed year Agreement. Herewith 10.9(e) Amendment No. 2 dated September 24, 1996 to the 364-day Filed Agreement. Herewith 10.10 Toyota Motor Sales, U.S.A., Inc. Supplemental Executive Retirement Plan. (16) 10.11 Toyota Motor Sales, U.S.A., Inc. 401(k) Excess Plan. (17) 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 - ---------------- (16) Incorporated herein by reference to Exhibit 10.1 filed with TMCC's Report on Form 10-Q for the quarter ended December 31, 1995. (17) Incorporated herein by reference to Exhibit 10.2 filed with TMCC's Report on From 10-Q for the quarter ended December 31, 1995. -64- EX-4.3(C) 2 AMENDMENT NO. 2 TO EURO MTN AGENCY AGREEMENT Exhibit 4.3(c) Execution Copy AMENDMENT NO. 2 TO AMENDED AND RESTATED AGENCY AGREEMENT in respect of THE TOYOTA MOTOR CREDIT CORPORATION EURO MEDIUM-TERM NOTE PROGRAM This Amendment No. 2, dated as of July 19, 1996, is made to the Amended and Restated Agency Agreement, dated as of July 28, 1994, among Toyota Motor Credit Corporation, as Issuer, The Chase Manhattan Bank, as Agent, and Chase Manhattan Bank Luxembourg S.A., as Paying Agent, as the same has been amended by Amendment No. 1 thereto dated as of July 27, 1995 (collectively, the "Agreement"), 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, effective July 19, 1996 the Company desires to increase the maximum aggregate principal amount of all Notes from time to time outstanding under the Program from U.S. $9,500,000,0000 to U.S. $12,000,000,000 (or its equivalent in other currencies or currency units); and WHEREAS, the Company, the Agent and the Paying Agent desire to amend the Agreement to reflect the increase in issuance capacity under the Program and to make certain additional changes to cure certain ambiguities and/or to correct or supplement certain provisions of the Agreement in a manner which shall not adversely affect existing holders of the 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. The Company, the Agent and the Paying Agent hereby agree that effective July 19, 1996 the maximum aggregate principal amount of all Notes from time to time outstanding under the Program shall be increased from U.S. $9,500,000,000 to U.S. $12,000,000,000 (or its equivalent in other currencies or currency units). Accordingly, all references throughout the Agreement and in each appended item thereto identifying the maximum aggregate principal amount of all Notes from time to time outstanding shall be deemed to refer to U.S. $12,000,000,000 (or its equivalent in other currencies or currency units). B. The legal name of "Merrill Lynch International Limited" has been changed to "Merrill Lynch International". Accordingly, the Company, the Agent and the Paying Agent hereby agree that all references throughout the Agreement and in each appended item thereto to the name Merrill Lynch International Limited or to "MLI" shall be deemed to refer to Merrill Lynch International. C. The legal name of "The Chase Manhattan Bank, N.A." has been changed to "The Chase Manhattan Bank". Accordingly, the Company, the Agent and the Paying Agent hereby agree that all references throughout the Agreement and in each appended item thereto to the name The Chase Manhattan Bank, N.A. or to the Agent shall be deemed to refer to The Chase Manhattan Bank. D. Clause 1 of the Agreement (Definitions and interpretation) is amended as follows: 1. The definition of "Cedel" is amended by replacing the word "Cedel" with the words "Cedel Bank". Accordingly, the Company, the Agent and the Paying Agent hereby agree that all references throughout the Agreement and in each appended item thereto to the name Cedel shall be deemed to refer to Cedel Bank as so defined. 2. The definition of "London Stock Exchange" is amended by replacing the text following the word "means" with "the London Stock Exchange Limited." Accordingly, the Company, the Agent and the Paying Agent hereby agree that all references throughout the Agreement and in each appended item thereto to the name "The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited" shall be deemed to refer to the London Stock Exchange Limited. 3. The definition of "SICOVAM" is amended by replacing the text following the word "means" with "Sicovam SA and the Intermediaries financiers habilites authorized to maintain accounts therein." E. Clause 3(1) is amended as follows: 1. The text of Clause 3(1)(c) is replaced by the following: "(c) to deliver such Temporary Global Note(s) to the specified common depositary of Euroclear, Cedel and/or such other clearing agency as is specified in the related Pricing Supplement in accordance with the Confirmation against receipt from such common depositary of confirmation that such common depositary is holding the Temporary Global Note(s) in safe custody for the account of Euroclear, Cedel or such other clearing agency and to instruct Euroclear, Cedel and/or such other clearing agency (as the case may be) to credit the Notes represented by such Temporary Global Note(s), unless otherwise agreed in writing between the Agent and the Company, to the Agent's distribution account (or in the case of a syndicated bond issue, the lead manager's account)." 2. The text following Clause 3(1)(c) is removed. 2 F. Clause 4(1) is amended as follows: 1. The text of Clause 4(1)(c) is replaced by the following: "(c) to deliver such Permanent Global Note to the specified common depositary that is holding the Temporary Global Note for the time being on behalf of Euroclear, Cedel and/or such other clearing agency as is specified in the related Pricing Supplement in exchange for such Temporary Global Note or, in the case of a partial exchange, after noting the details of such exchange in the appropriate spaces on both the Temporary Global Note and the Permanent Global Note, and in either case against receipt from the common depositary of confirmation that it is holding the Permanent Global Note in safe custody for the account of Euroclear, Cedel and/or such other clearing agency (as the case may be). 2. The text following Clause 4(1)(c) is removed. G. The text of Clause 5(1)(b) is replaced by the following: "(b) to deliver such Definitive Note(s) to or to the order of Euroclear, Cedel and/or to such other clearing agency as is specified in the related Pricing Supplement either in exchange for such Global Note or, in the case of a partial exchange, on entering details of any partial exchange of the Global Note in the relevant space in Schedule Two of such Global Note; provided that the Agent shall only permit a partial exchange of Notes represented by a Permanent Global Note for Definitive Notes if the Notes which continue to be represented by such Permanent Global Note are regarded as fungible by Euroclear, Cedel and/or such other clearing agency with the Definitive Notes issued in partial exchange therefor." H. Clause 11(1) is amended by the replacement of the number "40" with the number "15" and the addition of the words "and is set forth in the applicable Pricing Supplement" at the end of such Clause. I. APPENDIX A (Terms and Conditions) shall be amended and restated in its entirety as set forth in Exhibit I attached to this Amendment. J. APPENDIX B (Forms of Global and Definitive Notes, Coupons, Receipts and Talons) shall be amended as follows: 1. The third paragraph on page II-2 is amended by the replacement thereof by the following: 3 "This Temporary Global Note is to be held by a common depositary for Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), Cedel Bank, societe anonyme ("Cedel Bank") and/or such other clearing agency as is specified in the related Pricing Supplement on behalf of account holders which have the Notes represented by this Temporary Global Note credited to their respective securities accounts therewith from time to time." 2. The second full paragraph on page II-3 is amended by the replacement of the words "Euroclear or Cedel" in the fourth line thereof by the words "Euroclear, Cedel and/or such other relevant clearing agency". 3. The carryover paragraph on page II-4 is amended by the replacement of the words "Euroclear or Cedel" in the ninth line thereof by the words "Euroclear, Cedel and/or such other relevant clearing agency". 4. The signature page, page II-6, is amended by the replacement of the name "John McGovern" under the first signature line by the name "Douglas West." 5. The caption under the heading "Schedule Three" on page II-10 is ---------------- amended by the replacement of the words "EUROCLEAR AND CEDEL" by the words "APPROPRIATE CLEARING SYSTEM." 6. The signature block on page II-11 is amended by the replacement of the words "[MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Brussels office, as operator of the Euroclear System] or Cedel Bank, societe anonyme" with the words [APPROPRIATE CLEARING SYSTEM]." 7. The caption under the heading "CERTIFICATE A" on page II-12 is amended by the replacement of the words "EUROCLEAR OR CEDEL" by the words "APPROPRIATE CLEARING SYSTEM." 8. The second full paragraph on page II-15 is amended by the replacement thereof by the following: "This Permanent Global Note is to be held by a common depositary for Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euroclear System ("Euroclear"), Cedel Bank, societe anonyme ("Cedel Bank") and/or such other clearing agency as is specified in the related Pricing Supplement on behalf of account holders which have the Notes represented by this Permanent Global Note credited to their respective securities accounts therewith from time to time." 9. The third full paragraph on page II-16 is amended by the replacement of the words "Euroclear or Cedel" in the fourteenth and nineteenth lines thereof by the words "Euroclear, Cedel Bank or such other relevant clearing agency." 4 10. The signature pages, appearing at pages II-18 and II-25 are amended by the replacement of the name "John McGovern" under the first signature line by the name "Douglas West." K. APPENDIX D (Form of Operating & Administrative Procedures Memorandum) shall be amended as follows: 1. The last full paragraph on page IV-4 and the first full paragraph on page IV-5 are amended by the replacement thereof with the following: "Issue Date 3:00 p.m. The Agent prepares and authenticates minus 1 a Temporary Global Note for each Series of Notes which are to be purchased by the relevant Purchaser(s) on the Issue Date. All Temporary Global Notes are then delivered by the Agent to a common depositary for Euroclear, Cedel and/or another clearing agency specified in the related Pricing Supplement and instructions are given by the Agent to Euroclear, Cedel or such other clearing agency, as the case may be, to credit the Notes represented by such Temporary Global Notes to the Agent's distribution account. The Agent further instructs Euroclear, Cedel or such other clearing agency, as the case may be, to debit from the distribution account the principal amount of Notes of each Series which each Purchaser has agreed to purchase and to credit such principal amount to the account of such Purchaser with, Euroclear, Cedel or such other clearing agency, against payment to the account of the Agent of the subscription price for the relevant Notes for value on the Issue Date. The Company, the Purchaser(s) and the Agent may agree to arrange for "free delivery" to be made through the relevant clearing system if specified in the relevant Pricing Supplement. Issue Date Euroclear, Cedel or such other clearing agency, as the case may be, debit and credit accounts in accordance with instructions received by them. 5 The Agent pays to the Issuer the aggregate subscription moneys received by it to such account of the Company as shall have been notified to the Agent from time to time." 2. The second textual paragraph on page IV-7 is amended by the replacement of the date "July __, 1995" with the date "July __, 1996." 3. Item 19 on page IV-8 is amended by the replacement of the text thereof with the following: "19. Applicable "Business Day Convention" (if different from that in Condition 4(a)(i)) (Fixed Rate Note and Notes other than Floating Rate Notes): [ ]" 4. Item 20 on page IV-9 is amended by the replacement thereof with the following: "20. Applicable definition of "Business Day" (if different from Condition 4(b)(i)) (Fixed Rate Note and Notes other than Floating Rate Notes): [ ]" 5. Item 37 on page IV-11 is amended by the replacement of the text thereof with the following: "37. Company's Optional Redemption - [Yes/No] if yes, [ ] (a) Optional Redemption Date(s): [ ] (b) Optional Redemption Amount(s) and method, if any, of calculation of such amount(s): [ ] (c) If redeemable in part, (i) Minimum Redemption Amount: [ ] (ii) Higher Redemption Amount: [ ] (d) The Applicable Period for notice to Noteholders (if different from that set out in Condition 5(d)): and [ ] (e) The Applicable Period for notice to Agent (if different from that set out in Condition 5(d)) : [ ]" 6. The second textual paragraph on page IV-15 is amended by the replacement of the words "[Euroclear/Cedel]" with the words "[applicable clearing agency]." 6 7. Item 19 on page IV-16 is amended by the replacement of the text thereof with the following: "19. Applicable "Business Day Convention" (if different from that in Condition 4(a)(i)) (Fixed Rate Note and Notes other than Floating Rate Notes): [ ]" 8. Item 20 on page IV-17 is amended by the replacement thereof with the following: "20. Applicable definition of "Business Day" (if different from Condition 4(b)(i)) (Fixed Rate Note and Notes other than Floating Rate Notes): [ ]" 9. Item 37 on page IV-19 is amended by the replacement of the text thereof with the following: "37. Company's Optional Redemption - [Yes/No] if yes, [ ] (a) Optional Redemption Date(s): [ ] (b) Optional Redemption Amount(s) and method, if any, of calculation of such amount(s): [ ] (c) If redeemable in part, (i) Minimum Redemption Amount: [ ] (ii) Higher Redemption Amount: [ ] (d) The Applicable Period for notice to Noteholders (if different from that set out in Condition 5(d)): and [ ] (e) The Applicable Period for notice to Agent (if different from that set out in Condition 5(d)): [ ]" 10. Item 19 on page IV-24 is amended by the replacement of the text thereof with the following: "19. Applicable "Business Day Convention" (if different from that in Condition 4(a)(i)) (Fixed Rate Note and Notes other than Floating Rate Notes): [ ]" 11. Item 20 on page IV-24 is amended by the replacement thereof with the following: "20. Applicable definition of "Business Day" (if different from Condition 4(b)(i)) (Fixed Rate Note and Notes other than Floating Rate Notes): [ ]" 7 12. Item 37 on page IV-27 is amended by the replacement of the text thereof with the following: "37. Company's Optional Redemption - [Yes/No] if yes, [ ] (a) Optional Redemption Date(s): [ ] (b) Optional Redemption Amount(s) and method, if any, of calculation of such amount(s): [ ] (c) If redeemable in part, (i) Minimum Redemption Amount: [ ] (ii) Higher Redemption Amount: [ ] (d) The Applicable Period for notice to Noteholders (if different from that set out in Condition 5(d)): and [ ] (e) The Applicable Period for notice to Agent (if different from that set out in Condition 5(d)): [ ]" 13. The responsibility statement in the French language commencing on page IV-30 is amended and restated in its entirety as set forth in Exhibit II attached to this Amendment. 14. The Trading Desk Information provided in Annex E is amended and restated in its entirety as set forth in Exhibit III attached to this Amendment. L. APPENDIX E (Form of the Notes) shall be amended and restated in its entirety as set forth in Exhibit IV attached to this Amendment. M. This Amendment No. 2 may be executed in one or more counterparts all of which shall constitute one and the same agreement. From and after the date hereof, this Amendment No. 2 shall be deemed to be part of the Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to the Agreement as of the date first written above. 8 THE COMPANY Toyota Motor Credit Corporation 19001 South Western Avenue Torrance, California 90509 Telephone: 310-787-6195 Fax: 310-787-6194 Attention: Corporate Treasury Manager /S/ WOLFGANG JAHN - -------------------------------- By: Wolfgang Jahn Title: Senior Vice President and General Manager THE AGENT The Chase Manhattan Bank Woolgate House Coleman Street P.O. Box 16 London EC2P 2HD Telephone: 01202 347430 Fax: 01202 347438 Telex: 8954681 CMB G Attention: Manager, Corporate Trust Operations /S/ CHRIS KNOWLES - ---------------------------- By: Chris Knowles Title: Second Vice President THE OTHER PAYING AGENT Chase Manhattan Bank Luxembourg S.A. 5 Rue Plaetis L-2338 Luxembourg Telephone: 00 352 462685223 Fax: 00 352 462685380 Telex: 1223 CHAS LU Attention: Manager, Corporate Trust Operations /S/ CHRIS KNOWLES - ---------------------------- By: Chris Knowles Title: Second Vice President 9 Exhibit I to Amendment No. 2 to the Amended and Restated Agency Agreement TERMS AND CONDITIONS I-1 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 any Notes 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 such Notes. 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, an Amended and Restated Agency Agreement dated as of July 28, 1994, 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 principal paying agent and, if so specified 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 or Redemption Month, as the case may be, 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. I-2 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. 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. 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. I-3 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 Morgan Guaranty Trust Company of New York, Brussels office, as operator of the Euroclear System ("Euroclear") or of Cedel Bank, societe anonyme ("Cedel") and any other additional or alternative clearance system, including Sicovam, as the holder of a particular principal amount 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) approved by TMCC and the Agent. 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 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 Communities (the "EC"). Changes to the ECU may be made by the EC in which event the ECU will change accordingly. References herein to the ECU shall be deemed to be references to the ECU as so changed from time to time. 4. INTEREST (a) INTEREST ON FIXED 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 arrears 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 I-4 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 and no interest will accrue on the amount so payable for the period from and after such Fixed Interest Date or Maturity Date, as the case may be. 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 any Fixed Interest Date shall not be changed unless specified otherwise in the applicable Pricing Supplement. (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 such interest will be payable in arrears on each interest payment date (each an "Interest Payment Date") which (except as otherwise specified in these Terms and Conditions or the applicable Pricing Supplement) falls the number of months or other period specified as the Interest Period in the applicable Pricing Supplement after the preceding Interest Payment Date or, in the case of the first Interest Payment Date, after the Interest Commencement 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 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 shall be brought forward to the immediately preceding Business Day. 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 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. If the accrual periods for I-5 calculating the amount of interest due on any 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." 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 (B) either (1) in relation to Notes denominated in a Specified Currency other than ECU, 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) or (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")). 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 Luxembourg, 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 a 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"; I-6 (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. (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; I-7 (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; (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 and if New Zealand dollars, shall be Wellington) 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 I-8 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 and if New Zealand dollars, shall be Wellington) 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 the appropriate Associated Press-Dow Jones Tele-rate 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, Swiss Bank Corporation 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; (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 and if New Zealand dollars, shall be Wellington) 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. I-9 (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. (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. I-10 (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. (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. I-11 5. REDEMPTION AND PURCHASE (a) AT MATURITY Unless previously redeemed or purchased and canceled 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 (in the case of a Note other than a Floating Rate Note) or on the Interest Payment Date falling in the Redemption Month specified in the applicable Pricing Supplement (in the case of a Floating Rate Note). (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. (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 or, if the Notes of this Series are Floating Rate Notes, the Interest Payment Date falling in the relevant Redemption Month (in each case except as otherwise provided in paragraph (b) above and in Condition 13); or I-12 (ii) that such Notes will be redeemable at the option of TMCC and/or the holders of the Notes prior to such Maturity Date or, as the case may be, the Interest Payment Date falling in the relevant Redemption Month 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. 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. (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 I-13 (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; (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. 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. I-14 (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 All Notes redeemed or purchased as aforesaid will be canceled forthwith, together with all unmatured Receipts and Coupons attached thereto or surrendered or purchased therewith, and may not be resold or reissued. 6. PAYMENTS (a) METHOD OF PAYMENT Subject as provided below, payments in a currency other than ECU 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); provided, however, 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 in ECU will be made by credit or transfer to an ECU account specified by the payee. 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. I-15 (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 (in the case of a Note other than a Floating Rate Note) or prior to the Interest Payment Date falling in the Redemption Month (in the case of a Floating Rate Note) in respect thereof, 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 specified otherwise 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. 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. I-16 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 as the holder of a particular principal amount of Notes must look solely to Euroclear and/or Cedel, 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. (c) PAYMENT IN A COMPONENT CURRENCY If any payment of principal or interest in respect of a Note 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 I-17 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. I-18 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. 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 I-19 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. (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 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 and a Business Day as defined in Condition 4. (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. I-20 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 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 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. I-21 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; I-22 (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; (e) any tax, assessment or other governmental charge imposed on interest received by (i) a 10 percent 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. 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 I-23 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. 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 I-24 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. 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; I-25 (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 l 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). "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 I-26 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. 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 I-27 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. 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 canceled as provided in Condition 5, (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 I-28 (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 (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; I-29 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, (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. (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. I-30 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. 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. I-31 17. 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. I-32 Exhibit II to Amendment No. 2 to the Amended and Restated Agency Agreement AMENDED AND RESTATED RESPONSIBILITY STATEMENT 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 . . .) 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 17 Juillet, 1996, date du n P96-231 appose par la Commission des Operations de Bourse sur le Document de Base (Prospectus). - - (le [ ] date du visa n [ ]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] 2. Au nom de la banque presentatrice Personne assumant la responsabilite de la Note d'Information. (Name of relevant Dealer/lead manager) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [Name and title of signatory] a statement in French in respect of the Pricing Supplement in the following form: La notice legale sera publiee au Bulletin des Annonces Legales Obligatoires (BALO) du (date). La presente "Note d'Information" ne peut etre distribuee en France avant la date effective de cotation de l'emprunt a la Bourse de Paris et la publicite legale au BALO; and the registration and visa numbers allocated by the COB in respect of the Offering Circular and the Pricing Supplement in the following form: II-1 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. P96-231 du 17 Juillet,1996 et a appose sur la presente "Note d'Information" la visa no. ( ) du (date). II-2 Exhibit III to Amendment No. 2 to the Amended and Restated Agency Agreement ANNEX E ------- TRADING DESK INFORMATION ------------------------ The Company ----------- TOYOTA MOTOR CREDIT CORPORATION 19001 South Western Avenue A105 Torrance, California 90509 Telephone No: (310) 787-6195 Fax No: (310) 787-6194 Attention: National Treasury Manager III-1 The Dealers ----------- BANQUE PARIBAS CS FIRST BOSTON LIMITED 33 Wigmore Street One Cabot Square London W1H OBN London E14 4QJ Telephone: 0171 355 2000 Telephone: 010 516 4021 Telefax: 0171 895 2555 Telefax: 010 516 3719 Telex: 296723 PBRCAP Telex: 892132 CSFB G Attention: Euro Medium Term Note Desk Attention: MTN Trading Desk GOLDMAN SACHS INTERNATIONAL MERRILL LYNCH FINANCE SA Peterborough Court 96, avenue d'Iena 133 Fleet Street 75116 Paris, France London EC4A 2BB Telephone: 0171-774-2295 Telephone: 331-4069 Telefax: 0171-774-5711 Telefax: 605-985 Telex: 94012165 GSHH G Telex: 33149520502 Attention: Euro Medium Term Note Desk Attention: EMTN Trading and Distribution Desk LEHMAN BROTHERS INTERNATIONAL (EUROPE) 1 Broadgate MORGAN STANLEY & CO. London EC2M 7HA INTERNATIONAL LIMITED 25 Cabot Square Telephone: 0171 256 8256 Canary Wharf Telefax: 0171 260 2135 London E14 4QA Telex: 888881 LEHMAN G Telephone: 0171 425-7799 Attention: EMTN Trading Desk Telefax: 0171 425-7999 Telex: 8812564 Attention: Head of Tansaction Management Group MERRILL LYNCH INTERNATIONAL Ropemaker Place 25 Ropemaker Street J.P. MORGAN SECURITIES LTD. London EC2Y 9LY 60 Victoria Embankment London EC4Y 0JP Telephone: 0171 867 3995 Telefax: 0171 867 4327 Telephone: 0171 779 3469 Telex: 8811047 MERLYN G Telefax: 0171 325 8255 Attention: EMTN Trading and Distribution Telex: 8954804 MGLTD G Desk Attention: Euro Medium Term Note NOMURA INTERNATIONAL PLC Nomura House 1, St. Martin's-le-Grand SWISS BANK CORPORATION London EC1A 4NP 1 High Timber Street London EC4V 35B Telephone: 0171 936 2827 Telefax: 0171 583 1832 Telephone: 0171 711 2479 Telex: 883119 NOMURA G Telefax: 0171 711 2411 Attention: Fixed Income Trading Telex: 887434 SBCO G Attention: MTN Group III-2 UBS LIMITED 100 Liverpool Street London EC2M 2RH Telephone: 0171 901 4253 Telefax: 0171 901 3795 Telex: 8812800 UBSLTD G Attention: Euro Medium Term Note Desk III-3 Exhibit IV to Amendment No. 1 to the Amended and Restated Agency Agreement APPENDIX E ---------- FORM OF THE NOTES IV-1 FORM OF THE NOTES Each Tranche of Notes will initially be represented by one or more temporary global Notes, without receipts, interest coupons or talons, which will be delivered to a common depositary for Euroclear and Cedal Bank. If an interest payment date for any Notes occurs while such Notes are represented by a temporary global Note, the related interest payment will be made against presentation of the temporary global Note only to the extent that certification of non-U.S. beneficial ownership (in the form set out in the temporary global Note) has been received by Euroclear or Cedel Bank. Interests in the temporary global Note will be exchangeable for interests in a permanent global Note and/or for security printed definitive Notes (at the option of TMCC or as otherwise indicated in the applicable Pricing Supplement) 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. No interest payments will be made on a temporary global Note after the Exchange Date. Payments of principal or interest (if any) in respect of a permanent global Note will be made through Euroclear and Cedel Bank against presentation or surrender, as the case may be, of the permanent global Note without any requirement for further certification. A permanent global Note will be exchangeable in whole, but not in part, for security printed definitive Notes with, where applicable, receipts, interest coupons and talons attached not earlier than the Exchange Date (i) at the option of TMCC; and (ii) if specified in the applicable Pricing Supplement, at the option of Noteholders. If a portion of the Notes continue to be represented by the temporary global Note after the issuance of definitive Notes, the temporary global Note shall thereafter be exchangeable only for definitive Notes, subject to certification of non-U.S. beneficial ownership. Unless specified in the applicable Pricing Supplement, investors will have no right to require the delivery of definitive Notes, except in certain limited circumstances such as the closure of the relevant clearance systems. If the applicable Pricing Supplement provides investors with the right to require the delivery of definitive Notes, such delivery may be conditioned on written notice, as specified in the applicable Pricing Supplement, from Euroclear or Cedel Bank (as the case may be) acting on instructions of the holders of interest in the temporary or permanent global Note and/or on the payment of costs in connection with the printing and distribution of the definitive Notes. No definitive Note delivered in exchange for a permanent or temporary global Note shall be mailed or otherwise delivered to any locations in the United States of America in connection with such exchange. Temporary and permanent global Notes and definitive Notes will be issued by The Chase Manhattan Bank, London Office, as issuing and (unless specified otherwise in the applicable Pricing Supplement) principal paying agent and, if so specified in the applicable Pricing Supplement, as calculation agent (the "Agent", which expression includes any successor agents or any other calculation agent specified in the applicable Pricing Supplement) pursuant to an Amended and Restated Agency Agreement dated as of July 28, 1994, as amended (the "Agency Agreement"), and made between TMCC, the Agent and the other paying agents named therein (together with the Agent, the "Paying Agents", which expression includes any additional or successor paying agents). Until exchanged in full, the holder of an interest in any global Note shall in all respects be entitled to the same benefits as the holder of definitive Notes, receipts and interest coupons, except as set out in the terms and conditions applicable thereto. IV-2 If specified in the applicable Pricing Supplement, other clearance systems (including in the case of Notes listed on the Paris Bourse, Sicovam SA and Intermediaries financiers habilites authorized to maintain accounts therein (together, "Sicovam")) capable of complying with the certification requirements set forth in the temporary global Note may be used in addition to or in lieu of Euroclear and Cedel Bank. Temporary and permanent global Notes and definitive Notes will be issued in bearer form only. The following legend will appear on all global Notes, definitive Notes, receipts and interest coupons: "Any United States person (as defined in the Internal Revenue Code of the United States) who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in sections 165(j) and 1287(a) of the Internal Revenue Code." The sections referred to provide that United States holders, with certain exceptions, will not be entitled to deduct any loss on Notes, receipts or interest coupons and will not be entitled to capital gains treatment of any gain on any sale, disposition or payment of principal in respect of Notes, receipts or interest coupons. The Pricing Supplement relating to each Tranche will contain such of the following information as is applicable in respect of such Notes (all references to numbered Conditions being to the Terms and Conditions of the relevant Notes): (i) the Series number; (ii) if not a new Series, the date from which the Tranche of Notes being issued is to form a single series with the other Notes comprising that Series; (iii) the currency (which expression shall include ECU and other currency units) in which the Notes are denominated and, in the case of Dual Currency Notes (as defined below), the currency or currencies in which payment in respect of the Notes is to be made (each a "Specified Currency"); (iv) the aggregate principal amount of the Notes to be issued; (v) the interest and/or payment basis (the "Interest/Payment Basis") of the Notes, which may be one or more of the following: (a) Notes bearing interest on a fixed rate basis ("Fixed Rate Notes"); (b) Notes bearing interest on a floating rate basis ("Floating Rate Notes"); (c) Notes issued on a non-interest bearing basis ("Zero Coupon Notes"); (d) Notes with respect to which principal and/or interest is calculated by reference to an index and/or a formula ("Indexed Notes"); and/or IV-3 (e) Notes with respect to which principal and/or interest is payable in one or more Specified Currencies other than the Specified Currency in which they are denominated ("Dual Currency Notes"); (vi) if the Notes are not to have a single specified Interest/Payment Basis continuously from the Issue Date to the stated maturity thereof, the dates from (and including) and to (but excluding) which such Notes will have each specified Interest/Payment Basis; (vii) the date on which the Notes will be issued (the "Issue Date"); (viii) the denomination(s) of such Notes (each a "Specified Denomination"); (ix) the price (generally expressed as a percentage of the principal amount of the Notes) at which the Notes will be issued (the "Issue Price"); (x) in the case of Notes which are to be issued on a partly paid basis ("Partly Paid Notes"), the amount of each installment comprising the Issue Price and the date on which each payment is to be made and the consequences (if any) of failure to make any such payment; (xi) in the case of interest-bearing Notes, the date from which such Notes bear interest (the "Interest Commencement Date"), which may or may not be the Issue Date; (xii) in the case of Notes other than Floating Rate Notes, the date on which such Notes (unless previously redeemed or purchased and canceled) will be redeemed (the "Maturity Date"); (xiii) in the case of Floating Rate Notes, the month and year in which the Notes (unless previously redeemed or purchased and canceled) will be redeemed (the "Redemption Month"); (xiv) the amount at which each Note will be redeemed under (xii) and (xiii) above (the "Final Redemption Amount"), generally expressed as a percentage of the principal amount of the Notes and/or, in the case of Indexed Notes or Dual Currency Notes, as specified in accordance with (xix) or (xx) below; (xv) in the case of Notes redeemable in installments: (a) the date on which each installment is payable (each an"Installment Date"); and (b) the amount, generally expressed as a percentage of the principal amount of the Notes, of each such installment (each an "Installment Amount"); IV-4 (xvi) in the case of Fixed Rate Notes (and for subclauses (e) and (f), Notes other than Floating Rate Notes): (a) the rate, generally expressed as a percentage rate per annum, at which the Notes bear interest (the "Fixed Rate of Interest"), which may remain the same throughout the life of the Notes or increase and/or decrease; (b) the date(s) in each year on which interest is payable throughout the life of the Notes (each a "Fixed Interest Date"); (c) where the period from the Interest Commencement Date to the next Fixed Interest Date differs from the period between subsequent Fixed Interest Dates, the amount of the first payment of interest (the "Initial Broken Amount"); (d) where the Maturity Date is not a Fixed Interest Date, the amount of the final payment of interest (the "Final Broken Amount"); and (e) the applicable Business Day Convention (if different from that set out in Condition 4(a)(i)); (f) the applicable definition of "Business Day" (if different from that set out in Condition 4(b)(i)); (g) any other terms relating to the particular method of calculating interest for such Notes; (xvii) in the case of Floating Rate Notes: (a) the number of months or other period from (and including) the Interest Commencement Date to (but excluding) the first Interest Payment Date (as defined in Condition 4(b)(i)) and from (and including) that and each successive Interest Payment Date thereafter to (but excluding) the next following Interest Payment Date (each an "Interest Period"), which may or may not be the same number of months or other period throughout the life of the Notes; (b) the manner in which the rate of interest (the "Rate of Interest") is to be determined, including: (1) the date(s) on which the interest rate is to be reset (the "Reset Date"); (2) where the Rate of Interest is to be determined by reference to the ISDA Agreement and Confirmation (as defined and described respectively in Condition 4(b)(iii)) and Condition 4(b)(iii) applies, the "Floating Rate Option" (as defined below), "Designated Maturity" (as defined below) and margin (the "Margin") (which Margin may remain the same throughout the life of the Notes or increase and/or decrease); IV-5 (3) where the Rate of Interest is to be determined as provided in Condition 4(b)(iv) ("Screen Rate Determination"): (A) the reference rate (the "Reference Rate") by which the Rate of Interest is to be determined; (B) the Margin, if any, (expressed as a percentage rate per annum) over or under the Reference Rate by which the Rate of Interest is to be determined (which Margin may remain the same throughout the life of the Notes or increase and/or decrease) specifying whether any such Margin is to be added to, or subtracted from, the Reference Rate; and (C) the page, whatever its designation, on which the Reference Rate is for the time being displayed on the Reuters Monitor Money Rates Service or the appropriate Associated Press-Dow Jones Telerate Service or such other service as is indicated in the applicable Pricing Supplement; and (4) where the Rate of Interest is to be calculated otherwise than by reference to (1) or (2) above, details of the basis for determination of the Rate of Interest and any alternative fall-back provisions; (c) the applicable definition of "Reference Banks" (if different from that set forth in Condition 4(b)(iv)(E)); and (d) the applicable definition of "Interest Determination Date" (if different from that set out in Condition 4(b)(iv)(F)); (e) the applicable Business Day Convention (if different from that set out in Condition 4(b)(i)); (f) the applicable definition of "Business Day" (if different from that set out in Condition 4(b)(i)); (g) the minimum Rate of Interest, if any, at which the Notes will bear interest, which may remain the same throughout the life of the Notes or increase and/or decrease; (h) the maximum Rate of Interest, if any, at which the Notes will bear interest, which may remain the same throughout the life of the Notes or increase and/or decrease; and (i) if different from the Agent, details of the agent responsible for calculating (xvii)(b) above; (xviii) in the case of Zero Coupon Notes: (a) the accrual yield in respect of such Notes (the "Accrual Yield") expressed as a percentage rate per annum; IV-6 (b) the reference price attributed to the Notes on issue (the "Reference Price"); and (c) any other formula or basis for determining the amount payable, in each case for the purposes of Condition 5(f)(iii); (xix) in the case of Indexed Notes: (a) the index (the "Index") to which amounts payable in respect of principal and/or interest are linked and/or the formula (the "Formula") to be used in determining the amounts of principal and/or interest due; (b) the agent responsible for calculating the amount of principal and/or interest due; and (c) the provisions regarding calculation of principal and/or interest in circumstances where such calculation by reference to the Index and/or the Formula is impossible and/or impracticable; (xx) in the case of Dual Currency Notes: (a) the exchange rate(s) or basis of calculating the exchange rate(s) to be used in determining the amounts of principal and/or interest payable in the Specified Currencies (the "Rate(s) of Exchange"); (b) the agent, if any, responsible for calculating the amount of principal and/or interest payable in the Specified Currencies; (c) the provisions regarding calculation of principal and/or interest in circumstances where such calculation by reference to the Rate(s) of Exchange is impossible and/or impracticable; and (d) the person at whose option any Specified Currency or Currencies is or are to be or may be payable; (xxi) in the case of Partly Paid Notes: (a) the amount of each installment (expressed as a percentage of the principal amount of each Note) of the Issue Price for such Notes; (b) the due date(s) for any subsequent installments of the Issue Price; (c) the date (if any) after which a holder shall forfeit any relevant Partly Paid Notes should payment of any subsequent installment(s) not be made on or prior to such date together with accrued interest; IV-7 (d) the rate(s) of interest to accrue on the first and any subsequent installment(s) after the due date for payment of such installment(s); and (e) any other relevant information; (xxii) whether the Notes are to be redeemable at the option of TMCC (other than for taxation reasons) and/or the Noteholders and, if so: (a) each date upon which redemption may occur (each an "Optional Redemption Date") which, in the case of Notes denominated in sterling or French Franc Notes, may not be prior to one year from the Issue Date and in the case of Notes denominated in DM, may not be prior to two years from the Issue Date; (b) each redemption amount for the Notes (each an "Optional Redemption Amount") and/or the method, if any, of calculating the same; and (c) in the case of Notes redeemable by TMCC in part, the minimum principal amount of the Notes permitted to be so redeemed at any time (the "Minimum Redemption Amount") and any greater principal amount of the Notes permitted to be so redeemed at any time (each a "Higher Redemption Amount"), if any; (d) the applicable period for notice to noteholders (if different from that set out in Condition 5(d)); and (e) the applicable period for notice to the Agent (if different from that set out in Condition 5(d)), (xxiii) the redemption amount (the "Early Redemption Amount") with respect to the Notes payable on redemption for taxation reasons or following an Event of Default and/or method, if any, of calculating the same if required to be specified by, or if different from that set out in, Condition 5(f); (xxiv) whether talons for future coupons or receipts are to be attached to definitive Notes on issue and, if so, the date on which such talons mature; (xxv) details of the relevant stabilizing manager (if any); (xxvi) any additional selling restrictions which are required; (xxvii) details of any other relevant terms of such Notes or special conditions not inconsistent with the provisions of the Agency Agreement; (xxviii) the relevant Euroclear and Cedel Bank Common Code and ISIN Number; (xxix) details of any additional or alternative clearance system (including, if applicable, Sicovam) approved by TMCC and the Agent; IV-8 (xxx) whether or not the Notes are to be listed on the London Stock Exchange, the Paris Bourse or any other agreed stock exchange; (xxxi) whether the Notes are convertible automatically or at the option of TMCC and/or the holders of Notes into Notes of another Interest/Payment Basis, the date(s) upon which such conversion will occur or such option(s) may be exercised and the Interest/Payment Basis and other relevant terms; (xxxii) whether the temporary global Note initially representing the Notes will be exchangeable for a permanent global Note and/or definitive Notes and any notice period applicable to an exchange for definitive Notes; (xxxiii) method of distribution: (a) if syndicated, the names of the relevant managers; (b) if non-syndicated, the name of the relevant dealer; (xxxiv) whether TMCC may from time to time without the consent of the Noteholders create and issue further securities having the same terms and conditions as the Notes described in the Pricing Supplement so that the same shall be consolidated and form a single series with such Notes; and (xxxv) in the case of any Notes listed on the Paris Bourse: (a) the number of Notes to be issued in each Specified Denomination; (b) the Sicovam number or, in the case of Partly Paid Notes, Sicovam numbers, if any; (c) the name and specified office of any paying agent in France; (d) the address in Paris where any relevant documents will be available for inspection and a list of such documents; (e) the specialist broker in the case of an issue of French Franc Notes; (f) a statement in French signed manually or in facsimile by a person duly authorized on behalf of TMCC and the relevant Purchaser or, in the case of a syndicated issue of Notes, the relevant lead manager accepting responsibility for the information contained in the Pricing Supplement, in the following form: IV-9 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 ) -------- --------- 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 17 Juillet 1996, date du n P96-231 appose par la Commission des Operations de Bourse sur le Document de Base (Prospectus), - (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] 2. Au nom de la banque presentatrice Personne assumant la responsabilite de la Note d'Information. (Name of relevant Dealer/lead manager) ------------------------------------------------------------- [Name and title of signatory] (g) a statement in French in respect of the Pricing Supplement in the following form: La notice legale sera publiee au Bulletin des Annonces Legales Obligatoires (BALO) du (date). La presente "Note d'Information" ne peut etre distribuee en France avant la date effective de cotation de l'emprunt a la Bourse de Paris et la publicite legale au BALO; and IV-10 (h) the registration and visa numbers allocated by the COB in respect of the Offering Circular and the Pricing Supplement in the following form: 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. P96-231 du 17 Juillet 1996 et a appose sur la presente "Note d'Information" la visa no. ( ) du (date). If the applicable Pricing Supplement specifies any modifications to the Terms and Conditions of the Notes in relation to a particular issue as described below, it is expected that, to the extent that such modifications (not being significant for the purposes of section 147 of the Financial Services Act 1986) relate only to Conditions 1, 3, 4, 5 (except Condition 5(b)), 6, 14 and 16, they will not necessitate the preparation and issue of a supplementary Offering Circular or listing particulars. If the Terms and conditions of the Notes are to be modified in any other respect (as would be the case, for example, for an issue of subordinated Notes), it is expected that a supplementary Offering Circular or listing particulars or, if appropriate, further listing particulars describing the modifications will be prepared and issued. IV-11 EX-10.2(E) 3 TERMINATION OF FINANCIAL SERVICES AGREEMENT Exhibit 10.2(e) WORLD OMNI FINANCIAL CORP. 120 N. W. 12th Avenue Deerfield Beach, Florida 33442 August 29, 1996 Toyota Motor Credit Corporation 19001 South Western Avenue Torrance, California 90509 RE: Pooling and Servicing Agreement, dated as of August 1, 1996, by and among World Omni Retail Funding, Inc., World Omni Financial Corp. and First Bank National Association, as Trustee --------------------------------------------------------------- Ladies and Gentlemen: Reference is hereby made to the above-referenced agreement (the "Pooling and Servicing Agreement") and to the Purchase Agreement, dated as of August 1, 1996, by and between you and the undersigned (together with the Pooling and Servicing Agreement, the "Agreements"). Initially capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Pooling and Servicing Agreement. The Financial Services Agreement, dated December 21, 1984, between you and the undersigned (the "FSA"), is hereby terminated by mutual rescission in accordance with Section 11 thereof, and the parties hereto hereby waive the written notice of termination provided for therein. Each of the parties' respresentations and indemnities set forth in the FSA shall survive the termination of the FSA hereby. In additon, the parties hereto hereby acknowledge and agree that under no circumstances shall this Letter Agreement be deemed an amendment of the FSA. The undersigned hereby agrees to indemnify you for any liability (including attorneys' fees), costs, damages, claims or actions as a result of the undersigned's misuse of your name and/or logo in fulfilling its obligations as Servicer under the Pooling and Servicing Agreement. If the foregoing accurately reflects your understanding with respect to the matters contained herein, please acknowledge your agreement hereto by signing the enclosed copy of this letter and returning it to us. WORLD OMNI FINANCIAL CORP. By /S/ ALAN BROWDY -------------------------- Name: Alan Browdy Title: Vice President Accepted and Agreed: TOYTA MOTOR CREDIT CORPORATION By /S/ WOLFGANG JAHN -------------------------- Name: Wolfgang Jahn Title: Senior Vice President and General Manager EX-10.9(D) 4 AMENDMENT NO. 2 TO THREE-YEAR AGREEMENT Exhibit 10.9(d) [EXECUTION COPY] AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 24, 1996 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 E T H : WHEREAS, the parties hereto have heretofore entered into a Three- Year Credit Agreement dated as of September 29, 1994, as amended by Amendment No. 1 to Credit Agreement dated as of September 28, 1995 (the "Agreement"); 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. SECTION 2. Amendment of the Agreement. --------------------------- (a) Each reference to "1994" in the definition of "Borrower's 1994 Form 10-K" and in Section 4.04(a) is changed to "1995". (b) Each reference to "1995" in the definition of "Borrower's Latest Form 10-Q" and in Sections 4.04(b) and (c) is changed to "1996". (c) The date "September 29, 2000" appearing in the definition of "Termination Date" is changed to "September 24, 2001". (d) The definition of "CD Margin" in Section 2.07(b) is amended to read as follows: "CD Margin" means 0.225% per annum. (e) The term "Euro-Dollar Margin" in Section 2.07(c) is amended to read as follows: "Euro-Dollar Margin" means 0.10% per annum. (f) The first sentence of Section 2.08 is amended to read in its entirety as follows: The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the rate of 0.05% per annum. SECTION 3. Changes in Commitments. With effect from and ----------------------- including the date this Amended and Restated Credit Agreement becomes effective in accordance with Section 5 hereof, 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. 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 5. 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 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). 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/ WOLFGANG JAHN ---------------------------- Title: Senior Vice President and General Manager Commitments - ----------- $100,000,000 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /S/ KEVIN J. O'BRIEN ---------------------------- Title: Vice President $100,000,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By /S/ ALAN H. ROCHE ---------------------------- Title: Vice President $100,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD., LOS ANGELES BRANCH By /S/ TETSUJI KANO ---------------------------- Title: Deputy General Manager $100,000,000 THE CHASE MANHATTAN BANK By /S/ HIROSHI OHNO --------------------------- Title: Vice President 3 $100,000,000 CITICORP USA, INC. By /S/ ALLEN B. MACOMBER ---------------------------- Title: Global Risk Manager $100,000,000 CREDIT SUISSE By /S/ MARK A. SAMPSON ---------------------------- Title: Associate By /S/ MARILOU PALENZUELA ---------------------------- Title: Member of Senior Management $40,000,000 ABN AMRO BANK N.V. LOS ANGELES INTERNATIONAL BRANCH By: ABN AMRO North America, Inc., as Agent By /S/ ELLEN M. COLEMAN ---------------------------- Title: Vice President/Director By /S/ PAUL K. STIMPFL ---------------------------- Title: Vice President 4 $40,000,000 BANQUE PARIBAS By /S/ LYNNE A. LUEDERS ---------------------------- Title: Vice President By /S/ HARRY COLLYNS ---------------------------- Title: Vice President $40,000,000 BARCLAYS BANK PLC By /S/ KEITH MACKIE ---------------------------- Title: Director $40,000,000 DEUTSCHE BANK AG LOS ANGELES AND/OR CAYMAN ISLANDS BRANCHES By /S/ OLAF JANKE ---------------------------- Title: Associate By /S/ J. SCOTT JESSUP ---------------------------- Title: Vice President $40,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY By /S/ NOBORU AKAHANE ---------------------------- Title: Deputy General Manager 5 $40,000,000 THE SAKURA BANK, LIMITED LOS ANGELES AGENCY By /S/ DAIJIRO TSUCHIYA ---------------------------- Title: General Manager $40,000,000 THE SANWA BANK, LIMITED By /S/ NOBUO KATSUMATA ---------------------------- Title: Assistant Vice President $40,000,000 SWISS BANK CORPORATION, NEW YORK BRANCH By /S/ STEPHANIE W. KIM ---------------------------- Title: Associate Director By /S/ THOMAS R. SALZANO ---------------------------- Title: Associate Director Banking Finance Support, N.A. $40,000,000 THE TOKAI BANK, LIMITED LOS ANGELES AGENCY By /S/ TAKASHI KAWAGUCHI ---------------------------- Title: Assistant General Manager 6 $40,000,000 UNION BANK OF SWITZERLAND, NEW YORK BRANCH By /S/ C. C. GLOCKLER ---------------------------- Title: Vice President By /S/ SEIICHI SHINOMIYA ---------------------------- Title: Vice President - ----------------- Total Commitments $1,000,000,000 ============== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /S/ KEVIN J. O'BRIEN ---------------------------- Title: Vice President 7 EX-10.9(E) 5 AMENDMENT NO. 2 TO 364-DAY AGREEMENT Exhibit 10.9(e) [EXECUTION COPY] AMENDED AND RESTATED CREDIT AGREEMENT AMENDED AND RESTATED CREDIT AGREEMENT dated as of September 24, 1996 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 E T H : WHEREAS, the parties hereto have heretofore entered into a 364-Day Credit Agreement dated as of September 29, 1994, as amended by Amendment No. 1 to Credit Agreement dated as of September 28, 1995 (the "Agreement"); 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. SECTION 2. Amendment of the Agreement. --------------------------- (a) Each reference to "1994" in the definition of "Borrower's 1994 Form 10-K" and in Section 4.04(a) is changed to "1995". (b) Each reference to "1995" in the definition of "Borrower's Latest Form 10-Q" and in Sections 4.04(b) and (c) is changed to "1996". (c) The date "September 27, 1996" appearing in the definition of "Termination Date" is changed to "September 23, 1997". (d) The definition of "CD Margin" in Section 2.07(b) is amended to read as follows: "CD Margin" means 0.245% per annum. (e) The term "Euro-Dollar Margin" in Section 2.07(c) is amended to read as follows: "Euro-Dollar Margin" means 0.12% per annum. (f) The first sentence of Section 2.08 is amended to read in its entirety as follows: The Borrower shall pay to the Agent for the account of the Banks ratably a facility fee at the rate of 0.03% per annum. SECTION 3. Changes in Commitments. With effect from and ----------------------- including the date this Amended and Restated Credit Agreement becomes effective in accordance with Section 5 hereof, 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. 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 5. 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 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). 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/ WOLFGANG JAHN ---------------------------- Title: Senior Vice President and General Manager Commitments - ----------- $100,000,00 MORGAN GUARANTY TRUST COMPANY OF NEW YORK By /S/ KEVIN J. O'BRIEN ---------------------------- Title: Vice President $100,000,000 BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION By /S/ ALAN H. ROCHE ---------------------------- Title: Vice President $100,000,000 THE BANK OF TOKYO-MITSUBISHI, LTD., LOS ANGELES BRANCH By /S/ TETSUJI KANO ---------------------------- Title: Deputy General Manager $100,000,000 THE CHASE MANHATTAN BANK By /S/ HIROSHI OHNO ---------------------------- Title: Vice President 3 $100,000,000 CITICORP USA, INC. By /S/ ALLEN B. MACOMBER ---------------------------- Title: Global Risk Manager $100,000,000 CREDIT SUISSE By /S/ MARK A. SAMPSON ---------------------------- Title: Associate By /S/ MARILOU PALENZUELA ---------------------------- Title: Member of Senior Management $40,000,000 ABN AMRO BANK N.V. LOS ANGELES INTERNATIONAL BRANCH By: ABN AMRO North America, Inc., as Agent By /S/ ELLEN M. COLEMAN ---------------------------- Title: Vice President/Director By /S/ PAUL K. SHAMPFL ---------------------------- Title: Vice President 4 $40,000,000 BANQUE PARIBAS By /S/ LYNNE A. LUEDERS ---------------------------- Title: Vice President By /S/ HARRY COLLYNS ---------------------------- Title: Vice President $40,000,000 BARCLAYS BANK PLC By /S/ KEITH MACKIE ---------------------------- Title: Director $40,000,000 DEUTSCHE BANK AG LOS ANGELES AND/OR CAYMAN ISLANDS BRANCHES By /S/ OLAF JANKE ---------------------------- Title: Associate By /S/ J. SCOTT JESSUP ---------------------------- Title: Vice President $40,000,000 THE LONG-TERM CREDIT BANK OF JAPAN, LTD., LOS ANGELES AGENCY By /S/ NOBORU AKAHANE ---------------------------- Title: Deputy General Manager 5 $40,000,000 THE SAKURA BANK, LIMITED LOS ANGELES AGENCY By /S/ DAIJIRO TSUCHIYA ---------------------------- Title: General Manager $40,000,000 THE SANWA BANK, LIMITED By /S/ NOBUO KATSUMATA ---------------------------- Title: Assistant Vice President $40,000,000 SWISS BANK CORPORATION, NEW YORK BRANCH By /S/ STEPHANIE W. KIM ---------------------------- Title: Associate Director By /S/ THOMAS R. SALZANO ---------------------------- Title: Associate Director Banking Finance Support, N.A. $40,000,000 THE TOKAI BANK, LIMITED LOS ANGELES AGENCY By /S/ TAKASHI KAWAGUCHI ---------------------------- Title: Assistant General Manager 6 $40,000,000 UNION BANK OF SWITZERLAND, NEW YORK BRANCH By /S/ C. C. GLOCKLER ---------------------------- Title: Vice President By /S/ SEIICHI SHINOMIYA ---------------------------- Title: Vice President ____________________ Total Commitments $1,000,000,000 ============== MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent By /S/ KEVIN J. O'BRIEN ---------------------------- Title: Vice President 7 EX-12.1 6 CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES EXHIBIT 12.1 TOYOTA MOTOR CREDIT CORPORATION CALCULATION OF RATIO OF EARNINGS TO FIXED CHARGES
Years Ended September 30, ------------------------------------------ 1996 1995 1994 1993 1992 ------ ------ ---- ---- ---- (Dollars in Millions) Consolidated income before income taxes...... $ 260 $ 300 $293 $255 $175 ------ ------ ---- ---- ---- Fixed Charges Interest................. 819 716 486 454 450 Portion of rent expense representative of the interest factor (deemed to be one-third)....... 3 2 3 3 2 ------ ------ ---- ---- ---- Total fixed charges......... 822 718 489 457 452 ------ ------ ---- ---- ---- Earnings available for fixed charges........ $1,082 $1,018 $782 $712 $627 ====== ====== ==== ==== ==== Ratio of earnings to fixed charges........ 1.32 1.42 1.60 1.56 1.39 ==== ==== ==== ==== ==== ----------------- In March 1987, TMCC guaranteed payments of principal and interest on $58 million principal amount of bonds issued in connection with the Kentucky manufacturing facility of an affiliate. As of September 30, 1996, TMCC has not incurred any fixed charges in connection with such guarantee 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 1.49, 1.74, 1.90, 2.07 and 1.83 for the years ended September 30, 1996, 1995, 1994, 1993 and 1992, respectively. /TABLE EX-21.1 7 TMCC'S LIST OF SUBSIDIARIES EXHIBIT 21.1 TOYOTA MOTOR CREDIT CORPORATION LIST OF SUBSIDIARIES State of Subsidiary Incorporation - ---------- ------------- Toyota Motor Insurance Services, Inc. California Toyota Motor Insurance Agency of Ohio, Inc. Ohio Toyota Motor Insurance Services of Kentucky, Inc. Kentucky Toyota Motor Insurance Services of Rhode Island, Inc. Rhode Island Toyota Motor Insurance Services of Wyoming, Inc. Wyoming Toyota Motor Insurance Corporation of Vermont Vermont Toyota Motor Insurance Company Iowa Toyota Motor Life Insurance Company Iowa Toyota Motor Credit Receivables Corporation California Toyota Credit De Puerto Rico Corp. California EX-23.1 8 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-52359) of Toyota Motor Credit Corporation of our report dated October 31, 1996 appearing on page 19 of this Form 10-K. /S/ PRICE WATERHOUSE LLP Los Angeles, California December 20, 1996 EX-27.1 9 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOYOTA MOTOR CREDIT CORPORATION'S SEPTEMBER 30, 1996 FINANCIAL STATEMENTS AND NOTES THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR SEP-30-1996 SEP-30-1996 170 325 18,497 203 0 0 0 0 19,308 0 15,014 0 0 915 998 19,308 0 3,114 0 2,446 293 115 0 260 108 152 0 0 0 152 0 0 Receivables include Investments in Operating Leases net of Accumulated Depreciation and Finance Receivables net of Unearned Income. Toyota Motor Credit Corporation's Balance Sheet is not classified into Current and Long-Term Assets and Liabilities. Total Costs includes Interest Expense and Depreciation on Operating Leases.
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