HIGH PERFORMANCE. POSITIVE RESULTS. · 2019. 12. 6. · investors, investment banks, and institutional investors around the world. It’s our understanding of our investors’ interests,

A N N U A L R E P O R T

F I S C A L Y E A R

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H I G H P E R F O R M A N C E . P O S I T I V E R E S U L T S .

H I G H P E R F O R M A N C E

TABLE OFC O N T E N T S

ABOUT THEC O V E R

Mission & Vision 1

Value Story 2

Financial Highlights 3

Chairman’s Message 4

President’s Message 5

Board of Directors 6

Management Team 9

Operational Highlights 12

Corporate Governance 13

Risk Management 19

International Organizational Structure

21

Financial Statements 23

Audit Committee Report 24

Independent Auditors’ Report

25

Dealership Directory 67

High Performance. Positive Results.

Toyota Financial Services Philippines (TFSPH) is a leading finance and leasing company in the Philippines.

The cover design exemplifies the company’s high performance in fiscal year 2017. Year in and year out, TFSPH continues to deliver quality and excellence, and a service that is global in standard.

By turning in positive results this fiscal year, TFSPH remains committed in providing sound financial services that contribute to the progress of the clients being served.

TFSPH believes that the key to competitiveness means not resting on the laurels of its past successes. TFSPH continues to adapt and improve in all aspects, especially adhering to Toyota’s global best practices and care for the community. To keep winning customers for life, TFSPH works to exceed expectations, never accepting satisfactory performance.

1 P O S I T I V E R E S U L T S

MISS ION &V I S I O N

MissionProvide sound financial services that contribute to the prosperous life for Toyota customers and others.

VisionBecome the Most Admired Sales Finance Company in the World.

The TFS WayChallenge. Speed. Unity of Purpose.

The Toyota WayWe will always be closely linked to our Toyota Motor Corporation heritage and the Toyota Way’s two guiding principles.

Respect for PeopleOur people are our most important asset. To be the best, we rely on each person to give his or her best. Together, we respect and support all of our customers, stakeholders and colleagues by treating them as individuals and earning their trust through the consistent and fair treatment of others. We hold ourselves to the highest standards and realize the consolidated power of a team. We value individual differences and encourage the creative exchange of ideas.

Continuous ImprovementWe strive to offer financial solutions to our customers quickly and efficiently. We live in a world where decisions are made in seconds, technology changes rapidly and our customers expect quick responses. In this environment, we embrace a spirit of challenge and drive to deliver the best products and the best customer service in a strategic and creative way. We are always looking to improve our processes and we challenge ourselves to discover and implement innovative solutions for our dealers and end-consumers. We work to exceed expectations, never accepting satisfactory performance and always searching for the next breakthrough.

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2 H I G H P E R F O R M A N C E

VALUES T O R Y

FOR CUSTOMERSBy improving service, we can increase the value we bring to our customers. In offering competitive rates, quality products, simplicity and convenience for our fleet, lease and retail customers, we’re creating lifetime Toyota brand advocates and in turn, build on a lasting and reliable relationship with our customers.

FOR DEALERSOur dealers play a critical role in our success. We must provide high value products and services to meet their needs. However, we also must build true partnerships with them by extending our support and bringing customers back to that dealership. Through brand support, customer support and increasing our loyalty programs, we’re creating value for our dealers so that they can succeed.

FOR DISTRIBUTORS /TOYOTA MOTOR PHILIPPINES (TMP)It is important for us to extend our brand to our distributor/ TMP by providing competitive products and competitive pricing to support their sales activities. We aim to provide them with the same reputable offerings that the Toyota name implies. Our focus on Customers for Life ties our efforts clearly with their goals for customer retention and increased sales.

FOR INVESTORSWe work closely with various private investors, investment banks, and institutional investors around the world. It’s our understanding of our investors’ interests, our markets and our high credit rating that enable us to have effective, long-lasting partnerships with the investment community. The quality of our credit and ability to offer what investors want to buy at an optimum cost enable us to earn their trust and secure reliable funding in a cost-effective way for all of our operations.

FOR ASSOCIATESAcross the globe, we enable our associates to share ideas and information. Through our value of Unity of Purpose, we support our operations with global best practices and teamwork, which is increasingly important as we move into new markets. With the help of global functional committees, global management committees and tools like the internet, we’re able to work together more efficiently and effectively than ever before.

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F INANC IALH I G H L I G H T S

2015

40,491

2016

45,260

2017

58,74260,000

50,000

40,000

20,000

10,000

02015

470

2016

505

600

500

400

300

200

100

0

For the Fiscal Year Ended March 31, 2017(In Million Pesos, except per share amounts)

Balance Sheet Highlights (PHP) FY 2017 FY 2016 FY 2015

Percent Increase (Decrease)

2017 vs 2016

Percent Increase (Decrease)

2016 vs 2015

Total Assets 58,742 45,260 40,491 30% 12%

Loans and Receivables, net 48,276 36,706 33,501 32% 10%

Borrowings 49,287 36,727 31,435 34% 17%

Equity 5,052 4,528 4,019 12% 13%

Authorized Capital Stock 1,700 1,700 1,000 0% 0%

Income Statement Highlights (PHP)

Net Interest Income 2,330 1,820 1,524 28% 19%

Service Charges and Other Income 241 176 167 37% 5%

Net Operating Margin 2,571 1,996 1,690 29% 18%

Operating Expenses 1,037 774 613 34% 26%

Provision for Credit and Impairment Losses 770 526 397 46% 32%

Total Operating Expense 1,807 1,300 1,010 39% 29%

Operating Income 764 696 681 10% 2%

Provision for Income Tax 251 190 210 32% -10%

Net Income 513 505 470 2% 7%

Selected KPIs:

Return on Average Assets 1.0% 1.2% 1.3%

Return on Average Equity (after Tax) 10.7% 11.8% 13.7%

Book Value per Share 297 266 236

Total Assets(In Million Pesos)

Net Income(In Million Pesos)

2017

513

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Inspired by the passion and the will to win customers for life, Toyota Financial Services Philippines (TFSPH) is committed not just to Toyota family and Toyota clients but to the Philippine society as well. We aim to achieve corporate growth by ensuring stability and profitability through efficient financial resource management.

Asset base and income remained strong this fiscal year 2017. The company’s total assets rose by 30 percent to P58.74 billion. Net interest income also increased by 28 percent to P2.33 billion.

TFSPH continues to be one of the top leasing companies in the Philippines. According to the annual survey of the Philippine Finance Association (PFA), TFSPH is consistently among the Top 3 Finance & Leasing Companies in terms of Total Assets in calendar years 2013 to 2016. The Company recorded Total Assets of P55.58 billion as of December 31, 2016.

Our all-out effort to deliver quality service and timely support by utilizing manpower resources and potential, capitalizing on technological advancement, and transparent management have put the company in a position to succeed and achieve more milestones in the years to come. Indeed, growth is never by mere chance; it is the result of forces working together.

We will remain committed in offering quality products and services that address the needs of our patrons. Our skillful management and operational team will continue to work hand-in-hand towards the achievement of the goals of the company by embodying TFSPH values and standards, having an ever-watchful eye on external developments that may impact TFSPH’s growth, and developing ready responses on how to adapt to such market event and developments.

I am grateful for another solid performance this fiscal year and I look forward to another great year with our customers.

DR. ANTONIO S. ABACAN, JR.Chairman

"Beyond the numbers however, is our relentless focus on

continuous improvement in everything we do – the end goal of which is to make a

difference in the lives of our customers."

CHA IRMAN ’S M E S S A G E

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"I am confident that Toyota Financial Services Philippines

(TFSPH) is evolving into a company that is capable of

sustainable growth."

The industry continues to experience fast-paced changes driven by a volatile business environment and competition. In these time of challenges, I am confident that Toyota Financial Services Philippines (TFSPH) is evolving into a company that is capable of sustainable growth.

This fiscal year 2017 is another manifestation of our successful attempt to translate our goals to reality. TFSPH has always been committed in its mission to create value to customers through sound financial products and services that address their unique needs and meet their expectations. These translate to positive experiences that make more and more people develop preference for TFSPH.

TFSPH once again grew its asset base and income in fiscal year 2017. The company’s total assets rose to P58.74 billion in fiscal year 2017, up 30 percent from the previous year, while net interest income grew by 28 percent to P2.33 billion. Net income for the year was up 1.5 percent to P512.89 million.

Amid the surge in vehicle sales and higher consumer spending, we will continue to strive to be the number one provider of financial services. With our company’s Customer for Life philosophy, we will further intensify our relationships with our customers as they serve as lifetime Toyota brand advocates.

As we pursue our goals and fulfill our responsibilities, I would like to take this opportunity to express our gratitude and appreciation for the loyal support of our business partners, shareholders, and employees as well as of Toyota Motor Philippines and the Toyota dealer network – all of whom have played a significant part in our success through the years.

Moving forward, we will maintain our commitment in achieving market leadership by providing excellent service and innovative products for our patrons. We will strive to further strengthen the foundation of our company so that we can deliver the best value to our shareholders and clients.

ATSUSHI MURAKAMIPresident

PRES IDENT ’ S M E S S A G E

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BOARD OF D I R E C T O R S

DR. ANTONIO S. ABACAN, JR.Chairman*Nominee of GT Capital Holdings, Inc.74 years oldFilipino

Educational Background:• BSBA – Major in Banking and Finance

– Mapua Institute of Technology• BSBA – Major in Accounting – Far

Eastern University• Executive Program, Graduate School

of Business – Stanford University• Doctor of Business Administration,

Honoris Causa – Philippine Women’s University

Work Experience:• Group Vice Chairman – Metrobank

Group of Companies• Senior Adviser – Metropolitan Bank

and Trust Company• Chairman of the Board – Sumisho

Motor Finance Corporation• Chairman of the Board/President –

Manila Medical Services, Inc. (Manila Doctors Hospital)

• Chairman of the Board – Manila Tytana Colleges

• Chairman of the Board – Circa 2000 Homes, Inc.

• Director – Vivant Corporation• Director – Taal Land, Inc.• Honorary Chairman – Orix Metro

Leasing and Finance Corporation• Adviser – Federal Land, Inc.• Adviser – Toyota Manila Bay

Corporation Group• Trustee Treasurer – Philippine

Business Center• Director for Banking, Finance

and Taxation of Capital Market Development – Philippine Chamber of Commerce and Industry

• Governor – Makati Commercial Estate Association

• President – DARE (Drug Abuse Resistance Education) Philippines Association, Inc.

• Member – Management Association of the Philippines (MAP)

ATSUSHI MURAKAMIDirector/PresidentNominee of Toyota Financial Services Corporation (TFSC)59 years oldJapanese

Educational Background:• Bachelor of Business Administration

– Otaru Commerce University

Work Experience:• Vice President, Global Audit – Toyota

Financial Services Corporation (April 2009 – December 2014)

• Senior Manager, Audit – Bank of Tokyo Mitsubishi UFJ (April 2006 – March 2009)

• Senior Manager to Branch Manager – UFJ Bank

• Deputy President and Director – Tokai Bank Nederland

• Manager to Senior Manager – Tokai Bank

YASUHIRO YOMODADirectorNominee of Toyota Financial Services Corporation (TFSC)61 years oldJapanese

Educational Background:• B.S. Sociology – Hitotsubashi

University

Work Experience:• Chief Executive Officer of Asia Pacific

Region – Toyota Financial Services Corporation (TFSC)

• Chairman – Toyota Financial Services Vietnam Co., Ltd.

• Director – Toyota Finance Australia Ltd.• Director – Toyota Capital Malaysia

Sdn, Bhd.• Director – Hotai Finance Corp.• Director – Hotai Leasing Corp.• Director – Hoyun International

Leasing Corporation Ltd.• Commissioner – PT Toyota Astra

Financial Services• Director – Toyota Leasing Thailand

Co., Ltd.• Director – Toyota Finance New

Zealand Ltd.

SATORU SUZUKIDirectorNominee of Toyota Financial Services Corporation (TFSC)55 years oldJapanese Educational Background:• Bachelor of Economics – Hokkaido

University

• Senior Adviser – Metrobank Foundation

• Member , Board of Trustee – GT Metro Foundation

• Member, Board of Trustee – Piso for Unity, Peace and Progress Foundation

• Member, Board of Trustee – Evangelion Foundation

• Member – Stanford University Alumni Association

*Resigned effective June 30, 2017

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KENNETH GABRIEL T. CHUAIndependent Director47 years oldFilipino

Educational Background:• Bachelor of Science – San Jose State

University, U.S.A.

Work Experience:• Director – Century Savings Bank• Director – Bloomingdale Enterprises• VP Marketing/Director – Legaspi

Import & Export

DR. DAVID T. GOBoard Adviser and Treasurer63 years oldFilipino

Educational Background:• Bachelor of Arts – New York University

(Cum Laude)• Doctor of Philosophy – New York

University

Work Experience:• SEVP/Treasurer/Director – Toyota

Motor Philippines Corp.• Chairman – Toyota San Fernando, Inc.• Chairman – Toyota Makati Inc.• Chairman – Toyota Manila Bay, Inc.• Chairman – Toyota Santa Rosa

Laguna, Inc.• Vice Chairman – Toyota Autoparts

Philippines, Inc.• President – Toyota Motors Philippines

Foundation Corp.• President-Toyota Motor Philippines

School of Technology, Inc.

ATTY. MARIA ZENAIDA ONGKIKO-ACORDAIndependent Director54 years oldFilipino

Educational Background:• A.B. Political Science – University of

the Philippines (Magna Cum Laude)• Bachelor of Laws – University of the

Philippines• Master in Public Administration –

Harvard University, U.S.A.• Executive Master in Business

Administration – Asian Institute of Management

Work Experience:• Partner – Custodio Acorda Sicam De

Castro and Panganiban Law Offices• Partner – Ongkiko Manhit Custodio &

Acorda Law Offices• Partner – The ADR Center for

Negotiation, Mediation & Arbitration• Director – OKMA Realty Inc.• Director – Maria Equity Property and

Development Corp.• Director – Nova Fusion, Inc.• Trustee – Pacific Ace Her Cause

Foundation• Trustee – Being Human Foundation• Supreme Court-Accredited Appealed

Cases Mediator – Philippine Mediation Center

• Accredited Arbitrator – Intellectual Property Office

• Accredited Arbitrator – Wholesale Electricity Spot Market (WESM)

• Accredited Arbitrator – Construction Industry Arbitration Commission (CIAC)

PASCUAL M. GARCIA IIIDirector*Nominee of GT Capital Holdings, Inc.63 years oldFilipino

Educational Background:• B.S. Commerce Major in Management

– Ateneo de Zamboanga

Work Experience:• Director/President – Federal Land Orix

Corp.• Director/President – Bonifacio

Landmark Realty and Dev’t Corp.• Director/President – Horizon Land

Property Dev’t Corp.• Director/President – Federal Land, Inc.• Chairman/President – Central Realty

& Development Corp.• Chairman/President – Omni Orient

Management Corp.• Chairman/President – Metpark

Commercial Estates Association, Inc.• Vice Chairman/ President – Property

Company of Friends, Inc.• Chairman – Federal Land, Inc.,

ALVEO – Federal Land Communities Chairman – Crown Central Properties

• Chairman – Marcan Development Corporation

• Chairman – Camarillo Development Corporation

• Chairman – Williamton Holdings Inc.• Chairman – Micara Land, Inc.• Vice Chairman – Cathay International

Resources Corporation

Work Experience:• Director/President – Toyota Motor

Philippines Corporation (TMP)• Director – Toyota Motor Philippines

School of Technology• Director – Lexus Manila, Inc.• Director – Japanese Chamber of

Commerce and Industry• Director – Japanese Association of

Manila, Inc.• President – Philippine Automotive

Competitiveness Council, Inc.

• Board Adviser – GT Capital Holdings Inc.

• Adviser – Federal Brent Retail, Inc.

*Resigned effective June 30, 2017

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• Director – Lexus Manila• Director – Toyota Cubao, Inc.• Director – GT Capital Holdings, Inc.• Trustee – Toyota Motor Philippines

Savings and Loan Association

FRANCISCO H. SUAREZ, JR.Corporate Secretary57 years oldFilipino

Educational Background:• A.B. Applied Economics – De La Salle

University• MBA Candidate – Ateneo Graduate

School of Business

Current Positions and Affiliations in Other Companies/Institutions:• Chief Finance Officer – GT Capital

Holdings, Inc.• Corporate Secretary – Toyota Manila

Bay Corp.

ATTY. ROY Y. MARTELINOAssistant Corporate Secretary72 years oldFilipino

Educational Background:• Bachelor of Laws – San Beda College

Work Experience:• Corporate Secretary – Orix Metro

Leasing and Finance Corporation

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BERNARD M. CARAGUESenior Vice PresidentBusiness Services Group Head50 years oldFilipino

Educational Background:• AB Management Economics – Ateneo

de Manila University• Master of Business and Management

– Asian Institute of Management

Work Experience:• Global Business Power Corporation –

Vice President/Assistant Chief Finance Officer (January 2013 to July 2016)

• Security Bank Corporation – First Vice President (April 2011 to December 2012)

• Philippine National Bank – First Vice President (March 2008 to June 2010)

• Banco de Oro/Equitable PCI Bank – Vice President (April 2004 to January 2008)

• Security Bank Corporation – Senior Assistant Vice President (May 2000 to March 2004)

• Solid Bank Corporation – Senior Manager (May 1993 to April 2000)

ROMMEL J. OCAMPOSenior Vice PresidentSales and Marketing Group Head48 years oldFilipino

Educational Background:• BA Political Science – University of the

Philippines, Diliman

Work Experience:• Toyota Financial Services Philippines

Corporation (TFSPH) – Vice President to Senior Vice President (May 2011 to present)

• Consolidated Tours and Travel – President/General Manager (January 2009 to present)

• Toyota Financial Services Philippines Corporation (TFSPH) – Senior Manager to Vice President (August 2002 to November 2008)

• RCBC Savings Bank – Senior Manager (December 1998 to July 2002)

• RCBC Commercial – Authorized Signer to Assistant Manager (July 1993 to December 1998)

T FSPHM A N A G E M E N TTEAM

DR. DAVID T. GOBoard Advisor and Treasurer

ATSUSHI MURAKAMIDirector/President

KEISUKE NISHINAKAVice PresidentSpecial Projects32 years oldJapanese

Educational Background:• Business Administration – Yokohama

National University

Work Experience:• Toyota Financial Services Corporation

(TFSC), Nagoya, Japan – Assistant Manager, Corporate Planning Group (January 2011 to December 2013)

• Mitsubishi UFJ Morgan Stanley Securities, Tokyo, Japan – Associate, Investment Banking Business Unit (May 2010 to November 2010)

• Mitsubishi UFJ Securities , Tokyo, Japan – Analyst, Investment Banking Business Unit (April 2007 to May 2010)

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1 0 H I G H P E R F O R M A N C E

ATTY. MARIBEL M. DIMAYUGAVice PresidentChief Compliance Officer42 years oldFilipino

Educational Background:• Bachelor of Arts, Major in Political

Science – De La Salle University• Bachelor of Laws – San Sebastian

College

Work Experience:• China Bank Savings, Inc. – Assistant

Vice President, Chief Compliance Officer (December 2015 to July 2016)

• Planters Development Bank – Compliance Assistant to Chief Compliance Officer (July 2012 to December 2016, effective date of

MARILY M. CABUCOVice PresidentInternal Audit Department Head49 years oldFilipino

Educational Background:• Bachelor of Science in Commerce

Major in Accounting – Far Eastern University

• Master in Business Administration – De La Salle University

Work Experience:• Metropolitan Bank and Trust Company

– Division Head, Internal Audit (1998 to 2015)

• Security Bank – Department Head, Internal Audit (1989 to 1998)

• SGV & Company – Audit Assistant (1989 to 1989)

MARLON M. PERNEZVice PresidentChief Risk Officer49 years oldFilipino

Educational Background:• A.B. Economics – De La Salle University• Bachelor of Science in Commerce

Major in Accounting – De La Salle University

• Bachelor of Laws – Arellano Law School (Executive Class)

• Certified Public Accountant (CPA)


Corp.: a) Vice President - Comptroller (March 2011 to November 2013) b) Vice President - Chief Risk and Compliance Officer (November 2013 to September 2016) c) Vice President - Chief Risk Officer (September 2016 to July 2017)

merger with CBS)• Teletech Philippines – Contracts

Administration Manager (November 2010 to May 2011)

• Tong Yang Savings Bank, Inc. – Compliance Officer (July 2006 to April 2009/ January 2010 to November 2010)

• Pru Life UK – Sales and Compliance Manager (April 2009 to December 2009)

• Unet Distribution, Inc. – HR/Legal Officer (March 2006 to July 2006)

• General Practice (July 2005 to February 2006)

• Rico General Insurance Corporation – Corporate Legal Counsel (June 2003 to June 2005)

• Filipino Merchants Insurance Corporation – Corporate Legal Counsel (June 2001 to March 2003)

• PhilNo Business Support, Inc. – Director, Corporate Secretary (August 2011 to October 2012)

• Lufthansa Technik Philippines – Manager/ Controller, Controlling & Tax Division (October 2001 to March 2011)

• Macondray Finance Corporation – Finance and Admin Manager (February 1995 to June 2001)

• Associated Broadcasting Company (ABC5) – OIC/ Internal audit Manager (April 1993 to February 1995)

• SGV & Company – Staff-in-Charge Auditor (January 1990 to March 1993)

NOEL R. AMATAAssistant Vice PresidentCompliance Officer54 years oldFilipino

Educational Background:• B.S.B.A. Major in Accounting – Lyceum

of the Philippines • Master in Business Administration –

De La Salle University• Certified Public Accountant (C.P.A.)

Work Experience:• United Overseas Bank Philippines

(UOBP) – Assistant Vice President, Compliance, Internal Audit and Risk Management Department Head (2007 to 2008)

• Centennial Savings Bank – Assistant Vice President, Compliance and Internal Group Head (2005 to 2007)

• Malayan Bank – Chief Auditor and Compliance Officer (1998 to 2005)

• Prudential Bank:a) Internal Audit Department – Audit Clerk to Official Assistant (1987 to 1998)b) Buendia Branch – Settling Clerk (1984 to 1987)

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1 1 P O S I T I V E R E S U L T S

KATHLEEN L. AMORESAssistant Vice PresidentMarketing Department Head38 years oldFilipino

Educational Background:• B.S. Psychology – University of Sto

Tomas (Cum Laude)


Corporation (TFSPH):a) Senior Manager, Marketing Department Head (May 2011 to June 2014)b) Assistant Vice President, Marketing Department Head (July 2014 to present)

• Bank of the Philippine Islands – Manager (1999 to 2011)

MARIA CECILIA E. BALTAZARAssistant Vice PresidentCredit Administration Department Head42 years oldFilipino

Educational Background:• Bachelor of Science in Nursing –

Centro Escolar University


Corporation (TFSPH):a) Treasury Specialist to Treasury Administration Head (March 2008 to September 2012)b) Manager to Assistant Vice President, Credit Administration Head (October 2012 to present)

ATTY. TEODORO D. VILLAPENA, JR.Assistant Vice PresidentLegal Department Head43 years oldFilipino

Educational Background:• A.B. Political Science – San Sebastian

College• Bachelor of Laws – San Sebastian

College• Master in Business Administration

(MBA) – Jose Rizal University

Work Experience:• Radiowealth Finance Company, Inc.

– Vice President for Legal (February 2007 to June 2015)

• Citystate Savings Bank, Inc. – Legal Manager (August 2002 to January 2007)

JAMAR D. DALISAYAssistant Vice PresidentInformation Technology Head43 years oldFilipino

Educational Background:• B.S. Computer Science – Ateneo de

Manila University


Corporation (TFSPH) – Manager to Assistant Vice President, Information Technology Head (2006 to present)

• Business Info Solution – Senior Manager (2003 to 2006)

• Citifinancial – Manager (2001 to 2003)

• Asia United Bank – Senior Assistant Manager (1999 to 2001)

• BIS Software – Application Consultant (1997 to 1999)

• SPL Worldgroup – Application Developer (1995 to 1997)

MA. FE S. MEDRANOAssistant Vice PresidentBudget and Management Information System Head50 years oldFilipino

• BPI Securities Corporation – Customer Relations Specialist (February 2002 to March 2008)

• DBS Bank Phils., Inc. – Company Nurse (October 1998 to January 2008)

• Bank of Southeast Asia, Inc. – Loans Processor (December 1995 to September 1998)

Educational Background:• BSC Accounting – Letran College• Certified Public Accountant (C.P.A.)


Corporation (TFSPH):a) Senior Manager, Internal Audit Department Head (2008 to 2010)b) Senior Manager, Operations Department Head, (2010 to October 2012)c) Senior Manager, Budget and MIS Head (October 2012 to July 2015)d) Assistant Vice President, Budget and MIS Head (August 2015 to present)

• Masaito Development Corporation – Accounting Head (2005 to 2007)

• Platinum Plans Corporation – Accounting Head (1999 to 2005)

• RCBC Savings Bank – GSD Officer (1992 to 1998)

• Baskets Etc., Inc. - Accountant (1990 to 1992)

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OPERAT IONAL H I G H L I G H T S

Toyota Financial Services Philippines (TFSPH) turned in another positive performance in fiscal year 2017 as it holds true to its commitment to provide sound financial services that contribute to the progress of the clients we serve.

Financial Performance

The Company’s Total Assets improved anew for the fiscal year, increasing 29.79 percent to P58.74 billion from the P45.26 billion last year. This was led by Loans and Receivables recorded at P48.28 billion, up 31.52 percent from the previous year.

Net Interest Income grew to P2.33 billion, an increase of 28.03 percent over the P1.82 billion posted in FY 2016. Net Income after Tax was recorded at P512.89 million, improving on the P505.32 million of last year.

This fiscal year marked milestones in our financial performance. TFSPH achieved its highest net financed amount in March

2017 with P2.47 billion. The Company also posted its record high in new contracts, reaching 3,271 contracts (including used car) last December 2016. These are a result of the combined efforts of all team members in TFSPH.

Customer Service

The Company continues to benefit from investments made in Call Center Operations and the Office Help Desk. As projected, these systems have contributed to improved productivity, better call handling, and enhanced IVRS (interactive voice response system).

For the year, these upgrades contributed to serving 71,588 customers, with 53,831 serviced through the Call Center and another 17,757 via our Office Help Desk. Transactions received through the Call Center and Office Help Desk included product and service inquiries, requests, and other concerns.

For Call Center transactions, inquiries ranged from collection-related concerns, with a total of 13,797, document release inquiries at 8,171, and payment inquiries at 23,957 for a total of 45,925 inquiry transactions. Request-related transactions numbered 7,881; 3,131 of which were document requests, 660 check-related requests, and 4,090 pay-off requests. A total of 25 transactions on the other hand, were complaints.

For Office Help Desk transactions, inquiries included collection-related questions, with a total of 1,678, document release inquiries at 8,103, and payment inquiries at 2,710 for a total of 12,491 inquiry transactions. Request-related transactions totaled 5,681; 2,708 of which were document requests, 1, 396 check-related requests, and 1,577 pay-off requests. The remaining 8 transactions were complaints.

We expect these numbers to further improve as both our team members and customers become accustomed to these portals.

Poised for Further Growth

TFSPH will not rest on the laurels of its past successes. It must continue to adapt and improve in all aspects, especially in its perennial pursuit of “customers for life”. Towards this end, the Company has taken steps to further bolster its financial position.

In March 2017, TFSPH issued P1.50 billion in fixed rate notes. These were subscribed to by high net worth individuals and institutional investors. Proceeds from the issuance will be used for working capital and for other general corporate purposes.

This successful bond issue will allow TFSPH to pursue further improvement within the organization, as well as take advantage of opportunities that may emerge.

Building lasting and reliable relationships with our clients will remain the primary goal of TFSPH. We have begun to take the appropriate steps towards this goal, and we must not lose focus on this objective.

We will constantly look back at our service delivery and our financial products to ensure that these are aligned with the high standards that our customers demand and deserve. It is this level of performance that will allow TFSPH to sustain its leadership position among its peers, and more importantly in the lives of our customers.

Customers Served

Call Center53,831

17,757Office Help Desk

Type of Transactions received thru Call Center

Inquiries45,925

7,881Requests

Complaints25

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CORPORATE G O V E R N A N C E

PURPOSE AND BEINGCorporate Governance is an essential, defining structure for TFSPH. It consists of a framework of rules, systems and processes in the corporation that govern the performance of the Board of Directors and Management of their respective duties and responsibilities to the stockholders and other stakeholders which include, among others, customers, employees, suppliers, financiers, government and the community in which it operates.

THE BOARD OF DIRECTORSCompliance with the principles of good corporate governance starts with the Board of Directors. It shall be the Board’s responsibility to foster the long-term success of the Corporation and secure its sustained competitiveness in a manner consistent with its fiduciary responsibility, which it shall exercise in the best interest of the Corporation, its shareholders and other stakeholders. The Board shall conduct itself with utmost honesty and integrity in the discharge of its duties, functions and responsibilities.

The Board of Directors sets the pace with policies that embody TFSPH values and standards, medium and long term setting of goals, an ever-watchful eye on external developments that may impact TFSPH’s growth and ready responses on how to adapt to such market event and development.

The Board of Directors leads the way of strategic thinking on the opportunities and challenges that are eventually to come the way of TFSPH and by keeping these in regular review.

The Board of Directors monitors the performance of the executive management against ongoing or pipelined specified quantitative or qualitative criteria. Such evaluation criteria include standards for internal controls, regulatory and legal compliance and appropriate management policies, procedures and standards.

1. Composition The Board of Directors is composed of

seven (7) members, two (2) of whom are Independent Directors. Five (5) non-independent directors are nominated by the stockholders: three (3) directors by Toyota Financial Services Corporation (TFSC), while the remaining two (2) directors by GT Capital Holdings, Inc. All nominees to the Board are required to possess the minimum qualifications mandated in the Corporation Code, Securities Regulation Code, the General Banking Law and the BSP Manual of Regulations for Non-Bank Financial Institutions. It shall be reviewed and evaluated by the Corporate Governance Committee before endorsement to the Board of Directors for approval.

The appointment of a director shall be submitted to BSP within twenty (20) banking days for Monetary Board confirmation.

2. The Chairman The Board of Directors is headed by the

Chairman with following duties and responsibilities:

• Ensure that the meetings of the Board are held in accordance with the By-Laws;

• Supervise the preparation of the agenda of the meeting in coordination with the Corporate Secretary, taking into consideration the suggestions of the President Management and Directors, and;

• Maintain qualitative and timely lines of communication and information between the Board and Management.

3. Monitoring and Assessment One of the Monitoring and Assessment

mechanism embodied in the TFSPH Corporate Governance Manual is the Assessment for Individual Directors. It is a rating and evaluation system containing set of questions to be answered individually by the Directors that will reflect their personal view on the degree of TFSPH compliance on Corporate Governance. It covers an assessment of the performance of the Board of Directors, the Chairman, the President and the board-level committees. It is conducted at the end of every fiscal year initiated by the Compliance Department. Results of the self-assessment are discussed in the Corporate Governance Committee before finally being reported to the Board of Directors.

Selection Process for the BoardThe position of a director is one imbued with trust. It is essential that directors are selected based on probity, leadership, credibility and competence. The shareholders nominate candidates by submitting the nomination to the

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Corporate Governance Committee. The Committee evaluates the qualifications of the candidates and conducts fit and proper test.

BOARD COMMITTEESThere are five (5) board-level committees appointed by the Board of Directors: the Corporate Governance Committee, Audit Committee, Risk Oversight Committee, Related Party Transaction Committee (RPT), and the Executive Committee. The Management Committee and the Credit Committee comprise the Administrative Sub-Committee or the Management-Level Committees.

1. CORPORATE GOVERNANCE COMMITTEE The Corporate Governance Committee

has five (5) members (including two Independent Directors). It is chaired by an Independent Director, with regular meetings held every quarter. It’s General Purpose and Responsibilities include: assisting the Board of Directors in fulfilling corporate governance responsibilities; review and evaluation of qualifications of candidates to the BOD as well as nominees for senior officers’ position or positions requiring appointment by the BOD. They also determine the form and amount of per diem and allowances of the BOD. It also reviews and assesses policies submitted to the BOD for approval. They also oversee the periodic performance evaluation of the BOD and its committees and the President.

Composition: (As of March 31, 2017)

Chairman Atty. Ma. Zenaida O. Acorda

Members Mr. Kenneth Gabriel T. Chua

Mr. Atsushi Murakami

Mr. Pascual M. Garcia III

Dr. David T. Go*

*Dr. David T. Go has replaced Dr. Antonio S. Abacan, Jr. effective September 29, 2016.

2. AUDIT COMMITTEE The Audit Committee is comprised of

three (3) members, which include two (2) Independent Directors. It is chaired by an Independent Director with regular meetings held every quarter. Its General Purpose and Responsibilities include: providing oversight of the Company’s financial reporting process, system of internal control, and internal and

external audit functions; setting up the Internal Audit Department and the appointment of the Internal Auditor as well as Independent External Auditor who shall both report directly to the Audit Committee; and ensuring that a review of the effectiveness of the company’s internal controls, including financial, operational and compliance controls are conducted at least annually.


Chairman Ms. Kenneth Gabriel T. Chua

Members Atty. Ma. Zenaida O. Acorda

Dr. Antonio S. Abacan, Jr.*

*Dr. Antonio S. Abacan, Jr. was elected as member of the Committee on September 29, 2016 replacing Mr. Pascual M. Garcia III.

3. RISK OVERSIGHT COMMITTEE The Risk Oversight Committee is

comprised of five (5) Directors, which include two (2) Independent Directors. It is chaired by an Independent Director, with regular meetings held every quarter. It is responsible for the development and oversight of the company’s risk management program. The Committee provides independent views from the business units and ensures effective implementation of risk management framework through regular review of the Company’s performance against approved tolerance for each risk indicator. The Committee also monitors key and emerging risks as well as reviews and assesses the impact of business strategies, opportunities and initiatives on overall risk position.






Mr. Francisco H. Suarez, Jr.*

*Mr. Francisco H. Suarez, Jr. was elected as member of the Committee on May 25, 2016 replacing Mr. Domingo C. Go.

4. RELATED PARTY TRANSACTION COMMITTEE (RPT)

The RPT Committee is composed of five (5) members of the Board of Directors, including two (2) independent directors including the Chairman. The

RPT Committee shall meet whenever necessary to discuss, evaluate and approve related party transactions. The duties and responsibilities of the Committee include the following : Informs or reports to the Board of Directors, as needed, at least once a year; Evaluates on an ongoing basis existing relations between and among businesses and counterparties to ensure that all related parties are continuously identified, RPTs are monitored, and subsequent changes in relationships with counterparties are captured; Evaluates all materials RPTs to ensure that these are not undertaken on more favourable economic terms; Ensures that transactions with related parties are subject to periodic independent review or audit process; Oversees the implementation of the system for identifying monitoring, measuring, controlling, and reporting RPTs, including the periodic review of RPT policies and procedures.






Dr. David T. Go*

Dr. David T. Go has replaced Dr. Antonio S. Abacan, Jr. effective September 29, 2016.

5. EXECUTIVE COMMITTEE The Executive Committee is comprised

of five (5) members, with at least three (3) members of the Board of Directors. Regular meetings are held at least once every quarter. The members of the Committee are appointed by the Board of Directors to provide oversight, direction and counsel to the President on all policy matters; assist and guide the President in the resolution and implementation of major management decisions; involve in matters effective to the strategic direction of the Company; and monitor the financial performance of TFSPH and the adequacy of its capital.

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7. CREDIT COMMITTEEThe Credit Committee is composed of members coming from Senior Management appointed by the Board of Directors, with the President as Chairman. Regular meetings are held at least every month. It reviews and approves loan applications within the threshold set by the BOD. It evaluates and recommends to BOD accounts for write-off. It implements other directives of the Board of Directors and of the regional functional committees of Toyota Financial Services Corporation (TFSC).


Chairman Atsushi Murakami

Members Dr. David T. Go

Bernard M. Carague*

Rommel J. Ocampo

*Mr. Bernard M. Carague was elected as member of the Committee effective August 1, 2016 replacing Ms. Jennifer Joyce M. Umali.

ATTENDANCE TO BOARD AND BOARD-LEVEL COMMITTEE MEETINGS

NAMEBOARD OF DIRECTORS

CORPORATE GOVERNANCE

RISK OVERSIGHT AUDIT COMMITTEE EXECUTIVE COMMITTEE

Attended % Attended % Attended % Attended % Attended %

DIRECTORS:

DR. ANTONIO S. ABACAN, JR. 8/8 100% 2/2 100% N/A - 2/2 100% 7/7 100%

ATSUSHI MURAKAMI 8/8 100% 5/5 100% 4/4 100% N/A - 7/7 100%

YASUHIRO YOMODA 8/8 100% N/A - N/A - N/A - 2/2 100%

SATORU SUZUKI 7/8 88% N/A - N/A - N/A - N/A -

PASCUAL M. GARCIA III 8/8 100% 4/5 80% 4/4 100% 2/2 100% 2/2 100%

ATTY. MA. ZENAIDA O. ACORDA 8/8 100% 5/5 100% 4/4 100% 4/4 100% N/A -

KENNETH GABRIEL T. CHUA 8/8 100% 5/5 100% 4/4 100% 4/4 100% N/A -


Chairman Dr. David T. Go*

Members Mr. Atsushi Murakami

Mr. Yasuhiro Yomoda**

Mr. Pascual M. Garcia III**

Mr. Bernard M. Carague***

Adviser Dr. Antonio S. Abacan, Jr.**Dr. David T. Go was elected as Chairman of the Committee on September 29, 2016 replacing Dr. Antonio S. Abacan, Jr. who assumed the post of Adviser.**Mr. Yasuhiro Yomoda and Mr. Pascual M. Garcia III were elected as additional members of the

Committee on September 29, 2016.***Mr. Bernard M. Carague was elected as member of the Committee effective August 1, 2016 replacing Ms. Jennifer Joyce M. Umali.

6. MANAGEMENT COMMITTEE The Management Committee is composed

of members coming from the Senior Management of TFSPH appointed by the Board of Directors. The President is the Chairman of the Committee. Regular meetings are held every month, within the second week after the end of the month or as determined by the Chairman. The Committee oversees the management of the day-to-day activities of the TFSPH. It has to ensure that Management has in place policies, processes and procedures and assesses the significant risks to which

TFSPH is exposed, including compliance with applicable laws and regulations.


Chairman Atsushi Murakami

Members Dr. David T. Go

Bernard M. Carague*

Rommel J. Ocampo

*Mr. Bernard M. Carague was elected as member of the Committee effective August 1, 2016 replacing Ms. Jennifer Joyce M. Umali.

(Forward)

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NON-DIRECTORS:

DR. DAVID T. GO N/A - 3/3 100% N/A - N/A - 7/7 100%

FRANCISCO H. SUAREZ, JR. N/A - N/A - 4/4 100% N/A - N/A -

BERNARD M. CARAGUE N/A - N/A - N/A - N/A - 4/4 100%

TOTAL NUMBER OF MEETINGS 8 5 4 4 7

SELF-ASSESSMENT FUNCTIONS1. COMPLIANCE FUNCTIONTFSPH endeavors to create a culture of proactive compliance. We recognize our solemn duty to adhere to the regulations based on a culture of accountability and transparency as defined in our Code of Conduct. We are committed to put in place the appropriate processes to ensure a common understanding of, and compliance with, laws, rules and regulations, through a continuing training and education program, and enhanced monitoring and enforcement. This is in line with the company’s guiding principle of Toyota Way, which rests on two (2) pillars: “Continuous Improvement” and “Respect for People”. We can never be satisfied with where we are and are always seeking to improve our business by building on best ideas and putting forth our best effort to win customers for life. We believe that the success of our business is created through the strong combination of individual effort and effective teamwork.

The Board of Directors is ultimately accountable to the stakeholders of TFSPH. It is responsible for overseeing its compliance risk management. It encourages and gives appropriate directions to the senior management in establishing and implementing compliance framework at TFSPH that ensures TFSPH Code of Conduct and applicable laws, regulation are complied with. The Corporate Governance Committee of the Board of Directors shall be responsible in the establishment and implementation of the compliance framework of TFSPH that ensures TFSPH compliance with applicable laws, regulation. It obtains regular updates and reports from the Chief Compliance Officer on Compliance matters.

The Chief Compliance Officer oversees the design of the compliance system and promotes its effective implementation. The Chief Compliance Officer shall be the lead senior officer for the purpose of

administering the compliance program and interacting with BSP. The Chief Compliance Officer is assisted by an adequately staffed Compliance Department.

The President is the one responsible in ensuring that appropriate and effective compliance framework is established and implemented in TFSPH. The responsibility of ensuring compliance with applicable laws, rules and regulations in the respective departments and units lies with Department and Unit Heads.

Compliance risk management is the responsibility of all team members/ associates in TFSPH. Each team member/ associate must ensure that he/she complies with all applicable laws, regulatory requirements and TFSPH policies, procedures and manuals at all times. Any compliance breach or deficiency in compliance risk management must be reported in accordance with the Whistle Blowing Policy and other related procedures and manuals to the designated personnel without delay.

2. INTERNAL AUDIT FUNCTIONAn independent Internal Audit Department (IAD) was set up to provide the Board of Directors (BOD), through the Audit Committee, with reasonable assurance that key organizational and procedural controls are effective, appropriate, and complied with. The IAD of TFSPH is under the responsibility of Marily M. Cabuco, Chief Audit Executive (CAE). IAD is appropriately positioned, granted full and free access to any records, information systems, physical properties, personnel, and to the Audit Committee, and is provided with adequate resources to effectively fulfill its mission and purpose. Its independence and stature are clearly manifested by its direct reporting relationship to the BOD through the Audit Committee. BOD approved Internal Audit Charter, which sets out IAD’s mission, purpose, authority, scope, responsibility, and independence.

IAD performs its duties and responsibilities in adherence to the Institute of Internal Auditor’s (IIA) International Standards for the Professional Practice of Internal Auditing (ISPPIA) and Core Principles. The risk-based audit plan is carefully developed, incorporating directives at the regional (Toyota Financial Services Corporation [TFSC]) and company levels, strategic plans and activities disclosed in the Company’s Mid-Term Business Plans, regulatory requirements and inputs from the Senior Management, and ensuring that all critical business areas, control activities, regulatory requirements, and emerging risks are covered. Progress of these plans, and significant issues, internal control weaknesses and Kaizen opportunities resulting from IAD’s reviews are reported to Senior Management and the Audit Committee. The completion of the audit plan enabled the CAE to render an overall assessment on the adequacy and effectiveness of the Company’s governance, risk management and internal control processes; complemented the oversight responsibility of the BOD to Senior Management in establishing and maintaining an adequate, effective and efficient internal control framework; and provided value-added contributions, and process improvements across the organization that help address its risks and exposures.

REMUNERATION POLICYAs indicated in the Corporate Governance Manual, the levels of remuneration of the corporation should be fair, sufficient and competitive to be able to attract and retain the services of qualified and competent officers. It should ensure that their compensation is consistent with the corporation’s culture, strategy and the business environment in which it operates.

It is provided in the By-Laws that Directors may receive, in such capacity, compensation as may be determined by the resolution of the Meeting of the Stockholders, subject

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to the Philippine laws. By the resolution of the Board of Directors, each Director shall receive a reasonable per diem allowance for his/her attendance to each Meeting of the Board of Directors. Any decisions on remuneration, bonuses and allowances of Directors shall be resolved at the meeting of the Stockholders with the affirmative vote of not less than two-thirds of the total outstanding capital stock of the corporation.

The following are the policies and procedures in the remuneration of directors as stated in the Corporate Governance Manual of TFSPH:

1. Remuneration of directors shall be reviewed annually.

2. The Corporate Governance Group shall conduct research/ benchmarking with Toyota Motors Philippines Corporation and other subsidiaries / affiliates of GT Capital and Metrobank Group on per diem, transportation allowance and bonuses of directors.

3. Any increase in the per diem, transportation allowance, bonuses and other remuneration of directors shall be discussed in the Corporate Governance Committee for endorsement to the Board of Directors for approval.

4. After approval of the Board of Directors, it will be forwarded to the Stockholders during the annual or special stockholders meeting for final approval.

DIVIDEND POLICY As stated in the TFSPH By-Laws, the distribution of dividends shall be declared on the basis of outstanding capital stock held by the stockholders. The net amount available for dividends shall be the amount of unrestricted or free retained earnings and undivided profits reported in the Bangko Sentral prudential reports as of the calendar/ fiscal year-end immediately preceding the date of dividend declaration. The derivation of the amount of dividends from the unrestricted/free retained earnings shall be based on a sound accounting system and loss provisioning processes under existing regulations which takes into account relevant capital adjustments including losses, bad debts and unearned profits or income. At the time of the declaration of dividend, TFSPH shall have complied with the requirements of the Bangko Sentral ng Pilipinas.

To the extent permitted by the Corporation Code, dividends shall be declared by a resolution of the Board of Directors, and as the case may be, approved and confirmed

by the Stockholders, and shall be paid to all of the Stockholders whose names appear on the Stock and Transfer Book on the closing date of the fiscal year concerned, except as otherwise provided for by the Board of Directors.

Interim dividends may be declared at the discretion of the Board of Directors under the condition that sufficient profits are available for such interim dividends. Interim dividends shall be paid to all of the Stockholders whose names appear on the Stock and Transfer Book, on such date as the Board of Directors shall separately determine.

Notice of such declared dividends shall be given in writing to all of the Stockholders in accordance with paragraph the above paragraphs.

Dividends not claimed by any of the Stockholders within three (3) years after the declaration thereof shall be forfeited by the Corporation, and these dividends shall not bear interest.

RETIREMENT AND SUCCESSION POLICYAs stated in the By-Laws, each of the Directors shall hold his/her office until his/her successor shall have been elected and qualified at the Annual Meeting of the Stockholders held next after his/her election, until his/her election, until his/her death or until he/she resigned or has been removed in the manner as provided for hereunder.

Any Director may resign at any time by giving written notice thereof to each of the Chairman, the President and the Secretary. The resignation of any Director shall take effect at the time specified therein. The acceptance of such resignation shall not be necessary to make it effective.

Any vacancy in the Board of Directors caused by death, resignation, disqualification or any causes other than removal, increase in the number of the Directors, or expiration of a term, may be filled within sixty (60) calendar days after its occurrence by a majority vote of the remaining Directors then in office constituting a quorum, and each Director so elected to fill a vacancy shall be elected only for the unexpired term of his/her predecessor.

Any directorship to be filled by reason of an increase in the number of Directors shall be filled only by an election at a Regular or at a Special Meeting of Stockholders duly called for the purpose, or in the same Meeting

authorizing the increase of Directors if so stated in the notice of the Meeting.

The vacancy resulting from the removal of a Director by the Stockholders in the manner provided by the Philippine laws may be filled by election at the same meeting of the Stockholders without further notice, or at any Regular or at any Special Meeting of Stockholders called for the purpose after giving notice as prescribed in these By-Laws.

The normal retirement age as stated in the TFSPH Employees Retirement Plan is fifty five (55) years old. It covers all employees and officers, excluding the position of the President.

RELATED PARTY TRANSACTIONSAn internal guidelines has been established to ensure that all transactions with related parties are fully disclosed, reviewed to assess risks, ensure that such are conducted at arm’s-length terms and that corporate or business resources of the company are not misappropriated or misapplied and the highest ethical standards consistent with the principles for enhancing corporate risk governance are observed.

Material Related Party Transactions have to be coursed through the Related Party Transaction Committee for review before it will be endorsed to the Board of Directors for approval. A record of all Related Party Transactions approved by the Board of Directors shall be maintained for monitoring and for any disclosure or reporting requirements to BSP and entities within the Metrobank Group.

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FINANCIAL CONSUMER PROTECTIONToyota Financial Services Philippines Corporation (TFSPH) adheres to the principle that consumer is the driver of business; no business can survive without the patronage of consumers. Thus, TFSPH establishes an enabling environment that protects the interest of financial consumers and adheres to the highest service standards and embrace a culture of fair and responsible dealings in the conduct of the business through the adoption of a Financial Consumer Protection Framework.

1. Board of Directors• The Board of Directors shall be

responsible in the overseeing compliance with the BSP-prescribed Consumer Protection Framework and TFSPH Consumer Protection Framework.

• It shall be primarily responsible for approving and overseeing the implementation of the TFSPH consumer protection policies as well as the mechanism to ensure compliance with said policies.

• It shall be responsible for monitoring and overseeing the performance of Senior Management in managing the day to day consumer protection activities of TFSPH.

• It shall be responsible for developing and maintaining a sound Consumer Protection Risk Management System (CPRMS) that is integrated into the overall framework for the entire products and service life-cycle.

• The Board and Senior Management must ensure that sufficient resources have been devoted to the program.

• It shall periodically review the effectiveness of the CPRMS.

2. Senior Management It is responsible for the implementation

of the consumer protection policies approved by the Board.

3. Consumer Protection Policies• It is the responsibility of all TFSPH

personnel to respond to customer complaints quickly, effectively and in a courteous manner. All complaints must be reported to the Customer Service for recording and monitoring.

• The Customer Service Department is in charge and responsible for collating complaint data, processing and filing of customer complaints, and communicating to top management, complaints

received to give awareness on service improvement. It is also the responsibility of the Customer Service Department to monitor the progress of the response to the complaint, make follow-ups with concerned units and ensure that the response standards are met.

• Response Standards. Standards for response to a customer complaint shall be based on the following types of complaint: Simple and Complex. Complaints shall be responded within the set resolution turn-around time, or at a minimum within two (2) working days to let the customer be informed of the progress. All complaints received from BSP, DTI or government agencies must be immediately referred to the Compliance Department for proper handling and reply.

• Risk Assessment Strategies. Risk Management Department is in charge and responsible for the analysis, nature and trend of complaints, monitoring of complaint handling process and investigation. It is also the responsibility of the Risk Management Department to ensure that solutions and recommendations for improvement are done to avoid recurrence.

• Internal Reporting. All complaints received are discussed in the monthly Management Committee meeting and the Corporate Governance Committee meeting every quarter.

ANTI-MONEY LAUNDERINGThe commitment and leadership of the Board and Senior Management are vital in the whole spectrum of TFSPH’s money laundering and terrorist financing prevention program. They understand the true nature and level of risk being taken and the risk management policies and processes are made appropriate in the light of the risk profile and medium to long term business plans. To this end, TFSPH has adopted a Money Laundering and Terrorist Financing Prevention Program (MLPP) duly approved by the BOD.

The MLPP is designed in accordance with the structure and risk profile of TFSPH. The following are the guiding principles:

1. Conduct business in conformity with high ethical standards in order to protect its safety and soundness as well as the integrity of the national banking and financial system.

2. Know sufficiently your customer at all times and ensure that the financially or socially disadvantaged are not denied access to financial services while at the same time prevent suspicious individuals or entities from opening or maintaining an account or transacting business with TFSPH.

3. Adopt and effectively implement a sound AML and terrorist financing risk management system that identifies, assesses, monitors and controls risk associated with money laundering and terrorist financing, arising from customers, geographic areas of operations and customers, products, services, transactions or delivery channels. The risk assessment shall (a) consider all relevant risk factors; (b) adequately documented results and findings; and (c) be updated periodically or as necessary. Risk assessment shall also be required in relation to the development of new products and new business practices. Including new delivery mechanisms, and the use of new or developing technologies for both new and pre-existing products.

4. Comply fully with the Updated Anti-Money Laundering Rules and Regulations and existing laws aimed at combating money laundering and terrorist financing by making sure that officers and employees are aware of their respective responsibilities and carry them out in accordance with superior and principled culture of compliance.

5. Fully cooperate with the Anti-Money Laundering Council (AMLC) for the effective implementation and enforcement of the AMLA, as amended, and its RIRR.

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R I SK M A N A G E M E N T

Toyota Financial Services Philippines (TFSPH) operates an Enterprise Risk Management system which enables the Company to achieve corporate objectives while addressing and monitoring the risks it faces in its financing activities. The Board of Directors (BOD) oversees the overall risk management strategy as follows:

• The Risk Oversight Committee provides independent views from the business units and ensures effective implementation of the risk management framework through regular reviews of the Company’s performance against approved tolerance for each risk indicator. The Committee also monitors key and emerging risks as well as reviews and assesses the impact of business strategies, opportunities and initiatives on overall risk position.

• The Audit Committee through its Internal Audit Division provides independent assurance of robustness of processes and methodologies against practice.

• The Company's organizational structure includes the Risk Management Department (RMD), responsible for developing, recommending and implementing policies and strategies of ERM. It is also in charge of periodically monitoring and reporting to management, regional Risk Management Group and to the BOD through Risk Oversight Committee the state of company.

• The Executive Committee establishes and oversees execution of business strategies and has the accountability to identify and manage the embedded risks. Business strategies and business plans are thus aligned with the risk appetite of the Risk Oversight Committee and BOD, defined in the form of risk tolerances for a set of selected key risk indicators. These plans are executed by management and are reviewed by the President. Quarterly performances and risks are reviewed together with the appropriate Board Committees.

• All materials events that may negatively impact the Company's earnings, corporate value and reputation are identified and assessed for frequency, severity and causation. Both top down and bottom up risk assessment methodologies are

done through the deployed processes and practical standards.

• RMD oversees a formal process to monitor and report enterprise-wide risk exposures. These are discussed with business units and management. On a quarterly basis, RMD and BOD Risk Oversight Committee review risk reports for significant trends.

CREDIT RISKIt is the risk that TFSPH suffers losses when a counterparty fails to meet its financial obligation. As credit risk constitutes one of the principal risk categories that the Company faces, it requires dedicated focus and appropriate risk management framework.

The Company’s Credit Committee manages the credit risk associated with counterparty borrowers and sets out objectives related to overall quality and diversification of investments.

The Credit Review Unit under the Risk Management Department provides an objective appraisal of the credit approved loans and applications for potential or identified loan problems. It also ensures that the credit policies and procedures are adequate to meet the demands of the business. Its function also involves the review of the Company’s loan portfolio, including the development of a strategy to achieve its desired portfolio mix and risk profile based on a risk-adjusted return on capital. It also reviews and controls identified concentration of credit risks in order to manage the Company’s sensitivity to developments affecting a particular industry or geographic location. It also manages the TFSPH’s credit rating system which uses a combination of quantitative and qualitative factors to assess the general credit worthiness of the prospective borrower.

LIQUIDITY RISKIt is the risk that TFSPH will incur unexpected costs or losses in meeting its financial obligations when due.

The Asset Liability Committee (ALCO) oversees the management of liquidity risks and ensures that funds are properly allocated to the right product at the right

price to ensure healthy net interest and operating margins. Loan pricing is set by the ALCO on a quarterly basis and is driven by market factors, the Company’s position and the operating risks as well as credit risk scores of various borrowers. ALCO also monitors available sources of funds under disrupted market conditions.

The liquidity of the operations are managed and mainly supported by locally available, committed and uncommitted, sources of funds for shorter periods and a sound and conservative funding plan with an appropriate internal authorization for longer periods. The funding structure is diversified as to financial instruments adopted, geographical markets approached and funding maturities in order to maintain stable access to low cost funds. The Company also manages liquidity by managing the maturity profile of its outstanding loans while maintaining sufficient cash level.

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MARKET RISKIt is the risk that exposure to changes in market rates may negatively affect TFSPH’s value and ability to meet obligations as they mature. The Company faces market risks in the form of interest rate risk in its accrual positions since it does not have a trading portfolio.

The ALCO establishes and oversees the interest rate risk as part of the market risk management program of the Company. In considering interest rate exposures, risk profile is measured in terms of asset and debt/derivative notional size, asset yields and market rates, maturity profile, pre-payment and re-pricing characteristics as applicable. Interest rate risk exposures are also reported via portfolio hedge ratio. A critical element of the interest rate risk management system consists of measuring the risks associated with fluctuations in market interest rates on the Company’s net interest income.

OPERATIONAL RISKOperational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems or external events. The Risk Management Department seeks to manage operational risk by providing all business units with appropriate tools to identify, assess, measure, control, and monitor their operational risks. These tools include the Operational Risk Self-Assessment, Business Impact Analysis, Operational Key Risk Indicators and tolerances, and Operational Risk Event Reporting.

TFSPH adopts a comprehensive Crisis Management Framework that helps define the crisis management governance, self-assessment and strategy, program development, and implementation and review. Components of this framework include the Business Continuity, Emergency Response, Pandemic Management and Crisis Communication Programs. These programs are reviewed and tested annually to ensure functionality during business disruptions and disasters; additional crisis scenarios and operational risk items are also identified and assessed for their frequency, severity and causation, and are managed appropriately.

The Operational Risk Management framework traces its foundations to Toyota’s philosophy of Kaizen or “continuous improvement”. The principles of Kaizen guide us in reducing process errors and eliminating manual processes while, at the same time, helps us to deliver quality products and services to customers, avoid redundancies, lower operating costs and increase organizational learning.

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INTERNATIONALORGANIZAT IONALSTRUCTURE

TFS offers a comprehensive financial services lineup that caters to customers’ diverse needs while strengthening the core auto sales finance operation. By offering customers sound, high-quality financial products and services, TFS aims to build customers for life by supporting our customers’ life events.

TFS and TMC Sales Finance Business GroupsTFS has become a part of TMC as the “Sales Finance Business Group.” This integrates the sales finance business with the auto business to realize rapid decision-making and better “visualization” of risks.

TFSC Board of Directors and Management CommitteeThe TFSC Board of Directors is the highest decision-making body of TFS. Management Committee is composed of the TFS CEO, CMO, CRO, CFO, Region CEOs, and Functional Chief Officers. This advisory council discusses important strategic matters to help guide the decision-making for TFS.

Toyota Financial Services International Corporation (TFSIC/USA)TFS operates both a Japan and a USA headquarters to offer a financial services lineup that caters to customers’ needs. TFSIC was established in the USA to leverage localknowledge and our expertise in financial services. In Japan, TFSC collaborates with TMC headquarters and is responsible for corporate governance throughout the TFS group.

TOYOTA MOTOR CORPORATION

TOYOTA FINANCIAL SERVICES CORPORATION

USA

MANAGEMENT OFFICE

JAPAN

MANAGEMENT COMMITTEE

TMFNL

JAPANREGION

AMERICASREGION

EUROPEAFRICAREGION

ASIAPACIFICREGION

CHINA REGION

CORPORATE MANAGEMENT

RISK MANAGEMENT

STRATEGIC INNOVATION

SALES FINANCE BUSINESS GROUP

(SALES FINANCE BUSINESS DEPT.)

CORPORATE MANAGEMENT RISK MANAGEMENT

OPERATION CONTROLGLOBAL COLLABORATION

STEERINGCOMMITTEESFUNCTIONALCOMMITTEES

INTERNAL/EXTERNAL

AUDIT

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RegionsTFS operates five regions which are responsible for assessing the market, developing strategy, and supporting the TFS sales finance companies to best meet the various needs of TFS customers.

Global Functional GroupsTFS further prioritized its business operations with the establishment of three global functional groups to better address issues of common concern, manage risk, advance strategic innovation, and strengthen corporate governance. The functional groups are composed of Corporate Management, Risk Management, and Strategic Innovation.

Steering Committees / Functional CommitteesThe Steering Committees and Functional Committees are designed to enhance corporate governance, promote standardization, and streamline business operations. Both sets of committees report on key global issues and make proposals to TFS Management Committee for review and consideration.

Markets At A Glance

Japan RegionToyota Finance Corporation (TFC) was established in 1988, breaking apart from Toyota Motor Corporation to operate as a captive finance company in Japan.

Since opening its doors, TFC has provided high value-added financial products and services to authorized Toyota and Lexus dealers, affiliates, partners and our customers in Japan. We have continued to operate under the commitment to support Toyota sales by providing financial servicesas well as customer lifestyle support.

Americas Region*We have more than 3,600 team members dedicated to serving over 5.5 million customers, 2,000 dealers and 1,900 wholesale accounts. Combined, the Americas Region has more than US$136 billion in managed assets. With sales finance companies in Canada, the United States, Brazil, Argentina, Puerto Rico, Mexico and Venezuela, we remain dedicated to taking action on the unique market challenges and opportunities in our business.

Europe Africa Region*1,248 associates across 17 locations in Europe and Africa service over 1,500 Toyota and Lexus Retailers for whom TFS provides funding exceeding €2.8 billion. In total, our outstanding customer portfolio numbers exceed 1.3 million live accounts representing over €16.4 billion.

Asia Pacific Region**Asia Pacific Region is made up of 10 sales finance companies in Australia, New Zealand, Thailand, Malaysia, Philippines, Taiwan, Korea, Indonesia, Vietnam and India. Our more than 4,000 team members are dedicated to serving over 1.7 million customers and a distribution network of more than 1,100 dealers with 750 wholesale accounts. Asia Pacific Region has more than US$27 billion in managed assets.

China RegionTMFCN and Toyota Motor Leasing China (TMLCN) offer both loan and lease products for a wide range of customers. We are also making efforts to cultivate a new customer base by providing new attractive products such as Add on Expense Product and Insurance Related Product.

Today, we have more than 460,000 customers in China using our financial products.

*As of March 31, 2017**As of April 2017

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F INANC IALS T A T E M E N T S

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KENNETH GABRIEL T. CHUA ATTY. MA. ZENAIDA O. ACORDA Audit Committee Chairman Audit Committee Vice-Chairman

A U D I TCOMMIT TEER E P O R T

RESPONSIBIL ITY

The Audit Committee assists the Board of Directors (BOD) in fulfilling its statutory and fiduciary responsibilities, and exercises oversight responsibility to Senior Management in establishing and maintaining an adequate, effective and efficient internal control framework. It ensures that systems and processes are designed to provide assurance in areas including reporting, monitoring compliance with laws, regulations and internal policies, efficiency and effectiveness of operations, and safeguarding of assets. Working toward the goal of ensuring that Management and the Board meet organizational objectives, the internal audit aids in the execution of the Committee’s corporate governance responsibilities which include evaluation of risk in regard to legal and regulatory compliance, conflicts of interest, unethical behavior and investigation of fraudulent activities.

ACTIVIT IES

In line with the duties and responsibilities defined in the Audit Committee Charter, the Committee conducted quarterly meetings with the internal and independent auditors, with and without management present, to discuss the overall scope and plans for their respective audits; results of their examinations; their evaluations of the Company’s internal control, risk management and governance processes; and the overall quality of the Company’s financial reporting. Summarized below are the significant activities undertaken by the Committee in FY 2017:

Member Position Held in Committee Meetings Attended

Mr. Kenneth Gabriel T. Chua Chairman (Independent Director) 4/4

Atty. Ma. Zenaida O. Acorda Vice-Chairman (Independent Director) 4/4

Dr. Antonio S. Abacan, Jr. Member since September 29, 2016 2/2

Mr. Pascual M. Garcia, III Member until September 28, 2016 2/2

Governance • Discussed with Senior Management and reported to the Board significant matters and emerging risks that could impact the Company; • Assisted the Board through effective oversight over Senior Management, internal and external auditors; • Coordinated with other Board Committees to ensure policies and framework are set for the accomplishment of Company objectives; and • Reviewed and assessed the adequacy of the Committee and Internal Audit Charters; and ensured that all responsibilities outlined therein

have been carried out effectively.

Financial Reporting • Reviewed annual financial statements and disclosures in the context that the management is responsible for fair presentation, and SGV &

Co. is responsible for expressing an opinion; and • Evaluated the external auditor's objectivity, independence and qualifications, scope/plan and coordinating activities with internal audit (IA).

Control Framework • Reviewed and approved the IA methodology; risk-based audit plan, making sure that trends and emerging issues are considered; and

enhancements on audit rating system; • Monitored and reviewed the effectiveness of the IA function; its performance relative to the plan; and conformance with the International

Standards for the Professional Practice of Internal Auditing and Code of Ethics; • Regularly received IA reports and recommended countermeasures that create deterrent effect and improve internal controls; • Obtained status reports on significant matters ensuring that Management has taken appropriate corrective actions in a timely manner to address control

weaknesses, non-compliance with policy, laws and regulations, and other issues raised by the auditors; and • Reported significant issues to the Board.

CONCLUSION

Based on the activities undertaken by the Committee, the Chief Audit Executive’s overall assessment on the adequacy and effectiveness of the Company’s risk management, governance and internal control processes, and, the unqualified opinion expressed by the independent auditor on the financial statements audited, the Audit Committee concludes that adequate and effective internal control framework of the Company is in place, and that business objectives are met, while ensuring Management’s continuous process improvements and consistent adherence to policies, laws and regulations.

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I N D E P E N D E N TAUD I TORS ’R E P O R T

The Stockholders and the Board of Directors Toyota Financial Services Philippines Corporation

REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS

Opinion

We have audited the financial statements of Toyota Financial Services Philippines Corporation (the Company), which comprise the statements of

financial position as at March 31, 2017 and 2016, and the statements of comprehensive income, statements of changes in equity and statements

of cash flows for the years then ended, and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Company as at

March 31, 2017 and 2016, and its financial performance and its cash flows for the years then ended, in accordance with Philippine Financial

Reporting Standards (PFRS).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Our responsibilities under those standards are further

described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company

in accordance with the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with the ethical requirements

that are relevant to our audit of the financial statements in the Philippines, and we have fulfilled our other ethical responsibilities in accordance

with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide

a basis for our opinion.

RESPONSIBILITIES OF MANAGEMENT AND THOSE CHARGED WITH GOVERNANCE FOR THE FINANCIAL STATEMENTS

Management is responsible for the preparation and fair presentation of the financial statements in accordance with PFRSs, and for such internal

control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement,

whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing,

as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate

the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

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H I G H P E R F O R M A N C E2 6

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,

whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but

is not a guarantee that an audit conducted in accordance with PSAs will always detect a material misstatement when it exists. Misstatements

can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the

economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintain professional skepticism throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

REPORT ON THE SUPPLEMENTARY INFORMATION REQUIRED UNDER REVENUE REGULATIONS 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information required under Revenue Regulations 15-2010 in Note 27 to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and is not a required part of the basic financial statements. Such information is the responsibility of the management of Toyota Financial Services Philippines Corporation. The information has been subjected to the auditing procedures applied in our audit of the basic financial statements. In our opinion, the information is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.

SYCIP GORRES VELAYO & CO.

Janeth T. Nuñez-JavierPartnerCPA Certificate No. 111092SEC Accreditation No. 1328-AR-1 (Group A), July 28, 2016, valid until July 28, 2019Tax Identification No. 900-322-673BIR Accreditation No. 08-001998-69-2015, February 27, 2015, valid until February 26, 2018PTR No. 5908738, January 3, 2017, Makati City

July 6, 2017


2017 2016

ASSETS

Cash and Cash Equivalents (Notes 4 and 21) ₱566,214,150 ₱1,132,903,201

Due from Bangko Sentral ng Pilipinas (Note 4) 9,031,753,912 6,983,598,916

Available-for-Sale Investments (Note 5) 1,200,000 1,500,000

Loans and Receivables (Note 6) 48,275,705,571 36,706,013,615

Assets Held for Sale (Note 7) 120,560,362 74,944,685

Property and Equipment (Note 8) 73,245,729 40,570,727

Software Costs (Note 9) 34,885,737 32,651,335

Deferred Tax Assets (Note 19) 301,852,558 262,318,548

Derivative Asset (Note 14) 295,182,131 --

Other Assets (Note 9) 41,351,376 25,166,880

₱58,741,951,526 ₱45,259,667,907

LIABILITIES AND EQUITY

LIABILITIES

Loans Payable (Note 11) ₱49,286,534,228 ₱35,727,455,244

Derivative Liability (Note 14) 4,451,115 18,582,447

Accounts Payable and Other Liabilities (Notes 13 and 21) 1,035,725,027 764,861,698

Income Tax Payable 83,124,104 19,851,724

Deposits on Lease Contracts (Note 15) 2,080,371,441 3,201,390,461

Subordinated Debt (Note 12) -- 999,919,120

Deposit for Future Subscription (Notes 21 and 23) 1,200,000,00 --

53,690,205,915 40,732,060,694

EQUITY

Capital Stock - ₱100 par valueAuthorized, issued and outstanding - 17,000,000 shares in 2017 and 2016 (Note 23) 1,700,000,000 1,700,000,000

Retained Earnings (Note 23) 3,333,819,559 2,820,934,295

Net Unrealized Gain on Available-for-Sale Investments (Note 5) 550,000 850,000

Cash Flow Hedge Reserve (Note 14) 18,064,211 7,467,287

Actuarial Loss on Retirement (688,159) (1,644,369)

5,051,745,611 4,527,607,213

₱58,741,951,526 ₱45,259,667,907

See accompanying Notes to Financial Statements.

S T A T E M E N T S O FF INANC IALP O S I T I O N


Years Ended March 31

2017 2016

INTEREST INCOME

Loans and receivables (Note 6) ₱3,891,570,527 ₱3,127,924,542

Cash and cash equivalents (Notes 4 and 21) 22,258,681 7,427,884

TOTAL INTEREST INCOME 3,913,829,208 3,135,352,426

INTEREST EXPENSE (Notes 11 and 12) 1,583,847,959 1,315,489,478

NET INTEREST INCOME 2,329,981,249 1,819,862,948

SERVICE FEES AND OTHER INCOME (Note 17) 240,671,166 175,725,516

OPERATING EXPENSES

Provision for credit and impairment losses (Note 10) 769,592,416 526,321,581

Taxes and licenses 263,394,747 193,978,186

Compensation and fringe benefits (Notes 18 and 21) 184,716,451 127,096,604

Loss on sale of assets held for sale (Note 7) 149,494,812 76,416,446

Sales and marketing 109,741,795 83,240,796

Occupancy (Notes 20 and 21) 103,021,585 81,495,464

Litigation 54,817,198 72,983,126

Credit investigation 52,607,671 29,217,980

Depreciation and amortization (Notes 8 and 9) 27,352,419 22,684,399

Contractual Services 22,141,141 27,416,880

Supervision Fees 15,353,904 12,772,028

Transportation and travel 6,391,333 6,037,116

Management and professional fees (Note 21) 5,868,234 8,484,428

Entertainment, amusement and recreation (Note 19) 1,358,966 3,418,126

Others 41,241,324 28,406,325

1,807,093,996 1,299,969,485

INCOME BEFORE INCOME TAX 763,558,419 695,618,979

PROVISION FOR INCOME TAX (Note 19) 250,673,155 190,294,810

NET INCOME 512,885,264 505,324,169

OTHER COMPREHENSIVE INCOME

Other comprehensive income to be reclassified to profit or loss in subsequent periods:

Net unrealized gain (loss) on available-for-sale investments (Note 5) (300,000) 500,000

Net movement in cash flow hedges (Note 14) 15,138,463 10,667,553

Income tax effect (4,541,539) (3,200,266)

10,296,924 7,967,287

Other comprehensive income (loss) not to be reclassified to profit or loss in subsequent periods:

Actuarial gain (loss) on retirement (Note 18) 3,183,982 (4,192,059)

Income tax effect (Note 19) (2,227,772) -

956,210 (4,192,059)

11,253,134 3,775,228

TOTAL COMPREHENSIVE INCOME ₱524,138,398 ₱509,099,397


S T A T E M E N T S O FCOMPREHENS IVEI N C O M E


For the Years Ended March 31, 2017 and 2016

Capital Stock (Note 23)

Deposit for Future

Subscription(Note 23)

Retained Earnings (Note 23)

Net Unrealized Gains on

Available for Sale

Investments (Note 5)

Cash FlowHedge

Reserve(Note 14)

ActuarialGain (Loss) on

Retirement(Note 18) Total

Balances at April 1, 2016 ₱1,700,000,000 ₱- ₱2,820,934,295 ₱850,000 ₱7,467,287 (₱1,644,369) ₱4,527,607,213

Net income – – 512,885,264 – – – 512,885,264

Other comprehensive income – – – (300,000) 10,596,924 956,210 11,253,134

Total comprehensiveincome – – 512,885,264 (300,000) 10,596,924 956,210 524,138,398

Balances at March 31, 2017 ₱1,700,000,000 ₱– ₱3,333,819,559 ₱550,000 ₱18,064,211 (₱688,159) ₱5,051,745,611

Balances at April 1, 2015 ₱1,000,000,000 ₱700,000,000 ₱2,315,610,126 ₱350,000 ₱– ₱2,547,690 ₱4,018,507,816

Deposit for future subscription 700,000,000 (700,000,000) – – – – –

Net income – – 505,324,169 – – – 505,324,169

Other comprehensive income – – – 500,000 7,467,287 (4,192,059) 3,775,228

Total comprehensiveincome – – 505,324,169 500,000 7,467,287 (4,192,059) 509,099,397

Balances at March 31, 2016 ₱1,700,000,000 ₱– ₱2,820,934,295 ₱850,000 ₱7,467,287 (₱1,644,369) ₱4,527,607,213


S T A T E M E N T S O FCHANGESI N E Q U I T Y


Years Ended March 312017 2016

CASH FLOWS FROM OPERATING ACTIVITIES

Income before income tax ₱763,558,419 ₱695,618,979

Adjustments for:

Provision for credit and impairment losses (Note 10) 769,592,416 526,321,581

Loss on sale of assets held for sale (Note 7) 149,494,812 76,416,446

Depreciation and amortization (Notes 8 and 9) 27,352,419 22,684,399

Amortization of debt issue cost on loans payable and subordinated debt (100,541,731) 1,100,196

Gain on sale of property and equipment (3,643,320) (703,362)

Valuation loss (gain) on derivative instrument (Note 14) - 23,423

Changes in operating assets and liabilities:

Increase in:

Loans and receivables (14,519,377,633) (5,780,843,442)

Other assets (16,184,496) (4,290,091)

Accounts payable and other liabilities 274,047,311 309,575,386

Net cash used in operations (12,655,701,803) (4,154,096,485)

Income taxes paid (233,704,096) (289,913,100)

Net cash used in operating activities (12,889,405,899) (4,444,009,585)

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Property and equipment (Note 8) (39,493,816) (22,329,786)

Software (Note 9) (9,351,436) (24,146,777)

Proceeds from sale of:

Assets held for sale 846,237,986 608,351,181

Property and equipment 7,952,515 1,429,404

Net cash provided by investing activities 805,345,249 563,304,022

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from availment of loans payable 44,847,210,497 19,273,102,610

Settlement of loans payable (32,481,683,902) (13,952,165,817)

Proceeds from deposits for future subscription of additional shares (Note 23) 1,200,000,000 -

Net cash provided by financing activities 13,565,526,595 5,320,936,793

NET INCREASE IN CASH AND CASH EQUIVALENTS 1,481,465,945 1,440,231,230

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEARCash and cash equivalents 1,132,903,201 590,024,131

Due from Bangko Sentral ng Pilipinas 6,983,598,916 6,086,246,756

8,116,502,117 6,676,270,887

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4)

Cash and cash equivalents 566,214,150 1,132,903,201

Due from Bangko Sentral ng Pilipinas 9,031,753,912 6,983,598,916

₱9,597,968,062 ₱8,116,502,117

OPERATIONAL CASH FLOWS FROM INTERESTInterest received ₱3,913,842,364 ₱3,135,321,336

Interest paid 1,479,735,902 1,220,184,549


S T A T E M E N T S O FCASH F L O W S


1. CORPORATE INFORMATION

Toyota Financial Services Philippines Corporation (the Company) is a domestic corporation registered with the Securities and Exchange Commission (SEC) on August 16, 2002. The Company’s registered address is 32nd Floor, GT Tower International, Ayala Avenue corner H.V. Dela Costa St., Salcedo Village, Makati City

The Company serves customers of Toyota vehicles through financing and leasing services, as well as Toyota dealers, through inventory stock financing. On May 8, 2008, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) granted the Company its quasi-banking license, which enables the Company to diversify its sources of funds, as well as offer a wider range of financing products to its growing customers and perform other quasi-banking functions effective April 1, 2009.

The following table sets forth the ownership structure of the Company:

Percentage of ownership

Toyota Financial Services Corporation (TFSC) 60%

GT Capital Holdings, Inc. (GT Capital) 40%

The Company’s ultimate parent company is TFSC, a financial services company based in Japan. The accompanying financial statements were approved and authorized for issue by the Board of Directors (BOD) on July 6, 2017.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of PreparationThe accompanying financial statements of the Company have been prepared using the historical cost basis except for available-for-sale (AFS) investments and derivative financial instruments, which have been measured at fair value.

The accompanying financial statements are presented in Philippine peso (₱), which is also the Company’s functional currency.

All values are rounded to the nearest peso unless otherwise stated.

The accompanying financial statements provide comparative information in respect of the previous period.

Statement of ComplianceThe financial statements of the Company have been prepared in compliance with Philippine Financial Reporting Standards (PFRS).

Presentation of Financial StatementsThe Company presents its statement of financial position broadly in order of liquidity. An analysis regarding recovery or settlement within 12 months after the statement of financial position date (current) and more than 12 months after the statement of financial position date (non-current) is presented in Note 16.

Changes in Accounting Policies and DisclosuresThe Company applied for the first time certain standards and amendments, which are effective for annual periods beginning on or after January 1, 2016. Adoption of these pronouncements did not have a significant impact on the Company’s financial position or performance unless otherwise indicated.

Amendments to PAS 1, Presentation of Financial Statements, Disclosure Initiative

The amendments are intended to assist entities in applying judgment when meeting the presentation and disclosure requirements in PFRSs. They clarify the following:

• That entities shall not reduce the understandability of their financial statements by either obscuring material information with immaterial information; or aggregating material items that have different natures or functions

• That specific line items in the statement of income and other comprehensive income and the statement of financial position may be disaggregated

• That entities have flexibility as to the order in which they present the notes to financial statements

• That the share of other comprehensive income of associates and joint ventures accounted for using the equity method must be presented in aggregate as a single line item, and classified between those items that will or will not be subsequently reclassified to profit or loss.

Amendments to PAS 16, Property, Plant and Equipment and PAS 38, Intangible Assets, Clarification of Acceptable Methods of Depreciation and Amortization

The amendments clarify the principle in PAS 16 and PAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortize intangible assets.

Annual Improvements to PFRSs 2012 - 2014 Cycle

• Amendment to PFRS 5, Non-current Assets Held for Sale and Discontinued Operations, Changes in Methods of Disposal

The amendment is applied prospectively and clarifies that

changing from a disposal through sale to a disposal through distribution to owners and vice-versa should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is, therefore, no interruption of the application of the requirements in PFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification.

N O T E S T OF INANC IALS T A T E M E N T S


• Amendment to PFRS 7, Financial Instruments: Disclosures, Servicing Contracts

PFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferred asset that is derecognized in its entirety. The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance for continuing involvement in PFRS 7 in order to assess whether the disclosures are required.

The amendment is to be applied such that the assessment of which servicing contracts constitute continuing involvement will need to be done retrospectively. However, comparative disclosures are not required to be provided for any period beginning before the annual period in which the entity first applies the amendments.

• Amendment to PAS 19, Employee Benefits, Discount Rate: Regional Market Issue

This amendment is applied prospectively and clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used.

Significant Accounting Policies

Foreign Currency TranslationsTransactions denominated in foreign currencies are recorded using the applicable exchange rate at the date of the transaction. Foreign currency-denominated assets and liabilities are translated to PHP using the Philippine Dealing System (PDS) closing rate prevailing at the reporting date. Foreign exchange gains or losses arising from foreign currency transactions and revaluation of foreign currency-denominated assets and liabilities are credited to or charged to profit or loss in the year in which the rates change.

Fair Value MeasurementThe Company measures AFS investments and derivatives at fair value at each statement of financial position date. Also, fair values of other financial assets and liabilities are disclosed in Note 22.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

• in the principal market for the asset or liability, or• in the absence of a principal market, in the most advantageous

market for the asset or liability.

The principal or the most advantageous market must be accessible to the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits

by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorized within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1 - Quoted (unadjusted) market prices in active markets for identical assets or liabilities

• Level 2 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable

• Level 3 - Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the financial statements on a recurring basis, the Company determines whether transfers have occurred between levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on the basis of the nature, characteristics and fair value hierarchy as explained above.

Financial Instruments - Initial Recognition and MeasurementDate of recognition Purchases or sales of financial assets that require delivery of assets within the time frame established by regulation or convention in the marketplace are recognized on the settlement date, the date that an asset is delivered to or by the Company. Deposits on finance lease, amounts due to banks and loans are recognized when cash is received by the Company or advanced to the borrowers.

Initial recognition of financial instrumentsAll financial instruments are initially recognized at fair value. Except for financial assets and financial liabilities at fair value through profit or loss (FVPL), the initial measurement of financial assets includes transaction costs. The Company classifies its financial assets in the following categories: financial assets at FVPL, AFS investments, held-to-maturity (HTM) investments and loans and receivables. Financial liabilities are classified as financial liabilities at FVPL and other financial liabilities carried at amortized cost. Financial assets or financial liabilities at FVPL include financial assets or liabilities held for trading purposes and financial assets or liabilities designated upon initial recognition as at FVPL. The classification depends on the purpose for which the investments were acquired and whether they are quoted in an active market. Management determines the classification of its investments at initial recognition and, where allowed and appropriate, reevaluates such designation at every reporting date.

As of March 31, 2017 and 2016, the Company has no HTM investments.


‘Day 1’ differenceWhere the transaction price in a non-active market is different from the fair value of other observable current market transactions in the same instrument or based on a valuation technique whose variables include only data from observable market, the Company recognizes the difference between the transaction price and fair value (a ‘Day 1’ difference) in profit or loss unless it qualifies for recognition as some other type of asset. In cases where use is made of data which is not observable, the difference between the transaction price and model value is only recognized in profit or loss when the inputs become observable or when the instrument is derecognized. For each transaction, the Company determines the appropriate method of recognizing the ‘Day 1’ difference amount.

AFS investmentsAFS investments are those which are designated as such or do not qualify to be classified as financial assets held for trading, designated at FVPL, HTM investments or loans and receivables. These are purchased and held indefinitely, and may be sold in response to liquidity requirements or changes in market conditions.

After initial measurement, AFS investments are subsequently measured at fair value. The unrealized gains and losses arising from the fair valuation of AFS investments are excluded, net of tax, from reported earnings and are reported as other comprehensive income (OCI) in the statements of comprehensive income as ‘Net unrealized gain (loss) on available-for-sale investments,’ until the investment is derecognized or determined to be impaired at which time the cumulative gains or losses previously reported as OCI is included in profit or loss.

The Company’s AFS investments consist of golf club shares.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments and fixed maturities that are not quoted in an active market. These are not entered into with the intention of immediate or short-term resale and as such are not classified as financial assets at FVPL and AFS investments. They also do not include those for which the Company may not recover substantially its initial investments, other than because of credit deterioration.

After initial measurement, loans and receivables are subsequently measured at amortized cost using the effective interest method less allowance for credit losses. Amortized cost is calculated by taking into account any discount or premium on acquisition cost and fees that are an integral part of the effective interest rate (EIR). The amortization is included in profit or loss under ‘Interest income’. The losses arising from impairment are recognized in profit or loss under ‘Provision for credit and impairment losses’.

The Company’s loans and receivables consist of cash in bank, due from BSP, receivables from customers and other receivables.

Other financial liabilitiesIssued financial instruments or their components, which are not designated at FVPL, are classified as loans payable, accounts payable and other liabilities, deposits on lease contracts and subordinated debt where the substance of the contractual arrangement results in the Company having an obligation either to deliver cash or another financial assets to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares.

After initial measurement, these financial liabilities not qualified as and not designated at FVPL are subsequently measured at amortized cost using the effective interest method.

Derivative Financial Instrument and Hedge AccountingThe Company uses derivative financial instruments such as cross currency interest rate swap to hedge its foreign currency and interest rate risks. Such derivative financial instruments are initially recognized at fair value on the date in which a derivative transaction is entered into and are subsequently re-measured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

Any gains or losses arising from the changes in fair value of derivatives are taken directly to profit or loss, except for the effective portion of cash flow hedges, which is recognized as OCI.

For the purpose of hedge accounting, hedges are classified as:

• Fair value hedges when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment (except for foreign currency risk);

• Cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognized firm commitment; or

• Hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Company formally designates and documents the hedge relationship to which the Company wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedge item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an on-going basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized directly as OCI in the cash flow hedge reserve, while the ineffective portion is recognized directly in profit or loss.

Amounts recognized as OCI are transferred to profit or loss, such as when the hedged financial income or financial expense is recognized or when a forecast sale occurs. Where the hedged item is the cost of a non-financial asset or non-financial liability, the amounts recognized as OCI are transferred to the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognized in OCI are transferred to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover or if its designation as a hedge is revoked, any cumulative gain or loss previously recognized in OCI remains in OCI until the forecast transaction or firm commitment affects profit or loss. If the related transaction is not expected to occur, the amount is taken to profit or loss.


Derecognition of Financial Assets and LiabilitiesFinancial assetA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognized when:

• the rights to receive cash flows from the asset have expired; or• the Company retains the right to receive cash flows from

the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or

• the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Company has transferred its rights to receive cash flows from an asset or has entered into a ‘pass-through’ arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control over the asset, the asset is recognized to the extent of the Company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay.

Financial liabilityA financial liability is derecognized when the obligation under the liability, is discharged, cancelled or has expired. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognized in profit or loss.

Cash and Cash EquivalentsFor purposes of reporting cash flows, cash and cash equivalents include cash on hand, cash in banks, due from BSP and cash equivalents with original maturities of three months or less from date of placements and that are subject to insignificant risks of changes in value.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the statement of financial position if there is a currently enforceable legal right to set off the recognized amounts and there is intention to settle on a net basis, or to realize the asset and settle the liability simultaneously. The Company assesses that it has a currently enforceable right of offset if the right is not contingent on a future event, and is legally enforceable in the normal course of business, event of default, and event of insolvency or bankruptcy of the Company and all of the counterparties.

Impairment of Financial AssetsThe Company assesses at each reporting date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is

experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganization and where observable data indicate that there is measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

Loans and receivablesFor loans and receivables, carried at amortized cost, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively, for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses for impairment. Those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’ ability to pay all amounts due according to the contractual terms of the assets being evaluated. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognized are not included in a collective assessment for impairment.

If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows (excluding future credit losses that have not been incurred). The carrying amount of the asset is reduced through use of an allowance account and the amount of loss is charged to profit or loss. Interest income continues to be recognized based on the original EIR of the asset. The financial assets, together with the associated allowance accounts, are written off when there is no realistic prospect of future recovery and all collateral has been realized. If, in a subsequent year, the amount of the estimated impairment loss decreases because of an event occurring after the impairment was recognized, the previously recognized impairment loss is reduced by adjusting the allowance account. If a future write-off is later recovered, any amounts formerly charged are credited to “Other income” in profit or loss.

AFS investments For equity investments classified as AFS investments, impairment indicators would include a significant or prolonged decline in the fair value of the investments below its cost. Where there is evidence of impairment, the cumulative loss measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognized as OCI is removed and recognized in profit or loss. Impairment losses on equity instruments are not reversed through profit or loss. Increases in fair value after impairment are recognized directly in OCI.

Residual Value of Leased Assets and Deposits on Lease ContractsThe residual value of leased assets is the estimated proceeds from the disposal of the leased asset at the end of the lease term which approximates the amount of guaranty deposit paid by the lessee at the inception of the lease. At the end of the lease term, the residual value is generally applied against the guaranty deposit of the lessee when the lessee decides to buy the leased asset.

Property and EquipmentProperty and equipment are carried at cost less accumulated depreciation and amortization and impairment loss, if any.

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