Note 15 – Related Party Transactions

The tables below summarize amounts included in our Consolidated Statements of Income and in our Consolidated Balance Sheets under various related party agreements or relationships:


	Years Ended March 31,
	2017			2016			2015
Net financing revenues:
Manufacturers’ subvention and other revenues	$	1,374		$	1,315		$	1,196
Credit support fees incurred	$	(92	)	$	(91	)	$	(88	)
Interest and other expenses	$	(3	)	$	(4	)	$	(3	)

Insurance earned premiums and contract revenues:
Insurance premiums and contract revenues	$	149		$	132		$	129

Investments and other income, net:
Gain on sale of commercial finance business	$	-		$	197		$	-
Interest and other income	$	9		$	8		$	4

Expenses:
Shared services charges and other expenses	$	48		$	48		$	64
Employee benefits expense	$	25		$	33		$	24

Note 15 – Related Party Transactions (Continued)

	March 31,			March 31,
	2017			2016
Assets:
Finance receivables, net
Accounts receivable	$	136		$	120
Notes receivable under home loan programs	$	2		$	9
Deferred retail subvention income	$	(967	)	$	(794	)

Investments in operating leases, net
Investments in operating leases, net	$	4		$	3
Deferred lease subvention income	$	(1,174	)	$	(1,057	)

Other assets
Notes receivable	$	823		$	1,177
Other receivables, net	$	202		$	7

Liabilities:
Other liabilities
Unearned affiliate insurance premiums and contract revenues	$	332		$	278
Other payables, net	$	74		$	82
Notes payable	$	13		$	20

TMCC receives subvention payments from TMS which results in a gross monthly subvention receivable. As of March 31, 2017 and 2016, the subvention receivable from TMS was $165 million and $127 million, respectively. The subvention receivable is recorded in Other receivables, net in Other assets as of March 31, 2017. We have a master netting agreement with TMS and TMNA, which allows us to net settle payments for shared services and subvention transactions. Under this arrangement, we had a net payable to TMS and TMNA, which resulted in the subvention receivable being recorded in Other payables, net in Other liabilities as of March 31, 2016.

Note 15 – Related Party Transactions (Continued)

Financing Support Arrangements with Affiliates

TMCC is party to a credit support agreement with TFSC (the “TMCC Credit Support Agreement”). The TMCC Credit Support Agreement requires TFSC to maintain certain ownership, net worth maintenance, and debt service provisions in respect to TMCC, but is not a guarantee by TFSC of any securities or obligations of TMCC. In conjunction with this credit support agreement, TMCC has agreed to pay TFSC a semi-annual fee based on a fixed rate applied to the weighted average outstanding amount of securities entitled to credit support.

TCPR is the beneficiary of a credit support agreement with TFSC containing provisions similar to the TMCC Credit Support Agreement described above.

In addition, TMCC receives and provides financing support from TFSC and other affiliates in the form of promissory notes, conduit finance agreements and various loan and credit facility agreements. Total financing support received and provided, along with the amounts currently outstanding under those agreements, is summarized below. All foreign currency amounts have been translated at the exchange rates in effect as of March 31, 2017 and 2016.

Financing Support Provided by Parent and Affiliates:

			Amounts outstanding (USD) at
Affiliate	Financing available to TMCC		March 31, 2017		March 31, 2016

Toyota Credit Canada Inc.	CAD	1,500	$	-	$	-
Toyota Motor Finance (Netherlands) B.V.	Euro	1,000		-		-
Toyota Financial Services International Corporation	USD	200		5		12
Toyota Finance Australia Limited	USD	1,000		-		-
Toyota Financial Services Securities USA Corporation	USD	15		8		8
Total			$	13	$	20

Financing Support Provided to Parent and Affiliates:

			Amounts outstanding (USD) at
Affiliate	Financing made available by TMCC		March 31, 2017		March 31, 2016

Toyota Financial Savings Bank	USD	400	$	-	$	-
Toyota Credit Canada Inc.	CAD	2,500		-		220
Toyota Motor Finance (Netherlands) B.V.	Euro	1,000		407		619
Toyota Financial Services International Corporation	USD	200		-		-
Toyota Financial Services Mexico, S.A. de C.V.	USD	500		-		-
Banco Toyota do Brasil	USD	300		116		58
Toyota Finance Australia Limited	USD	1,000		300		280
Total			$	823	$	1,177

Note 15 – Related Party Transactions (Continued)

Other Financing Support Provided to Affiliates

•

TMCC provides home loans to certain employees. In addition, we also provide home equity advances through a relocation provider to certain employees relocating to Texas. TMCC executive officers and directors are not eligible for the home loan or home equity advance programs.

•

TMCC provides wholesale financing, real estate and working capital loans to certain dealerships that were consolidated with another affiliate under the accounting guidance for variable interest entities. TMCC also pays these dealers origination fees. These costs represent direct costs incurred in connection with the acquisition of retail and lease contracts, including incentive and rate participation.

•

TMCC has guaranteed the payments of principal and interest with respect to the bonds of manufacturing facilities of certain affiliates. The nature, business purpose, and amounts of these guarantees are described in Note 14 – Commitments and Contingencies.

•

TMCC and TFSB are parties to a master participation agreement pursuant to which TMCC agreed to purchase up to $60 million per year of residential mortgage loans originated by TFSB that meet specified credit underwriting guidelines. At March 31, 2017 and 2016, there were $33 million and $37 million, respectively, in loan participations outstanding that had been purchased by TMCC under this agreement.

Shared Service Arrangements with Affiliates

TMCC is subject to the following shared service agreements:

•

TMCC and TCPR incur costs under various shared service agreements with our affiliates. Services provided by affiliates under the shared service agreements include marketing, technological, facilities, and administrative services, as well as services related to our funding and risk management activities and our bank and investor relationships.

•

TMCC provides various services to our financial services affiliates, including certain administrative, systems and operational support.

•

TMCC provides various services to TFSB, including marketing, administrative, systems, and operational support in exchange for TFSB making available certain financial products and services to TMCC’s customers and dealers meeting TFSB’s credit standards. TMCC is party to a master netting agreement with TFSB, which allows TMCC to net settle payments for shared services between TMCC and TFSB.

•

TMCC is a party to expense reimbursement agreements with TFSB and TFSC related to costs incurred by TMCC or these affiliates on behalf of the other party in connection with TMCC’s provision of services to these affiliates or the provision by these affiliates of certain financial products and services to our customers and dealers in support of TMCC’s customer loyalty strategy and programs, and other brand and sales support. TMCC is also party to an expense reimbursement agreement with TFSIC that reimbursed expenses incurred by TFSIC with respect to costs related to TFSB’s credit card rewards program. TFSB sold its credit card rewards portfolio in October 2015 and no credit card reward program costs have been incurred after such date.

Note 15 – Related Party Transactions (Continued)

Operational Support Arrangements with Affiliates

•

TMCC and TCPR provide various wholesale financing to dealers, which result in our having payables to TMS and Toyota de Puerto Rico Corp (“TDPR”).

•

TMCC is party to a lease agreement with TMS for our headquarters location in the TMS headquarters complex in Torrance, California, expiring in 2018, and our Customer Service Center located in Cedar Rapids, Iowa, expiring in 2019. The lease commitments are described in Note 14 – Commitments and Contingencies.

•

Subvention receivable represents amounts due from TMS and other affiliates in support of retail and lease subvention and other cash incentive programs offered by TMCC. Deferred subvention income represents the unearned portion of amounts received from these transactions, and manufacturers’ subvention and other revenues primarily represent the earned portion of such amounts.

•

Leases represent the investment in operating leases of vehicles leased to affiliates.

•

TMCC is a participating employer in certain retirement, postretirement health care and life insurance benefits, previously sponsored by TMS. In connection with TMC’s planned consolidation of its three North American headquarters for manufacturing, sales and marketing, and finance operations to a single new headquarters facility in Plano, Texas, the sponsorship of these benefits was transferred from TMS to TMNA in fiscal 2017. Refer to Note 12 – Pension and Other Benefit Plans for additional information. TMCC also participates in share-based compensation plans sponsored by TMC.

•

Affiliate insurance premiums and contract revenues primarily represent revenues from TMIS for administrative services and various types of coverage provided to TMS and affiliates. This includes contractual indemnity coverage for limited warranties on certified Toyota and Lexus pre-owned vehicles and related administrative services for TMS’ certified pre-owned vehicle program and umbrella liability policy. TMIS provides umbrella liability insurance to TMS and affiliates covering certain dollar value layers of risk above various primary or self-insured retentions. On all layers in which TMIS has provided coverage, 99 percent of the risk has been ceded to various reinsurers. Up until April 30, 2016, TMIS also provided property deductible reimbursement insurance to TMS and affiliates covering losses incurred under their primary policy.

•

On October 1, 2015, we completed the sale of our commercial finance business to TICF. As part of this transaction, we entered into an Expense Reimbursement Agreement with TICF relating to certain expenses incurred by TMCC and a Transition Services Agreement relating to certain post-close services to be provided by TMCC to TICF. The transition services were completed as of March 31, 2017.