toyota financial services · 2020-03-05 · 2 mission and vision mission vision the tfs way the...

Toyota Financial Services

About the Cover

The commitment to constantly improve its financial products and services for its customers is what TFSPH holds close to its heart. Creating value for all, TFSPH utilizes sound financial assistance to guide people towards their goals. It is TFSPH’s mission after all, to contribute to a prosperous life for its stakeholders.

The cover design is a reflection of the group’s Global Vision as a key enabler of freedom of movement. The sun over the waves in the sea, coupled with its glow and luminous reflection,

symbolizes a sense of accomplishment and unity of purpose -- leading to new beginnings and a brighter future for the company. The large arrows at the bottom of the cover are clearly directed to the right, showing how Toyota Financial Services moves customers forward by providing only the best financial products and services.

The rebranded logo of TFSPH is also introduced with the change in its font and the addition of a yellow exclamation point. This is a representation of TFSPH’s broadening market which increasingly includes a younger customer base.

Positioned for growth in the years ahead, Toyota Financial Services is powered by optimism to ensure a strengthened future for all.

Powered by optimism. Strengthened future.

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Table ofContents

2

3

4

6

8

10

19

22

23

24

28

34

35

36

39

110

112

9

Mission & Vision

Corporate Policy

Chairman’s Message

President’s Message

Financial Highlights

Operational Highlights

Corporate Governance

Risk Management

Corporate Social Responsibility

Organizational Structure

Board of Directors

Management Team

Products and Services

Report from the Audit Committee

Independent Auditor’s Report

Financial Statements

Dealership Directory

Business Directory

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Mission and Vision

Mission

Vision

The TFS Way

The Toyota Way

Respect for People

Continuous Improvement

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

Create Value by Enabling Freedom of Movement.

Challenge. Speed. Unity of Purpose.

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

Our 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.

We 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.


3

CorporatePolicy

Toyota Financial Services Philippines Corporation (TFSPH) has been providing its customers with outstanding financing and leasing services, as well as inventory stock financing for its dealers for almost two decades now. The company broadened its range of financing products even further in 2009 when it officially began operating as a quasi-bank.

Through the best practices from the Toyota Financial Services global network, TFSPH continuously improves its services—taking significant steps towards the creation of “Customers for Life.”

TFSPH’s distinction from other quasi-banks lies in its ability to improve services through Kaizen activities supported by global best practices and teamwork.

Through Toyota Motor Philippines (TMP), TFSPH has direct access to its clients and prospects—creating value for customers through sound financial products and services that address their unique needs and exceed their expectations.

To ensure continued successful business operations, TFSPH is guided by the drive to create value for shareholders and stakeholders of the company:

DISTRIBUTOR/TOYOTA MOTOR PHILIPPINES

A major distinction of TFSPH from other quasi-banks is its ability to create lifetime Toyota brand advocates through the company’s distributor, Toyota Motor Philippines. By extending its brand to TMP, TFSPH is able to provide competitive products and pricing to support TMP’s sales activities. TFSPH aims to provide the distributor with the same reputable offerings that the Toyota name implies. The focus of TFSPH on “Customers for Life” ties the company’s efforts clearly with TMP’s goals for customer retention and increased sales.

CUSTOMERS

By constantly improving its quality of service, Toyota Financial Services increases the value the company brings to its customers. The company creates “Customers for Life” by offering competitive rates, quality products, simplicity, and convenience for the company’s fleet, lease, and retail customers.

INVESTORS

Working closely with various private investors, investment banks, and institutional investors around the world, the company’s understanding of its customers’ interests, knowledge of the markets and its high credit ratings enable TFSPH to have effective and long lasting partnerships with the investment community.

With its credit and ability to offer what investors want to buy at an optimum cost, TFSPH earn the investors’ trust and secure reliable funding in a cost effective way for all of the company’s operations.

ASSOCIATES

Across the globe, TFSPH enables its associates to share ideas and information. TFSPH supports its operations with global best practices and teamwork, which is increasingly important as the company moves into new markets. Through its value of Unity of Purpose and with the help of global functional and management committees, TFSPH is able to work together with its network more efficiently and effectively than ever before.


4

Chairman’sMessage

Carmelo Maria L. BautistaChairman


5

With another year under our belt, we look back with pride on all the milestones Toyota Financial Services Philippines (TFSPH) has achieved in the past years, and look forward to further growth in the years to come.

We are pleased to report that the company continued to exceed expectations in Fiscal Year 2019, performing excellently in all aspects of the business and taking advantage of a strong Philippine economy.

As the country’s GDP grew 6.2% last year, TFSPH also saw its assets grow 13% to P84.8 billion in fiscal year 2019 from P75.2 billion in the previous year. The Philippines has one of the fastest-growing economies in Asia, and the overall business outlook remains positive especially with the government’s infrastructure and spending push.

In spite of a slight drop in the country’s total vehicle sales in 2018, TFSPH’s net interest income still grew to P3.2 billion this year, a 6% increase from the previous year. This was aided by the consistent rise in the company’s sales penetration to 20.68% this year.

We have sufficient working capital for further expansion moving forward, thanks to the company’s issuances of a total of P5.0 billion worth of fixed rate notes in October of 2017 and August 2018. These were subscribed to by both individual and institutional investors alike.

While we constantly adjust our product and service range to suit customers’ needs, we also provide them with options to optimize their yields through offers such as retail promissory notes which give investors guaranteed higher returns. We value our role as committed partners of our clients in their success, and we will always seek ways to innovate and adapt.

We also continue to focus on upgrading overall customer experience, with all our channels performing efficiently to respond to numerous customer inquiries and requests. We are driven after all, by our overriding goal of creating the best value for our stakeholders by enabling freedom of movement.

Apart from our passion to serve and to improve lives, our strength lies in our global network that is continuously improving and expanding. We are part of a leading financial services group that operates in over 37 countries and serves a growing customer base of more than 26 million drivers worldwide – and we are here to stay.

I would like to express my deepest gratitude to our customers, partners and stakeholders for your continued trust and support, and would also wish to sincerely thank our directors, management and employees, who have always led and served with professionalism and customer focus. We aspire to continue creating customers for life.


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President’sMessage

We are pleased to report that Toyota Financial Services Philippines (TFSPH) once again exceeded expectations in fiscal year 2019. The company continued to maximize on industry opportunities and a positive economic outlook, growing the business further and strengthening operations across the board.

We have focused through the years on creating the best value and customer experience for our clients, and as a result, our skilled and motivated customer service teams have been successful at extending sound financial guidance and enabling a prosperous way of life for Toyota’s stakeholders. Wherever you are across the country, our business centers are always ready to serve you.

Our management has ensured that the organization continues to adapt to changes in the business landscape and to varying needs of the market. Whether it is addressing the growing transport network vehicle service (TNVS) industry through beneficial financing packages or providing special offers for Overseas Filipino Workers, we are attuned to the dynamic Philippine market and have produced excellent results in the process.

The collaboration between TFSPH, Toyota Motor Philippines and Grab Philippines for instance, is

borne of a common vision of providing mobility for all. A variety of special financing packages have been created to suit the needs and preferences of Grab drivers and operators. These include affordable financing packages, preventive maintenance deals and discounts on services and parts among others.

Our total team effort has led to a 10% rise in loans and receivables to P67.7 billion in FY2019 from P61.6 billion in the previous year. With a healthy Return on Equity (ROE) of 9.16% and a Capital Adequacy Ratio of 13.35% that is well above regulatory requirements, we are operating at an optimum financial level and are poised for further expansion in the years ahead.

More than the bottom line however, we are all driven by a sense of responsibility to contribute to the common good of the community, to always innovate, create, stay ahead of the times, and ultimately enrich lives of people we work with. Our corporate values and governance principles are founded on these core beliefs.

We move onward with gratitude to all our partners, stakeholders and team members who have helped us achieve our goals through the years. We are stronger than ever, and are full of optimism for the road ahead!


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Atsushi MurakamiPresident


8

FinancialHighlights

Consolidated Parent Bank (Solo)

Minimum Required Data

Profitability

Total Net Interest Income

Total Non-Interest Income

Total Non-Interest Expenses

Pre-provision profit

Provision for Credit and

Impairment Losses

Net Income

Selected Balance Sheet Data

Liquid Assets

Gross Loans

Deposits

Total Equity

Selected Ratios

Return on Equity

Return on Assets

CET 1 Capital Ratio Tier 1 Capital Ratio

Capital Adequacy Ratio

Per Common Share Data

Net income per share:

Basic

Diluted

Book Value

Others

Cash dividends declared

Headcount:

Officers

Staff

Current Year

3,202,047,145

318,356,951

1,724,613,288

1,795,790,808

749,667,197

762,618,292

41,995,147,745

68,834,581,608

0

9,580,388,180

9.16%

0.95%

12.99%

12.99%

13.35%

23.83

23.83

203.84

0

133

284

Previous Year

3,011,257,695

250,344,164

1,438,200,851

1,823,395,329

736,467,232

759,787,320

36,861,450,426

62,751,291,317

0

7,075,888,236

12.53%

1.13%

13.37%

13.37%

14.31%

33.03

33.03

244.00

0

111

247

Current Year

3,202,047,145

318,356,951

1,724,613,288

1,795,790,808

749,667,197

762,618,292

41,995,147,745 68,834,581,608

0

9,580,388,180

9.16%

0.95%

12.99%

12.99%

13.35%

23.83

23.83

203.84

0

133

284

Previous Year

3,011,257,695

250,344,164

1,438,200,851

1,823,395,329

736,467,232

759,787,320

36,861,450,426 62,751,291,317

0

7,075,888,236

12.53%

1.13%

13.37%

13.37%

14.31%

33.03

33.03

244.00

0

111

247


9

OperationalHighlights

Toyota Financial Services Philippines (TFSPH) continues to solidify its leadership position in the industry, closing the fiscal year 2019 with consistently strong returns and enhanced operational efficiency.

Creating value for its customers, TFSPH’s dedication to provide optimum financial services enabled the company to record a total loan receivables of P68.8 billion for 2019, an increase of 9.7% compared to the previous year’s P62.7 billion. Interest income has also significantly increased by 19.2% to P6.2 billion this year.

The company issues Retail Promissory Notes (RPN) to support further expansion and provide optimum yields for customers. With TFSPH’s term options and scheduled return payouts, the RPNs provide investors guaranteed higher returns.

Last October 2017 and August 2018, TFSPH also issued a total of P5 billion Fixed Rate Notes (FRN), which were subscribed to by high net worth individuals and institutional investors. Proceeds from the issuance were used for working capital and for other general corporate purposes. The successful issuance of FRN will allow the Company to continuously pursue development within the organization, as well as focus on opportunities that may emerge.

Driven by the vigor and commitment of TFSPH’s talented customer service workforce, the company served a total of 112,017 customers through its call

center and office help desk channels. Of the total customer transactions received, 75% were inquiries; while the remaining 25% recorded were mainly customer requests. The company continues to implement improvements in its service channels in order to deliver an excellent customer experience for all.

TFSPH will build on the past years’ successes and maintain its strong performance both financially and operations-wise, investing in future growth all the while staying true to its commitment to create value for its customers.

Customers Served

Call Center

67%

11%

22%

Walk-In

Email

Types of Transactions

Inquiries

Requests

Concerns

*0.16% of total transactions

75%25%


10

CorporateGovernance

PURPOSE AND BEING

TFSPH adheres to principles and standards. These principles and standards serve as Corporate Governance structure of TFSPH. The Corporate Governance landscape consists of a framework of rules, systems and processes 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 DIRECTORS

Compliance with the principles of good corporate governance starts with the Board of Directors. The primary responsibility of the Board is 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 conducts itself with utmost honesty and integrity in the discharge of its duties, functions and responsibilities.

The primary responsibility is one of stewardship and trusteeship. 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 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

A. 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. (GT Capital). All nominees to the Board are required to possess the minimum qualifications mandated in the Corporation Code, Securities Regulation Code, the General Banking


11

Law and the Manual of Regulations of the BSP. Nominations are reviewed and evaluated by the Corporate Governance Committee before the same is endorsed to the Board of Directors for approval.

B. THE CHAIRMAN

The Board of Directors is headed by the Chairman. He provides leadership in the board of directors. He ensures that the Board is functioning effectively by doing the following:

1. Ensures that the meeting agenda focuses on strategic matters including discussion on risk appetites, and key governance concerns

2. Ensures a sound decision making process;3. Encourages and promotes critical discussion;4. Ensures that dissenting views can be

expressed and discussed within the decision-making process;

5. Ensures that members of the board of directors receives accurate, timely and relevant information;

6. Ensures the conduct of proper orientation for first time directors and provide training opportunities for all directors;

7. Ensures conduct of performance evaluation of the board of directors at least once a year.

C. MONITORING AND ASSESSMENT

One of the Monitoring and Assessment mechanism embodied in the TFSPH Corporate Governance Manual is the Performance Assessment for the Board and Individual Directors. On an annual basis, performance assessment is conducted and it is facilitated by the Compliance Department. It covers an assessment of the performance of the Board of Directors, the Chairman, the President, and board-level committees. Results of the self-assessment are discussed in the Corporate Governance Committee and noted by the Board of Directors.

D. CORPORATE INFORMATION

Name of Director

STOCKHOLDER NATIONALITY NUMBER OF SHARES RATIO

CARMELO MARIA L.

BAUTISTA

CARMELO MARIA L. BAUTISTA

TOYOTA FINANCIAL SERVICES CORPORATION

GT CAPITAL HOLDINGS, INC.

ATSUSHI MURAKAMI

Type of Directorship

AttendanceRatio % #

Board of Directors

StockholderNominee

No. of yearsas Director

SharesSubscribedNationality

Ratio

YASUHIRO YOMODA*

SATORU SUZUKI

ATTY. MA. ZENAIDA O.

ACORDA

KENNETH GABRIEL T.

CHUA

DR. DAVID T. GO

DR. DAVID T. GO

NON-EXECUTIVE

FILIPINO GT CAPITAL 2 1 0%

1 0%

1 0%

1 0%

1 0%

1 0%

1 0%

1

7

0%

4

7

3

10

8

2

LESS THAN1 YEAR

TFSC

TFSC

TFSC

FILIPINO

FILIPINO

FILIPINO

JAPANESE

JAPANESE

JAPANESE

JAPANESE

TOTAL

7/7 100

100

100

7/7

5/7

7/7

7/7

5/5

7/7

1/1

NON-EXECUTIVE

NON-EXECUTIVE

NON-EXECUTIVE

EXECUTIVE

EXECUTIVE

INDEPENDENT INDEPENDENT

INDEPENDENTINDEPENDENT

MASAYOSHI HORI**

MASAYOSHI HORI

* Mr. Yasuhiro Yomoda was a Director until his resignation on December 31, 2018.

** Mr. Masayoshi Hori was elected as Director effective January 30, 2019.

71

100

100

100

100

GT CAPITAL

TFSC

ATSUSHI MURAKAMI

SATORU SUZUKI

ATTY. MA. ZENAIDA O. ACORDA

KENNETH GABRIEL T. CHUA

ROLANDO A. RODRIGUEZ

FILIPINO

FILIPINO

FILIPINO

FILIPINO

FILIPINO

TOTAL

FILIPINO

JAPANESE

JAPANESE

JAPANESE

JAPANESE

28,199,995

18,799,997

1

1

1

1

1

1

1

1

47,000,000

60%

40%

0%

0%

0%

0%

0%

0%

0%

0%

100%


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Selection Process for the Board and Key Positions

The position of a director is one imbued with trust. It is essential that directors are selected based on probity, leadership, credibility and competence. The Corporate Governance Committee evaluates the qualifications of candidates and conducts fit and proper test.

The selection for Key Positions begins with identifying high potential candidates depending on the established job descriptions and set qualifications or requirements for the function. Candidates undergo screening process such as series of interviews by the Human Resource Department Head, President, and Treasurer and endorsed to the appropriate board committee. The priority candidates for Key Positions are internal candidates but succession is also considered.

BOARD and MANAGEMENT COMMITTEES

There are four (4) board-level committees appointed by the Board of Directors: the Corporate Governance Committee/Related Party Transactions Committee, Audit Committee, Risk Oversight Committee, and the Executive Committee. The Management Committee and the Credit Committee comprise the Administrative Sub-Committee or the Management-Level Committees.

A. CORPORATE GOVERNANCE COMMITTEE

The Corporate Governance Committee has three (3) members including 2 Independent Directors. It is chaired by an Independent Director. Meetings are conducted on a quarterly basis. The general purpose and responsibilities include: assisting the Board of Directors by identifying individuals qualified to become Board members, and to recommend to the Board of Director nominees for the next annual meeting of shareholders; recommend to the Board the Corporate Governance Guidelines applicable to the company and to lead the Board in its annual review of the Board’s and Management’s performance.

The Corporate Governance Committee also functions as a Related Party Transaction Committee. Part of the function is to provide internal guidelines on related party transactions to ensure that such are fully disclosed, conducted at arm’s-length terms that corporate or business resources are not misappropriated or misapplied and the highest ethical standards consistent with the principles for enhancing corporate risk governance are observed.

B. AUDIT COMMITTEE

The Audit Committee is comprised of three (3) members of the Board of Directors who are all non-executive directors, and two (2) of whom are Independent Directors including the Chairman. Regular meetings are held every quarter. Its general purpose and responsibilities include assisting the Board: in fulfilling its responsibilities with respect to internal controls including financial, operational and compliance controls, accounting and auditing policies, risk management and financial reporting practices; and in its oversight of (i) the integrity of the financial statements, (ii) compliance with legal and regulatory requirements, and (iii) qualification, independence, and performance of the external and internal audit functions

CHAIRMAN

MEMBERS

5/5 100%

100%

100%

5/5

5/5


MR. KENNETH GABRIEL T. CHUA

MR. CARMELO MARIA L. BAUTISTA

CHAIRMAN

VICE CHAIRMAN

MEMBER

4/4 100%

100%

100%

4/4

4/4




Composition (as of March 31, 2019)



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C. RISK OVERSIGHT COMMITTEE

The Risk Oversight Committee is comprised of three (3) 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 structure which includes policies and procedures in managing credit, market, operational and certain other risks, as well as those relating to capital, liquidity, financing, merger, acquisition and divestiture activities. The Committee also reports to the Board of Directors regarding company’s risk profile, risk management framework, and the overall adequacy of company’s Risk Management function.

D. 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.

E. 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 assess the significant risks to which TFSPH is exposed, including compliance with applicable laws and regulations.

F. CREDIT COMMITTEE

The Credit Committee is composed of members coming from Senior Management appointed by the Board of Directors (BOD), 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.

CHAIRMAN

MEMBERS

4/4 100%

100%

100%

4/4

4/4




CHAIRMAN

MEMBERS

DR. DAVID T. GO

DR. DAVID T. GO

MR. ATSUSHI MURAKAMI


MR. MASAYOSHI HORI***

MR. BERNARD M. CARAGUE


MR. YASUHIRO YOMODA**

MR. ROMMEL J. OCAMPO

MR. MARLON M. PERNEZMR. CARMELO MARIA BAUTISTA*

6/6

6/6

1/1

4/4

1/1

6/6

100%

100%

100%

100%

100%

100%

CHAIRMAN

MEMBERS

*Mr. Carmelo Maria Bautista was a member until June 14, 2018.

**Mr. Yasuhiro Yamada was a member until his resignation on December 31, 2018.

***Mr. Masayoshi Hori has been a member effective January 30, 2019.

****Mr. Francisco H. Suarez, Jr. has been a member effective June 14, 2018.

DR. DAVID T. GO



MR. ROMMEL J. OCAMPO

MR. MARLON M. PERNEZ

CHAIRMAN

MEMBERS





MR. FRANCISCO H. SUAREZ, JR.****

5/5 100%


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SELF-ASSESSMENT FUNCTIONS

A. COMPLIANCE FUNCTION

Taking into account the evolving regulatory landscape, TFSPH endeavors to create a culture of proactive compliance. TFSPH adheres to regulations based on culture of accountability and transparency as defined in its Code of Conduct. It is the thrust of TFSPH to continue the implementation of appropriate processes to ensure a common understanding of, and compliance with, laws, rules and regulations, through continuing training and education program, and enhanced monitoring and enforcement. The very objective is anchored with the company’s guiding principle of Toyota Way, which rests on two (2) pillars: “Continuous Improvement” and “Respect for People”. TFSPH always seeks to improve its business by building on best ideas and putting forth its best effort to win customers for life. The success of the 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 for overseeing its compliance risk management. It is responsible for encouraging and giving 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 is responsible in the continuous implementation of the compliance framework of TFSPH that ensures TFSPH compliance with applicable laws, regulation. It obtains regular updates and report 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 is the lead senior officer for the purpose of administering the compliance program and interacting with regulatory agencies.

The President is the one responsible in ensuring that appropriate and effective compliance framework is implemented across TFSPH and 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 of TFSPH. Each team member is expected to ensure that he/she complies with all applicable laws, regulatory requirements and TFSPH policies, procedures and manuals at all times.

B. INTERNAL AUDIT FUNCTION

The Internal Audit Department (IAD) of TFSPH is appropriately positioned and its independence and stature are fortified through its direct reporting relationship to the Board of Directors (BOD) through the Audit Committee (AC). Internal auditors are free from interference in determining the scope of internal auditing, performing work and communicating results. IAD is prohibited from developing or implementing systems or procedures, preparing records, or engaging in activities, which would normally be subject to internal audit review, and that could reasonably be construed to compromise an auditor’s independence or objectivity. While internal auditors assisted management or participated in activities in a consulting or advisory role, their independence is not adversely affected by recommending standards, modifications, or improvements in internal controls when business management is responsible for the decision to accept and implement the recommendations.

BOD approved Internal Audit Charter, which sets out IAD’s mission, purpose, authority, scope, responsibility, and independence, supports the function of IAD, and is aligned with regulations, standards and best practices. The mission of IAD echoes the prescribed mission by the Institute of Internal Auditors (IIA): To enhance and protect organizational value by providing risk-based and objective assurance, advice and insight. Its purpose is to provide independent, objective assurance and consulting services designed to add value and improve the TFSPH operations. IAD helps the organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes.

The TFSPH AC grants IAD full authority to act in a manner consistent with its mission and purpose. All processes, systems, units and activities within TFSPH are within the scope of work of IAD. Internal auditors have full and free access to any records (manual or electronic), information systems, physical properties, personnel, and


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to the AC. An annual audit plan which sets out IAD’s overall objectives, strategies and targets is carefully developed by IAD based on robust risk assessment, and including inputs from the AC, senior management, and other stakeholders. The AC reviews and approves the audit plan ensuring that the scope covers the review of the effectiveness of TFSPH internal controls, including financial, operational and compliance controls, and risk management system. Progress of the plan, and significant issues, internal control weaknesses and Kaizen opportunities resulting from IAD reviews are reported to Senior Management and the AC. The completion of the audit plan enabled the Chief Audit Executive 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 TFSPH that help address its risks and exposures.

In Fiscal Year 2019, IAD had its first external assessment of the internal audit activity conducted by the R.G. Manabat & Co., a member firm of KPMG. Results of the review and assessment indicate that the IAD “generally conforms” with the requirements of the International Standards for the Professional Practice of Internal Auditing (ISPPIA). Generally conforms is the top rating among the three-tiered ratings (Generally Conforms, Partially Conforms, and Does Not Conform), and means that the internal audit activity has a charter, policies, processes and the execution and results of these are judged to be in accordance with the ISPPIA.

IAD remains focused on its ultimate goal of becoming a “trusted advisor” where IAD takes pride in providing value-added services and proactive strategic advice to the business well beyond the effective and efficient execution of the assurance engagements. Gradually, IAD is taking steps transitioning from the traditional audit role to being a strategic Management partner.

REMUNERATION POLICY

As 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 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 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.

For the management, TFSPH adopts a compensation policy that corresponds to qualification, experience, and responsibility of the individual. The compensation policy aims to attract high caliber candidates, promote good performance, and motivate best persons and retain them. Regular review as well as benchmarking with similar industry is being conducted. Salary restructuring is made, if necessary, to ensure that the team members’ compensation is reasonable to what the business is offering. In addition, the company provides annual salary increase based on performance to help inspire performers to do better.


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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 POLICY

As 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.

As a general rule, no Director may stand for reelection following the fiscal year in which that Director turns 75 years of age. However, upon recommendation of the Corporate Governance Committee, the Board may decide to waive the requirement as to any Director if such waiver is for the best interest of TFSPH.

In terms of succession in the management level, key positions requiring available and qualified successors are identified. The key positions refer to Department Head level and specific positions such as the Internal Auditor, Chief Compliance Officer and Chief Risk Officer. The identified successors shall undergo development program to ensure availability and preparedness, hence minimizing the risks that may arise from operational disruptions.

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.


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RELATED PARTY TRANSACTIONS

An 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.

All Related Party Transactions have to be coursed through the Corporate Governance Committee which also acts as the Related Party Transaction Committee for review and presentation 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.

ORIENTATION AND EDUCATION PROGRAM FOR DIRECTORS AND MANAGEMENT

As part of the continuing education program, the Compliance Department provides training for all members of the Board of Directors and Senior Management. Electronic training covering relevant rules and regulations are provided on a regular basis. For the Annual Training on Corporate Governance, an external facilitator is engaged to conduct the same. For first time directors, training is conducted by an external training provider and a Certificate of Completion is submitted to the Bangko Sentral ng Pilipinas.

The Annual Training on Corporate Governance should be for a minimum of 4 hours. For FY 2019, the training was completed on March 14, 2019.

As regards the training for officer and team members, it is very important that team members have good understanding of the business methods, values and culture, and regulatory environment. To ensure that every team members contribute effectively, the Company establishes an annual training program for continuous development of every team member. The education program helps prevent the risk that may occur in every process and everyone is compelled to manage own risk-taking. Moreover, to have a high standard and a guiding motivation for the people, the Company organizes training based on the global principle of Toyota that defines how the people perform and behave in order to deliver the global

standard values and allows every team members to share best ideas that may improve the respective business process.

FINANCIAL CONSUMER PROTECTION

Toyota 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.

A. BOARD OF DIRECTORS

1. The Board of Directors is responsible in the overseeing compliance with the BSP-prescribed Consumer Protection Framework and TFSPH Consumer Protection Framework.

2. It is 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.

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

4. It is 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.

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

6. The Board periodically reviews the effectiveness of the CPRMS.

B. SENIOR MANAGEMENT

1. It is responsible for the implementation of the consumer protection policies approved by the Board.

2. It periodically reviews the effectiveness of the CPRMS, including how findings are reported and whether the audit mechanisms in place enable oversight.

3. It must make certain that CPRMS weaknesses are addressed and corrective actions are taken in a timely manner.


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4. The Customer Service Unit presents regular reports on customer complaints and concerns to the Management Committee, Risk Oversight Committee, Corporate Governance Committee and Board of Directors.

C. CONSUMER PROTECTION POLICIES

1. 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.

2. 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.

3. 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.

4. 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.

5. Internal Reporting. All complaints received are discussed in the monthly Management Committee meeting. Quarterly reports are presented to Risk Oversight Committee and Corporate Governance Committee for complaints coursed through the Bangko Sentral ng Pilipinas. Monthly report is also submitted to the Board of Directors.


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RiskManagement

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 the BOD through Risk Oversight Committee the state of the 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.


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• 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 RISK

It 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 the company’s portfolio.

The Credit Risk 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 risk rating systems which use a combination of quantitative and qualitative factors to assess the general credit worthiness and changes in credit quality of the prospective and existing borrowers, respectively.

LIQUIDITY RISK

It 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.

MARKET RISK

It 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, prepayment 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 RISK

Operational 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 Risk Control 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, and Crisis Management Programs. These programs are reviewed and tested annually to ensure functionality


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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.

IT RISK

It is the risk of any potential adverse outcome, damage, loss, violation, failure or disruption associated with the use or reliance on computer hardware, software, devices, systems, applications, and networks.

TFSPH adopts an IT Risk Management Framework that address risks associated with emerging trends in technology and growing concerns on cyber security. IT Steering Committee oversees IT performance and execution of IT risk controls in network and computer hardware, software, and supporting documentations.

ANTI-MONEY LAUNDERING

TFSPH is committed to comply with laws, rules and regulations on Anti-Money Laundering. The commitment and leadership of the Board of Directors and Senior Management are vital in the whole spectrum of TFSPH’s Money Laundering and Terrorist Financing Prevention Program (MTPP).

The MTPP 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.

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.

The Compliance Department ensures the effective implementation of the MTPP. Reports on AML compliance are submitted to the Board of Directors through the Corporate Governance Committee. Regular trainings are provided to all team members as well as members of the Board of Directors.


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Corporate SocialResponsibility

Toyota Financial Services Philippines Corporation (TFSPH) takes pride not only in being the leading provider of automotive financial services in the Philippines, but also in its ability to create value for all its customers. With its recent adoption of a new Global Vision: ‘Create Value by Enabling Freedom of Movement’, the company is continuously improving lives by promoting inclusiveness, implementing various innovations, and maintaining active social involvement.

EDUCATION

Guided by the Toyota Way, TFSPH established a Scholarship Program in 2017 in partnership with Manila Tytana Colleges (MTC), the educational arm of Metrobank Group.

TFSPH already produced one graduate from Senior High School, while the other is currently in her third year in college. Knowing that education is vital to a community’s growth, TFSPH and MTC will continue to aid families and support students in order to produce future community builders.

TFSPH also joined the annual “Bags of Blessings” by the Metrobank Foundation where another batch of volunteers joined Mr. Atsushi Murakami, TFSPH President, in distributing various food items to hundreds of well-deserved families during Chinese New Year in San Agustin Church in Manila, Sto. Domingo Church in Quezon City, and San Isidro Labrador Parish Church in Marikina. Not only was this a celebration of the Chinese New Year, but it was also a way to share blessings and love throughout the community.

Through various volunteer programs, the company was able to motivate employees and increase their involvement in giving back to the community.

In addition to the Scholarship Program, TFSPH celebrated National Teachers’ Month last September 2018 together with the Metrobank Foundation. TFSPH team members participated in various activities during the World Teacher’s Day and posted various heartfelt notes and letters at the office boards and in social media. These activities were symbolic of how teachers and mentors have greatly contributed to the current success and growth of TFSPH team members.

VOLUNTEERISM

In partnership with Metrobank Foundation and GT Foundation, several TFSPH volunteers joined tree planting activities and planted close to 100 seedlings at Makiling Botanical Gardens, UP Los Baños. TFSPH promotes volunteerism among its team members in order to contribute to the protection and sustainability of the environment.


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OrganizationalStructure

International OrganizationalStructure

Business Planning Business Transformation Corporate Management Risk Management Legal••••

Region

Toyota Motor Corporation (TMC)Sales Finance Business Group

Toyota FinancialServices (TFS)

Toyota Financial Services Corporation

TFS Group Top Management

Board of Directors

TMFNL

Japan Americas • Oceania Europe • Africa Asia Pacific China

Inte

rnal

/Ext

erna

l Aud

it

Business Planning Business Transformation Corporate Management Risk Management Legal• • • •


Board of Directors

President

Corporate GovernanceCommitteeAudit CommitteeRisk Oversight

Committee

ComplianceDepartment

Internal AuditDepartment

Risk ManagementDepartment

Business ServicesGroup

TreasuryDepartment

CreditDepartment

TreasuryDepartment

CreditAdministration

Department

Sales & MarketingGroup

SalesDepartment

MarketingOperations

Department

SalesAdministration

Department

Collection & Asset Recovery

Department

InformationTechnology

Department

LegalDepartment

HumanResources

Department

ComptrollershipGroup

Budget & MISDepartment

Finance & GeneralAccounting

DepartmentGeneral Services

DepartmentProcurementDepartment

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Board ofDirectors

MASAYOSHIHORI


ATTY. MARIA ZENAIDA O.ACORDA



25

DR. DAVID T. GO

ATSUSHI MURAKAMI

SATORUSUZUKI

FRANCISCO H.SUAREZ JR.

ATTY. ROY Y. MARTELINO


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ATSUSHI MURAKAMI

MASAYOSHI HORI

SATORU SUZUKI

ATTY. MARIA ZENAIDA O. ACORDA

ChairmanElected: May 31, 2017Nominee of GT Capital Holdings, Inc.61 years oldFilipino

Educational Background:• Bachelor of Arts Major in Economics – Ateneo

De Manila University

Director/PresidentElected: January 1, 2015Nominee of Toyota Financial Services Corporation (TFSC)61 years oldJapanese

Educational Background:• Bachelor of Business Administration – Otaru

Commerce University

DirectorElected: January 2019Nominee of Toyota Financial Services Corporation (TFSC)58 years oldJapanese

Educational Background:• Bachelor of Business Administration –

Kwanseigakuin University

• Masters in Business Management, Dean’s Citation List – Asian Institute of Management

Current Positions and Affiliations in other Companies/ Institutions• Director – Toyota Subic, Inc.• Adviser – GT Foundation, Inc.• Director – GT Capital Auto Dealership Holdings, Inc.• Director – Toyota Motor Philippines Corporation• Director – Federal Land, Inc.• President/ Director – GT Capital Holdings, Inc.• Independent Director - Vivant Corporation

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

Current Positions and Affiliations in other Companies/ Institutions:• Deputy Chief Executive Officer (for Asia Pacific Region

Toyota Financial Services Corporation• Alternative Director - Toyota Capital Malaysia Sdn. Bhd.• Director - Hotai Finance Corporation• Director - Hotai Leasing Corporation• Director - Hoyun International Leasing Corporation Ltd.• Director - Toyota Leasing Thailand Co., Ltd

Director Elected: March 14, 2016Nominee of Toyota Financial Services Corporation (TFSC)57 years oldJapanese

Educational Background:• Bachelor of Economics – Hokkaido University

Current Positions and Affiliations in Other Companies/ Institutions:• 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.

Independent Director Elected: February 9, 200956 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• Lawyer


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Current Positions and Affiliations inOther Companies/ Institutions:• Partner – Custodio Acorda Sicam De Castro and

Panganiban Law Offices• Director – OKMA Realty Inc.• Director – Maria Equity Property and

Development Corp.• 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)

• Accredited Arbitrator – Philippine International Center for Conflict Resolution (PICCR)

• Senior Vice-President for Programs - Philippine Institute of Arbitrators (PIARB)

Independent Director Elected: May 05, 201049 years oldFilipino

Educational Background:• Bachelor of Science – San Jose State University, U.S.A.

Current Positions and Affiliations in Other Companies/ Institutions:• Director – Century Savings Bank• Director – Bloomingdale Enterprises• VP Marketing / Director – Legaspi Import & Export

FRANCISCO H. SUAREZ, JR.

ATTY. ROY Y. MARTELINO

Director/TreasurerElected: July 31, 2017Elected as Treasurer: September 200265 years oldFilipino

Educational Background:• Bachelor of Arts – New York University

(Magna Cum Laude)• Doctor of Philosophy – New York University

Corporate SecretaryElected: May 25, 201658 years oldFilipino

Educational Background:• A.B. Applied Economics – De La Salle University• MBA Candidate – Ateneo Graduate School of Business

Assistant Corporate SecretaryElected: August 200274 years oldFilipino

Current Positions and Affiliations in Other Companies/ Institutions:• Treasurer/ Vice Chairman – Toyota Motor

Philippines Corp.• Vice Chairman – Toyota Autoparts Philippines, Inc.• President – Toyota Motors Philippines Foundation Corp.• Trustee – Toyota Savings & Loan Association• Chairman – Toyota San Fernando, Inc.• Director – Lexus Manila, Inc.• Chairman – Toyota Manila Bay Corp.• President – Toyota Motor Philippines

School of Technology, Inc.• Director – GT Capital Holdings, Inc.• Chairman – Toyota Motor Philippines Logistic, Inc.• Chairman/President - TMBC Insurance Agency Corp.

Current Positions and Affiliations in Other Companies/ Institutions:• Chief Finance Officer – GT Capital Holdings, Inc.• Corporate Secretary – Toyota Manila Bay Corp.

Educational Background:• Bachelor of Laws – San Beda College• Lawyer

Current Positions and Affiliations in Other Companies/ Institutions:• Corporate Secretary – Orix Metro Leasing

and Finance Corporation• Corporate Secretary – SMBC Metro Investment Corp.

DR. DAVID T. GO


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ManagementTeam

ATSUSHI MURAKAMI

DR. DAVID T. GO

BERNARD M. CARAGUE

ROMMEL J. OCAMPO

MARLON M. PERNEZ


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AKINOBUUDA

MARILY M. CABUCO

ATTY. MARIBEL M. DIMAYUGA

MARIA CECILIA E. BALTAZAR

KATHLEEN L. AMORES

ATTY. TEODORO D. VILLAPEÑA, JR.


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JAMAR D. DALISAY

MA. FE S. MEDRANO

ROSEMARIE B. BALIÑA

MAUREEN ASTER E. ESPINAS


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BERNARD M. CARAGUE

ROMMEL J. OCAMPO

MARLON M. PERNEZ

Senior Vice PresidentBusiness Services Group HeadWith TFSPH since August 1, 201652 years oldFilipino

Senior Vice PresidentSales and Marketing Group HeadWith TFSPH since August 200250 years oldFilipino

Vice PresidentComptrollerWith TFSPH since March 7, 201151 years oldFilipino

Educational Background:• A Certified Public Accountant• Completed Bachelor of Arts Major in Economics and

Bachelor of Science in Commerce Major in Accountancy at De La Salle University

Educational Background:• Completed AB Management Economics at Ateneo

de Manila University and Master of Business and Management, Asian Institute of Management

Work Experience:• Former Vice President/Assistant Chief Finance Officer,

Global Business Power Corporation• Former First Vice President, Security Bank Corporation• Former First Vice President, Philippine National Bank

Educational Background:• Completed BA Political Science at University of the

Philippines, Diliman (Cum Laude)

Current Positions and Affiliations in other Companies/Institutions:• Currently the President/ General Manager,

Consolidated Tours and Travel

• Completed Bachelor of Laws, San Beda College of Law and Arellano Law School

Work Experience:• Former Vice President - Chief Risk and Compliance

Officer of Toyota Financial Services Philippines Corporation

• Former Manager/ Controller, Controlling & Tax Division, Lufthansa Technik Philippines

MARILY M. CABUCO

Vice PresidentChief Audit ExecutiveWith TFSPH since June 1, 201551 years oldFilipino

Educational Background:• A Certified Public Accountant, Certified Internal Auditor

and Certified Financial Services Auditor

• Completed Bachelor of Science in Commerce Major in Accounting at Far Eastern University (Magna Cum Laude)

• With earned units - Master in Business Administration at De La Salle University

Work Experience:• Former Division Head/ Department Head for Head Office

Audit, Subsidiaries & Affiliates, and Branch Audit Sections, Metropolitan Bank & Trust Company – Internal Audit Group

AKINOBU UDA

Vice PresidentChief Risk OfficerWith TFSPH since January 2, 201837 years oldJapanese

Educational Background:• Completed his Bachelor of Engineering degree and

Master of Energy Science at Kyoto University

Work Experience:• Former Vice President for Special Projects at Toyota

Financial Services Philippines Corporation (TFSPH)• Former Manager, Toyota Financial Services Corporation

(TFSC) • Former Assistant Manager, Toyota Financial Services

Corporation (TFSC)• Former Analyst, GE Capital


ATTY. MARIBEL M. DIMAYUGA

Vice PresidentChief Compliance OfficerWith TFSPH since August 8, 201644 years oldFilipino

Educational Background:• A Lawyer• Completed Bachelor of Arts, Major in Political Science

at De La Salle University• Completed Bachelor of Laws, San Sebastian College

Work Experience:• Former Assistant Vice President/ Chief Compliance

Officer, China Bank Savings, Inc. and Planters Development Bank

• Former Contracts Administration Manager, Teletech Philippines

• Former Compliance Officer, Tong Yang Savings Bank, Inc.

MARIA CECILIA E. BALTAZAR

KATHLEEN L. AMORES

Vice PresidentBusiness Services HeadWith TFSPH since March 17, 200844 years oldFilipino

Educational Background:• Completed Bachelor of Science in Nursing,

Centro Escolar University

Vice PresidentMarketing Operations Department HeadWith TFSPH since 201140 years oldFilipino

Work Experience:• Handled the following positions at Toyota Financial Services

Philippines Corporation:a.) Credit Administration Head - Assistant Vice Presidentb.) Credit Administration Head - Senior Managerc.) Credit Administration Head - Managerd.) Former Treasury Administration Head - Managere.) Treasury Officer - Assistant Managerf.) Treasury Specialist - Junior Assistant Manager

• Customer Relations Specialist, BPI Securities Corporation

Educational Background:• Completed B.S. Psychology, University of Sto. Tomas

(Cum Laude)

Work Experience:• Former Manager, Bank of the Philippine Islands

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TEODORO D. VILLAPENA, JR.

Vice PresidentLegal OfficerWith TFSPH since June 8, 201544 years oldFilipino

Educational Background:• A Lawyer• Completed A.B. Political Science and Bachelor of Laws

at San Sebastian College • Master in Business Administration (MBA),

Jose Rizal University

Work Experience:• Former Vice President for Legal, Radio Wealth Finance

Company, Inc.

JAMAR D. DALISAY

Assistant Vice PresidentInformation Technology Head/Data Privacy OfficerWith TFSPH since July 1, 200645 years oldFilipino

Educational Background:• Completed B.S. Computer Science,

Ateneo de Manila University


MA. FE S. MEDRANO

ROSEMARIE B. BALIÑA

MAUREEN ASTER E. ESPINAS

Assistant Vice PresidentBudget and Management Information System HeadWith TFSPH since January 200852 years oldFilipino

Educational Background:• A Certified Public Accountant• Completed BSC Accounting, Letran College

Assistant Vice PresidentSales Administration Head47 years oldFilipino

Educational Background:• Completed BSC – Computer Data Management Processing,

Lyceum of the Philippines

Assistant Vice PresidentCollection and Asset Recovery Department Head44 years oldFilipino

Educational Background:• Completed BS Computer Science, Adamson University 1995

Work Experience:• Handled the following positions at Toyota Financial

Services Philippines Corporation (TFSPH):a.) Senior Manager, Internal Audit Department Headb.) Senior Manager, Operations Department Headc.) Senior Manager, Budget and MIS Head

Work Experience:• Handled the following positions at Toyota Financial

Services Philippines Corporationa.) Senior Manager, Sales Administration Departmentb.) Senior Manager, Sales Department – Special Projectc.) Senior Manager, Credit Department

• Former Senior Assistant Manager, Credit Department, Eastwest Bank

Work Experience:• Former Deputy Head, Collections, Maybank Phils. Inc. • Former Collection Group Head, Asia Trust Bank• Former Sr. Credit and Collection Officer,

ADP Industries Corp.• Former Revenue Assurance/ Billing Head,

Phil. Telegraph & Telephone Corp.

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Products andServices

Toyota Financial Services Philippines (TFSPH) is committed to creating lifetime Toyota brand advocates by providing sound financial products and services that address the unique needs and meet the expectations of all customers.

We strive to offer financial solutions timely and efficiently by applying best practices from the Toyota Financial Services Corporation (TFSC) global network, helping our customers fulfill the goals and dreams they have set for their loved ones.

At Toyota Financial Services, we strive for excellence and continuous improvement everyday – helping to make more and more people develop a preference for and deepen their loyalty to the Toyota brand.

AUTO LOANS

TFS Auto Loans allow you to drive home your brand new Toyota car with minimal financial worries and complete vehicle ownership.

Customers just need to settle the down payment (20 to 50%), and then pay the remaining balance over a fixed term (12 to 60 months).

FINANCE LEASE

Increase your financial confidence by taking advantage of TFS Finance Lease plan’s minimal initial cash payment. With this product, we will be the one to buy the vehicle for you and you will have the right to possess and use it over the agreed lease period.

All the customer needs to do is provide cash deposit and pay the remaining amount over a fixed term. Availing of this financing is easy, with simple documentary requirements and fast processing.

FLEET FINANCING

If you’re a businessman or entrepreneur interested in acquiring Toyota vehicles, TFS provides fully customizable financing plans which are perfect for all types of business enterprises, from small, start-up businesses to full-fledged corporations.

The financing plans come with the huge bonus of reduced tax expenses and initial cash outlays or total freedom from high chattel mortgage fees.

We also finance vehicles for public use, such as taxis and utility vehicles as well as transport network vehicle services like Grab.

RETAIL PROMISSORY NOTES

The retail promissory note is a high-earning financial product from TFSPH that yields optimal interest. As a one-stop, all inclusive, investment tool, it is designed to give customers the advantage they need to achieve their goals — whether it is to acquire a new Toyota or to earn or save to the fullest.

With a wide range of investment amounts and terms to choose from, customers can achieve optimal returns on their investments.


35

Report from theAudit Committee

For the fiscal year ended March 31, 2019, the Audit Committee has assisted the Board of Directors (BOD) in fulfilling its statutory and fiduciary responsibilities through its oversight of the integrity of the financial statements, compliance with legal and regulatory requirements, and the qualification, independence, and performance of the external and internal audit functions, thereby enhancing stakeholders’ value and protecting their interest.

The Audit Committee is governed by a Board-approved, periodically reviewed and updated charter that sets forth overall purpose, authority, composition, meeting requirements and responsibilities. It is composed of three (3) non-executive directors, two (2) of whom are independent directors including the Chairman. The Committee held four (4) meetings in FY2019 with all the members present, with and without management present, and discussed with the Comptroller, internal and external auditors financial reporting and internal operational matters. Results of reviews and significant matters discussed were subsequently reported by the Committee to the BOD. Moreover, the Committee members held concurrent roles in other Board-level Committees, through which they were apprised of significant developments, and enabled them to provide advice on risk taking and management activities.

In FY2019, the Committee comprehensively deliberated the following matters:

Company’s Financial Statements and Financial Reporting Framework

Reviewed the interim and annual financial reports and disclosures, and ensured that the reporting framework enables the generation and preparation of accurate and comprehensive information and reports.

Systems of Internal Control, Risk Management and Governance

Reviewed and discussed the results of external and internal audits, and evaluated and monitored management’s plans and actions taken ensuring thatrappropriatercorrectivetmeasures are implemented in a timely manner to address risk exposures, internal control, governance and compliance issues

Oversee the external and internal audit functions

Reviewed and approved the internal and external auditors’ plan and scope including budget/ fee, ensuring as well their objectivity, independence and qualifications. Significant matters including investigation of operational risk events and whistleblowing reports, and status of remediating control issues were regularly discussed and reported to the Committee. Monitored and evaluated completion of the approved audit plan, and appraised performance of the Chief Audit Executive (CAE). Reviewed and approved the engagement and scope of the external quality assessment review on the internal audit activity, and thoroughly discussed results thereof, including the adoption of best practices.

Based on the reviews and discussions undertaken, the CAE’s overall assessment on the Company’s governance, internal control and risk management processes, and the unqualified opinion expressed by the independent auditor on the financial statements audited, the Audit Committee concludes that there is reasonable assurance that the systems of internal control, risk management and governance are generally adequate and designed to meet the organization’s business objectives. Continuous improvement is being pursued to strengthen the Company’s policies and procedures including adherence to applicable laws and regulatory requirements.


Independent Auditor’sReport

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INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of DirectorsToyota 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, 2019 and 2018, andthe statements of comprehensive income, statements of changes in equity and statements of cash flows forthe years then ended, and notes to the financial statements, including a summary of significant accountingpolicies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financialposition of the Company as at March 31, 2019 and 2018, and its financial performance and its cash flowsfor the years then ended, in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Company in accordancewith the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with theethical requirements that are relevant to our audit of the financial statements in the Philippines, and wehave fulfilled our other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis 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 inaccordance with PFRSs, and for such internal control as management determines is necessary to enablethe preparation of financial statements that are free from material misstatement, whether due to fraud orerror.

In preparing the financial statements, management is responsible for assessing the Company’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Company or to ceaseoperations, or has no realistic alternative but to do so.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, October 4, 2018, valid until August 24, 2021SEC Accreditation No. 0012-FR-5 (Group A), November 6, 2018, valid until November 5, 2021

A member firm of Ernst & Young Global Limited

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INDEPENDENT AUDITOR’S REPORT

The Stockholders and the Board of DirectorsToyota 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, 2019 and 2018, andthe statements of comprehensive income, statements of changes in equity and statements of cash flows forthe years then ended, and notes to the financial statements, including a summary of significant accountingpolicies.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financialposition of the Company as at March 31, 2019 and 2018, and its financial performance and its cash flowsfor the years then ended, in accordance with Philippine Financial Reporting Standards (PFRSs).

Basis for Opinion

We conducted our audits in accordance with Philippine Standards on Auditing (PSAs). Ourresponsibilities under those standards are further described in the Auditor’s Responsibilities for the Auditof the Financial Statements section of our report. We are independent of the Company in accordancewith the Code of Ethics for Professional Accountants in the Philippines (Code of Ethics) together with theethical requirements that are relevant to our audit of the financial statements in the Philippines, and wehave fulfilled our other ethical responsibilities in accordance with these requirements and the Code ofEthics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis 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 inaccordance with PFRSs, and for such internal control as management determines is necessary to enablethe preparation of financial statements that are free from material misstatement, whether due to fraud orerror.

In preparing the financial statements, management is responsible for assessing the Company’s ability tocontinue as a going concern, disclosing, as applicable, matters related to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Company or to ceaseoperations, or has no realistic alternative but to do so.

SyCip Gorres Velayo & Co.6760 Ayala Avenue1226 Makati CityPhilippines

Tel: (632) 891 0307Fax: (632) 819 0872ey.com/ph

BOA/PRC Reg. No. 0001, October 4, 2018, valid until August 24, 2021SEC Accreditation No. 0012-FR-5 (Group A), November 6, 2018, valid until November 5, 2021


*SGVFS037733*

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

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 arefree from material misstatement, whether due to fraud or error, and to issue an auditor’s report thatincludes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that anaudit 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 theaggregate, they could reasonably be expected to influence the economic decisions of users taken on thebasis of these financial statements.

As part of an audit in accordance with PSAs, we exercise professional judgment and maintainprofessional skepticism throughout the audit. We also:

· Identify and assess the risks of material misstatement of the financial statements, whether due to fraudor error, design and perform audit procedures responsive to those risks, and obtain audit evidence thatis sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a materialmisstatement resulting from fraud is higher than for one resulting from error, as fraud may involvecollusion, 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 proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control.

· Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates 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 orconditions 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’sreport to the related disclosures in the financial statements or, if such disclosures are inadequate, tomodify our opinion. Our conclusions are based on the audit evidence obtained up to the date of ourauditor’s report. However, future events or conditions may cause the Company to cease to continueas a going concern.

· Evaluate the overall presentation, structure and content of the financial statements, including thedisclosures, and whether the financial statements represent the underlying transactions and events in amanner that achieves fair presentation.

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



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Report on the Supplementary Information Required Under Revenue Regulations No. 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements takenas a whole. The supplementary information required under Revenue Regulations No. 15-2010 in Note 27to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and isnot a required part of the basic financial statements. Such information is the responsibility of themanagement of Toyota Financial Services Philippines Corporation. The information has been subjectedto the auditing procedures applied in our audit of the basic financial statements. In our opinion, theinformation is fairly stated, in all material respects, in relation to the basic financial statements taken as awhole.

SYCIP GORRES VELAYO & CO.

Veronica Mae A. ArcePartnerCPA Certificate No. 0117208SEC Accreditation No. 1740-A (Group A), February 7, 2019, valid until February 6, 2022Tax Identification No. 234-282-413BIR Accreditation No. 08-001998-135-2018, December 17, 2018, valid until December 16, 2021PTR No. 7332521, January 3, 2019, Makati City

July 1, 2019


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Report on the Supplementary Information Required Under Revenue Regulations No. 15-2010

Our audits were conducted for the purpose of forming an opinion on the basic financial statements takenas a whole. The supplementary information required under Revenue Regulations No. 15-2010 in Note 27to the financial statements is presented for purposes of filing with the Bureau of Internal Revenue and isnot a required part of the basic financial statements. Such information is the responsibility of themanagement of Toyota Financial Services Philippines Corporation. The information has been subjectedto the auditing procedures applied in our audit of the basic financial statements. In our opinion, theinformation is fairly stated, in all material respects, in relation to the basic financial statements taken as awhole.

SYCIP GORRES VELAYO & CO.

Veronica Mae A. ArcePartnerCPA Certificate No. 0117208SEC Accreditation No. 1740-A (Group A), February 7, 2019, valid until February 6, 2022Tax Identification No. 234-282-413BIR Accreditation No. 08-001998-135-2018, December 17, 2018, valid until December 16, 2021PTR No. 7332521, January 3, 2019, Makati City

July 1, 2019


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TOYOTA FINANCIAL SERVICES PHILIPPINES CORPORATIONSTATEMENTS OF FINANCIAL POSITION

March 312019 2018

ASSETSCash and Cash Equivalents (Notes 4, 11 and 21) P=833,059,610 P=1,352,955,871Due from Bangko Sentral ng Pilipinas (Note 4) 14,293,137,914 9,648,688,862Securities Purchased Under Resale Agreement (Note 5) – 1,118,192,680Financial Assets at Fair Value Through Other Comprehensive

Income (FVOCI) (Note 6) 1,200,000 –Available-for-Sale Investments (Note 6) – 1,200,000Loans and Receivables (Notes 7 and 11) 67,734,326,048 61,612,956,397Assets Held for Sale (Notes 8 and 11) 153,512,591 128,471,430Property and Equipment (Note 9) 117,308,156 108,090,326Software Costs (Note 10) 87,671,388 60,712,829Deferred Tax Assets (Note 19) 337,355,353 264,486,093Derivative Asset (Note 14) 1,103,133,383 868,094,713Other Assets (Note 10) 103,380,541 58,356,214

P=84,764,084,984 P=75,222,205,415

LIABILITIES AND EQUITYLIABILITIESLoans Payable (Note 12) P=73,720,587,695 P=64,099,967,136Derivative Liability (Note 14) 294,478,757 –Accounts Payable and Other Liabilities (Notes 13, 18 and 21) 1,100,399,615 1,077,070,923Income Tax Payable – 55,738,864Deposits on Lease Contracts (Note 15) 68,230,737 1,113,540,256Deposit for Future Subscription (Notes 21 and 23) – 1,800,000,000

75,183,696,804 68,146,317,179EQUITYCapital Stock - P=100 par value Authorized – 90,000,000 shares, issued and outstanding –

47,000,000 shares in 2019 and authorized, issued andoutstanding – 29,000,000 shares in 2018 (Note 23) 4,700,000,000 2,900,000,000

Retained Earnings (Note 23) 4,819,510,606 4,093,606,879Fair Value Reserves on Financial Assets at FVOCI (Note 6) 550,000 –Net Unrealized Gain on Available-for-Sale Investments (Note 6) – 550,000Cash Flow Hedge Reserve (Note 14) 70,236,652 76,943,799Actuarial Gain (Loss) on Retirement (Note 18) (9,909,078) 4,787,558

9,580,388,180 7,075,888,236P=84,764,084,984 P=75,222,205,415

See accompanying Notes to Financial Statements.


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TOYOTA FINANCIAL SERVICES PHILIPPINES CORPORATIONSTATEMENTS OF COMPREHENSIVE INCOME

Years Ended March 312019 2018

INTEREST INCOMELoans and receivables (Note 7) P=6,241,299,821 P=5,245,907,515Due from Bangko Sentral ng Pilipinas (Note 4) 148, 306,154 5,500,347Securities purchased under resale agreement (Note 4) 34,299,412 10,538,961Cash and cash equivalents (Notes 4 and 21) 12,348,619 5,928,656TOTAL INTEREST INCOME 6,436,254,006 5,267,875,479INTEREST EXPENSE (Notes 12 and 21) 3,234,206,861 2,256,617,784NET INTEREST INCOME 3,202,047,145 3,011,257,695SERVICE FEES AND OTHER INCOME (Note 17) 318,356,951 250,344,164OPERATING EXPENSESProvision for credit and impairment losses (Note 11) 749,667,197 736,467,232Taxes and licenses 509,291,904 370,758,592Compensation and fringe benefits (Notes 18 and 21) 301,625,878 247,538,439Loss on sale of assets held for sale (Note 8) 276,604,692 182,740,246Litigation 165,878,612 111,773,121Occupancy (Notes 20 and 21) 147,434,460 132,994,535Sales and marketing 111,754,354 152,628,989Depreciation and amortization (Notes 9 and 10) 44,591,429 36,897,364Credit investigation 35,512,408 88,440,479Supervision fees 23,850,804 20,469,117Management and professional fees (Note 21) 14,545,732 7,075,753Transportation and travel 14,133,731 10,322,901Contractual services 9,189,524 27,488,083Entertainment, amusement and recreation (Note 19) 1,901,000 1,900,615Others 68,298,760 47,178,296

2,474,280,485 2,174,673,762INCOME BEFORE INCOME TAX 1,046,123,611 1,086,928,097PROVISION FOR INCOME TAX (Note 19) 283,505,319 327,140,777NET INCOME 762,618,292 759,787,320OTHER COMPREHENSIVE INCOME (LOSS)Other comprehensive income (loss) to be reclassified to profit or

loss in subsequent periods:Net movement in cash flow hedges (Note 14) (56,690,087) 84,113,697Income tax effect 49,982,940 (25,234,109)

(6,707,147) 58,879,588Other comprehensive income not to be reclassified to

profit or loss in subsequent periods:Actuarial gain (loss) on retirement (Note 18) (20,995,195) 7,672,450Income tax effect 6,298,559 (2,196,733)

(14,696,636) 5,475,717(21,403,783) 64,355,305

TOTAL COMPREHENSIVE INCOME P=741,214,509 P=824,142,625


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*SGVFS037733*

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*SGVFS037733*

TOYOTA FINANCIAL SERVICES PHILIPPINES CORPORATIONSTATEMENTS OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIESIncome before income tax P=1,046,123,611 P=1,086,928,097Adjustments for:

Provision for credit and impairment losses (Note 11) 749,667,197 736,467,232Loss on sale of assets held for sale (Note 8) 276,604,692 182,740,246Depreciation and amortization (Notes 9 and 10) 44,591,429 36,897,364Amortization of debt issue cost on loans payable and

subordinated debt (Note 12) 105,649,178 104,877,628Gain on sale of property and equipment (Note 17) – (510,410)Unrealized loss (gain) on cash flow hedge (Note 14) 2,750,000 (493,250,000)Changes in operating assets and liabilities:

Decrease (increase) in:Loans and receivables (8,895,304,928) (15,490,896,891)Other assets (45,024,326) (17,004,838)

(Decrease) Increase in:Deposits on lease contracts (1,045,309,519) (966,831,185)Accounts payable and other liabilities 2,333,497 49,018,346

Net cash used in operations (7,757,919,169) (14,771,564,411)Income taxes paid (355,831,944) (344,590,395)Net cash used in operating activities (8,113,751,113) (15,116,154,806)

CASH FLOWS FROM INVESTING ACTIVITIESAcquisitions of:

Property and equipment (Note 9) (33,191,121) (58,252,568)Software (Note 10) (37,004,280) (33,519,709)

Proceeds from sale of:Assets held for sale 1,694,611,099 1,218,026,443Property and equipment 11,046,156 3,214,710

Net cash provided by investing activities 1,635,461,854 1,129,468,876

CASH FLOWS FROM FINANCING ACTIVITIESProceeds from availment of loans payable 48,306,267,930 45,921,301,138Settlement of loans payable (38,791,296,549) (31,212,745,857)Payment of share issuance costs (30,322,011) –Proceeds from deposits for future subscription of

additional shares (Note 23) – 1,800,000,000Net cash provided by financing activities 9,484,649,370 16,508,555,281

NET INCREASE IN CASH AND CASH EQUIVALENTS 3,006,360,111 2,521,869,351

(Forward)

42


43*SGVFS037733*

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CASH AND CASH EQUIVALENTS AT BEGINNING OF YEARCash and cash equivalents P=1,352,955,871 P=566,214,150Due from Bangko Sentral ng Pilipinas 9,648,688,862 9,031,753,912Securities purchased under resale agreement 1,118,192,680 –

12,119,837,413 9,597,968,062

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 4)Cash and cash equivalents 833,059,610 P=1,352,955,871Due from Bangko Sentral ng Pilipinas 14,293,137,914 9,648,688,862Securities purchased under resale agreement – 1,118,192,680

P=15,126,197,524 P=12,119,837,413

OPERATIONAL CASH FLOWS FROM INTERESTInterest received P=5,327,019,723 P=5,267,538,161Interest paid 2,942,498,941 2,036,980,608



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TOYOTA FINANCIAL SERVICES PHILIPPINES CORPORATIONNOTES TO FINANCIAL STATEMENTS

1. Corporate Information

Toyota Financial Services Philippines Corporation (the Company) is a domestic corporationregistered with the Securities and Exchange Commission (SEC) on August 16, 2002. The Company’sregistered address is 32F GT Tower Ayala Ave. cor. HV Dela Costa St. Makati City. The Companyhas a corporate life of 50 years.

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

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

Percentage of ownershipToyota 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 ofDirectors (BOD) on July 1, 2019.

2. Summary of Significant Accounting Policies

Basis of PreparationThe accompanying financial statements of the Company have been prepared using the historical costbasis except for financial assets and financial liabilities at fair value though profit or loss (FVTPL),financial assets at fair value through other comprehensive income (FVOCI) / 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 (P=), which is also theCompany’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 previousperiod.

Statement of ComplianceThe financial statements of the Company have been prepared in compliance with Philippine FinancialReporting Standards (PFRSs).

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Presentation of Financial StatementsThe Company presents its statement of financial position broadly in order of liquidity. An analysisregarding 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) ispresented in Note 16.

Changes in Accounting Policies and DisclosuresThe accounting policies adopted in the preparation of the financial statements are consistent withthose of the previous financial year, except for the adoption of new standards and amendmentseffective as of April 1, 2018. The Company has not early adopted any standards, interpretations oramendments that have been issued, but are not yet effective.

New standards

PFRS 9, Financial InstrumentsThe Company has adopted PFRS 9 effective April 1, 2018 using a modified retrospective approach.This approach allows the entity not to restate prior periods, however, adjustments are made at thebeginning balance of the annual reporting period that includes the date of initial adoption. PFRS 9replaces Philippine Accounting Standard (PAS 39), Financial Instruments: Recognition andMeasurement and all previous versions of PFRS 9. The Company adopted the requirements of thestandard as follows:

a. Classification and MeasurementFinancial assets are measured at fair value through profit or loss (FVTPL) unless these aremeasured at FVOCI or at amortized cost. The classification and measurement provisions ofPFRS 9 require that all debt financial assets that do not meet the “solely payment of principal andinterest” (SPPI) test, including those that contain embedded derivatives, be classified at initialrecognition as financial assets at FVTPL. The intent of the SPPI test is to ensure that debtinstruments that contain non-basic lending features, such as conversion options and equity linkedpay-outs, are measured as financial assets at FVTPL. Subsequent measurement of instrumentsclassified as financial assets at FVTPL under PFRS 9 operates in a similar manner to financialinstruments held for trading (HFT) under PAS 39.

For debt financial assets that meet the SPPI test, classification at initial recognition will bedetermined based on the business model under which these instruments are managed. Debtinstruments that are managed on a “hold to collect and for sale” basis will be classified asfinancial assets at FVOCI for debt. Debt instruments that are managed on a “hold to collect”basis will be classified as financial assets at amortized cost. Subsequent measurement ofinstruments classified as financial assets at FVOCI and at amortized cost classifications underPFRS 9 operate in a similar manner to AFS investments for debt financial assets and loans andreceivables, respectively, under existing PAS 39, except for the impairment provisions which arediscussed below.

For those debt financial assets that would otherwise be classified as financial assets at FVOCI orat amortized cost, an irrevocable designation can be made at initial recognition to instead measurethe debt instrument as financial asset at FVTPL under the fair value option (FVO) if doing soeliminates or significantly reduces an accounting mismatch.


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All equity financial assets are required to be classified at initial recognition as at FVTPL unlessan irrevocable designation is made to classify the instrument, which is not HFT, as financial assetat FVOCI for equities. Unlike AFS for equity securities under PAS 39, the FVOCI for equitiescategory results in all realized and unrealized gains and losses being recognized in OCI with norecycling to profit and loss. Only dividends will continue to be recognized in profit and loss.

b. ImpairmentThe Company recognizes expected credit loss (ECL) for all loans and other debt financial assetsnot classified as FVTPL, together with loan commitments and financial guarantee contracts.

ECL methodologyThe application of ECL significantly changed the Company’s credit loss methodology andmodels. ECL represents credit losses that reflect an unbiased and probability-weighted amountwhich is determined by evaluating a range of possible outcomes, the time value of money andreasonable and supportable information about past events, current conditions and forecasts offuture economic conditions. The objective is to record lifetime losses on all financial instrumentswhich have experienced a significant increase in credit risk (SICR) since their initial recognition.As a result, ECL allowances are measured at amounts equal to either:

(i) 12-month ECL; or(ii) lifetime ECL for those financial instruments which have experienced a SICR since initial

recognition (General Approach)

The 12-month ECL is the portion of lifetime ECL that results from default events on a financialinstrument that are possible within the 12 months after the reporting date. The lifetime ECL arecredit losses that result from all possible default events over the expected life of a financialinstrument. In comparison, the previous incurred loss model under PAS 39 recognizes lifetimecredit losses only when there is objective evidence of impairment while ECL model eliminate thethreshold or trigger event required under the incurred loss model, and lifetime ECL arerecognized earlier.

c. Hedge AccountingThe new accounting model under PFRS 9 aims to simplify hedge accounting, align theaccounting for hedge relationships more closely with an entity’s risk management activities andpermit hedge accounting to be applied more broadly to a greater variety of hedging instrumentsand risks eligible for hedge accounting. As of April 1, 2018, the Company has assessed that theadoption of these amendments did not have any significant impact in the Company’s financialposition. Any ineffectiveness resulting from effectiveness testing shall be charged to the profit orloss during the term of the cross-currency interest rate swap.

A reconciliation between the carrying amounts under PAS 39 to the balances reported under PFRS 9classification as at April 1, 2018 is presented below. The Company’s adoption of PFRS 9 did nothave any impact on its financial liabilities:

PAS 39 ECL PFRS 9Category Amount Remeasurement Category Amount

Financial AssetsCash and cash equivalents L&R P=1,352,955,871 (P=176,948) AC1 P=1,352,778,923Due from BSP L&R 9,648,688,862 – AC 9,648,688,862SPURA L&R 1,118,192,680 – AC 1,118,192,680AFS investments AFS 1,200,000 – FVOCI2 1,200,000Loans and receivables L&R 61,612,956,397 (6,215,606) AC 61,606,740,791Derivative asset FVPL3 868,094,713 – FVTPL 868,094,713Total financial assets P=74,602,088,523 (P=6,392,554) P=74,595,695,969

(Forward)

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PAS 39 ECL PFRS 9Category Amount Remeasurement Category Amount

Financial LiabilitiesLoans payable AC P=64,099,967,136 P=– AC P=64,099,967,136Accounts payable AC 525,955,895 – AC 525,955,895Accrued interest payable and other

expenses AC 412,150,743 – AC 412,150,743Deposit on lease contracts AC 1,113,540,256 – AC 1,113,540,256Total financial liabilities P=66,151,614,030 P=– P=66,151,614,030

1Amortized Cost (AC)2Fair Value Through Other Comprehensive Income (FVOCI)3Fair Value Through Profit or Loss (FVTPL)

The impact of transition to PFRS 9 on retained earnings is as follows:

Closing balance under PAS 39, April 1, 2018 P=4,093,606,879Recognition of PFRS 9 ECLs (6,392,554)Opening balance under PFRS 9, April 1, 2018 4,087,214,325Total change in equity due to adoption of PFRS 9 (6,392,554)

PFRS 15, Revenue from Contracts with CustomersPFRS 15 establishes a new five-step model that will apply to revenue arising from contracts withcustomers. Under PFRS 15, revenue is recognized at an amount that reflects the consideration towhich an entity expects to be entitled in exchange for transferring goods or services to a customer.

The Company applied PFRS 15 on its revenue arrangements (e.g., service fees and miscellaneousincome) that are scoped in the new standard. The Company has assessed that the effect of thesechanges is immaterial.

The accounting policies adopted are consistent with those of the previous financial year except for theadoption of the following amendments and improvements to PFRS, which became effective on orafter January 1, 2018. The adoption of the amendments and improvements to PFRS did not have animpact on the Company’s financial statements.

o Amendments to PFRS 2, Share-based Payment, Classification and Measurement of Share-basedPayment Transactions

o Amendment to PFRS 4, Insurance Contracts, Applying PFRS 4, Financial Instruments, withPFRS 4

o Amendments to PAS 28, Investment in Associates and Joint Ventures, Measuring an Associate orJoint venture at Fair Value (Part of Annual Improvements to PFRSs 2014-2016 Cycle)

o Philippine Interpretation IFRIC-22, Foreign Currency Transactions and Advance Consideration

Significant Accounting Policies

Foreign Currency TranslationsThe Company translates its foreign currency-denominated monetary assets and liabilities using thePhilippine Dealing System (PDS) closing rate prevailing at the statement of financial position date;income and expenses are translated at PDS weighted average rates prevailing at transaction dates.Effective April 2018, in accordance with the publication of the Bank of the Philippines (BAP), theCompany ceased to use PDS closing rates and started to use BAP closing rates, as provided byBloomberg, in translating its foreign currency-denominated instruments.


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Foreign exchange gains or losses arising from foreign currency transactions and revaluation offoreign currency-denominated assets and liabilities are credited to or charged to profit or loss in theyear in which the rates change.

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

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

• 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 participantswould use when pricing the asset or liability, assuming that market participants act in their economicbest interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability togenerate economic benefits by using the asset in its highest and best use or by selling it to anothermarket 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 whichsufficient data are available to measure fair value, maximizing the use of relevant observable inputsand minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements arecategorized within the fair value hierarchy, described as follows, based on the lowest level input thatis 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, theCompany determines whether transfers have occurred between levels in the hierarchy by re-assessingcategorization (based on the lowest level input that is significant to the fair value measurement as awhole) at the end of each reporting period.

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

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

Initial recognition of financial instrumentsAll financial instruments, including trading and investment securities and loans and receivables, areinitially measured at fair value. Except for FVPL investments and liabilities, the initial measurementof financial instruments includes transaction costs.

Investments at FVTPLFinancial assets or financial liabilities at FVTPLFinancial assets and financial liabilities at FVTPL include financial assets and financial liabilitiesheld for trading purposes and derivative instruments.

Financial instruments held-for-tradingOther financial assets or financial liabilities held for trading (HFT) are recorded in the statements ofcondition at fair value. Included in this classification are debt securities which have been acquiredprincipally for the purpose of selling in the near term. Changes in fair value relating to the HFTpositions are recognized in the statements of comprehensive income. Interest earned or incurred isrecorded as interest income or expense, respectively, while dividend income is recorded in thestatements of comprehensive income when the right to receive payment has been established.

Financial Instruments - Classification and Subsequent MeasurementPolicies applicable beginning April 1, 2018Starting April 1, 2018, the Company classifies its financial assets in the following categories:financial assets at FVTPL, financial assets at FVOCI, and financial assets at amortized cost whilefinancial liabilities are classified as financial liabilities at FVTPL and financial liabilities at amortizedcost. The classification of financial instruments depends on the contractual terms and the businessmodel for managing the instruments. Subsequent to initial recognition, the Company may reclassifyits financial assets only when there is a change in its business model for managing these financialassets. Reclassification of financial liabilities is not allowed.

The Company determines its business model at the level that best reflects how it manages groups offinancial assets to achieve its business objective. The Company’s business model is not assessed onan instrument-by-instrument basis, but at a higher level of aggregated portfolios. As a second step ofits classification process, the Company assesses the contractual terms of financial assets to identifywhether they pass the contractual cash flows test (SPPI test).

Financial assets at FVTPLa. Derivatives recorded at FVTPL

The Company uses derivative financial instruments such as cross currency interest rate swaps tohedge its foreign currency and interest rate risks. Such derivative financial instruments areinitially recognized at fair value on the date in which a derivative transaction is entered into andare subsequently re-measured at fair value. Derivatives are carried as assets when the fair valueis 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 toprofit or loss, except for the effective portion of cash flow hedges, which is recognized as OCI.


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Hedge accountingFor the purpose of hedge accounting, hedges are classified as:

· fair value hedges when hedging the exposure to changes in the fair value of a recognizedasset or liability or an unrecognized firm commitment;

· cash flow hedges when hedging the exposure to variability in cash flows that is eitherattributable to a particular risk associated with a recognized asset or liability or a highlyprobable forecast transaction or the foreign currency risk in an unrecognized firmcommitment; and

· hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Company formally designates and documents thehedge relationship to which it wishes to apply hedge accounting and the risk managementobjective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item, the natureof the risk being hedged and how the Company will assess whether the hedging relationshipmeets the hedge effectiveness requirements, including the analysis of sources of hedgeineffectiveness and how the hedge ratio is determined. A hedging relationship qualifies for hedgeaccounting if it meets all of the following effectiveness requirements:

· There is ‘an economic relationship’ between the hedged item and the hedging instrument.· The effect of credit risk does not ‘dominate the value changes’ that result from that economic

relationship.· The hedge ratio of the hedging relationship is the same as that resulting from the quantity of

the hedged item that the Company actually hedges and the quantity of the hedging instrumentthat the Company actually uses to hedge that quantity of hedged item.

Cash flow hedgesThe effective portion of the gain or loss on the hedging instrument is recognized directly in OCIunder the cash flow hedge reserve account, while the ineffective portion is recognized directly inprofit or loss. Refer to Note 14 for details.

Amounts recognized in OCI is transferred to profit or loss, when the hedged financial income orfinancial expense is recognized or when a forecast sale occurs. Where the hedged item is the costof a non-financial asset or non-financial liability, the amounts recognized in OCI are transferredto 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 gainor loss previously recognized in OCI is transferred to profit or loss. If the hedging instrumentexpires or is sold, terminated or exercised without replacement or rollover or if its designation asa hedge is revoked, any cumulative gain or loss previously recognized in OCI remains in OCIuntil the forecast transaction or firm commitment affects profit or loss. If the related transactionis not expected to occur, the amount is taken to profit or loss.

Financial assets at FVOCIFinancial assets at FVOCI include equity instruments. Equity instruments at FVOCI are those thatthe Company made an irrevocable election to present in the OCI subsequent changes in fair value.

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After initial measurement, these financial assets are subsequently measured at fair value. Gains andlosses arising from changes in fair value are recognized in OCI and accumulated in ‘Fair valuereserves on financial assets at FVOCI’ in the statement of financial position. When the asset isdisposed of, the cumulative gain or loss previously recognized in ‘Fair value reserves on financialassets at FVOCI’ is not reclassified to statement of income, but is reclassified to ‘Retained earnings’.

The Company has designated its equity instruments as at FVOCI on initial application of PFRS 9.

Financial assets at amortized costFinancial assets at amortized cost are debt financial assets that meet both of the following conditions:(i) these are held within a business model whose objective is to hold the financial assets in order tocollect contractual cash flows; and (ii) the contractual terms give rise on specified dates to cash flowsthat are SPPI on the outstanding principal amount. This accounting policy relates to the statements offinancial position captions ‘Cash and Cash Equivalents’, ‘Due from BSP’, ‘SPURA’ and ‘Loans andreceivables’.

After initial measurement, financial assets at amortized cost are subsequently measured at amortizedcost using the effective interest method, less impairment in value. Amortized cost is calculated bytaking into account any discount or premium on acquisition and fees that are an integral part of theeffective interest rate (EIR). The amortization is included in ‘Interest income and service charge’ inthe statements of income. Gains and losses are recognized in statements of income when thesefinancial assets are derecognized or impaired, as well as through the amortization process. The ECLare recognized in the statements of income under ‘Provision for credit and impairment losses’.

Policies applicable prior to April 1, 2018Before April 1, 2018, the Company classifies its financial assets in the following categories: financialassets at FVTPL, held-to-maturity investments (HTM), AFS investments and loans and receivables.The classification depends on the purpose for which the investments were acquired. Financialliabilities are classified into financial liabilities at FVTPL and financial liabilities at amortized cost.The classification depends on the purpose for which the investments were acquired and whether theyare quoted in an active market. Management determines the classification of its investments at initialrecognition and, where allowed and appropriate, re-evaluates such designation at every statement offinancial position date.

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

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

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


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

After initial measurement, loans and receivables are subsequently measured at amortized cost usingthe effective interest method less allowance for credit losses. Amortized cost is calculated by takinginto account any discount or premium on acquisition cost and fees that are an integral part of theeffective 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 andimpairment losses’.

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

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

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

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 financialassets) 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 norretained substantially all the risks and rewards of the asset, but has transferred control of theasset.

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 andrewards of the asset nor transferred control over the asset, the asset is recognized to the extent of theCompany’s continuing involvement in the asset. Continuing involvement that takes the form of aguarantee over the transferred asset is measured at the lower of original carrying amount of the assetand the maximum amount of consideration that the Company could be required to repay.

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Financial liabilityA financial liability is derecognized when the obligation under the liability is discharged, cancelled orhas expired. Where an existing financial liability is replaced by another from the same lender onsubstantially different terms, or the terms of an existing liability are substantially modified, such anexchange or modification is treated as a derecognition of the original liability and the recognition of anew 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,and cash equivalents with original maturities of three months or less from date of placements and thatare subject to insignificant risks of changes in value. Due from BSP includes statutory reservesrequired by the BSP, which the Company considers as cash equivalents wherein drawings can bemade to meet cash requirements.

Offsetting Financial InstrumentsFinancial assets and financial liabilities are offset and the net amount is reported in the statement offinancial position if there is a currently enforceable legal right to set off the recognized amounts andthere 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 contingenton a future event, and is legally enforceable in the normal course of business, event of default, andevent of insolvency or bankruptcy of the Company and all of the counterparties.

Securities Purchased Under Resale AgreementSecurities purchased under agreements to resell at a specified future date (‘reverse repos’) are notrecognized in the statement of financial position. The Company is not permitted to sell or repledgethe securities in the absence of default by the owner of the collateral. The corresponding cash paid,including accrued interest, is recognized on the statement of financial position as ‘SecuritiesPurchased Under Resale Agreement’, and is considered a loan to the counterparty. The differencebetween the purchase price and resale price is treated as interest income and is accrued over the life ofthe agreement using the effective interest method.

Impairment of Financial AssetsPolicies applicable beginning April 1, 2018PFRS 9 requires the Company to record ECL for all loans and other debt financial assets notclassified as at FVTPL, together with loan commitments and financial guarantee contracts.

Expected credit loss methodologyECL represent credit losses that reflect an unbiased and probability-weighted amount which isdetermined by evaluating a range of possible outcomes, the time value of money and reasonable andsupportable information about past events, current conditions and forecasts of future economicconditions. The objective of the new impairment standard is to record lifetime losses on all financialinstruments which have experienced a significant increase in credit risk (SICR) since their initialrecognition. As a result, ECL allowances are now measured at amounts equal to either (i) 12-monthECL or (ii) lifetime ECL for those financial instruments which have experienced a SICR since initialrecognition (General Approach). The 12-month ECL is the portion of lifetime ECL that results fromdefault events on a financial instrument that are possible within the 12 months after the reportingdate. Lifetime ECL are credit losses that result from all possible default events over the expected lifeof a financial instrument. In comparison, the previous incurred loss model recognizes lifetime creditlosses only when there is objective evidence of impairment.


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PFRS 9 also allows the use of simplified approach in estimating ECL in cases where lease receivablesresulted from transactions that are within the scope of PAS 17, Leases which may be appliedseparately to finance and operating lease receivables. As a result, the Company applies the simplifiedapproach wherein ECL allowances will be measured at an amount equal to lifetime ECL. Theassessment of significant increase in credit risk (SICR) that is solely based on the change in the riskof default is not applied under this approach.

Definition of “default” and “cure”The Company defines a financial instrument as in default, which is fully aligned with the definition ofcredit impaired, in all cases when the borrower becomes 31 days past due on its contractual payments.As a part of a qualitative assessment of whether a customer is in default, the Company also considersa variety of instances that may indicate unlikeliness to pay. When such events occur, the Companycarefully considers whether the event should result in treating the customer in default. An instrumentis considered to be no longer in default (i.e. to have cured) when it no longer meets any of the defaultcriteria and has exhibited a satisfactory track record.

Significant increase in credit risk (SICR)The criteria for determining whether credit risk has increased significantly vary by portfolio andinclude quantitative changes in probabilities of default and qualitative factors, including a backstopbased on delinquency. The credit risk of a particular exposure is deemed to have increasedsignificantly since initial recognition if, based on the Company’s internal credit assessment, theborrower or counterparty is determined to require close monitoring or with well-defined creditweaknesses. Moreover, if contractual payment are more than a specified days past due threshold, thecredit risk is deemed to have increase significantly since initial recognition. Days past due aredetermined by counting the number of days since the earliest elapsed due date in respect of whichamortized payment has not been received. Due dates are determined without considering any graceperiod that might be available to the borrower.

ECL parameters and methodologiesThe PD for each individual instrument is modelled based on historical data and is estimated based oncurrent market conditions and reasonable and supportable information about future economicconditions. The Company segmented its credit exposures based on homogenous risk characteristicsand developed a corresponding PD methodology for each portfolio. The PD methodology for eachrelevant portfolio is determined based on the underlying nature or characteristic of the portfolio,behavior of the accounts and materiality of the segment as compared to the total portfolio.

EAD is modelled on historical data and represents an estimate of the outstanding amount of creditexposure at the time a default may occur. LGD is the amount that may not be recovered in the eventof default and is modelled based on historical cash flow recovery and reasonable and supportableinformation about future economic conditions, where appropriate. LGD takes into consideration theamount and quality of any collateral held.

Economic overlaysThe Company incorporates economic overlays into the measurement of ECL to add a forward-looking risk measure parallel to the expected future macroeconomic atmosphere. The inputs andmodels used for calculating ECL may not always capture all characteristics of the market at the dateof the financial statements. To address this, quantitative adjustments or overlays are occasionallymade as temporary adjustments when such differences are significantly material.

In compliance with PFRS 9, the Company developed ECL parameters and methodologies, usinghistorical data as well as forward-looking inputs and assumptions.

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Policies applicable prior to April 1, 2018The Company assesses at each reporting date whether there is objective evidence that a financial assetor a group of financial assets is impaired. A financial asset or a group of financial assets is deemed tobe impaired if, and only if, there is objective evidence of impairment as a result of one or more eventsthat 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 offinancial assets that can be reliably estimated. Evidence of impairment may include indications thatthe borrower or a group of borrowers is experiencing significant financial difficulty, default ordelinquency in interest or principal payments, the probability that they will enter bankruptcy or otherfinancial reorganization and where observable data indicate that there is measurable decrease in theestimated future cash flows, such as changes in arrears or economic conditions that correlate withdefaults.

Loans and receivablesFor loans and receivables carried at amortized cost, the Company first assesses whether objectiveevidence of impairment exists individually for financial assets that are individually significant, orcollectively, for financial assets that are not individually significant. If the Company determines thatno objective evidence of impairment exists for an individually assessed financial asset, whethersignificant or not, it includes the asset in a group of financial assets with similar credit riskcharacteristics and collectively assesses for impairment. Those characteristics are relevant to theestimation of future cash flows for groups of such assets by being indicative of the debtors’ ability topay all amounts due according to the contractual terms of the assets being evaluated. Assets that areindividually 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 ismeasured as the difference between the asset’s carrying amount and the present value of the estimatedfuture cash flows (excluding future credit losses that have not been incurred). The carrying amountof the asset is reduced through use of an allowance account and the amount of loss is charged to profitor loss. Interest income continues to be recognized based on the original EIR of the asset. Thefinancial assets, together with the associated allowance accounts, are written off when there is norealistic prospect of future recovery and all collateral has been realized. If, in a subsequent year, theamount of the estimated impairment loss decreases because of an event occurring after theimpairment was recognized, the previously recognized impairment loss is reduced by adjusting theallowance account. If a future write-off is later recovered, any amounts formerly charged are creditedto “Other income” in profit or loss.

AFS investmentsFor equity investments classified as AFS investments, impairment indicators would include asignificant or prolonged decline in the fair value of the investments below its cost. The Companytreats ‘significant’ generally as 20.00% or more and ‘prolonged’ greater than 12 months. In addition,the Company evaluates other factors, including normal volatility in share price for quoted equitysecurities and the future cash flows and the discount factors for unquoted equity securities. Wherethere is evidence of impairment, the cumulative loss measured as the difference between theacquisition cost and the current fair value, less any impairment loss on that financial asset previouslyrecognized as OCI is removed and recognized in profit or loss. Impairment losses on equityinstruments are not reversed through profit or loss. Increases in fair value after impairment arerecognized directly in OCI.


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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 atthe end of the lease term which approximates the amount of guaranty deposit paid by the lessee at theinception of the lease. At the end of the lease term, the residual value is generally applied against theguaranty 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 andimpairment loss, if any.

The initial cost of property and equipment consists of its purchase price, any directly attributablecosts of bringing the asset to its working condition and location for its intended use.

Expenditures incurred after an item of property and equipment has been put into operation, such asrepairs and maintenance, are normally charged to operations in the year in which the costs areincurred. In situations where it can be clearly demonstrated that the expenditures have resulted in anincrease in the future economic benefits expected to be obtained from the use of an item of propertyand equipment beyond its originally assessed standard of performance, the expenditures arecapitalized as an additional cost of property and equipment. When the property and equipment areretired or otherwise disposed of, the cost and the related accumulated depreciation and amortizationare removed from the accounts and any resulting gain or loss is reflected in profit or loss.

Depreciation and amortization is computed using the straight-line method over the estimated usefullives of the property and equipment as follows:

Leasehold improvements5 years or the lease term,

whichever is shorterFurniture, fixtures and equipment 3-5 yearsTransportation equipment 3-5 years

The useful life and the depreciation and amortization method are reviewed periodically to ensure thatthe period and method of depreciation and amortization are consistent with the expected pattern ofeconomic benefits from items of property and equipment.

An item of property and equipment is derecognized upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of the assets,which is calculated as the difference between the net disposal proceeds and the carrying amount ofthe asset, is included in profit or loss in the year the asset is derecognized.

Assets Held for SaleAn asset is classified as held for sale if its carrying amount will be recovered principally through asale transaction rather than through continuing use, available for immediate sale and its sale is highlyprobable. An asset classified as held for sale is measured at the lower of fair value less costs to selland its carrying amount.

Any impairment loss on write-down of the asset to fair value less costs to sell is recognized in profitor loss. Any gain on subsequent increase in fair value less costs to sell is also recognized in profit orloss, but not in excess of the cumulative impairment loss already recognized on the asset.

Assets held for sale of the Company consists mainly of motor vehicles foreclosed from borrowers orlessees who have defaulted on their installment or lease payments.

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Intangible AssetsThis consists of software costs, stated at acquisition cost and is amortized on a straight-line basis overestimated useful life of five (5) years.

An intangible asset is recognized only when its cost can be measured reliably and it is probable thatthe expected future economic benefits that are attributable to it will flow to the Company.

Other AssetsOther assets consist of prepaid expenses, security deposits and withholding tax receivables.

Prepaid expenses are advanced payments for occupancy costs and employee benefits. Securitydeposits are rental deposits for the Company’s office space and residential units for officers.

Prepaid expenses and security deposits are recognized in the statement of financial position when it isprobable that the future economic benefits will flow to the entity and the asset has a cost or value thatcan be measured reliably. Amortization of prepayments is recognized monthly on a straight-linebasis.

Withholding tax receivable pertains to Creditable Withholding Tax (CWT). CWT is recognized byvirtue of Republic Act (RA) No. 8424 relative to the withholding on income subject to expanded andfinal withholding tax on compensation, value-added tax and other percentage taxes. CWT isrecognized when the counterparty withheld certain taxes payable to the taxation authority, and isreduced to the extent of that CWT will not be realized, through the use of an allowance account.

Impairment of Non-financial AssetsThe carrying values of non-financial assets (i.e. property and equipment, assets held for sale, softwarecost and other assets) are reviewed for impairment when events or changes in circumstances indicatethat the carrying values may not be recoverable. If any such indication exists and where the carryingvalues exceed the estimated recoverable amounts, the assets or cash-generating units are written downto their recoverable amounts. The recoverable amount of an asset is the greater of its net selling priceand value in use. In assessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current market assessments of the time valueof money and the risks specific to the asset. For an asset that does not generate largely independentcash inflows, the recoverable amount is determined for the cash-generating unit to which the assetbelongs. Impairment loss is recognized under ‘Provision for credit and impairment losses’ in thestatement of comprehensive income.

An assessment is made at each reporting date as to whether there is any indication that previouslyrecognized impairment losses may no longer exist or may have decreased. If such indication exists,the recoverable amount is estimated. A previously recognized impairment loss is reversed only ifthere has been a change in the estimates used to determine the asset’s recoverable amount since thelast impairment loss was recognized. If that is the case, the carrying amount of the asset is increasedto its recoverable amount. That increased amount cannot exceed the carrying amount that would havebeen determined, net of depreciation and amortization, had no impairment loss been recognized forthe asset in prior years. Such reversal is recognized in profit or loss. After such a reversal,depreciation and amortization expense is adjusted in future years to allocate the asset’s revisedcarrying amount, less any residual value, on a systematic basis over its remaining life.

Retirement CostThe Company has a funded, noncontributory defined benefit retirement plan covering all itsemployees with regular employment status. The defined benefit liability (asset) is the aggregate ofthe present value of the defined benefit obligation at the end of the reporting period reduced by the


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fair value of plan assets, adjusted for any effect of limiting a net defined benefit asset to the assetceiling. The asset ceiling is the present value of any economic benefits available in the form ofrefunds from the plan or reductions in future contributions to the plan.

The cost of providing benefits under the defined benefit plans is actuarially determined using theprojected unit credit method.

Defined benefit costs comprise the following:· Service cost· Net interest on the net defined benefit liability or asset· Remeasurements of net defined benefit liability or asset

Service costs which include current service costs, past service costs and gains or losses on non-routine settlements are recognized as expense in profit or loss. Past service costs are recognizedwhen plan amendment or curtailment occurs.

Net interest on the net defined benefit liability or asset is the change during the period in the netdefined benefit liability or asset that arises from the passage of time which is determined by applyingthe discount rate based on government bonds to the net defined benefit liability or asset. Net intereston the net defined benefit liability or asset is recognized as expense or income in profit or loss.

Remeasurements comprising of actuarial gains and losses, return on plan assets and any change in theeffect of the asset ceiling (excluding net interest on defined benefit liability) are recognizedimmediately in OCI in the period in which they arise. Remeasurements are not reclassified to profitor loss in subsequent periods.

Plan assets are assets that are held by a long-term employee benefit fund. Plan assets are notavailable to the creditors of the Company, nor can they be paid directly to the Company. Fair valueof plan assets is based on market price information. When no market price is available, the fair valueof plan assets is estimated by discounting expected future cash flows using a discount rate thatreflects both the risk associated with the plan assets and the maturity or expected disposal date ofthose assets (or, if they have no maturity, the expected period until the settlement of the relatedobligations). If the fair value of the plan assets is higher than the present value of the defined benefitobligation, the measurement of the resulting defined benefit asset is limited to the present value ofeconomic benefits available in the form of refunds from the plan or reductions in future contributionsto the plan.

LeasesThe determination of whether an arrangement is, or contains a lease is based on the substance of thearrangement at inception date whether the fulfillment of the arrangement is dependent on the use of aspecific asset or assets or the arrangement conveys a right to use the asset.

Company as lessorThe Company recognizes assets held under a finance lease in its statement of financial position as areceivable at an amount equal to the net investment in the lease. The lease payments received fromthe lessee are treated as repayments of principal and finance income. Initial direct costs that areincremental and directly attributable to negotiating and arranging the lease are included in themeasurement of the net investment in the lease at inception and reflected in the calculation of theimplicit interest rate.

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Company as lesseeLease of assets under which the lessor effectively retains all the risks and rewards of ownership isclassified as operating lease. Lease payments under an operating lease are recognized as an expenseon a straight-line basis over the lease term.

Revenue RecognitionRevenue is measured based on consideration specified in a contract with a customer. The Companyrecognizes revenue when it transfers control over a good or service to a customer. The followingspecific recognition criteria must also be met before revenue is recognized:

Interest incomeFor all financial instruments measured at amortized cost and interest-bearing financial instrumentsclassified as financial assets at FVOCI/AFS investments, interest income is recorded at the EIR,which is the rate that exactly discounts estimated future cash receipts through the expected life of thefinancial instrument or a shorter period, where appropriate, to the net carrying amount of the financialasset. The calculation takes into account all contractual terms of the financial instrument (forexample, prepayment options), including any fees or incremental costs that are directly attributable tothe instrument and are an integral part of the EIR.

The carrying amount of the financial asset or financial liability is adjusted if the Company revises itsestimates of payments or receipts. The adjusted carrying amount is calculated based on the originalEIR and the change in carrying amount is recorded as ‘Interest income’.

Under PFRS 9, when a financial asset becomes credit-impaired and is, therefore, the Companycalculates interest income by applying the EIR to the net amortized cost of the financial asset. If thefinancial asset cures and is no longer credit-impaired, the Company reverts to calculating interestincome on a gross basis. Under PAS 39, once the recorded value of a financial asset or group ofsimilar financial assets has been reduced due to an impairment loss, interest income continues to berecognized using the original EIR applied to the new carrying amount.

Service feesService fees earned for the provision of transaction services such as processing fees are recognizedupon completion of the underlying transaction.

Recoveries of accounts written offRecoveries of accounts written off are recognized as income upon actual collection.

Gain or loss on sale of non-current assetsIncome from sale of properties is recognized when control of the such services or properties aretransferred to the customer at an amount that reflects the consideration to which the Company expectsto be entitled in exchange for those properties.

Foreign exchange gain/lossExchange differences arising on the settlement of monetary items or on translating monetary items atrates different from those at which they were translated on initial recognition during the period or inprevious financial statements shall be recognized in profit or loss in the period in which they arise.

Expense RecognitionExpenses are recognized in profit or loss when decrease in future economic benefit related to adecrease in an asset or an increase in a liability has arisen that can be measured reliably. Expensesare recognized in profit or loss: on the basis of a direct association between the costs incurred and theearning of specific items of income; on the basis of systematic and rational allocation procedures


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when economic benefits are expected to arise over several accounting periods and the associationwith income can only be broadly or indirectly determined; or immediately when an expenditureproduces no future economic benefits or when, and to the extent that, future economic benefits do notqualify or cease to qualify, for recognition in the statements of financial position as an asset.

Borrowing CostsBorrowing costs for all interest-bearing financial liabilities are recognized in ‘Interest expense’ in thestatement of income using the EIR of the financial liabilities to which they relate.

Income TaxesCurrent taxesCurrent tax assets and liabilities are measured at the amount expected to be recovered from or paid tothe taxation authorities. The tax rates and tax laws used to compute the amount are those that areenacted or substantively enacted at the reporting date.

Deferred taxesDeferred tax is provided on all temporary differences at the reporting date between the tax bases ofassets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets arerecognized for all deductible temporary differences, carryforward benefit of the excess of minimumcorporate income tax (MCIT) over regular corporate income tax (RCIT) and unused net operatingloss carryover (NOLCO), to the extent that it is probable that taxable profit will be available againstwhich the deductible temporary differences and carryforward of MCIT and unused NOLCO can beutilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to theextent that it is no longer probable that sufficient taxable profit will be available to allow all or part ofthe deferred tax assets to be utilized. Unrecognized deferred tax assets are reassessed at eachreporting date and are recognized to the extent that it has become probable that future taxable profitwill allow all or part of the deferred tax assets to be recovered. Deferred tax, however, is notrecognized on temporary differences that arise from the initial recognition of an asset or liability in atransaction that is not a business combination and, at the time of the transaction, affects neither theaccounting income nor taxable income or loss.

Deferred tax assets and liabilities are measured at the tax rate that is expected to apply to the yearwhen the asset is realized or the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted at the reporting date.

Current tax and deferred tax relating to items recognized directly in equity is also recognized inequity and not in profit or loss.

Deferred tax assets and tax liabilities are offset, if a legally enforceable right exists to set off currenttax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and thesame taxation authority.

ProvisionsProvisions are recognized when the Company has a present obligation (legal or constructive) where,as a result of a past event, it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation and a reliable estimate can be made of the amount of theobligation.

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ContingenciesContingent liabilities are not recognized but are disclosed in the notes to the financial statementsunless the possibility of an outflow of resources embodying economic benefits is remote. Contingentassets are not recognized but are disclosed in the notes to the financial statements when the inflow ofeconomic benefits is probable.

EquityCapital stock is measured at par value for all shares issued and outstanding. When the Companyissues more than one class of stock, a separate account is maintained for each class of stock and thenumber of shares issued.

When the shares are sold at premium, the difference between the proceeds and the par value iscredited to ‘Additional paid-in capital’ account. When shares are issued for a consideration otherthan cash, the proceeds are measured by the fair value of the consideration received. In case theshares are issued to extinguish or settle the liability of the Company, the shares shall be measuredeither at the fair value of the shares issued or fair value of the liability settled, whichever is morereliably determinable.

Direct cost incurred related to the equity issuance, such as underwriting, accounting and legal fees,printing costs and taxes are chargeable to ‘Additional paid-in capital’ account. If additional paid-incapital is not sufficient, the excess is charged against ‘Retained Earnings’.

Retained earnings represent accumulated net income of the Company, net of dividends paid.

Deposit for Future Stock SubscriptionDeposit for future stock subscription represents payments made on subscription of shares whichcannot be directly credited to ‘Capital stock’ pending registration with the SEC of the amendment tothe Articles of Incorporation increasing capital stock. The paid-up subscription can be classifiedunder equity if the nature of the transaction gives rise to a contractual obligation of the Company todeliver its own shares to the subscriber in exchange of the subscription amount.

In addition, deposit for future stock subscription shall be classified under equity if all of the followingelements are present as at reporting date, as prescribed by SEC:

a. The unissued authorized capital stock of the entity is insufficient to cover the amount of sharesindicated in the contract;

b. There is BOD approval on the proposed increase in authorized capital stock (for which a depositwas received by the corporation);

c. There is stockholders’ approval of said proposed increase; andd. The application for the approval of the proposed increase has been presented for filing or has

been filed with the Securities and Exchange Commission (SEC).

DividendsDividends are recognized as a liability and deducted from equity when declared and approved by theBOD of the Company and of the BSP. Dividends for the year that are declared and approved after thereporting date, if any, are dealt with as an event after the reporting date and disclosed accordingly.

Events after the Reporting PeriodPost year-end events that provide additional information about the Company’s financial position atthe reporting date (adjusting events) are reflected in the financial statements. Post year-end eventsthat are not adjusting events are disclosed in the notes to the financial statements when material.


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Standards issued but not yet effectivePronouncements issued but not yet effective are listed below. Unless otherwise indicated, theCompany does not expect the future adoption of the said pronouncements to have a significant impacton its financial statements. The Company intends to adopt the following pronouncements when theybecome effective.

Effective beginning on or after April 1, 2019· PFRS 16, Leases

PFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure ofleases and requires lessees to account for all leases under a single on-balance sheet model similarto the accounting for finance leases under PAS 17, Leases. The standard includes two recognitionexemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and short-termleases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease,a lessee will recognize a liability to make lease payments (i.e., the lease liability) and an assetrepresenting the right to use the underlying asset during the lease term (i.e., the right-of-useasset). Lessees will be required to separately recognize the interest expense on the lease liabilityand the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events(e.g., a change in the lease term, a change in future lease payments resulting from a change in anindex or rate used to determine those payments). The lessee will generally recognize the amountof the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under PFRS 16 is substantially unchanged from today’s accounting underPAS 17. Lessors will continue to classify all leases using the same classification principle as inPAS 17 and distinguish between two types of leases: operating and finance leases. PFRS 16 alsorequires lessees and lessors to make more extensive disclosures than under PAS 17.

A lessee can choose to apply the standard using either a full retrospective or a modifiedretrospective approach. The standard’s transition provisions permit certain reliefs.

The Company is currently assessing the impact of adopting PFRS 16.

· Amendments to PAS 19, Employee Benefits, Plan Amendment, Curtailment or Settlement

The amendments to PAS 19 address the accounting when a plan amendment, curtailment orsettlement occurs during a reporting period. The amendments specify that when a planamendment, curtailment or settlement occurs during the annual reporting period, an entity isrequired to:

o Determine current service cost for the remainder of the period after the plan amendment,curtailment or settlement, using the actuarial assumptions used to remeasure the net definedbenefit liability (asset) reflecting the benefits offered under the plan and the plan assets afterthat event

o Determine net interest for the remainder of the period after the plan amendment, curtailmentor settlement using: the net defined benefit liability (asset) reflecting the benefits offeredunder the plan and the plan assets after that event; and the discount rate used to remeasurethat net defined benefit liability (asset).

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The amendments also clarify that an entity first determines any past service cost, or a gain or losson settlement, without considering the effect of the asset ceiling. This amount is recognized inprofit or loss. An entity then determines the effect of the asset ceiling after the plan amendment,curtailment or settlement. Any change in that effect, excluding amounts included in the netinterest, is recognized in other comprehensive income.

The amendments apply to plan amendments, curtailments, or settlements occurring on or after thebeginning of the first annual reporting period that begins on or after January 1, 2019, with earlyapplication permitted. These amendments will apply only to any future plan amendments,curtailments, or settlements of the Company.

· Philippine Interpretation IFRIC-23, Uncertainty over Income Tax Treatments

The interpretation addresses the accounting for income taxes when tax treatments involveuncertainty that affects the application of PAS 12, Income Taxes, and does not apply to taxes orlevies outside the scope of PAS 12, nor does it specifically include requirements relating tointerest and penalties associated with uncertain tax treatments.

The interpretation specifically addresses the following:o Whether an entity considers uncertain tax treatments separatelyo The assumptions an entity makes about the examination of tax treatments by taxation

authoritieso How an entity determines taxable profit (tax loss), tax bases, unused tax losses, unused tax

credits and tax rateso How an entity considers changes in facts and circumstances

An entity must determine whether to consider each uncertain tax treatment separately or togetherwith one or more other uncertain tax treatments. The approach that better predicts the resolutionof the uncertainty should be followed.

The Company is currently assessing the impact of adopting IFRIC-23.

· Amendments to PAS 28, Long-term Interests in Associates and Joint Ventures

· Annual Improvements to PFRSs 2015-2017 Cycleo Amendments to PFRS 3, Business Combinations, and PFRS 11, Joint Arrangements,

Previously Held Interest in a Joint Operationo Amendments to PAS 12, Income Tax Consequences of Payments on Financial Instruments

Classified as Equityo Amendments to PAS 23, Borrowing Costs, Borrowing Costs Eligible for Capitalization

Effective beginning on or after April 1, 2020· Amendments to PFRS 3, Definition of a Business· Amendments to PAS 1, Presentation of Financial Statements, and PAS 8, Accounting Policies,

Changes in Accounting Estimates and Errors, Definition of Material

Effective beginning on or after April 1, 2021· PFRS 17, Insurance Contracts


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3. Significant Accounting Judgments and Estimates

The preparation of the accompanying financial statements in conformity with PFRS requiresmanagement to make judgments, estimates and assumptions that affect the reported amounts in thefinancial statements and accompanying notes. The judgments, estimates and assumptions used in theaccompanying financial statements are based upon management’s evaluation of relevant facts andcircumstances as of the date of the financial statements. Actual results could differ from suchestimates.

Judgments and estimates are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under thecircumstances.

JudgmentsIn the process of applying the Company’s accounting policies, management has made the followingjudgments, apart from those involving estimates and assumptions, which have the most significanteffect on the amounts recognized in the financial statements.

a. Finance leasesThe Company, as a lessor, has entered into finance leases of vehicles with its customers. TheCompany has determined that it transfers all the significant risks and rewards of ownership as thelease terms are for the major part of the economic life of these properties which are leased out onfinance leases.

EstimatesThe key assumptions concerning the future and other key sources of estimation uncertainty at thestatement of condition date, which have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next period, are described below. The Companybased its assumptions and estimates on parameters available when the financial statements wereprepared. Existing circumstances and assumptions about future developments, however, may changedue to market changes or circumstances beyond the control of the Company. Such changes arereflected in the assumptions when they occur.

a. Impairment of financial assetsBeginning April 1, 2018The Company’s ECL calculations are outputs of complex models with a number of underlyingassumptions regarding the choice of variable inputs and their interdependencies. Significantfactors affecting the estimates on the ECL model include:· Segmentation of the portfolio, where the appropriate model or ECL approach is used· Development of ECL models, including the various formulas and the choice of inputs· Determination of associations between macroeconomic scenarios and economic inputs and

the effect on PDs, EADs and LGDs· Selection of forward-looking macroeconomic scenarios to derive the economic inputs into the

ECL models

The allowance for credit losses of financial assets as of March 31, 2019 are disclosed in Notes 4and 7, respectively.

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Prior to April 1, 2018The Company reviews impairment of receivables on a monthly basis. Impairment loss onreceivables is determined on a collective basis using the net flow rate methodology.

In determining whether an impairment loss should be recorded in the statement of comprehensiveincome, the Company makes judgments as to whether there is any observable data indicating thatthere is a measurable decrease in the estimated future cash flows from a portfolio of receivablesfinanced and lease contract receivables before the decrease can be identified with an individualaccount in that portfolio. This observable data may include adverse changes in the paymentstatus of borrowers in a group, or national or local economic conditions that correlate withdefaults on assets in the portfolio.

The amount and timing of recorded expenses for any period would differ if the Company madedifferent estimates. An increase in allowance for credit losses would increase the recordedexpenses and decrease the related asset account.

The gross carrying amounts of financial assets subject to ECL as of March 31, 2018 and therelated allowance for credit losses are disclosed in Notes 7 and 11, respectively.

b. Fair value of derivativesThe fair values of derivatives that are not quoted in active markets are determined using valuationtechniques. Where valuation techniques are used to determine fair values, they are validated andperiodically reviewed by qualified personnel independent of the area that created them. Allmodels are reviewed before they are used, and models are calibrated to ensure that outputs reflectactual data and comparative market prices. To the extent practical, models use only observabledata, however areas such as credit risk (both own and counterparty), volatilities and correlationsrequire management to make estimates. Changes in assumptions about these factors could affectreported fair value of financial instruments. Refer to Note 14 for the information on the fair valueof the financial instrument.

c. Valuation of assets held for saleThe Company’s assets held for sale are carried at the lower of its carrying amount and fair valueless costs to sell. Fair value is based on the valuation performed by the internal appraiser.Valuation of assets held for sale is ascertained using the market data approach, wherein currentsales prices of identical vehicles, together with the valuation opinions of conversant appraisers areaccumulated, compared and thoroughly analyzed. As of March 31, 2019 and 2018, assets heldfor sale is disclosed in Note 8.

d. Recognition of deferred tax assetsDeferred tax assets are recognized for all deductible temporary differences to the extent that it isprobable that taxable income will be available against which the losses can be utilized.Significant management judgment is required to determine the amount of deferred tax assets thatcan be recognized, based upon the likely timing and level of future taxable income together withfuture tax planning strategies.

The Company has been in a taxable income position over the past several years. The Companybelieves, based on its expected future taxable income that it is highly probable for temporarydifferences to be realized in the future.

As of March 31, 2019 and 2018, the carrying value of the recognized net deferred tax assets isdisclosed in Note 19.


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4. Cash and Cash Equivalents and Due from Bangko Sentral ng Pilipinas

Cash and Cash EquivalentsThis account consists of:

2019 2018Cash on hand P=584,031 P=329,757Cash in banks (Note 21) 632,710,681 652,626,114Cash equivalents (Note 21) 200,000,000 700,000,000

833,294,712 P=1,352,955,871Allowance for impairment losses (235,102) –

P=833,059,610 P=1,352,955,871

Cash in bank earns annual interest ranging from 0.1% to 1.3% in 2019 and 2018.

Cash equivalents pertain to overnight placement that earns annual interest ranging from 0.9% to 6.8%in 2019 and 0.9% to 3.1% in 2018.

Due from BSPThis account consists of:

2019 2018Demand deposits P=9,293,137,914 P=9,600,688,862Term deposits 5,000,000,000 −Overnight deposits − 48,000,000

P=14,293,137,914 P=9,648,688,862

Due from BSP includes non-interest bearing demand deposit account in 2019 and 2018. It alsoincludes term deposit facility that earns annual interest ranging from 3.0% to 5.2% in 2019.

Deposit substitutes are subjected to required reserves equivalent to 18.0% in 2019 and in 2018. Therequired reserves shall be kept in the form of deposits maintained in the Demand Deposit Account(DDA) with the BSP and any government securities which were previously used as compliance untilthey mature. The Company was in compliance with such regulations as of March 31, 2019 and 2018.

The total available reserves booked under ‘Due from BSP’ amounted to P=9.3 billion and P=9.6 billionin 2019 and 2018, respectively.

The allowance for credit losses recognized under ‘Cash and cash equivalents’ pertains only to ‘Cashin banks’ and ‘Cash equivalents.’ No allowance for credit losses was recognized for ‘Due from BSP’as of March 31, 2019.

An analysis of changes in the gross carrying amount and corresponding allowance for credit lossesfor cash and cash equivalents as of March 31, 2019 follow:

Gross carrying amount Cash in Banks Cash Equivalents TotalBalances as of March 31, 2018 P=652,626,114 P=700,000,000 P=1,352,626,114Movements in asset balance (19,915,433) (500,000,000) (519,915,433)Balance at March 31 ,2019 P=632,710,681 P=200,000,000 P=832,710,681

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Allowance for credit losses Cash in Banks Cash Equivalents TotalBalances as of March 31, 2018 P=– P=– P=–PFRS 9 transition 171,468 5,480 176,948Balance at April 1, 2018 171,468 5,480 176,948Provision during the year 62,294 (4,140) 58,154Balance at March 31 ,2019 P=233,762 P=1,340 P=235,102

Interest income on cash and cash equivalents, due from BSP and SPURA consists of:

2019 2018Cash in banks (Note 21) P=3,047,169 P=3,116,013Cash equivalents (Note 21) 9,301,450 2,812,643Due from BSP 148,306,154 5,500,347SPURA (Note 5) 34,299,412 10,538,961

P=194,954,185 P=21,967,964

5. Securities Purchased Under Resale Agreement (SPURA)

This account consists of government securities purchased under reverse repurchase agreement withthe BSP as counterparty. These government securities with face value amounting to nil andP=1.1 billion in 2019 and 2018, respectively, were pledged in favor of the Company as collateral forSPURA equivalent to the face value of the government securities.

6. Financial Assets at Fair Value through Other Comprehensive Income (FVOCI) / Available-for-Sale (AFS) Investments

Financial assets at FVOCI / AFS investments consist of the following:

2019 2018Financial assets at FVOCIEquity Securities P=1,200,000 P=−

AFS investmentsEquity Securities P=− P=1,200,000


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7. Loans and Receivables

This account consists of:

2019 2018Receivables from customers

Receivables financed P=11,550,528,065 P=11,853,470,534Unearned finance income (1,598,400,525) (1,705,836,912)

9,952,127,540 10,147,633,622Finance lease receivables

Finance lease receivables 69,615,291,927 61,046,426,409Residual value of leased assets 68,230,737 1,113,540,256

69,683,522,664 62,159,966,665Unearned lease income (10,862,308,906) (9,639,304,310)

58,821,213,758 52,520,662,35568,773,341,298 62,668,295,977

Other receivablesReceivables from clients 37,264,611 65,720,073Receivables from employees 17,027,500 16,447,807Accrued interest receivable 6,865,000 531,074Others 83,199 296,386

61,240,310 82,995,340Allowance for credit losses (Note 11) (1,100,255,560) (1,138,334,920)

P=67,734,326,048 P=61,612,956,397

Receivables financed earn fixed interest ranging from 6.5% to 20.3% in 2019 and from 6.0% to20.3% in 2018 while finance lease receivables earn fixed interest ranging from 4.5% to 20.7% in2019 and from 5.1% to 19.3% in 2018. An account shall be considered delinquent when after thearrival of a payment due date, the client failed to settle the amount.

An analysis of changes in loans and receivables from customers as of March 31, 2019 follows:

2019Receivables

financedFinance lease

receivablesOther

receivables TotalBalances as of March 31, 2018 P=11,853,470,534) P=62,159,966,665) P=82,995,340) P=74,096,432,539)New assets originated or purchased 4,373,128,677) 30,101,775,607) −) 34,474,904,284)Assets derecognized or repaid (4,624,761,866) (22,147,646,986) (21,755,030) (26,794,163,882)Accounts written off (42,389,711) (349,292,573) − (391,682,284)Accounts written off - interest (8,919,569) (81,280,049) − (90,199,618)

11,550,528,065) 69,683,522,664) 61,240,310) 81,295,291,039)Unearned interest and discount (1,598,400,525) (10,862,308,906) −) (12,460,709,431)Balance at March 31, 2019 P=9,952,127,540) P=58,821,213,758) P=61,240,310) P=68,834,581,608)

Receivables from customers are due in monthly installments with terms ranging from one (1) to five(5) years. The receivables financed, net of unearned finance income, by contractual maturity dates isanalyzed as follows:

2019 2018Due within 1 year P=3,546,594,957 P=3,497,218,684Due beyond 1 year but not beyond 5 years 6,405,532,583 6,650,414,938

P=9,952,127,540 P=10,147,633,622

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The breakdown of the Company’s net investment in finance lease receivables by contractual maturitydates is analyzed as follows:

2019 2018Gross investment in finance lease receivables

Due within 1 year P=22,437,656,241 P=19,331,750,707Due beyond 1 year but not beyond 5 years 47,177,635,686 41,714,675,702

69,615,291,927 61,046,426,409Residual value of leased assets

Due within 1 year 68,230,737 1,058,317,290Due beyond 1 year but not beyond 5 years − 55,222,966

68,230,737 1,113,540,256Unearned lease income

Due within 1 year (4,769,329,627) (4,158,156,500)Due beyond 1 year but not beyond 5 years (6,092,979,279) (5,481,147,810)

(10,862,308,906) (9,639,304,310)Net investment in finance lease receivables P=58,821,213,758 P=52,520,662,355

The net investment in finance lease receivables is analyzed as follows:

2019 2018Due within 1 year P=17,736,557,351 P=16,231,911,497Due beyond 1 year but not beyond 5 years 41,084,656,407 36,288,750,858

P=58,821,213,758 P=52,520,662,355

Interest income on loans and receivables consists of:

2019 2018Receivables financed P=966,997,941 P=883,033,074Finance lease receivables 5,274,301,880 4,362,874,441

P=6,241,299,821 P=5,245,907,515

An analysis of changes in the ECL allowances for receivables from customers as of March 31, 2019and 2018 follows:

2019Receivables


receivablesOther

receivables TotalBalances as of March 31, 2018 P=168,111,544 P=970,004,878 P=218,498 P=1,138,334,920PFRS 9 transition (Note 2) (14,063,052) 20,278,658 − 6,215,606Balance at April 1, 2018 154,048,492 990,283,536 218,498 1,144,550,526New assets originated or purchased 45,443,639 454,313,127 − 499,756,766Assets derecognized or repaid (36,368,639) (116,000,809) − (152,369,448)Accounts written off (42,389,711) (349,292,573) − (391,682,284)Balance at March 31, 2019 P=120,733,781 P=979,303,281 P=218,498 P=1,100,255,560

2018Receivables


receivablesOther

receivables TotalBalances at beginning of year P=181,952,458 P=946,640,842 P=− P=1,128,593,300Provisions (Note 11) 33,895,261 370,087,590 218,498 404,201,349Accounts written off (47,736,175) (346,723,554) − (394,459,729)Balances at end of year P=168,111,544 P=970,004,878 P=218,498 P=1,138,334,920


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Section 9(f) of Republic Act (RA) No. 8556 requires that a 100.0% allowance for credit losses shouldbe set up for the following:

a. clean loans and advances past due for a period of more than 6 months;b. past due loans secured by collateral such as inventories, receivables, equipment and other chattels

that have declined in value by more than 50.0%, without the borrower offering additionalcollateral for the loans;

c. past due loans secured by real estate mortgage title to which is subject to an adverse claimrendering settlement through foreclosure doubtful;

d. when borrower and his co-maker or guarantor, are insolvent or where their whereabouts areunknown, or their earnings power is permanently impaired;

e. accrued interest receivable that remain uncollected after six months from the maturity date ofsuch loans to which it accrues; and

f. accounts receivable past due for 361 days or more.

As of March 31, 2019 and 2018, the Company’s allowance for credit losses for accounts receivable isin compliance with the requirements of RA No. 8556.

BSP reportingAs of March 31, 2019 and 2018, information on concentration of receivables from customers (net ofunearned income, excluding residual value of leased assets) as to economic activity of the Companyfollows:

2019 2018Amount % Amount %

Other community and personal activities P=17,100,228,863 24.89% P=13,662,785,107 22.20%Social work activities 11,920,611,074 17.35% 10,497,184,216 17.05%Wholesale and retail trade 11,266,990,303 16.40% 9,889,791,984 16.07%Transportation, storage and communication 5,983,041,129 8.71% 6,091,089,005 9.90%Education 5,217,888,727 7.59% 4,438,461,750 7.21%Real estate, renting and business activities 5,026,755,626 7.32% 5,737,124,584 9.32%Financial intermediaries 2,622,822,322 3.82% 2,631,730,983 4.28%Manufacturing 2,481,047,776 3.61% 2,339,007,535 3.80%Hotels and restaurants 2,428,272,329 3.53% 2,145,968,872 3.49%Agricultural, hunting and forestry, fishing 2,060,685,581 3.00% 1,716,884,361 2.79%Construction 1,603,250,513 2.33% 1,499,087,347 2.44%Electricity, gas and water 856,409,846 1.25% 801,760,623 1.30%Mining and quarrying 137,106,472 0.20% 103,879,354 0.17%

P=68,705,110,561 100.00% P=61,554,755,721 100.00%

The BSP considers that concentration of credit exists when total loan exposure to a particular industryor economic sector exceeds 30.0% of total loan portfolio.

As of March 31, 2019 and 2018, all of the Company’s receivables from customers are secured bychattel mortgage.

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As of March 31, 2019 and 2018, nonperforming loans (NPLs) not fully covered by allowance forcredit losses of the Company, as reported to BSP, follow:

2019 2018Total NPLs P=1,344,831,001 P=1,402,207,153NPLs fully covered by allowance for credit losses (599,073,397) (530,610,909)

P=745,757,604 P=871,596,244

Generally, NPLs refer to loans whose principal and/or interest is unpaid for ninety (90) days or moreafter due date or after they have become past due in accordance with existing BSP rules andregulations. This shall apply to loans payable in lump sum and loans payable in quarterly, semi-annual, or annual installments, in which case, the total outstanding balance thereof shall be considerednonperforming.

In the case of receivables that are payable in monthly installments, the total outstanding balancethereof shall be considered nonperforming when three (3) or more installments are in arrears. In thecase of receivables that are payable in weekly, or semi-monthly installments, the total outstandingbalance thereof shall be considered nonperforming at the same time that they become past due inaccordance with existing BSP regulations, i.e., the entire outstanding balance of the receivable shallbe considered as past due when the total amount of arrearages reaches more than 10.0% of the totalreceivable balance.

8. Assets Held for Sale

The rollforward analysis of this account follows:

2019 2018CostBalance at beginning of year P=169,739,176 P=160,300,487Additions (Note 26) 2,420,097,250 1,749,444,717Disposals and transfers to PPE (Notes 9 and 26) (2,392,140,246) (1,740,006,028)Balance at end of year 197,696,180 169,739,176Allowance for impairment losses (Note 11)Balance at beginning of year 41,267,746 39,740,125Provision for impairment losses 402,221,724 332,265,883Reversals (399,305,881) (330,738,262)Balance at end of year 44,183,589 41,267,746Net book value P=153,512,591 P=128,471,430

The Company’s assets held for sale consist of repossessed collaterals from customers who havedefaulted in their respective loan accounts. These are actively marketed for sale and are expected tobe sold within one year from the date of its classification as assets held for sale.

‘Loss on sale of assets held for sale’ amounted to P=276.6 million and P=182.7 million in 2019 and2018, respectively.


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9. Property and Equipment

The composition and movements in this account follow:2019

LeaseholdImprovements

Furniture,Fixtures and

EquipmentTransportation

Equipment TotalCostBalances at beginning of year P=76,230,609 P=123,279,241 P=49,063,051 P=248,572,901Acquisitions 521,980 25,491,052 7,178,089 33,191,121Transfers (Notes 8 and 26) − − 21,618,573 21,618,573Disposals − − (17,091,920) (17,091,920)Balances at end of year 76,752,589 148,770,293 60,767,793 286,290,675Accumulated depreciation

and amortizationBalances at beginning of year 44,069,411 79,294,216 17,118,948 140,482,575Depreciation and amortization 8,576,984 14,754,259 11,214,465 34,545,708Disposals and others 123,750 (123,750) (6,045,764) (6,045,764)Balances at end of year 52,770,145 93,924,725 22,287,649 168,982,519Net book value P=23,982,444 P=54,845,568 P=38,480,144 P=117,308,156

2018

LeaseholdImprovements

Furniture,Fixtures and

EquipmentTransportation

Equipment TotalCostBalances at beginning of year P=55,779,450 P=92,391,399 P=42,500,378 P=190,671,227Acquisitions 20,451,159 30,887,842 6,913,567 58,252,568Transfers (Notes 8 and 26) − − 8,501,076 8,501,076Disposals − − (8,851,970) (8,851,970)Balances at end of year 76,230,609 123,279,241 49,063,051 248,572,901Accumulated depreciation and

amortizationBalances at beginning of year 36,967,964 66,037,945 14,419,589 117,425,498Depreciation and amortization 7,180,145 13,258,071 8,766,531 29,204,747Disposals and others (78,698) (1,800) (6,067,172) (6,147,670)Balances at end of year 44,069,411 79,294,216 17,118,948 140,482,575Net book value P=32,161,198 P=43,985,025 P=31,944,103 P=108,090,326

As of March 31, 2019 and 2018, the cost of the Company’s fully depreciated property and equipmentstill in use amounted to P=111.1 million and P=87.9 million, respectively.

10. Software Costs and Other Assets

Software CostsMovements in software costs follow:

2019 2018CostBalances at beginning of year P=136,035,522 P=102,515,813Additions 37,004,280 33,519,709Balances at end of year 173,039,802 136,035,522Accumulated amortizationBalances at beginning of year 75,322,693 67,630,076Amortization 10,045,721 7,692,617Balance at end of year 85,368,414 75,322,693Net book value P=87,671,388 P=60,712,829

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Amortization of software costs is included in the ‘Depreciation and amortization’ in the statements ofcomprehensive income.

As of March 31, 2019 and 2018, the cost of the Company’s fully amortized software still in useamounted to P=67.7 million and P=58.4 million, respectively.

Other AssetsThis account consists of:

2019 2018Prepaid expenses P=79,760,116 P=46,116,252Security deposits 13,394,944 11,954,548Withholding tax receivable 87,255 78,049Others 10,138,226 207,365

P=103,380,541 P=58,356,214

Prepaid expenses mainly consist of prepayments on office and warehouse rent, IT related costs, andelectronic documentary stamps.

Others include gross receipt tax receivable and income tax receivable.

11. Allowance for Credit and Impairment Losses

The analysis of the movement of allowance for credit and impairment losses as of March 31, 2019and 2018 follows:

2019Balance at March 31, 2018

Loans and receivablesReceivables financed P=168,111,544Finance lease receivables 970,004,878Other receivables 218,498

1,138,334,920Assets held for sale 41,267,746

PFRS 9 transition 6,392,554Balance at April 1, 2018 1,185,995,220Provision for credit and impairment losses 749,667,197Accounts written off (Note 7) (391,682,284)Reversal (Note 8) (399,305,881)

(41,320,968)Balance at March 31, 2019 P=1,144,674,252


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2018Balances at March 31, 2017

Loans and receivablesReceivables financed P=181,952,458Finance lease receivables 946,640,842Other receivables −

1,128,593,300Assets held for sale 39,740,125

1,168,333,425Provision for credit and impairment losses 736,467,232Accounts written off (Note 7) (394,459,729)Reversal (Note 8) (330,738,262)

11,269,241Balance at March 31, 2018 P=1,179,602,666

Below is the breakdown of allowance for credit and impairment losses:

2019 2018Loans and receivables (Note 7)

Receivables financed P=120,733,781 P=168,111,544Finance lease receivables 979,303,281 970,004,878Other receivables 218,498 218,498

1,100,255,560 1,138,334,920Cash and cash equivalents (Note 4) 235,102 −Assets held for sale (Note 8) 44,183,590 41,267,746

P=1,144,674,252 P=1,179,602,666

Below is the breakdown of provision for credit and impairment losses:

2019 2018Loans and receivables (Note 7)

Receivables financed P=9,075,000 P=33,895,261Finance lease receivables 338,312,319 370,087,590Other receivables − 218,498

347,387,319 404,201,349Cash and cash equivalents 58,154 −Assets held for sale (Note 8) 402,221,724 332,265,883

P=749,667,197 P=736,467,232

With the foregoing level of allowance for credit and impairment losses, management believes that theCompany has sufficient allowance to absorb any losses that may be incurred from the non-collectionor nonrealization of its receivables and assets held for sale.

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12. Loans Payable


2019 2018Bank loans (Note 21) P=42,694,682,180 P=41,109,066,754Bank loan from Mizuho Bank Ltd. – Singapore

Branch (Note 14) 7,853,517,483 6,497,267,347Bonds payable from Bank of Tokyo - Mitsubishi

UFJ, Ltd. – Japan Branch (Note 14) 6,479,498,193 5,131,707,556Fixed rate notes 4,980,651,029 3,981,193,797Notes payable 3,921,167,346 3,290,616,590Bank loan from Mitsubishi UFJ Trust and Banking

Corporation – Singapore Branch (Note 14) 2,613,814,386 2,593,041,631Bank loan from The Norinchukin Bank – Singapore

Branch (Note 14) 2,608,169,417 −Bank loan from Resona Bank Ltd. – Japan Branch

(Note 14) 1,303,860,000 −Bonds payable from Sumitomo Mitsui Banking

Corporation (SMBC) – Japan Branch (Note 14) 1,265,227,661 −Corporate note − 1,497,073,461

P=73,720,587,695 P=64,099,967,136

Bank loansBank loans bear interest rates ranging from 3.3% to 8.7% in 2019 and 2.7% to 5.5% in 2018. As ofMarch 31, 2019 and 2018, the Company’s bank loans have maturity periods of 1 month to 5 years.

Bank loan from Mizuho Bank Ltd. - Singapore BranchOn November 27, 2015, the Company and Mizuho Singapore Branch entered into a term loanagreement where Mizuho Singapore Branch granted the Company a committed term loan facility in amaximum aggregate amount of US$50.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 1 December 14, 2015 December 16, 2019 US$25.0 millionTranche 2 November 3, 2016 November 3, 2020 US$25.0 million

Interest is payable semi-annually based on 6-month USD Intercontinental Exchange (ICE) LIBORplus 50 bps.

On March 10, 2017, the Company and Mizuho Singapore Branch entered into another term loanagreement where Mizuho Singapore Branch granted the Company a committed term loan facility in amaximum aggregate amount of US$25.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 3 April 4, 2017 April 4, 2019 US$25.0 million

Interest is payable quarterly based on 3-month USD ICE LIBOR plus 30 bps.


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On June 9, 2017, the Company and Mizuho Singapore Branch entered into another term loanagreement where Mizuho Singapore Branch granted the Company a committed term loan facility in amaximum aggregate amount of US$25.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 4 June 15, 2017 June 15, 2021 US$25.0 million


On February 23, 2018, the Company and Mizuho Singapore Branch entered into another term loanagreement where Mizuho Singapore Branch granted the Company a committed term loan facility in amaximum aggregate amount of US$25.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 5 March 7, 2018 March 7, 2022 US$25.0 million


On June 01, 2018, the Company and Mizuho Singapore Branch entered into another term loanagreement where Mizuho Singapore Branch granted the Company a committed term loan facility in amaximum aggregate amount of US$25.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 6 June 6, 2018 June 6, 2022 US$25.0 million


The Company also entered into a cross-currency interest rate swap agreements with Mizuho BankLtd. - Singapore Branch which was designated by the Company as a cash flow hedge (see Note 14).

Bonds payable from Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) Japan BranchThe private bonds were subscribed by BTMU Japan branch under various subscription agreements asfollows:

Date Drawn Maturity Date Principal AmountSeries 1 June 17, 2016 June 17, 2020 US$30.0 millionSeries 2 September 29, 2016 September 29, 2020 US$20.0 millionSeries 3 March 16, 2017 March 16, 2021 US$25.0 millionSeries 4 August 10, 2017 August 10, 2021 US$25.0 millionSeries 5 November 21, 2018 November 19, 2021 US$25.0 million

Interest on the private bond issue are payable quarterly based on the 3-month USD IntercontinentalExchange London Interbank Offered Rate (USD ICE LIBOR) plus 2 basis points (bps) for Series 1and 2 and the 3-month USD ICE LIBOR for Series 3, 4 & 5 without spread.

The Company also entered into a cross-currency interest rate swap agreements with BTMU ManilaBranch which was designated by the Company as a cash flow hedge (see Note 14).

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Fixed rate notesOn March 24, 2017, the Company issued retail fixed rate notes amounting to P=1.5 billion and anadditional P=2.5 billion on October 12, 2017.

As of March 31, 2019 and 2018, the Company’s retail fixed rate notes bear interest rates ranging from3.6% to 5.5% and 3.5% to 3.9% and have maturity period of 18 month to 24 months and 15 months to24 months, respectively.

Notes payableNotes payable pertains to retail notes issued by the Company that bear interest rates ranging from1.9% to 7.3% in 2019 and 1.3% to 3.9% in 2018. As of March 31, 2019 and 2018, the Company’snotes payable have maturity period of 1 month to 4 years and 1 month to 3 years, respectively.

Bank loan from Mitsubishi UFJ Trust and Banking Corporation (MUTB) Singapore BranchOn September 22, 2017, the Company and MUTB Singapore Branch entered into a loan agreementwhere MUTB Singapore Branch granted the Company an uncommitted loan facility in a maximumaggregate amount of US$50.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 1 November 22, 2017 November 22, 2021 US$25.0 millionTranche 2 January 17, 2018 January 18, 2022 US$25.0 million

Interest is payable semi-annually based on 3-month USD LIBOR plus 80 bps. The Company alsoentered into a cross-currency interest rate swap agreements with MUTB Singapore Branch which wasdesignated by the Company as a cash flow hedge (see Note 14).

Bank loan from The Norinchukin Bank (TNB) Singapore BranchOn June 29, 2018, the Company and TNB - Singapore Branch entered into a term loan agreementwhere TNB Singapore Branch granted the Company a committed term loan facility in a maximumaggregate amount of US$50.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 1 August 28, 2018 August 30, 2022 US$25.0 millionTranche 2 October 15, 2018 October 15, 2020 US$25.0 million

Interest is payable quarterly based on 3-month USD LIBOR BBA plus 80 bps for tranche 1 and 70bps for tranche 2.

Bank loan from Resona Bank Limited (RBL) Nagoya BranchOn June 29, 2018, the Company and RBL - Nagoya Branch entered into a term loan agreement whereTNB Nagoya Branch granted the Company a committed term loan facility in a maximum aggregateamount of US$25.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountTranche 1 July 19, 2018 July 19, 2022 US$25.0 million

Interest is payable quarterly based on 3-month USD LIBOR BBA plus 65 bps.


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Bonds Payable from Sumitomo Mitsui Banking Corporation (SMBC)- Japan BranchOn February 7, 2019, the Company and SMBC - Japan Branch entered into a bond purchaseagreement where SMBC Japan Branch as the “Purchaser” of the entire amount of bonds n amaximum aggregate principal amount of US$25.0 million. Details of the loan are as follows:

Date drawn Maturity Date Principal AmountSeries 1 February 7, 2019 February 7, 2022 US$25.0 million

Interest is payable quarterly based on 3-month USD LIBOR.

Corporate noteOn January 24, 2014 (the Issue Date), the Company issued fixed rate notes amounting toP=1.5 billion. The fixed rate notes bear interest of 5.4% and will mature on January 25, 2019 but canbe early redeemed, at the option of the Company, on any interest payment date on or after the thirdanniversary of the Issue Date, subject to certain conditions, at amount equivalent to the principal andall accrued interest due on the notes and a prepayment penalty equivalent to 1.0% per annum to becomputed on the remaining term of the principal amount of the notes prepaid. The Company is alsorequired to maintain, at all times, a Capital Adequacy Ratio (CAR) of not less than 10.0% or suchother percentage as may be required by BSP. The Company is compliant with the minimum CARrequirement as of March 31, 2019 and 2018 (see Note 23).

Interest expense on loans payable consists of:

2019 2018Bank loans P=1,869,533,455 P=1,505,856,726Bank loan from Mizuho Bank – Singapore 392,193,160 220,320,096Bonds payable (BTMU and SMBC) 266,054,385 190,531,172Fixed rate notes 232,167,948 117,784,603Notes payable 127,137,062 102,864,734Bank loan from Mitsubishi UFJ Trust and Banking

Corporation – Singapore 122,421,734 33,467,194Bank loan from TNB - Singapore 95,696,655 –Corporate note 70,355,905 85,793,259Bank loan from RBL - Nagoya 58,646,557 –

P=3,234,206,861 P=2,256,617,784

As of March 31, 2019 and 2018, the outstanding loans payable are unsecured.

The unamortized transaction costs on loans are P=313.1 million and P=234.6 million as of 2019 and2018, respectively.

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13. Accounts Payable and Other Liabilities


2019 2018Accounts payable (Note 21) P=282,905,782 P=525,955,896Accrued interest payable 488,220,493 340,102,249Accrued expenses 261,756,089 175,205,459Withholding tax payable 33,996,406 26,508,261Retirement liability (Note 18) 32,223,818 8,216,556Others 1,297,027 1,082,502

P=1,100,399,615 P=1,077,070,923

Accounts payable are composed of trade payables to dealers, insurance and outsourcing companieswhich are non-interest bearing and are normally settled on a 30-day term.

Accrued expenses pertain to accrual of gross receipts tax and fringe benefit tax, accrual of unbilledutilities, employees’ compensated leaves and absences and accrual of BSP annual supervision fees.

Others consist of Social Security System, Medicare, employees’ compensation premium and homedevelopment mutual fund payable.

14. Derivatives

The breakdown of derivative asset (liability) as of March 31, 2019 and 2018 follows:

2019 2018Derivative asset P=1,103,133,383 P=868,094,713Derivative liability (294,478,757) −

P=808,654,626 P=868,094,713

The movements in fair value changes of the derivative asset (liability) follow:

2019 2018Beginning balance P=868,094,713 P=290,731,016Net changes in fair value of derivatives (59,440,087) 577,363,697

P=808,654,626 P=868,094,713

Currency swap agreements with Mizuho Bank Ltd. Manila Branch· On December 14, 2015, the Company entered into a currency swap agreement with

Mizuho-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 1 in theforeign loan availed from Mizuho Singapore Branch. Under the agreement, the Company, on asemi-annual basis, pays fixed interest rate of 4.35% per annum on the peso principal amountingto P=1.3 billion and receives floating interest rate at 6-months USD ICE LIBOR plus 0.50% onUSD$25.0 million over a period of four (4) years from December 14, 2015 to December 16,2019. Effectively, under the swap agreement, the Company swaps its USD-denominated floatingrate loans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to (P=9.6) million in 2019 and P=5.8 million in 2018, net of the related deferred taxes.


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As of March 31, 2019 and 2018, the positive fair value of the currency swap included in“Derivative Assets” amounted P=122.5 million and P=131.4 million, respectively.

· On November 3, 2016, the Company entered into a currency swap agreement withMizuho-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 2 in theforeign loan availed from Mizuho Singapore Branch. Under the agreement, the Company, on asemi-annual basis, pays fixed interest rate of 4.20% per annum on the peso principal amountingto P=1.2 billion and receives floating interest rate at 6-months USD ICE LIBOR plus 0.50% onUSD$25.0 million over a period of four (4) years from November 3, 2016 to November 3, 2020.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to P=20.8 million in 2019 and P=8.6 million in 2018, net of the related deferred taxes.As of March 31, 2019 and 2018, the positive fair value of the currency swap included in“Derivative Assets” amounted P=141.2 million and P=108.2 million, respectively.

· On April 4, 2017, the Company entered into a currency swap agreement withMizuho-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 3 in theforeign loan availed from Mizuho Singapore Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 3.85% per annum on the peso principal amounting toP=1.2 billion and receives floating interest rate at 3-months USD ICE LIBOR plus 0.30% onUSD$25.0 million over a period of two (2) years from April 4, 2017 to April 4, 2019.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to (P=1.4) million in 2019 and P=0.2 million in 2018, net of the related deferred taxes.As of March 31, 2019 and 2018, the positive fair value of the currency swap included in“Derivative Assets” amounted P=56.2 million and P=49.8 million, respectively.

· On June 15, 2017, the Company entered into a currency swap agreement withMizuho-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 4 in theforeign loan availed from Mizuho Singapore Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 4.48% per annum on the peso principal amounting toP=1.2 billion and receives floating interest rate at 3-months USD ICE LIBOR plus 0.70% onUSD$25.0 million over a period of four (4) years from June 15, 2017 to June 15, 2021.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to P=5.4 million in 2019 and P=15.9 million in 2018, net of the related deferred taxes.As of March 31, 2019 and 2018, the positive fair value of the currency swap included in“Derivative Assets” amounted P=95.4 million and P=89.0 million.

· On March 7, 2018, the Company entered into a currency swap agreement withMizuho-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 5 in theforeign loan availed from Mizuho Singapore Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 5.90% per annum on the peso principal amounting toP=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR plus 0.70% onUSD$25.0 million over a period of four (4) years from March 7, 2018 to March 7, 2022.

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Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to (P=28.9) million in 2019 and P=10.1 million in 2018, net of the related deferred taxes.As of March 31, 2019 and 2018, the negative fair value of the currency swap included in“Derivative Liability” amounted P=21.6 million and the positive fair value of the currency swapincluded in “Derivative Asset” amounted P=17.5 million, respectively.

· On June 1, 2018, the Company entered into a currency swap agreement withMizuho-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 6 in theforeign loan availed from Mizuho Singapore Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 6.39% per annum on the peso principal amounting toP=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR plus 0.50% onUSD$25.0 million over a period of four (4) years from June 6, 2018 to June 6, 2022. Effectively,under the swap agreement, the Company swaps its USD-denominated floating rate loans intopeso fixed-rate loans. On the same date, the Company designated the swap as an effectivehedging instrument under a cash flow hedge relationship. As such, the effective portion of thechanges in fair value of the swaps was recognized under other comprehensive income amountingto (P=22.8) million in 2019, net of the related deferred taxes. As of March 31, 2019, the negativefair value of the currency swap amounted (P=35.3) million included in “Derivative Liability”.

Currency swap agreements with Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) Manila Branch· On June 17, 2016, the Company entered into a currency swap agreement with the BTMU Manila

Branch to hedge foreign currency and interest rate risks on the Series 1 private bonds with BTMUSingapore Branch. Under the agreement, the Company, on a quarterly basis, pays fixed interestrate of 3.65% per annum on the peso principal amounting to P=1.4 billion and receives floatinginterest rate at 3-months USD ICE LIBOR plus 0.02% per annum on USD$30.0 million over aperiod of four (4) years from June 17, 2016 to June 17, 2020. Effectively, under the swapagreement, the Company swaps its USD-denominated floating rate loan into a peso fixed-rateloan. On the same date, the Company designated the swap as an effective hedging instrumentunder a cash flow hedge relationship. As such, the effective portion of the changes in fair valueof the swaps was recognized under other comprehensive income amounting to (P=17.2) million in2019 and (P=0.4) million in 2018, net of the related deferred taxes. As of March 31, 2019 and2018, the positive fair value of the currency swap included in “Derivative Assets” amountedP=205.6 million and P=170.6 million, respectively.

· On September 29, 2016, the Company entered into a currency swap agreement with the BTMUManila Branch to hedge foreign currency and interest rate risks on the Series 2 private bonds withBTMU Singapore Branch. Under the agreement, the Company, on a quarterly basis, pays fixedinterest rate of 3.30% per annum on the peso principal amounting to P=1.0 billion and receivesfloating interest rate at 3-months USD ICE LIBOR plus 0.020% per annum on USD$20.0 millionover a period of four (4) years from September 26, 2016 to September 26, 2020. Effectively,under the swap agreement, the Company swaps its USD-denominated floating rate loan into apeso fixed-rate loan. On the same date, the Company designated the swap as an effectivehedging instrument under a cash flow hedge relationship. As such, the effective portion of thechanges in fair value of the swap was recognized under other comprehensive income amountingto P=18.7 million in 2019 and (P=1.5) million in 2018. As of March 31, 2019 and 2018, the positivefair value of the currency swap included in “Derivative Assets” amounted P=110.3 million andP=75.9 million, respectively.


- 39 -

*SGVFS037733*

· On March 16, 2017, the Company entered into a currency swap agreement with the BTMUManila Branch to hedge foreign currency and interest rate risks on the Series 3 private bonds withBTMU Singapore Branch. Under the agreement, the Company, on a quarterly basis, pays fixedinterest rate of 3.40% per annum on the peso principal amounting to P=1.3 billion and receivesfloating interest rate at 3-months USD ICE LIBOR per annum on USD $25.0 million over aperiod of four (4) years from March 16, 2017 to March 16, 2021. Effectively, under the swapagreement, the Company swaps its USD-denominated floating rate loan into a peso fixed-rateloan. On the same date, the Company designated the swap as an effective hedging instrumentunder a cash flow hedge relationship. As such, the effective portion of the changes in fair valueof the swaps was recognized under other comprehensive income amounting to P=28.7 million in2019 and (P=1.9) million in 2018, net of the related deferred taxes. As of March 31, 2019 and2018, the positive fair value of the currency swap included in “Derivative Assets” amountedP=94.8 million and P=44.2 million, respectively.

· On August 10, 2017, the Company entered into a currency swap agreement with the BTMUManila Branch to hedge foreign currency and interest rate risks on the Series 4 private bonds withBTMU Singapore Branch. Under the agreement, the Company, on a quarterly basis, pays fixedinterest rate of 3.60% per annum on the peso principal amounting to P=1.3 billion and receivesfloating interest rate at 3-months USD ICE LIBOR per annum on USD $25.0 million over aperiod of four (4) years from August 10, 2017 to August 10, 2021. Effectively, under the swapagreement, the Company swaps its USD-denominated floating rate loan into a peso fixed-rateloan. On the same date, the Company designated the swap as effective hedging instrument undera cash flow hedge relationship. As such, the effective portion of the changes in fair value of theswaps was recognized under other comprehensive income amounting to P=30.1 million in 2019and (P=2.6) million in 2018, net of the related deferred taxes. As of March 31, 2019 and 2018, thepositive fair value of the currency swap included in “Derivative Assets” amounted P=96.3 millionand P=43.0 million, respectively.

· On November 16, 2018, the Company entered into a currency swap agreement with the BTMUManila Branch to hedge foreign currency and interest rate risks on the Series 5 private bonds withBTMU Singapore Branch. Under the agreement, the Company, on a quarterly basis, pays fixedinterest rate of 6.34% per annum on the peso principal amounting to P=1.3 billion and receivesfloating interest rate at 3-months USD ICE LIBOR per annum on USD $25.0 million over aperiod of three (3) years from November 21, 2018 to November 19, 2021. Effectively, under theswap agreement, the Company swaps its USD-denominated floating rate loan into a peso fixed-rate loan. On the same date, the Company designated the swap as effective hedging instrumentunder a cash flow hedge relationship. As such, the effective portion of the changes in fair valueof the swaps was recognized under other comprehensive income amounting to (P=12.4) million in2019, net of the related deferred taxes. As of March 31, 2019, the negative fair value of thecurrency swap amounted P=23.3 million included in “Derivative Liability”.

Currency swap agreements with Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU) Manila Branch· On November 22, 2017, the Company entered into a currency swap agreement with

BTMU Manila Branch to hedge foreign currency and interest rate risks on the Tranche 1 of theforeign loan availed from MUTB Singapore Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 4.50% per annum on the peso principal amounting toP=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR plus 0.80% onUSD$25.0 million over a period of four (4) years from November 22, 2017 to November 22,2021. Effectively, under the swap agreement, the Company swaps its USD-denominated floatingrate loans into peso fixed-rate loans. On the same date, the Company designated the swap aseffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive income

82


83

- 40 -

*SGVFS037733*

amounting to P=19.0 million in 2019 and P=21.8 million in 2018, net of the related deferred taxes.As of March 31, 2019 and 2018, the positive fair value of the currency swap included in“Derivative Assets” amounted P=86.9 million and P=64.7 million, respectively.

· On January 17, 2018, the Company entered into a currency swap agreement withBTMU Manila Branch to hedge foreign currency and interest rate risks on the Tranche 2 of theforeign loan availed from MUTB Singapore Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 4.75% per annum on the peso principal amounting toP=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR plus 0.80% onUSD$25.0 million over a period of four (4) years from January 17, 2018 to January 18, 2022.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as effectivehedging instrument under a cash flow hedge relationship. As such, the effective portion of thechanges in fair value of the swaps was recognized under other comprehensive income amountingto P=14.4 million in 2019 and P=20.9 million in 2018, net of the related deferred taxes. As ofMarch 31, 2019 and 2018, the positive fair value of the currency swap included in “DerivativeAssets” amounted P=90.2 million and P=73.9 million, respectively.

Currency swap agreements with The Hongkong and Shanghai Banking Corporation (HSBC) ManilaBranch· On July 19, 2018, the Company entered into a currency swap agreement with

HSBC-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 1 in theforeign loan availed from Resona Bank Limited-Japan Branch. Under the agreement, theCompany, on a quarterly basis, pays fixed interest rate of 6.05% per annum on the peso principalamounting to P=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR onUSD$25.0 million over a period of four (4) years from July 19, 2018 to July 22, 2022.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to (P=29.7) million in 2019, net of the related deferred taxes. As of March 31, 2019, thenegative fair value of the currency swap amounted (P=66.7) million included in “DerivativeLiability”.

Currency swap agreements with Australia and New Zealand Banking Group Limited (ANZ) ManilaBranch· On August 28, 2018, the Company entered into a currency swap agreement with

ANZ-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 1 in theforeign loan availed from The Norinchukin Bank-Singapore Branch. Under the agreement, theCompany, on a quarterly basis, pays fixed interest rate of 6.23% per annum on the peso principalamounting to P=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR onUSD$25.0 million over a period of four (4) years from August 28, 2018 to August 30, 2022.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to (P=28.7) million in 2019, net of the related deferred taxes. As of March 31, 2019, thenegative fair value of the currency swap amounted to P=65.8 million included in “DerivativeLiability”.


- 41 -

*SGVFS037733*

· On October 15, 2018, the Company entered into a currency swap agreement withANZ-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 2 in theforeign loan availed from The Norinchukin Bank-Singapore Branch. Under the agreement, theCompany, on a quarterly basis, pays fixed interest rate of 6.76% per annum on the peso principalamounting to P=1.4 billion and receives floating interest rate at 3-months USD ICE LIBOR onUSD$25.0 million over a period of two (2) years from October 15, 2018 to October 15, 2020.Effectively, under the swap agreement, the Company swaps its USD-denominated floating rateloans into peso fixed-rate loans. On the same date, the Company designated the swap as aneffective hedging instrument under a cash flow hedge relationship. As such, the effective portionof the changes in fair value of the swaps was recognized under other comprehensive incomeamounting to (P=26.5) million in 2019, net of the related deferred taxes. As of March 31, 2019, thenegative fair value of the currency swap amounted P=81.8 million included in “DerivativeLiability”.

Currency swap agreements with Sumitomo Mitsui Banking Corporation SMBC Manila Branch· On February 7, 2019, the Company entered into a currency swap agreement with

SMBC-Manila Branch to hedge foreign currency and interest rate risks on the Tranche 1 in theforeign loan availed from SMBC-Japan Branch. Under the agreement, the Company, on aquarterly basis, pays fixed interest rate of 5.85% per annum on the peso principal amounting toP=1.3 billion and receives floating interest rate at 3-months USD ICE LIBOR on USD$25.0million over a period of three (3) years from February 7, 2019 to February 7, 2020. Effectively,under the swap agreement, the Company swaps its USD-denominated floating rate loans intopeso fixed-rate loans. On the same date, the Company designated the swap as an effectivehedging instrument under a cash flow hedge relationship. As such, the effective portion of thechanges in fair value of the swaps was recognized under other comprehensive income amountingto (P=0.9) million in 2019, net of the related deferred taxes. As of March 31, 2019, the positive fairvalue of the currency swap amounted P=3.8 million included in “Derivative Assets”.

The cross-currency interest rate swaps are initially recognized at a fair value of zero (0) at inceptiondate since the cash flow hedge was designated for hedge accounting. Such derivative financialinstruments are subsequently remeasured at fair value.

The credit risk standing of the Company and the counterparty-banks are both good, and at reportingdate, there are no known or significant events or circumstances that would adversely affect the creditrisk standings of both counter parties. The terms of the hypothetical derivative match the criticalterms of the hedged item.

The Company identified the possible sources of ineffectiveness:· the timing of the interest payments wherein actual interest payments for the underlying loan and

the swap; and· the maturity date of the underlying loan does not coincide with the maturity date of the cross-

currency interest rate swaps or non-renewal of the cross-currency interest rate swaps.

The Company does neither foresee nor intend to change the timing of the interest payments. Also,non-renewal of cross-currency interest rate swaps shall only transpire if and only if the marketconditions on renewal date becomes favorable to the company. There were no other sources ofineffectiveness in these hedge relationships as of March 31, 2019.

An economic relationship exists between the hedged items and hedging instrument as the criticalterms of the loan and the derivative match.

84


85

- 42 -

*SGVFS037733*

Hedge effectiveness is assessed at inception of the hedge, at each reporting date, and upon asignificant change in the circumstances affecting the hedge effectiveness. At reporting date, hedgeratio is calculated for the hedging instrument. As of the inception and reporting date, the hedge ratiois 1:1 or 100%.

As of March 31, 2019, the Company has the following instruments with maturities of 1 to 5 years tohedge exposures to changes in interest rates and foreign exchange currency rates:

Cross-currency interest rate swapsNominal amount P=21,557,075,000Average foreign exchange rate 50.74Average fixed interest rate 4.9%

The amounts relating to items designated as hedging instruments and hedge ineffectiveness in as ofand for the year ending March 31, 2019 were as follows:

Nominalamount

Carryingamount

Changes infair values

Changes inthe value ofthe hedginginstrument

recognized inOCI

Hedgeineffectiveness

recognizedin statement

of income

Amountreclassified

from the ‘Cashflow reserve’to statement

of incomeCross-currency

interest rate swaps P=21,557,075,000 P=808,654,626 (P=59,440,087) P=56,690,087 P=– P=2,750,000

The Company’s financial instruments designated as hedged items in cash flow hedge relationshipsfollow:

Change invalue used for

calculating hedgeineffectiveness

Cash flowhedge reserve

Floating rate dollar-denominated notes P=56,690,087 P=70,236,652

The movements in cash flow hedge reserve follow:

2019 2018Beginning balance P=109,919,713 P=25,806,016Net unrealized gains (loss) on cash flow hedges (59,440,087) 577,363,697Net loss (gains) on cash flow hedges reclassified to

profit or loss 2,750,000 (493,250,000)Ending balance (gross of tax) 53,229,626 109,919,713Deferred tax 17,007,026 (32,975,914)Ending balance (net of tax) P=70,236,652 P=76,943,799


- 43 -

*SGVFS037733*

15. Deposits on Lease Contracts

Deposits on lease contracts consist of deposits from lessees and customers of finance leasereceivables to serve as security for the prompt and faithful performance of the terms and conditions ofthe contracts. Such deposits are applied as lease payments at the end of the lease term subject toterms and conditions of the contract.

The maturity information of deposits on lease contracts follow:

2019 2018Within 1 year P=68,230,737 P=1,058,317,290Beyond 1 year but not beyond 5 years – 55,222,966

P=68,230,737 P=1,113,540,256

16. Maturity Analysis of Assets and Liabilities

The following tables present the assets and liabilities as of March 31, 2019 and 2018 analyzedaccording to when they are expected to be recovered or settled within one year and beyond one yearfrom the reporting date:

2019 2018Due within

one yearDue beyond

one year TotalDue within

one yearDue beyond

one year TotalFinancial AssetsCash and cash equivalents P=833,294,712 P=– P=833,294,712 P=1,352,955,871 P=– P=1,352,955,871Due from BSP 14,293,137,914 – 14,293,137,914 9,648,688,862 – 9,648,688,862SPURA – – – 1,118,192,680 – 1,118,192,680Financial asset at FVOCI – 1,200,000 1,200,000 – – –AFS investments – – – – 1,200,000 1,200,000Loans and receivables

Receivables from customersReceivables financed 4,313,483,051 7,237,045,014 11,550,528,065 4,279,625,414 7,573,845,120 11,853,470,534Finance lease receivables 22,505,886,979 47,177,635,685 69,683,522,664 20,390,067,997 41,769,898,668 62,159,966,665

Other receivablesReceivables from clients 37,264,611 – 37,264,611 65,720,073 – 65,720,073Receivables from employees 5,132,279 11,895,221 17,027,500 5,372,069 11,075,738 16,447,807Accrued interest receivable 6,865,000 – 6,865,000 531,074 – 531,074Others 83,199 – 83,199 296,386 – 296,386

Derivative asset – 1,103,133,383 1,103,133,383 – P=868,094,713 P=868,094,713Other asset

Security deposits – 13,394,944 13,394,944 – 11,954,548 11,954,54841,995,147,745 55,544,304,247 97,539,451,992 36,861,450,426 50,236,068,787 87,097,519,213

Nonfinancial AssetsAssets held for sale 197,696,181 – 197,696,181 169,739,176 – 169,739,176Property and equipment – 286,290,675 286,290,675 – 248,572,901 248,572,901Software costs – 173,039,802 173,039,802 – 136,035,522 136,035,522Deferred tax assets – 337,355,353 337,355,353 – 264,486,093 264,486,093Other assets

Prepaid expenses 79,760,116 – 79,760,116 46,116,252 – 46,116,252Withholding tax receivable 10,225,481 – 10,225,481 285,414 – 285,414

287,681,778 796,685,830 1,084,367,608 216,140,842 649,094,516 865,235,358Less: Unearned finance and lease

income 5,536,217,722 6,924,491,709 12,460,709,431 4,940,563,230 6,404,577,992 11,345,141,222 Allowance for credit and

impairment losses 131,187,929 1,013,486,323 1,144,674,252 324,172,184 855,430,482 1,179,602,666Accumulated depreciation and

amortization – 254,350,933 254,350,933 – 215,805,268 215,805,268P=36,615,423,872 P=48,148,661,112 P=84,764,084,984 P=31,812,855,854 P=43,409,349,561 P=75,222,205,415

86


87

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*SGVFS037733*

2019 2018Due within

one yearDue beyond

one year TotalDue within

one yearDue beyond

one year Total

Financial LiabilitiesLoans payable

Bank loans P=22,837,758,758 P=19,856,923,422 P=42,694,682,180 P=18,542,327,478 P=22,566,739,276 P=41,109,066,754Bank loan from Mizuho Bank -

Singapore 2,625,000,000 5,228,517,483 7,853,517,483 – 6,497,267,347 6,497,267,347

Bonds Payable from BTMU –Japan – 6,479,498,193 6,479,498,193 – 5,131,707,556 5,131,707,556

Bank loan from MUTB - Singapore – 2,613,814,386 2,613,814,386 – 2,593,041,631 2,593,041,631Fixed Rate Notes 4,496,587,051 484,063,978 4,980,651,029 1,496,600,364 2,484,593,433 3,981,193,797Notes payable 3,626,460,316 294,707,029 3,921,167,346 2,937,575,955 353,040,635 3,290,616,590Corporate note – – – 1,497,073,461 – 1,497,073,461TNB Loan USD – 2,608,169,417 2,608,169,417 – – –RBL Loan USD – 1,303,860,000 1,303,860,000 – – –SMBC Loan USD – 1,265,227,661 1,265,227,661 – – –

33,585,806,125 40,134,781,570 73,720,587,695 24,473,577,258 39,626,389,878 64,099,967,136

Derivative liability – 294,478,757 294,478,757 – – –Accounts payable and other liabilities

Accounts payable 350,587,090 – 350,587,090 525,955,896 – 525,955,896Accrued interest payable 227,302,039 260,918,454 488,220,493 104,288,967 235,813,282 340,102,249Accrued expenses 72,280,944 – 72,280,944 72,048,494 – 72,048,494

Deposits on lease contracts 68,230,737 – 68,230,737 1,058,317,290 55,222,966 1,113,540,256 34,304,206,935 40,690,178,781 74,994,385,716 26,234,187,905 39,917,426,126 66,151,614,031

Nonfinancial LiabilitiesIncome tax payable – – – 55,738,864 – 55,738,864Accounts payable and other liabilities

Accrued expenses 121,793,837 – 121,793,837 103,156,965 – 103,156,965Withholding tax payable 33,996,406 – 33,996,406 26,508,261 – 26,508,261Retirement liability – 32,223,818 32,223,818 – 8,216,556 8,216,556Other liabilities 1,297,027 – 1,297,027 1,082,502 – 1,082,502

Deposit for future subscription – – – 1,800,000,000 – 1,800,000,000 157,087,270 32,223,818 189,311,088 1,986,486,592 8,216,556 1,994,703,148

P=34,461,294,205 P=40,722,402,599 P=75,183,696,804 P=28,220,674,497 P=39,925,642,682 P=68,146,317,179

17. Service Fees and Other Income

This account consists of:2019 2018

Service and other fees P=256,069,084 P=177,171,018Recoveries from accounts written off 62,282,814 72,560,024Others 5,053 613,122

P=318,356,951 P=250,344,164

Service and other fees include income from late payments and penalty charges, processing andregistration fees.

Miscellaneous income presented under ‘Others’ in 2019 and 2018 amounted to P=5,053 and P=102,174,respectively. ‘Others’ in 2018 also includes gain on disposal of property and equipment (Note 9).


- 45

-

*SGVFS037733*

18.R

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n

The

Com

pany

has

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bene

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P=42,

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P=16,

547,

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6,22

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P=19,

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P=78,

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ben

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(Not

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821

P=264

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P=–P=1

,669

,357

P=19,

325,

838

P=20,

995,

195

P=32,

223,

818

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rent

serv

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P=9,5

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,238

(P=11

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The fair value of plan assets by each classes as at the end of the reporting period are as follows:

2019 2018Cash and cash equivalents P=9,293,914 P=954,563Financial assets at FVTPL

Unitized Investment Trust Funds (UITF) 378,387 468,282Financial assets at FVOCI/AFS

Government securities 39,699,601 32,681,33339,699,601 32,681,333

Accrued interest receivable 337,095 287,204Total assets 49,708,997 34,391,382Accounts payable (3,752,547) (575)Accrued expenses (24,483) (28,958)Fair value of plan assets P=45,931,967 P=34,361,849

All debt instruments held have quoted prices in active market. The remaining plan assets do not havequoted market prices in active market.

The cost of defined benefit pension plans as well as the present value of the pension obligation aredetermined using actuarial valuations. The actuarial valuation involves making various assumptions.The principal assumptions used in determining pension obligations for the defined benefit plans areshown below:

2019 2018Discount rates 6.3% 8.2%Future salary increases 7.5% 7.5%

The sensitivity analysis below has been determined based on reasonably possible changes of eachsignificant assumption on the defined benefit obligation as of the end of the reporting period,assuming if all other assumptions were held constant:

2019 2018Percentage Amount Percentage Amount

Discount rates + 100 bps (4,835,055) + 100 bps (P=2,343,272)– 100 bps 5,420,553 – 100 bps 2,605,331

Future salary increases + 100 bps 5,303,627 + 100 bps 2,212,839– 100 bps (4,826,038) – 100 bps (2,033,114)

Attrition rate 96.2% 75,195,239 81.00% 34,481,328

The Retirement Plan Trustee has no specific matching strategy between the plan assets and the planliabilities.

The Company is not required to pre-fund the future defined benefits payable under the retirementplan before they become due. For this reason, the amount and timing of contributions to theretirement fund are at the Company’s discretion. However, in the event a benefit claim arises and theretirement fund is insufficient to pay the claim, the shortfall will then be due and payable from theCompany to the retirement fund.


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The Company expects to contribute P=10.0 million to the defined pension plan in 2020.

The average duration of the defined benefit obligation at the end of the reporting period is6.6 years and 5.8 years in 2019 and 2018, respectively.

Shown below is the maturity analysis of the undiscounted benefit payments:

2019 2018More than 1 year to 5 years P=63,053,498 P=39,757,124More than 5 years 77,647,693 50,159,074

19. Income Taxes

Provision for income tax consists of:

2019 2018Current

Regular P=261,143,357 P=312,965,488Final 38,949,723 4,239,667

300,093,080 317,205,155Deferred (16,587,761) 9,935,622

P=283,505,319 P=327,140,777

The components of net deferred tax assets follow:

2019 2018Deferred tax assets:

Allowance for credit and impairment losses P=343,402,275 P=353,985,800Cash flow hedge reserve loss 17,007,026 −Accrued expenses 10,670,071 2,231,209Retirement liability 7,202,179 2,464,966Excess of rent expense over payment 814,256 1,096,441Pension cost 242,514 242,514

379,338,321 360,020,930Deferred tax liabilities:

Debt issue cost 41,947,067 62,521,923Cash flow hedge reserve − 32,975,914Unrealized foreign exchange gain 35,901 37,000

41,982,968 95,534,837P=337,355,353 P=264,486,093

Under current tax regulations, the maximum amount of entertainment, amusement and recreation(EAR) expenses allowable as deduction from gross income for purposes of income tax computationshall not exceed 1.0% of the gross revenue of the Company. EAR expenses incurred in 2019 and2018 amounted to P=1.9 million.

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The reconciliation of provision for income tax computed at the statutory corporate income tax rate toprovision for income tax shown in the statements of comprehensive income follows:

2019 2018At statutory income tax rate P=313,837,084 P=326,078,429Adjustments for:

Nontaxable income (41,149,713) −Nondeductible expenses 30,354,480 3,413,070Interest income subjected to final tax (19,536,532) (2,350,722)

P=283,505,319 P=327,140,777

20. Lease Commitments

The Company currently leases both of the office premises it occupies. The contracts for the 42nd and32nd floors in GT Tower will both expire on June 30, 2020. In 2019 and 2018, rent expense, which isincluded under ‘Occupancy’ account, amounted to P=45.1 million and P=40.5 million, respectively(Note 21).

The leasehold rental commitments of the Company follow:

2019 2018Within 1 year P=63,774,435 P=46,793,617Beyond 1 year 20,755,868 55,576,500

P=84,530,303 P=102,370,117

21. Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control theother party, or exercise significant influence over the other party in making financial and operatingdecisions. Parties are also considered to be related if they are subject to common control or commonsignificant influence (referred to as affiliates).

In the normal course of business, the Company enters into transactions with its related partiesprincipally consisting of advances and other borrowings. Under RA No. 8556, Financing CompanyAct, the Company’s amount of credit accommodation to its directors, officers, stockholders and otherrelated parties should not exceed 15.0% of its net worth. In 2019 and 2018, the Company hascomplied with this regulatory requirement.


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The year-end account balances with respect to related parties included in the financial statementsfollow:

2019Category Amount/Volume Outstanding Balance Nature/Terms and Conditions

StockholderTFSC (Parent Company)

Accounts payable (P=609,928) P=− Amount payable to TFSC relating tobilling for the support services being

provided to the Company

Deposit for future subscription (1,080,000,000) − Amount of payable relating todeposit for future subscription of

capital stock

Management and otherprofessional fees

2,298,585 − Expense incurred relating to billingfor the support services provided by

TFSC & Asia Pacific Region(located at Toyota Leasing Thailand)

to the Company

GT CapitalDeposit for future subscription (720,000,000) − Amount of payable relating to

deposit for future subscription ofcapital stock

Subsidiaries of the StockholderMetropolitan Bank & TrustCompany (MBTC)

Cash in bank (102,805,582) 138,464,024 Demand deposit account with annualinterest of 0.25%

Interest income 702,456 − Interest earned from the depositaccount

Cash equivalents (200,000,000) − Investment in money marketsecurities with interest rate of 1.25%

Interest income 984,358 − Interest on investment in cashequivalents

Loans payable 300,000,000 5,300,000,000 Loan availment with interest ratesranging from 3.88% to 4.75%

Interest expense 43,007,127 − Interest expense on bank loans

Philippine Savings Bank(PSBank)

Cash in bank (3,885,285) 2,495,322 Demand deposit account with annualinterest of 1.25%


Federal Land, Inc.Accounts payable 521,993 1,333,172 Accrual for office rental and

maintenance fee

Occupancy expenses 40,275,488 − Expenses incurred pertaining tooffice rent and maintenance fees

(Forward)

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Key Management Personnel

Salaries and wagesSalaries and other short-term benefits

P=51,533,359 P=− Salaries and other short-termbenefits for its key management

personnel

Post-employment benefits 8,904,285 − The post-employment benefits for itskey management personnel


StockholderTFSC (Parent Company)

Accounts payable P=− P=609,928 Amount payable to TFSC relatingto billing for the support services

being provided to the Company

Deposit for future subscription − 1,080,000,000 Amount of payable relating todeposit for future subscription of

capital stock

Management and otherprofessional fees

1,312,596 − Expense incurred relating to billingfor the support services providedby TFSC & Asia Pacific Region

(located at Toyota LeasingThailand) to the Company

GT CapitalDeposit for future subscription − 720,000,000 Amount of payable relating to

deposit for future subscription ofcapital stock

Subsidiaries of the StockholderMBTC

Cash in bank 45,827,562 241,269,606 Demand deposit account withannual interest of 0.25%


Cash equivalents 200,000,000 200,000,000 Investment in money marketsecurities with interest rate of

1.25%

Interest income 901,931 − Interest on investment in cashequivalents

Loans payable 5,000,000,000 5,000,000,000 Loan availment with interest ratesranging from 3.88% to 4.75%

Interest expense 207,995,342 − Interest expense on bank loans

PSBank

Cash in bank 2,071,187 6,380,607 Demand deposit account withannual interest of 1.25%

(Forward)


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*SGVFS037733*


Interest income P=49,097 P=− Interest earned from the depositaccount

Federal Land, Inc.Accounts payable − 811,179 Accrual for office rental and

maintenance fee

Occupancy expenses 43,531,822 − Expenses incurred pertaining tooffice rent and maintenance fees

Key Management PersonnelSalaries and wages

Salaries and other short-term benefits

45,410,912 − Salaries and other short-termbenefits for its key management

personnel

Post-employment benefits 6,879,849 − The post-employment benefits forits key management personnel

Relationship with the following Toyota Dealers are mainly purchase of Toyota vehicles on behalf ofour borrowers.

· Toyota Abad Santos· Toyota Manila Bay· Toyota Cubao· Toyota Dasmarinas· Toyota Marikina

Existing banking regulations limit the amount of individual loans to directors, officers, stockholders,and related interests (DOSRI), 70.0% of which must be secured, to the total of their respectivedeposits. Such limit does not apply to loans secured by assets considered as non-risk as defined in theregulations. In the aggregate, loans to DOSRI generally should not exceed the respective totalregulatory capital or 15.0% of total loan portfolio, whichever is lower.

BSP Circular No. 423 dated March 15, 2004 amended the definition of DOSRI accounts.

BSP Circular No. 560 which became effective on February 22, 2007 provides the rules andregulations that govern loans, other credit accommodations and guarantees granted to subsidiaries andaffiliates of the banks/quasi-banks. Under the said Circular, the total outstanding exposures to eachof the said subsidiaries and affiliates shall not exceed 10.0% of the lending bank's/quasi-bank’s networth, the unsecured portion of which shall not exceed 5.0% of such net worth. Further, the totaloutstanding exposures to subsidiaries and affiliates shall not exceed 20.0% of the net worth of thelending bank/quasi-bank; and the subsidiaries and affiliates of the lending bank/quasi-bank are notrelated interest of any director, officer and/or stockholder of the lending institution, except wheresuch director, officer or stockholder sits in the BOD or is appointed officer of such corporation asrepresentative of the bank/quasi-bank.

As of March 31, 2019 and 2018, the Company has no DOSRI accounts.

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Transactions with Retirement PlanUnder PFRS, certain post-employment benefit plans are considered as related parties. TheCompany’s retirement plan is in the form of a trust administered by MBTC. The carrying value ofthe fund which approximates its fair value follows:

2019 2018Investment in securities P=40,077,988 P=33,149,615Cash and cash equivalents 9,293,914 954,563Accrued interest receivable 337,095 287,204Accounts payable (3,752,547) (575)Accrued expenses (24,483) (28,958)

P=45,931,967 P=34,361,849

As of March 31, 2019 and 2018, the cash and cash equivalents of the Company’s retirement plan iswith MBTC.

22. Fair Value Measurement

The methods and assumptions used by the Company in estimating the fair value of the financialinstruments are:

Cash and cash equivalents and Due from BSP - Due to the short-term nature of the instruments, thefair values approximate the carrying amounts as of the reporting date.

Financial assets at FVOCI and AFS investments - Fair values are generally based on quoted marketprices.

Loans and receivables - Fair value was computed using the discounted cash flow method. Thediscount rate used was the BVAL rate plus 350 bps and PDST-R2 rate plus 350 bps in 2019 and2018, respectively.

Derivative financial instruments - The fair values of cross currency interest rate swap transactionsare derived using acceptable valuation methods. The valuation assumptions are based on marketconditions existing at the reporting dates.

Loans payable and subordinated debt - Fair value was computed using the discounted cash flowmethod. The discount rate used was the zero curve for BVAL rate plus 200 bps and PDST-R2 rateplus 200 bps in 2019 and 2018, respectively.

Accounts payable and other liabilities - Due to the short-term nature of the transactions, the fairvalue approximates the carrying amount as of the reporting date.


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The following tables summarize the carrying amount and fair values of the financial assets andliabilities, analyzed based on the following hierarchy for determining and disclosing the fair value offinancial instruments by valuation technique:

2019Carrying Fair Value

Value Level 1 Level 2 Level 3 TotalAssets and liabilities measured

at fair value:Financial assets:

Financial assets at FVOCI P=1,200,000 P=1,200,000 P=− P=− P=1,200,000Derivative assets 1,103,133,383 − 1,103,133,383 − 1,103,133,383

Financial liabilities:Derivative liability 294,478,757 − 294,478,757 − 294,478,757

Assets and liabilities for which fairvalue is disclosed:Financial assets:

Loans and receivablesReceivables from customersReceivables financed - net 9,952,127,540 − − 9,984,482,532 9,984,482,532Finance lease receivables -

net 58,821,213,758 − − 59,224,317,728 59,224,317,728

Financial liabilities:Loans payableBank loans 42,694,682,180 − − 41,628,281,629 41,628,281,629Corporate note − − − −Notes payable 3,921,167,346 − − 3,911,879,104 3,911,879,104Mizuho Term Loan 7,853,517,483 − − 6,482,804,551 6,482,804,551Fixed Rate Notes 4,980,651,029 − − 4,927,830,163 4,927,830,163BTMU Loan USD 6,479,498,193 − − 5,236,894,460 5,236,894,460

MUTB Loan USD 2,613,814,386 − − 2,055,577,194 2,055,577,194TNB Loan USD 2,608,169,417 − − 2,207,254,548 2,207,254,548

RBL Loan USD 1,303,860,000 − − 1,016,919,006 1,016,919,006SMBC Loan USD 1,265,227,661 − − 1,034,944,802 1,034,944,802

Deposit on lease contracts 68,230,737 − − 67,562,489 67,562,489

2018Carrying Fair Value

Value Level 1 Level 2 Level 3 TotalAssets and liabilities measured

at fair value:Financial assets:

Available-for-sale investments P=1,200,000 P=1,200,000 P=− P=− P=1,200,000Derivative assets 868,094,713 − 868,094,713 − 868,094,713

Assets and liabilities for which fairvalue is disclosed:Financial assets:

Loans and receivablesReceivables from customersReceivables financed - net 9,979,522,078 − − 10,391,548,591 10,391,548,591Finance lease receivables -

net 51,550,657,477 − − 53,895,156,306 53,895,156,306

Financial liabilities:Loans payable

Bank loans 41,109,066,754 − − 40,176,025,514 40,176,025,514Corporate note 1,497,073,461 − − 1,504,622,657 1,504,622,657Notes payable 3,290,616,590 − − 3,278,403,441 3,278,403,441Mizuho Term Loan 6,497,267,347 − − 5,264,329,384 5,264,329,384Fixed Rate Notes 3,981,193,797 − − 3,927,065,896 3,927,065,896BTMU Loan USD 5,131,707,556 − − 4,064,291,173 4,064,291,173

MUTB Loan USD 2,593,041,631 − − 1,971,582,513 1,971,582,513Deposit on lease contracts 1,113,540,256 − − 1,064,021,713 1,064,021,713

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As of March 31, 2019 and 2018, no transfers were made among the three levels in fair valuehierarchy.

23. Capital Management and Financial Performance Ratios

Capital Stock

Shares Amount2019 2018 2019 2018

AuthorizedCommon stock – P=100 par value 90,000,000 29,000,000 P=9,000,000,000 P=2,900,000,000

Common stock issued and outstandingBalance at beginning of year 29,000,000 17,000,000 P=2,900,000,000 P=1,700,000,000Issuance of stocks 18,000,000 12,000,000 1,800,000,000 1,200,000,000Balance at end of year 47,000,000 29,000,000 P=4,700,000,000 P=2,900,000,000

Share issue cost amounted to P=30.3 million and P=6.0 million for 2019 and 2018, respectively.

Capital ManagementThe primary objective of the Company’s capital management is to ensure that it maintains a strongcredit rating and healthy capital ratios in order to support its business and maximize shareholdervalue.

The Company manages its capital structure and makes adjustments to it, in light of changes ineconomic conditions. To maintain or adjust the capital structure, the Company may adjust thedividend payment to shareholders or issue new shares. No changes were made in the objectives,policies or processes for the years ended March 31, 2019 and 2018.

The Company considers the following as capital:

2019 2018Capital stock P=4,700,000,000 P=2,900,000,000Retained earnings 4,819,510,606 4,093,606,879Deposit for future subscription (Note 21) − 1,800,000,000

P=9,519,510,606 P=8,793,606,879

The Company monitors capital using debt-to-equity ratio. The Company’s target debt-to-equity ratiois 10:1. Based on the above capital consideration, the Company's debt-to equity ratio is 8:1 as ofMarch 31, 2019 and 2018.

Deposit for Future SubscriptionOn March 26, 2018, TFSC and GT Capital infused additional capital amounting to P=1.1 billion andP=720.0 million, respectively. Total capital infusion amounted to P=1.8 billion recognized as deposit forfuture subscriptions under liabilities since it did not meet the requirements of the SEC to berecognized as equity. The P=1.2 billion (12,000,000 shares) deposit for future subscription in 2017 wasrecognized as part of capital stock after SEC approval on August 18, 2017.

On September 28, 2018, BSP approved the increase in authorized capital stock to P=9.0 billion(90,000,000 shares with par value of P=100). Consequently, the Company filed the application withthe SEC on December 11, 2018 and was approved on January 25, 2019. The shares were issued onFebruary 4, 2019.


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Regulatory ReportingThe Company has started its operations as a Quasi-bank effective April 1, 2009. Thus, the Companybegan to actively manage its capital in accordance with regulatory requirements of BSP. The primaryobjective of which is to ensure that the Company maintains adequate capital to cover risks inherent toits quasi-banking activities without prejudice to optimizing shareholder’s value.

Under existing BSP regulations, the capital accounts of the Company should not be less than anamount equal to 10.0% of its risk assets. Risk assets consist of total assets less cash on hand, duefrom BSP, loans covered by hold-out on or assignment of deposits, loans or acceptances under lettersof credit to the extent covered by margin deposits, and other non-risk items as determined by theMonetary Board of the BSP.

The following table sets the Company’s regulatory capital as reported to BSP as at March 31, 2019and 2018 (amounts in thousands):

2019 2018CET1 capital P=9,243,033 P=8,611,402Tier 1 capital P=9,243,033 P=8,611,402Tier 2 capital 255,152 599,574Gross qualifying capital P=9,498,185 P=9,210,976Total risk weighted assets P=71,143,944 P=64,385,991CET1 ratio 12.99% 13.37%Tier 1 ratio 12.99% 13.37%Risk-based CAR 13.35% 14.31%

In 2019 and 2018, the Company complied with the required capital adequacy ratio of the BSP.

Under the Financing Company Act, the Company is required to maintain the following capitalrequirements:

· Minimum paid-up capital of P=10.0 million; and· Additional capital requirements for each branch of P=1.0 million for branches established in Metro

Manila, P=0.5 million for branches established in other classes of cities and P=0.2 million forbranches established in municipalities.

As of March 31, 2019 and 2018, the Company was in compliance with this minimum paid-up capital.

Retained EarningsUnder the Corporation Code of the Philippines (the Code), a stock corporation is prohibited fromretained surplus profits in excess of 100.0% of its paid-in capital stock, except when:a. Justified by definite corporate expansion projects or programs approved by the BOD; orb. The corporation is prohibited under any loan agreement with any financial institution or creditor,

whether local or foreign, from declaring dividends without its or his consent, and such consenthas not yet been secured; or

c. It can be clearly shown that such retention is necessary under special circumstances obtaining inthe corporation, such as when there is need for special reserve for probable contingencies.

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The Company has capital requirements to comply under BSP as discussed in ‘Regulatory Reporting’above. Considering such BSP’s capital requirement for the Company, the retention of earnings inexcess of its paid-in capital as of March 31, 2019 could be considered as one of the exemptions underthe Code.

Financial Performance RatiosThe following basic ratios measure the financial performance of the Company:

2019 2018Return on average equity 9.16% 12.53%Return on average assets 0.95% 1.13%Net interest margin on average earning assets 4.92% 5.54%

24. Financial Risk Management Objectives and Policies

The Company’s principal financial instruments are composed of cash in banks, due from BSP, loansand receivables, derivative asset, loans payable, derivative liability, and accounts payable and accruedexpenses. These financial instruments are used in operations. Financial instruments used infinancing are bank loans, subordinated debt and notes payable. The main risks arising from the use offinancial instruments are credit risk, liquidity risk and market risk.

Risk Management FrameworkThe Company serves customers of Toyota vehicles through financing and leasing services.Enterprise Risk Management (ERM) enables the Company to achieve corporate objectives whileoperating within the boundary of its risk appetite through a well-defined and established riskmanagement framework.

The BOD oversees the Company's overall risk management strategy through the various Committeescreated as follows:a. Executive Committee

The Executive Committee establishes and oversees execution of business strategies and has theaccountability to identify and manage the embedded financial and operational risks.

b. Risk Oversight CommitteeThe Risk Oversight Committee provides independent views from the business units and ensureseffective implementation of risk management framework through regular reviews of theCompany's performance against approved tolerance for each risk indicator. The Committee alsomonitors key and emerging risks as well as reviews and assesses the impact of business strategies,opportunities and initiatives on overall risk position.

c. Audit CommitteeThe Audit Committee through the Internal Audit Department provides independent assurance ofrobustness of processes and methodologies against practice.

Risk Management StructureThe Company's organizational structure includes the Risk Management Department (RMD),responsible for developing, recommending and implementing policies and strategies of ERM. It isalso in charge of periodically monitoring and reporting to management, regional TFSC RiskManagement Group and the BOD through the Risk Oversight Committee, the state of the company-wide risk position and effectiveness of the ERM framework.


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Risk Management StrategyThe Executive Committee establishes and oversees execution of business strategies and has theaccountability to identify and manage the embedded risks. Business strategies and business plans arethus aligned with the risk appetite approved by the Risk Oversight Committee and BOD, defined inthe form of risk tolerances for a set of selected key risk indicators. These plans are executed bymanagement and are reviewed by the President. Quarterly performances and risks are reviewedtogether with the appropriate Board Committees.

Risk Monitoring and ReportingAll material events that may negatively impact the Company’s earnings, corporate value andreputation are identified and assessed for frequency, severity and causation. Both top down andbottom up risk assessment methodologies are done through the deployed processes and practicalstandards.

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

Risk Control and MitigationAs part of its market risk mitigation activities, the Company uses derivatives to manage exposuresresulting from changes in foreign currencies and appropriate hedging activities to manage its interestrate exposures. Credit risks are reduced through the use of chattel mortgages and insuranceprotection. Concentration risks are managed by setting exposure limits. Concentration reports areprovided to management on a monthly basis and to various related committees on a quarterly basis.Limits approved by the Risk Oversight Committee and the BOD, undergo at least an annual review oras needed.

Operational risks are controlled and mitigated through the set-up of an appropriate organizationalstructure, supported by human resource allocation, staff training and education, combination of robustpolicies, procedures and standards, information technology and periodic performance measurement.

The Company’s risk management policies are summarized below:

Credit RiskCredit risk is the risk that the Company suffers losses when a counterparty to a credit transaction failsto meet its financial obligation.

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

The Credit Review Unit under the Risk Management Department provides an objective appraisal ofthe credit approved loans and applications for potential or identified loan problems. It also ensuresthat the credit policies and procedures are adequate to meet the demands of the business. Its functionalso involves the review of the Company’s loan portfolio, including the development of a strategy toachieve its desired portfolio mix and risk profile based on a risk-adjusted return on capital. It alsoreviews and controls identified concentration of credit risks in order to manage the Company’ssensitivity to developments affecting a particular industry or geographic location. It also manages theTFSPH’s credit risk rating systems which use a combination of quantitative and qualitative factors toassess the general credit worthiness and changes in credit quality of the prospective and existingborrowers, respectively.

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Loan amounts that exceed the approval limit of the Credit department head are brought up to theCredit Committee. Loan amounts that exceed the limit of Credit Committee are elevated to theExecutive Committee and recommended to the BOD for approval.

All DOSRI loans are subject to approval of the BOD. All such loans are on commercial arm’s lengthbasis. BSP Circular No. 560 states that “the total outstanding loans, other credit accommodations andguarantees to each of the company’s subsidiaries and affiliates shall not exceed 10.0% of the networth”. As of March 31, 2019 and 2018, the Company has no loans with DOSRI.

The credit policy manual defines the evaluation process in order to provide an objective assessmentof credit worthiness of counterparties. The credit policy manual undergoes a minimum of annualreview.

Investment grade pertains to cash in banks, deposited or invested in BSP and other banks based on amark-to-market value exposure to each counterparty. For receivables financed and finance leasereceivables using the credit rating system, investment grade pertains to receivables predicted as lowrisk; non-investment grade pertains to receivables predicted as normal to high risk.

The Company has neither credit rating system nor grading for other types of receivables.

Maximum exposure to credit riskThe gross maximum exposure, net of allowance for credit and impairment losses, to the credit risk ofthe Company and the related fair value of collateral and other credit enhancements and its financialeffect are shown below:

2019

GrossMaximumExposure

Fair Valueof Collateral

MaximumExposure

to Credit Risk

FinancialEffect of

Collateralor Credit

EnhancementReceivables from customers

Receivables financed P=9,831,393,759 P=14,478,612,975 P=345,313,243 P=9,486,080,516Finance lease receivables 57,841,910,477 65,161,626,137 4,317,394,948 53,524,515,529

P=67,673,304,236 P=79,640,239,112 P=4,662,708,191 P=63,010,596,045

2018

GrossMaximumExposure

Fair Valueof Collateral

MaximumExposure

to Credit Risk

FinancialEffect of

Collateralor Credit

EnhancementReceivables from customers

Receivables financed P=9,979,522,078 P=14,391,687,921 P=340,995,339 P=9,803,690,679 Finance lease receivables 51,550,657,477 56,616,250,313 3,145,908,285 49,377,803,978

P=61,530,179,555 P=71,007,938,234 P=3,486,903,624 P=59,181,494,657

The carrying values of the other financial assets represent the maximum exposure to credit risk as ofMarch 31, 2019 and 2018.

Concentration of risks of financial assets with credit risk exposure Concentrations arise when a number of counterparties are engaged in similar business activities, or

activities in the same geographic region, or have similar economic features that would cause theirability to meet contractual obligations to be similarly affected by changes in economic, political orother conditions. Concentrations indicate the relative sensitivity of the Company’s performance to


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developments affecting a particular industry or geographic location. In order to avoid excessiveconcentrations of risk, the Company’s policies and procedures include specific guidelines to focus onmaintaining a diversified portfolio. Identified concentrations of credit risks are controlled andmanaged accordingly.

Concentration by industryAn analysis of concentrations of credit risk at the reporting date based on carrying amount is shownbelow:

2019

Loans andReceivables

Loans andAdvances to

Banks* TotalFinancial intermediaries P=2,627,557,382 P=15,125,848,595 P=17,753,405,977Community, social and personal activities 11,935,707,141 – 11,935,707,141Wholesale and retail trade 11,285,960,872 – 11,285,960,872Transportation, storage and communication 5,992,844,703 – 5,992,844,703Education 5,224,579,352 – 5,224,579,352Real estate, renting and business activities 5,044,051,220 – 5,044,051,220Manufacturing (various industries) 2,485,483,118 – 2,485,483,118Hotels and restaurants 2,431,238,439 – 2,431,238,439Agricultural, hunting and forestry 2,064,699,448 – 2,064,699,448Construction 1,606,157,265 – 1,606,157,265Electricity, gas and water 857,589,315 – 857,589,315Mining and quarrying 137,311,980 – 137,311,980Others 17,141,401,372 – 17,141,401,372

68,834,581,608 15,125,848,595 83,960,430,203Less allowance for credit and impairment losses 1,100,255,560 235,102 1,100,490,662

P=67,734,326,048 P=15,125,613,493 P=82,859,939,541* Comprised of Cash in banks, Cash equivalents, Due from BSP and SPURA

2018

Loans andReceivables


Banks* TotalCommunity, social and personal activities P=24,486,271,089 P=– P=24,486,271,089Financial intermediaries 2,703,354,430 12,119,507,656 14,822,862,086Wholesale and retail trade 10,057,852,709 – 10,057,852,709Real estate, renting and business activities 6,212,208,077 – 6,212,208,077Transportation, storage and communication 5,974,617,992 – 5,974,617,992Education 4,510,114,240 – 4,510,114,240Manufacturing (various industries) 2,412,317,301 – 2,412,317,301Hotels and restaurants 2,181,746,092 – 2,181,746,092Agricultural, hunting and forestry 1,735,185,120 – 1,735,185,120Construction 1,532,492,825 – 1,532,492,825Electricity, gas and water 819,797,612 – 819,797,612Mining and quarrying 106,988,412 – 106,988,412Others 18,345,418 – 18,345,418

62,751,291,317 12,119,507,656 74,870,798,973Less allowance for credit and impairment losses 1,138,334,920 – 1,138,334,920

P=61,612,956,397 P=12,119,507,656 P=73,732,464,053* Comprised of Cash in banks, Cash equivalents, and Due from BSP

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Concentration by geographical location

2019

Loans andreceivables


Banks* TotalMetro Manila P=20,938,621,266 P=15,125,848,595 P=36,064,469,861Luzon (except Metro Manila) 43,444,316,452 – 43,444,316,452Visayas 7,433,727,953 – 7,433,727,953Mindanao 9,478,625,368 – 9,478,625,368

81,295,291,039 15,125,848,595 96,421,139,634Less: Allowance for credit and impairment

losses 1,100,255,560 235,102 1,100,490,662Unearned interest income 12,460,709,431 – 12,460,709,431

P=67,734,326,048 P=15,125,613,493 P=82,859,939,541* Comprised of Cash in banks, Cash equivalents and Due from BSP

2018

Loans andreceivables


Banks* TotalMetro Manila P=22,279,654,907 P=12,119,507,656 P=34,399,162,563Luzon (except Metro Manila) 39,736,568,504 – 39,736,568,504Visayas 5,794,323,484 – 5,794,323,484Mindanao 6,285,885,644 – 6,285,885,644

74,096,432,539 12,119,507,656 86,215,940,195Less: Allowance for credit and impairment

losses 1,138,334,920 – 1,138,334,920Unearned interest income 11,345,141,222 – 11,345,141,222

P=61,612,956,397 P=12,119,507,656 P=73,732,464,053* Comprised of Cash in banks, Cash equivalents and Due from BSP

Credit quality per class of financial assets The following tables provide information regarding the credit risk exposure of the Company by

classifying financial assets according to the Company’s credit ratings of the counterparties.

2019Neither past due nor impaired Past Due but

InvestmentGrade

Non-investmentGrade

Not SpecificallyImpaired Total

Cash and cash equivalents – net * P=832,710,681 P=– P=– P=832,710,681Due from BSP 14,293,137,914 – – 14,293,137,914SPURA – – – –Receivables financed – net** 9,008,964,189 776,585,832 166,577,519 9,952,127,540Finance lease receivables – net*** 51,246,591,311 5,992,275,041 1,582,347,406 58,821,213,758Other receivables

Receivables from clients – 37,264,611 – 37,264,611Receivables from employees – 17,027,500 – 17,027,500Accrued interest receivable – 6,865,000 – 6,865,000Others – 83,199 – 83,199

75,381,404,095 6,830,101,183 1,748,924,925 83,960,430,203Less: Allowance for credit and

impairment losses 240,130,255 189,751,417 670,608,990 1,100,490,662P=75,141,273,840 P= 6,640,349,766 P= 1,078,315,935 P=82,859,939,541

* Excludes Cash on hand** Net of Unearned finance income*** Net of Unearned lease income


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2018Neither past due nor impaired Past Due but

InvestmentGrade

Non-investmentGrade

Not SpecificallyImpaired Total

Cash and cash equivalents* P=1,352,626,114 P=– P=– P=1,352,626,114Due from BSP 9,648,688,862 – – 9,648,688,862SPURA 1,118,192,680 – – 1,118,192,680AFS investments 1,200,000 – – 1,200,000Receivables financed – net** 8,871,812,472 1,023,387,618 252,433,532 10,147,633,622Finance lease receivables – net*** 42,913,678,759 7,684,608,357 1,922,375,239 52,520,662,355Other receivables

Receivables from clients – 65,720,073 – 65,720,073Receivables from employees – 16,447,807 – 16,447,807Accrued interest receivable – 531,074 – 531,074Others – 296,386 – 296,386

63,906,198,887 8,790,991,315 2,174,808,771 74,871,998,973Less: Allowance for credit and

impairment losses 512,242,975 81,184,947 544,906,998 1,138,334,920P=63,393,955,912 P=8,709,806,368 P=1,629,901,773 P=73,732,464,053

* Excludes Cash on hand** Net of Unearned finance income*** Net of Unearned lease income

The credit quality of the financial assets was determined as follows:

· Cash and cash equivalents, Due from BSP and AFS investments - Investment grade pertains tocash in banks, cash equivalents placed, deposited or invested in local banks and investments ingolf shares from issuer with a credit rating of AAA, AA and A.

· Receivables financed and finance lease receivables - Using the credit rating system, investmentgrade pertains to receivables predicted as low risk; non-investment grade pertains to receivablespredicted as normal to high risk. Allowance for credit and impairment losses is classified intoinvestment and non-investment grade based on the credit rating system.

· The Company has neither credit rating system nor grading for other types of receivables.

Aging of past due but not specifically impaired loans and receivablesThe table below shows the aging analysis of loans and receivables per class that the Company held.Under PAS 39, a financial asset is past due when a counterparty has failed to make payments whencontractually due.

2019Past due but not specifically impaired

31 - 60 days 61 - 90 days 91 - 120 days Over 120 days TotalReceivables financed – net* P=31,167,487 P=24,812,871 P=20,333,809 P=90,263,352 P=166,577,519Finance lease receivables – net* 330,405,303 213,254,307 153,370,555 885,317,242 1,582,347,407

P=361,572,790 P=238,067,178 P=173,704,364 P=975,580,594 P=1,748,924,926*Gross of allowance for credit losses

2018Past due but not specifically impaired

31 - 60 days 61 - 90 days 91 - 120 days Over 120 days TotalReceivables financed – net* P=67,575,978 P=40,422,915 P=22,092,150 P=122,342,489 P=252,433,532Finance lease receivables – net* 524,594,521 334,835,635 222,620,683 840,324,400 1,922,375,239

P=592,170,499 P=375,258,550 P=244,712,833 P=962,666,889 P=2,174,808,771*Gross of allowance for credit losses

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Collateral and other credit enhancementsThe Company holds collateral against loans and receivables in the form of chattel mortgages.Estimates of fair value are based on the value of collateral assessed at the time of borrowing andgenerally are not updated except when a loan is assessed to be impaired. The following table showsthe fair value of collateral held against loans and receivables:

2019 2018Against neither past due nor impaired P=77,954,382,924 P=68,895,773,518Against past due but not specifically impaired 1,685,856,188 2,112,164,716

P=79,640,239,112 P=71,007,938,234

It is the Company’s policy to dispose assets acquired in an orderly fashion. The proceeds of the saleof the foreclosed assets classified as assets held for sale are used to reduce or repay the outstandingclaim.

Liquidity RiskLiquidity risk is the risk of encountering difficulty in raising funds to meet commitments associatedwith financial instruments.

Liquidity of the Company’s operations are managed with highest degree of accuracy, supported bysufficient, locally available, committed and uncommitted sources of funds for shorter periods and asound and conservative funding plan with an appropriate internal authorization for longer periods.The funding structure is diversified as to financial instruments adopted, geographical marketsapproached and funding maturities in order to maintain stable access to low cost funds.

The Asset Liability Committee (ALCO) oversees the management of liquidity risks. The Company’sTreasury Department has the primary responsibility for managing the Company’s sources of funding,and is tasked with ensuring that the Company has adequate liquidity at all times. As part of thisfunction, the Treasury Department prepares an annual funding plan that places the highest priority onliquidity and diversity of funding structure. The Department also prepares an annual contingencyfunding plan based on stress scenarios which include inability to access the debt market for anextended period. As such, computation of Days until Alternative Funding key risk indicator andsetting of appropriate limits provides management the means to adopt measures that will strengthenits liquidity position.

The Company’s principal source of funding are borrowings from international and domestic banksamounting to ₱57.1 billion and ₱50.2 billion as of March 31, 2019 and 2018, respectively, withmaturity periods ranging from 1 month to 5 years in 2019 and 2018. The Company also issues bondstotaling to ₱12.7 billion and ₱10.6 billion as of March 31, 2019 and 2018, respectively with maturityperiods ranging from 1 month to 5 years in 2019 and 15 months to 5 years in 2018.

The Company maintains what it believes to be a sufficient cash level. In addition, the Companymanages its liquidity by managing the maturity profile of its outstanding loans.


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Analysis of financial assets and liabilities by remaining contractual maturitiesThe following tables set forth the financial assets and liabilities based on undiscounted future cashflows of the Company as of March 31, 2019 and 2018 into their relevant maturity groups based on theremaining period at reporting dates to their contractual maturities.

2019

On demand Up to 1 month

More than1 month upto 3 months

More than3 months upto 6 months

More than6 months upto 12 months Beyond 1 year Total

Financial AssetsCash and cash equivalents P=633,059,610 P=200,000,000 P=– P=– P=– P=– P=833,059,610Due from BSP 14,293,137,914 – – – – – 14,293,137,914Financial assets at FVOCI – – – – – 1,200,000 1,200,000Receivables from customers

Receivables financed - net 39,931,844 346,976,635 604,492,023 884,146,847 1,671,047,608 6,405,532,583 9,952,127,540Finance lease receivable - net 281,159,256 1,724,588,032 2,890,805,190 4,335,553,326 8,436,220,810 41,084,656,407 58,752,983,021Other receivables

Receivables from clients 37,264,611 – – – – – 37,264,611Receivables from

employees 664,270 466,716 755,076 1,125,290 2,120,927 11,895,221 17,027,500

Accrued interestReceivable

– 6,865,000 – – – – 6,865,000

Other receivables – 83,199 – – – – 83,199Derivative assets

Receive leg – 44,645,090 156,669,775 143,671,372 1,359,805,052 20,776,033,696 22,480,824,985Pay leg – (70,404,905) (225,107,506) (234,121,885) (1,701,588,336) (23,134,675,899) (25,365,898,531)

P=15,285,217,505 P=2,253,219,767 P=3,427,614,558 P=5,130,374,950 P=9,767,606,061 P=45,144,642,008 P=81,008,674,849Financial LiabilitiesLoans payable

Bank loans – 1,821,361,837 5,462,690,021 8,987,510,300 8,270,219,383 21,806,559,341 46,348,340,882Mizuho Term Loan – 1,254,693,368 – – 1,181,384,110 5,070,924,144 7,507,001,622BTMU Loan USD – – – – – 6,150,439,734 6,150,439,734Fixed Rate Notes – 1,008,936,500 – – 3,654,860,722 541,937,426 5,205,734,648Notes payable – 803,308,840 1,343,287,980 1,008,066,188 570,967,829 329,773,438 4,055,404,275MUTB Term Loan – – – – – 2,583,198,050 2,583,198,050TNB Loan USD – – – – – 2,700,244,574 2,700,244,574RBL Loan USD – – – – – 1,339,767,125 1,339,767,125SMBC Loan USD P=– P=– P=– P=– P=– P= 1,309,594,315 P= 1,309,594,315Corporate note – – – – – – –Accounts payable and other

liabilitiesAccounts payable 16,131,669 326,354,425 8,100,997 – – – 350,587,091Accrued interest payable and

other expenses– 30,860,582 36,746,848 137,110,680 127,088,691 260,918,454 592,725,255

Deposit on lease contracts 24,139,938 16,621,848 21,945,851 5,371,700 151,400 – 68,230,737P=40,271,607 P=5,262,137,400 P=6,872,771,697 P=10,138,058,868 P=13,804,672,135 P=42,093,356,601 P=78,211,268,308

2018





Financial AssetsCash and cash equivalents P=652,775,871 P=700,000,000 P=– P=– P=– P=– P=1,352,775,871Due from BSP 9,600,688,862 48,000,000 – – – – 9,648,688,862SPURA – 1,118,182,680 – – – – 1,118,182,680AFS investments – – – – – 1,200,000 1,200,000Receivables from customers

Receivables financed – net 46,214,699 376,933,259 597,978,960 868,813,218 1,607,278,548 6,650,414,938 10,147,633,622Finance lease receivable - net 257,233,933 1,584,014,846 2,448,667,240 3,672,726,577 7,210,951,610 36,233,527,892 51,407,122,098Other receivables

Receivables from clients 65,720,073 – – – – – 65,720,073Receivables from

employees 595,201 822,154 712,807 1,069,211 2,172,696 11,075,738 16,447,807Accrued interest

receivable – 531,074 – – – – 531,074Other receivables 296,386 – – – – – 296,386

Derivative assetsReceive leg – 33,945,302 99,797,575 79,800,878 1,252,934,107 14,203,400,949 15,669,878,811Pay leg – (7,962,900) (98,178,904) (119,500,836) (1,469,751,293) (14,769,816,107) (16,465,210,040)

P=10,623,525,025 P=3,854,466,415 P=3,048,977,678 P=4,502,909,048 P=8,603,585,668 P=42,329,803,410 P=72,963,267,244(Forward)

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2018





Financial LiabilitiesLoans payable

Bank loans P=– P=2,268,224,321 P=4,316,694,954 P=4,890,129,429 P=7,963,641,546 P=24,367,977,873 P=43,806,668,123Mizuho Term Loan – 124,808 887,907 204,143 486,254 6,191,704,603 6,193,407,715BTMU Loan USD – – 534,965 59,648 888,745 4,879,500,701 4,880,984,059Fixed Rate Notes – 23,561,500 947,210,043 596,404,656 48,693,767 2,553,100,411 4,168,970,377Notes payable – 758,380,800 1,081,192,147 600,582,789 554,053,456 362,104,845 3,356,314,037MUTB Term Loan – 158,208 167,119 150,971 274,283 2,536,712,953 2,537,463,534Corporate note – – – 40,756,675 1,541,657,375 – 1,582,414,050

Accounts payable and otherliabilities

Accounts payable 22,580,970 478,854,361 24,520,564 – – – 525,955,895Accrued interest payable and

other expenses – 13,400,671 21,223,045 88,458,087 73,010,129 235,813,282 431,905,214Deposit on lease contracts 34,133,992 76,132,938 146,668,095 261,220,814 540,161,451 55,222,966 1,113,540,256

P=56,714,962 P=3,618,837,607 P=6,539,098,839 P=6,477,967,212 P=10,722,867,006 P=41,182,137,634 P=68,597,623,260

Market RiskMarket risk is exposure to changes in market rates that may adversely affect the Company value andability to meet obligations as they mature. Market risks cover interest rate and foreign exchangerisks.

Interest rate riskInterest rate risk arises from interest margin compression due to an adverse movement in the marketinterest rates. This risk applies only to accrual positions as the Company has no trading portfolio.

The ALCO establishes and oversees the Company’s interest rate risk as part of the market riskmanagement program. In considering interest rate exposures, the Company measures its risk profilein terms of asset and debt/derivative notional size, asset yields and market rates, maturity profile, pre-payment and re-pricing characteristics. Interest rate risks exposures are evaluated using a variety oftechniques and measures, each of which are based on projecting asset and liability cash flows underinterest rate and market price scenarios.

Interest rate risk exposures are reported via portfolio hedge ratio. This tool highlights the level of gapin amounts in fixed rates of interest between assets and liabilities, as a measure of exposure to interestrate changes, the critical components of which are notional size, maturities and re-pricing profiles.

The Company also measures the potential impact of bps yield curve parallel shift on the expectedearnings. This tool gives a measure of expected earnings at risk as a result of interest rate riskexposure.

Foreign currency riskForeign currency risk is the risk that the value of a financial instrument will fluctuate as a result ofchanges in the value of foreign currencies which include volatility in exchange rates, correlationsacross currencies and changes in currency regime.

As a general rule, the Company is not allowed to have a forex position. All foreign borrowings mustbe fully hedged from inception until maturity. The Company’s foreign exchange risk resultsprimarily from movements of the PHP against the USD with respect to USD-denominated financialassets (such as cash and cash equivalents) and USD-denominated financial liabilities (such asaccounts payable and other liabilities).


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25. Offsetting of Financial Assets and Liabilities

The amendments to PFRS 7 require the Company to disclose information about rights of offset andrelated arrangements (such as collateral posting requirements) for financial instruments under anenforceable master netting agreements or similar arrangements. The effects of these arrangements aredisclosed in the succeeding table.

March 31, 2019

Financial instrumentsrecognized at

end of reportingperiod by type

Gross carryingamounts(before

offsetting)

Gross amountsoffset in

accordance withthe offsetting

criteria

Net amountpresented instatements of

financialposition

[a−b]

Effects of remaining rights ofset−off (including rights to set

off financial collateral) thatdo not meet PAS 32 offsetting

criteria

Net exposure[c−d]

Financialinstruments

Fair value offinancialcollateral

[a] [b] [c] [d] [e]Financial assetsCross-currency interest rate swaps P=1,103,133,383 P=– P=1,103,133,383 (P=80,177,835) P=– P=1,022,955,548

Financial liabilitiesCross-currency interest rate swaps P=294,478,757 P=– P=294,478,757 (P=80,177,835) P=– P=214,300,922

March 31, 2018

Financial instrumentsrecognized at

end of reportingperiod by type

Gross carryingamounts (before

offsetting)

Gross amountsoffset in

accordance withthe offsetting

criteria

Net amountpresented instatements of

financialposition

[a−b]

Effects of remaining rights ofset−off (including rights to set

off financial collateral) thatdo not meet PAS 32 offsetting

criteria

Net exposure[c−d]

Financialinstruments

Fair value offinancialcollateral

[a] [b] [c] [d] [e]Financial assetsCross-currency interest rate swaps P=868,094,713 P=– P=868,094,713 P=– P=– P=868,094,713SPURA 1,118,192,680 – 1,118,192,680 – 1,118,192,680 –

P=1,986,287,393 P=– P=1,986,287,393 P=– P=1,118,192,680 P=868,094,713

26. Note to Statements of Cash Flows

Noncash investing activities pertain to transfer of repossessed vehicles classified as assets held forsale to property and equipment amounting to P=21.6 million and P=8.5 million in 2019 and 2018,respectively. It also includes foreclosure of repossessed vehicles classified as assets held for saleamounting to P=2.4 billion and P=1.7 billion in 2019 and 2018, respectively.

Changes in liabilities arising from financing activities

April 1, 2018 Cash flows*

Changes infair values and

amortization costsIssuance of

capital stock March 31, 2019Loans payable P=64,099,967,136 P=9,514,971,381 P=105,649,178 P=– P=73,720,587,695Deposit for future subscription 1,800,000,000 – – (1,800,000,000) –Derivative liability – – 294,478,757 – 294,478,757Total liabilities from financing

activities P=65,899,967,136 P=9,514,971,381 P=401,127,935 (P=1,800,000,000) P=74,015,066,452*Represent net of availments and payments

The Company classifies interest paid as cash flows from operating activities.

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27. Supplementary Information Required Under Revenue Regulations 15-2010

The Company reported and/or paid the following types of taxes for the year endedMarch 31, 2019:

Gross Receipts Tax (GRT)The Company is subject to GRT on its gross income from Philippine sources. GRT is imposed oninterest, commissions and discounts from lending activities at 5.0% or 1.0%, depending on theremaining maturities of instruments from which such receipts are derived, and at 7.0% on non-lending fees and commissions, trading and foreign exchange gains and other items constituting grossincome.

Details of the Company’s income and GRT accounts in 2019 are as follows:

Gross ReceiptsGross

Receipts TaxIncome derived from lending activities P=6,240,400,413 P=312,020,021Other income 514,210,545 32,098,293

P=6,754,610,958 P=344,118,314

Other Taxes and LicensesFor the year ended March 31, 2019, other taxes and licenses included in ‘Taxes and licenses’ accountof the Company consist of:

Documentary stamps taxes P=103,154,290Local taxes 11,456,356Others 50,562,944

P=165,173,590

Others include fringe benefits tax, LTO registration and SEC registration fee.

Withholding Taxes

Total Remittances BalanceExpanded withholding taxes P=108,733,759 P=11,729,324Final withholding taxes 124,776,035 13,823,831Withholding taxes on compensation and benefits 28,437,944 8,443,251

P=261,947,738 P=33,996,406


DealershipDirectory

METRO MANILA DEALERS

Toyota Abad Santos, Manila2210 Jose Abad Santos Ave., Manila(02) 230-1111

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Toyota Balintawak, Inc.EDSA cor. V. Ang & Gen. Evangelista Sts.Caloocan City(02) 366-8901 to 06

Toyota Bicutan, ParañaqueKm. 15 West Service RoadSouth Superhighway, Parañaque City(02) 777-9500

Toyota Commonwealth, Inc.Commonwealth Ave., Quezon City(02) 952-1021 to 27

Toyota Cubao926 Aurora Blvd., Cubao, Quezon City(02) 981-6168

Toyota Fairview, Inc.Block 6 Lot 2, 3, 4 and 5 Neopolitan Business ParkBelfast cor. Mindanao AvenueQuezon City(02) 277-0911 to 18

Toyota Global City, Inc.38th St. cor. 11th Ave, Uptown Fort Bonifacio, Global CityTaguig(02) 846-7777

Toyota Makati, Inc.Ayala cor. Metropolitan Ave., Makati City(02) 897-3333

Toyota Manila Bay Corp.Metropolitan Ave., Metropolitan Park Pasay City(02) 581-6168

Toyota MarikinaSumulong Highway cor. Gil Fernando Ave.Brgy. Sto. Niño, Marikina City(02) 981-6000

Toyota North Edsa1010 EDSA Quezon City(02) 927-7215; (02) 927-7217(02) 927-7230; (02) 927-7239

Toyota Otis, Inc.1770 Paz M. Guazon St., Paco, Manila(02) 564-1811 to 20

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Toyota Pasong Tamo, Inc.2292 Pasong Tamo Ext., Makati City(02) 893-8084

Toyota Quezon Ave., Inc.728 Quezon Ave., Quezon City(02) 554-2000

Toyota Shaw, Inc.304 Shaw Blvd., Mandaluyong City(02) 532-8428

Toyota Valenzuela, Inc.457 McArthur Highway,Dalandanan, Valenzuela City(02) 396-8000

LUZON DEALERS

Toyota AlbayLot 3 533-25-C-1-A, National Highway Brgy. Salvacion, Daraga, Albay 4501(052) 204-8225

Toyota Angeles, Pampanga, Inc.Angeles-Magalang Road, Pulung Maragul Angeles City, Pampanga(038) 409-1000

Toyota Bacoor, Cavite, Inc.Bacoor Boulevard, Mambog IVBacoor City, Cavite(046) 489 8000

Toyota Baguio CityBokawkan Rd. cor. Aguila St.Baguio City, Benguet(074) 443-6778; (074) 300-3273 to 74

Toyota Bataan, Inc.Roman Superhighway, Brgy. TuyoBalanga City, Bataan(047) 612-1671; (047) 612-1662 to 63

Toyota Batangas City, Inc.Diversion Rd., Brgy. BalagtasBatangas City, Batangas(043) 300-4088

Toyota Calamba, Laguna, Inc.National One Highway, Brgy. TurbinaCalamba City, Laguna(049) 508-3443

Toyota Calapan City, Inc.Km. 12 Brgy. Biga National Highway Calapan Oriental Mindoro(043) 441-0114

Toyota Camarines Sur, Inc.624-B National Rd., Pili, Camarines Sur(054) 477-2526

Toyota Dagupan City, Inc.Diversion Rd., Brgy. San MiguelCalasiao, Pangasinan(075) 517-2026 to 28

Toyota Dasmariñas-CaviteAguinaldo Highway, Brgy. SalitranDasmariñas City, Cavite(02) 581-6000 / (046) 481-0000

Toyota Ilocos NorteManila North Road, San Nicolas Ilocos Norte(077) 600-8891

Toyota Isabela, Inc.Km. 321 Maharlika HighwayBrgy. Malapat, Cordon, Isabela(078) 305-3106

Toyota La UnionManila North Rd., Bauang, La Union(072) 705-8007 to 08; (072) 607-3501 to 02

Toyota Lipa, Batangas, Inc.1-A-2, Magnificant ComplexPres. J.P. Laurel HighwayBrgy. Banay-Banay, Lipa City, Batangas(043) 757-0211

Toyota Marilao, Bulacan, Inc.MacArthur Highway, Abangan SurMarilao, Bulacan(044) 815-8778

Toyota Nueva Ecija, Inc.Km.106 Maharlika Hwy, Brgy. GomezSta. Rosa, Nueva Ecija, 3101(044) 960-7070 to 77

Toyota Plaridel, Bulacan9001 Purok 1, Parulan, Plaridel, Bulacan(044) 794-1888

Toyota Puerto Princesa City, Inc.National Highway, Brgy. Tagburos Puerto Princesa City, Palawan(048) 717-8200 to 8299

Toyota San Fernando, Pampanga, Inc.Olongapo-Gapan Rd. San Fernando City, Pampanga(045) 961-1188

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Toyota San Pablo, Laguna, Inc.Km. 78 Maharlika Highway, Brgy. San Benito Alaminos, Laguna(02) 543-1183 ; (02) 519-4357; (02) 543-5031 to 34

Toyota San Jose Del Monte, BulacanQuirino Highway cor. Pleasant Hill RoadCity of San Jose, Del Monte, Bulacan(044) 919-8990 to 8999

Toyota Santa Rosa, LagunaLot 1968-D Santa Rosa-Tagaytay Road Brgy. Pulong Sta. Cruz Santa Rosa City, Laguna(02) 883-7600; (049) 545-3581

Toyota Silang, Cavite, Inc.General Emilio Aguinaldo Highway Brgy. Lucsuhin, Silang, Cavite(02) 519-4596; (046) 412-1554

Toyota SubicMarshalling Yard Rizal HighwaySubic Gateway District, SBFZOlongapo City, Zambales(047) 250-8008

Toyota Tarlac City, Inc.Plaza Luisita Center Brgy. San Miguel, Tarlac City, Tarlac(045) 628-1756

Toyota Taytay, Rizal, Inc.15 A Manila East Rd., Brgy. DoloresTaytay, Rizal(02) 653-7222; (02) 995-3096

Toyota TuguegaraoEnrile Boulevard, Caggay, Tuguegarao City(044) 960 7070 to 77

VISAYAS DEALERS

Toyota Aklan, Inc.Laguinbanua East Numancia Aklan(036) 265 3597

Toyota Calbayog, SamarMaharlika Highway, Brgy. Bagacay Calbayog City, Samar(055) 209-4047 to 48

Toyota Cebu City, Inc.34 M.J. Cuenco St., Cebu City, Cebu(032) 253-1161; (032) 416-1161

Toyota Dumaguete City4741 Brgy. Tubtubon, SibulanNegros Oriental 6201(035) 419-9490; (035) 522-0859

Toyota Iloilo, Inc.Gran Plains SubdivisionJaro, Iloilo City, Iloilo(033) 320-6115 to 19

Toyota Lapu-Lapu, CebuSitio Hawaiian 1, Marigondon Lapu-Lapu City, Cebu(032) 384-0101 / (032) 495-1784

Toyota Mabolo, Cebu, Inc.53 Pope John Paul II AvenueMabolo, Cebu City(032) 252-0000

Toyota Mandaue North, CebuRizal St., Tabok, Mandaue City, Cebu(032) 345-8670; (032) 422-8670

Toyota Mandaue South, CebuOuano Ave., North Reclamation Area Mandaue City, Cebu(032) 420-9555; (032) 236-0951

Toyota Negros OccidentalNational Highway, Barangay Km. 15Talisay City, Negros Occidental(034) 445-0773

Toyota Roxas CityIloilo-Capiz Road, Brgy. BoloRoxas City, Capiz(036) 620-2407 to 09

Toyota Tacloban, Leyte, Inc.Maharlika Hwy., Naga-NagaTacloban City, Leyte(053) 832-8854

Toyota Tagbilaran CityCPG North Avenue, Taloto DistrictTagbilaran City, Bohol(038) 411-1341

Toyota Talisay, CebuSRP Road Lawaan 1, Talisay City, Cebu(032) 260-9201

MINDANAO DEALERS

Toyota Butuan CityNational Highway, LibertadButuan City 8600(085) 815-0348 / (085) 341-8980

Toyota Cagayan De Oro, Inc.Km. 2 National Highway, KauswaganCagayan De Oro City, Misamis Oriental(088) 858-9994; (088) 858-7770

Toyota Davao City, Inc.Km. 6 Lanang, Davao CityDavao Del Sur(082) 234-2994

Toyota General Santos, Inc.National Highway, City HeightsGeneral Santos City, South Cotabato(083) 554-2994

Toyota Iligan City, Inc.Purok Vanda, Brgy. AcmacIligan City, Lanao del Norte(063) 224-7580 to 84

Toyota Kidapawan CityLot 7, Blk 8 Brgy. BalindogKidapawan City 9400(064) 520-2000

Toyota Matina, DavaoMacArthur HighwayBrgy. Matina Crossing Talomo District, Davao City(082) 226-2994

Toyota Tagum CityDavao-Agusan National Highway Barangay Canocotan, Tagum CityDavao Del Norte(084) 655-2994

Toyota Valencia City, Inc.P17A Sayre Highway, Hagkol PoblacionValencia City, Bukidnon(088) 828-0854

Toyota Zamboanga CityMCLL Highway, Boalan, Zamboanga City(062) 926-7226

LEXUS DEALER

Lexus Manila, Inc.3402 8th Ave. Cor. 34th St.North Bonifacio Global City, Taguig City(02) 856-5050

SERVICE CENTERS

Toyota Shaw Service CenterShaw Boulevard cor. GomezvilleAddition Hills, Mandaluyong City(02) 717-0807; (02) 532-7249 local 202/204

Toyota North EDSA Service CenterMindanao Ave., extension, Brgy. UgongSitio Duhat, Valenzuela City(02) 774-6925/(02) 774-6933

Toyota Davao City Body and Paint CenterPurok 9, Barangay CommunalBuhangin District, Davao City, 8000(082) 233-0395; (082) 233-0440

Toyota Alabang Service CenterAlabang Zapote Road, Brgy. PamplonaLas Piñas City(02) 396-0000

Toyota Negros Occidental Service CenterAraneta St. Gardenville SubdivisionBacolod City, Negros Occidental(034) 444-3135/ (034) 445-7533


BusinessDirectory

HEAD OFFICE

32nd Flr., GT Tower Int’l. Ayala Ave. cor. HV Dela Costa St., Salcedo Village, Makati City 1227Trunk Line: (02) 858-8500Customer Service Hotline: (02) 757-8500Investor Assistance Hotline: (02) 756-7430Website: www.toyotafinancial.ph

PROVINCIAL BUSINESS CENTERS

Cebu Business CenterEsperanza Bldg. GF Door B & C, AC Cortez Ave.Ibabao, Mandaue City, Cebu(032) 236-2547

San Fernando Pampanga Business CenterAria Place, GF Building C, Unit 112, Jose Abad Santos Ave.Dolores, San Fernando City, Pampanga(045) 963-1726

Davao Business CenterGround Flr., Manuel A. Morales Building 109 JP Laurel Avenue, Bajada, Barangay 12-B, Davao City(082) 233-0855

Lipa Business CenterUnit 6 GF Seasons Mall Building, JP Laurel Highway Tambo, Lipa City Batangas 4217(043) 741-4965

PROVINCIAL LENDING DESKS

Bacolod Lending DeskDoor #2, Sugarland Hotel, Araneta StreetSingcang Bacolod City, Negros Occidental(034) 434-6580

Cagayan De Oro Lending DeskKm. 2, National Hi-way, Kauswagan Cagayan De Oro City(088) 858-8555

Dagupan Lending DeskDiversion Rd. Brgy San Miguel Calasiao, Pangasinan(075) 522-8318/ (075) 522-8638

Isabela Lending DeskKm. 321 Daang Maharlika HighwayBrgy. Malapat, Cordon, Isabela(0917) 870 2429

Nueva Ecija Lending DeskG/F, Km. 106 Maharlika Hi-way,Barangay GomezSta Rosa, Nueva Ecija(044) 463-0008

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32nd Floor GT Tower Int’l. Ayala Avenue cor. H.V. dela Costa Street, Salcedo Village, Makati City 1227Investor Assistance Hotline (02) 756-7430

www.toyotafinancial.ph

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