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Driving to Innovate New Value
Annual Report 2008
Year ended March 31, 2008
TOYOTA MOTOR CORPORATION Annual Report 2008

Table of contents

  • Page 1
    Annual Report 2008 Year ended March 31, 2008 Driving to Innovate New Value

  • Page 2
    ...of information relating to the Company and its management • Corporate Philosophy • Corporate Governance • Directors and Auditors • Risk Factors • R&D and Intellectual Property • R&D Organization • Production Sites • Overseas Manufacturing Companies • Toyota Milestones 69 Financial...

  • Page 3
    ... society by creating better products. Today, the Company manufactures vehicles and parts at 53 production sites in 27 countries and regions around the globe and is an active member in the communities it serves. In fiscal 2008, ended March 31, 2008, the Toyota Group sold approximately 8.91 million...

  • Page 4
    ... Toyota Motor Corporation Fiscal years ended March 31 Consolidated Performance (U.S. GAAP) Yen in millions U.S. dollars* in millions % change 2006 2007 2008 2008 2007vs2008 For the Year: Net Revenues...Operating Income ...Net Income ...ROE ...At Year-End: Total Assets...Shareholders' Equity...

  • Page 5
    ... Overview • Management & Corporate Information • Financial Section • Investor Information • Consolidated Vehicle Production and Sales Thousands of units % change 2006 2007 2008 2007vs2008 Vehicle Production by Region: Japan ...Overseas Total ...North America...Europe ...Asia...

  • Page 6
    ... of applicability, Toyota aims to achieve annual sales of one million hybrid vehicles by the early 2010s. Toyota and Isuzu Motors reach basic agreement on collaboration for development, supply, and production of small diesel engines Maximizing use of the technology and expertise of both companies...

  • Page 7
    ... PHV equipped with lithium-ion batteries to fleet customers in the United States and other markets by 2010. Mass production of the lithium-ion batteries is currently being considered by Panasonic EV Energy Co., Ltd., a joint-venture company of Toyota and the Matsushita Group. • Annual Report 2008...

  • Page 8
    Messages from the Management Chairman's Message "Toyota aims to achieve sustained, long-term growth by providing high-quality vehicles to people everywhere, and by contributing to the realization of a bountiful and nurturing society." At Tokyo Head Office 6 TOYOTA • Annual Report 2008 •

  • Page 9
    ... Overview • Management & Corporate Information • Financial Section • Investor Information • In fiscal 2008, ended March 31, 2008, Toyota again posted solid business results. On behalf of Toyota's management team, I would like to sincerely thank our shareholders, customers, suppliers...

  • Page 10
    Messages from the Management President's Message "A strong, flexible corporate structure for increased corporate value" At Tsutsumi Plant, Aichi Prefecture 8 TOYOTA • Annual Report 2008 •

  • Page 11
    • Performance Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • In fiscal 2008, ended March 31, 2008, Toyota set new records in consolidated net revenues and ...

  • Page 12
    ...Vehicle Sales by Region (Thousands of units) 10,000 +4.6% 8,913 8,000 -3.7% 2,188 6,000 +0.5% 2,958 4,000 +4.9% 1,284 2,000 +21.2% 956 +17.8% 1,527 '04 '05 '06 '07 '08 0 FY Japan North America Europe Asia Other Regions Note: Fiscal years ended March 31 10 TOYOTA • Annual Report 2008 •

  • Page 13
    ... the concept of "Built-in quality" in development, manufacturing and sales. As a manufacturer, quality is the Toyota Group's lifeline and we are working with suppliers and dealers to improve. Our main priority is to improve quality from the perspective of our customers. Since 2005, through our...

  • Page 14
    ... production sites in 27 countries and regions, with sales operations in over 170 countries and regions. With such geographic diversity, we need to advance human resources development globally. We established a GPC at our Motomachi plant to pass Toyota's unique culture and values on to all employees...

  • Page 15
    ... the market is growing rapidly, we will construct a second plant with an annual production capacity of 100 thousand vehicles. Operations are scheduled to start in 2010, with the manufacture of a newly developed compact car designed to meet regional needs. Sales of Lexus brand models, Land Cruisers...

  • Page 16
    ...2009, ending March 31, 2009, we anticipate a decline in North American vehicle sales. However, we plan to increase sales across the entire Toyota Group to 9.06 million vehicles, an increase of 147,000 over the previous fiscal year, by growing our sales in resource-rich and emerging countries in Asia...

  • Page 17
    ...flexibility. In principle, we plan to cancel any treasury stocks acquired in the future. We intend to aggressively invest in research and development to improve our corporate value and to expand our production facilities and sales network while consistently returning profits to shareholders. We will...

  • Page 18
    ... technology, supply, and marketing and their supporting factors, such as product quality, cost, and human resources. Though these efforts and by taking advantage of opportunities, while avoiding or absorbing risks, in all product segments and regions, Toyota will continue to pursue stable, long-term...

  • Page 19
    ... that Toyota develops and produces overseas for markets worldwide. 44.9% Other Regions 6.7% Asia 9.1% Europe 11.7% North America 27.6% Operating Income by Region FY 2008 Japan 63.0% Other Regions 6.3% Asia 11.2% Europe 6.2% North America 13.3% • Annual Report 2008 • TOYOTA 17

  • Page 20
    ...improving profitability and capital efficiency. Balanced implementation of 1.-3. over the medium to long term 3. Stability: Maintaining a solid financial base Toyota maintains a solid financial base by ensuring sufficient liquidity and stable shareholders' equity. At fiscal year-end, liquid assets...

  • Page 21
    ... '08 Consolidated dividend payout ratio (Right scale) Note: Fiscal years ended March 31 Toyota considers the returning of profits to its shareholders as one of its priority management policies and continuously strives to increase per-share earnings through aggressively promoting its business while...

  • Page 22
    ... Areas": "research and development," "manufacturing," and "nurturing society." We are working to satisfy the needs of both environmental preservation and economic growth. Eventually, we hope to contribute to the realization of a prosperous, low-carbon society. 20 TOYOTA • Annual Report 2008 •

  • Page 23
    • Performance Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Technology Achieving Sustainable Mobility Technological innovations hold the key to the ...

  • Page 24
    ... to power trains, by 2010 we will have installed in all our vehicles a new series of gasoline and diesel engines and transmissions to boost fuel efficiency. In addition, we are currently increasing efforts to further evolve hybrid technology and expand our hybrid lineup. Improving fuel efficiency...

  • Page 25
    • Performance Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Toyota Hybrid Technologies Over the 10 years since we first launched the Prius in 1997, the ...

  • Page 26
    ... overcome such FCHV technical problems as starting and driving in temperatures as low as -30ºC. Various Alternative Fuel Issues Toyota is working to address other various alternative fuel issues. We are using yeast technologies incubated in Japan to develop ethanol production capability based on...

  • Page 27
    ...Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Approaches to Safety Toyota is committed to technological developments based on the Integrated Safety Management...

  • Page 28
    ... in the plan and are now working to meet a new, even higher target for the year ending March 31, 2011. CO2 Emission Reduction Targets, Results and New Targets Region CO2 Emissions 2010 Target 2007 Results New 2010 Target Worldwide* TMC (Japan) Volume per sales unit Volume per sales unit Volume 20...

  • Page 29
    ..., Toyota has designated its Toyota Motor Manufacturing, Mississippi, Inc. (TMMMS) plant (currently scheduled to begin production in 2010) as a model "Sustainable Plant." In addition to incorporating innovative production line technology, it is also actively promoting tree-planting activities as part...

  • Page 30
    ... Program supports projects that nurture environment-friendly people and technologies. Now in its eighth year, the program has supported 140 projects in 42 countries worldwide. Before afforestation After afforestation In research and development, manufacturing, and nurturing society, Toyota is...

  • Page 31
    ...• Business Overview • Management & Corporate Information • Financial Section • Investor Information • Business Overview 30 34 36 Solid Foundations for Future Growth At a Glance Automotive Operations 36 38 40 42 44 46 48 50 Japan North America Europe Asia Central and South America...

  • Page 32
    ... the business environment. This commitment to continuous improvement in the areas of "technology," "production & supply," and "sales & marketing" that drives our growth, and of the "product quality," "cost," and "human resources" that sustain it, has long been a guiding principle at Toyota. We plan...

  • Page 33
    ... that information back into the design process to further improve quality related to long-term durability. We also drive new cars 100,000-200,000 kilometers in a single year to identify problems and implement countermeasures. We have increased the use of in-line measurement in production lines to...

  • Page 34
    ... of high-quality products to the world in a timely manner amid fluctuating global demand, we are working to increase the self-reliance of our overseas manufacturing companies. Kaizen Genchi Genbutsu Respect Respect for People Teamwork 32 TOYOTA • Annual Report 2008 • Integration within...

  • Page 35
    ...Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Technical training at GPC in Thailand » Self-Reliance Supporting Programs Historically, human resource development for Toyota...

  • Page 36
    ... sales in resource-rich and emerging countries such as Asia, Central and South America, Oceania, and Africa, helping to offset stagnant sales in Japan. Operating income was up 6.5%, to ¥2,171.9 billion, mainly due to increases in both production volume and vehicle unit sold, and cost reduction...

  • Page 37
    ... the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Net Revenues by Regions Japan (¥ Billion) 16,000 (%) 16 North America (¥ Billion) 16,000 (%) 16 Europe (¥ Billion) 16,000 (%) 16 Asia...

  • Page 38
    ... increased 1.2%, to 5.16 million vehicles, due to higher demand overseas. 0 0 FY '04 '05 '06 '07 '08 FY '04 '05 '06 '07 '08 Consolidated vehicle sales Consolidated vehicle production Note: Fiscal years ended March 31 Note: Toyota, Daihatsu, and Hino 36 TOYOTA • Annual Report 2008 •

  • Page 39
    ... • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Crown Corolla Rumion Lexus LS600hL Mark X ZiO Land Cruiser » Market Conditions and Regional Strategy A two-pronged approach to market revitalization In fiscal 2008, total...

  • Page 40
    ... and application of numerous advanced technologies aimed at achieving sustainable mobility » Performance Overview Record U.S. sales for the 12th consecutive year Toyota sold a record 2.95 million vehicles on a consolidated basis in North America in fiscal 2008, overcoming lackluster U.S. market...

  • Page 41
    ... from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Tundra Highlander Lexus ES Scion xD Prius » Market Conditions and Regional Strategy Ongoing efforts to secure continuing profits...

  • Page 42
    ...meet regional needs In fiscal 2008, sales in the European market (19 countries) totaled 17.88 Consolidated vehicle sales Consolidated vehicle production Diesel vehicle sales Diesel sales ratio (Right scale) Note: Fiscal years ended March 31 Note: Calendar years 40 TOYOTA • Annual Report 2008...

  • Page 43
    ... are moving forward with plans to increase production capacity at our manual transmission manufacturing plant in Poland, raising output from the current level of 600 thousand units a year to 720 thousand units by mid-2009. European Annual Production Capacity in 2008 Plant Number of vehicles United...

  • Page 44
    ... one of the world's most 500 250 0 0 FY '04 '05 '06 '07 '08 CY '03 '04 '05 '06 '07 Consolidated vehicle sales Consolidated vehicle production Vehicle sales in China Vehicle production in China Note: Fiscal years ended March 31 Note: Calendar years 42 TOYOTA • Annual Report 2008 •

  • Page 45
    ... • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Camry important automobile markets. Demand also grew in Thailand, and increased steadily in India. Toyota's plant in...

  • Page 46
    ... grow, particularly in resource-rich and emerging countries in the region. Against this backdrop of high demand, these countries are 500 0 FY '04 '05 '06 '07 '08 Consolidated vehicle sales Consolidated vehicle production Note: Fiscal years ended March 31 44 TOYOTA • Annual Report 2008 •

  • Page 47
    ...• Business Overview • Management & Corporate Information • Financial Section • Investor Information • Corolla Land Cruiser Yaris Camry playing a major role in Toyota's IMV project, with expanded production of IMV pickup trucks and SUVs in Argentina. To meet the regional needs...

  • Page 48
    ... services offerings overseas, addressing demand for attractive financial services such as easy payment plans, strengthening the group's domestic revenue base, promotion of comprehensive global risk management and funding, and operational process improvement. In emerging markets where business...

  • Page 49
    .... 14 million Approx. 8,000 50% Overseas Sales Finance Companies Toyota Finance Corporation Toyota Financial Services Toyota Asset Securities Corporation Management Co., Ltd. Toyota Accounting Service Co. Market coverage No. of customers No. of employees • Annual Report 2008 • TOYOTA 47

  • Page 50
    ... to strive for greater integration of cars and information technologies. In addition to our GAZOO service, which meets increasingly diverse customer needs by providing information about new and used cars, automotive-related services, and a wide range of other 48 TOYOTA • Annual Report 2008 •

  • Page 51
    ... Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • SINCÉ Cada Mode topics, we manage internal and external websites that offer information about specific businesses and brands. In fiscal 2008...

  • Page 52
    ... car technologies, and fostered the development of young drivers through the Toyota Young Drivers Program (TDP) and support for entry-level motorsports activities. 2008 Motorsports Activities In 2008, Toyota continued to participate in F1, NASCAR, SUPER GT, and Formula Nippon races, and to promote...

  • Page 53
    ... Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Management & Corporate Information 52 54 58 60 62 64 65 66 68 Corporate Philosophy Corporate Governance Directors and Auditors Risk Factors R&D and Intellectual...

  • Page 54
    ... through open and fair communication. We expect our business partners to support this initiative and act in accordance with it. Customers • Based on our philosophy of "Customer First", we develop and provide innovative, safe and outstanding high quality products and services that meet a wide...

  • Page 55
    ...Principles 5) • Management of each company takes leadership in fostering a corporate culture, and implementing policies, that promote ethical behavior. (Guiding Principles 1 and 5) • We respect our business partners such as suppliers and dealers and work with them through long-term relationships...

  • Page 56
    ..., including shareholders, customers, business partners, local communities, and employees. We are convinced that providing products that fully cater to customer needs is essential to achieve stable, long-term growth. That philosophy is outlined in the "Guiding Principles at Toyota." Further...

  • Page 57
    ... Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Directors at the executive vice president level and above as well as representatives of Corporate Auditors, to deliberate important issues and measures relating...

  • Page 58
    ... corporate ethics inquiry office and other channels. (6) System to ensure the appropriateness of business operations of the corporation and the business group consisting of the parent company and subsidiaries 1) Toyota will expand the "Guiding Principles at Toyota" 56 TOYOTA • Annual Report 2008...

  • Page 59
    ...upon the "Guiding Principles at Toyota" and the Regarding significant differences in corporate governance practices between Toyota and U.S. companies listed on the New York Stock Exchange, please refer to the annual report on Form 20-F filed with the United States Securities and Exchange Commission...

  • Page 60
    ... Takimoto Quality Group / Research & Development President, Member of the Board Akio Toyoda Product Management / e-TOYOTA / IT & ITS / Global Planning Operations / Japan Sales Operations / Overseas Sales Operations / Customer Service Operations Katsuaki Watanabe 58 TOYOTA • Annual Report 2008...

  • Page 61
    ...Takahiko Ijichi Business Development Group / Accounting Group Hiroshi Takada Product Management Div. / Global Planning Operations Group Akira Sasaki China Operations Group / Toyota Motor (China) Investment Co., Ltd. Tetsuo Agata Toyota Motor Engineering & Manufacturing North America, Inc. Teiji...

  • Page 62
    ...continuing globalization and consolidation in the worldwide automotive industry. Factors affecting competition include product quality and features, the amount of time required for innovation and development, pricing, reliability, safety, fuel economy, customer service and financing terms. Increased...

  • Page 63
    ... the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • The worldwide financial services industry is highly competitive. The worldwide financial services industry is highly competitive. The market...

  • Page 64
    ... products and services that respond to the needs of customers worldwide. 200 » R&D Activities 0 FY '04 '05 '06 '07 '08 Note: Fiscal years ended March 31 R&D Facilities Head Office Technical Center (Toyota City, Aichi Prefecture, Japan) Toyota Motor Engineering & Manufacturing North America...

  • Page 65
    ...., and Kanto Auto Works, Ltd. Overseas, technical centers in North America, Europe, Asia, and Oceania, as well as a range of design and motorsports R&D centers around the world, give us strong global R&D capabilities that enable us to build cars that better meet the needs of customers in each region...

  • Page 66
    ... 31, 2008 7 8 9 4 1 2 3 6 5 10 11 Japan Company name 1 Activities Location Establishment Head Office Technical Center Toyota Central Research & Development Laboratories, Inc. Higashi-Fuji Technical Center Shibetsu Proving Ground Planning and design of products, prototypes manufacture, and...

  • Page 67
    ... Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Production Sites As of March 31, 2008 2 3 Tom ei ay ssw pre Ex 7 8 4 10 6 9 5 12 Hirose Plant 1 Toyota...

  • Page 68
    ...S.A. Toyota de Venezuela Compania Anonima (TDV)** Hilux, Fortuner Corolla, Corolla Fielder/Hilux underbody parts Land Cruiser Prado Corolla, Fortuner, Hilux, Dyna, Land Cruiser Main products 100.00 100.00 28.00 90.00 Voting rights ratio* (%) 1997 1959 1992 1981 Start of operations Europe Country...

  • Page 69
    ... Ltd. (AVA) Toyota South Africa Motors (Pty) Ltd. (TSAM) Land Cruiser Corolla, Hilux, Fortuner, Dyna Main products - 100.00 Voting rights ratio* (%) 1977 1962 Start of operations Asia Country/Area Company name 27 28 29 30 31 32 33 34 35 36 China Tianjin Jinfeng Auto Parts Co., Ltd. (TJAC...

  • Page 70
    ... in Europe. 1990s Hybrid vehicle, first-generation Prius 1992 1997 1999 Establishment of Toyota Supplier Support Center in the United States U.K. plant (TMUK) begins production Launch of the Prius hybrid vehicle Toyota Motor Corporation lists on the New York and London stock exchanges Cumulative...

  • Page 71
    ... Income Consolidated Statements of Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Management's Annual Report on Internal Control over Financial Reporting Report of Independent Registered Public Accounting Firm • Annual Report 2008 • TOYOTA...

  • Page 72
    ... ...Net Cash Provided by (Used in) Financing Activities...R&D Expenses ...Capital Expenditures for Property, Plant and Equipment* ...Depreciation ...At Year-End: Shareholders' Equity ...Total Assets...Long-Term Debt ...Cash and Cash Equivalents ...Ratio of Shareholders' Equity ... ¥12,174,404 583...

  • Page 73
    ...Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Yen in millions % change 2003 2004 2005 2006 2007 2008 2007 vs 2008...• Annual Report 2008 • TOYOTA 71

  • Page 74
    Financial Section Consolidated Segment Information Toyota Motor Corporation Fiscal years ended March 31 Yen in millions % change 2003 Business Segment: Net Revenues: Automotive...Â¥14,311,451 Financial Services ...724,898 All Other ...795,217 Intersegment Elimination ...(330,013) Consolidated...

  • Page 75
    ... from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Consolidated Quarterly Financial Summary Toyota Motor Corporation Fiscal years ended March 31 Yen in billions 2007 First Quarter...

  • Page 76
    ... table sets forth Toyota's consolidated vehicle unit sales by geographic market based on location of customers for the past three fiscal years. Thousands of units Years ended March 31, 2006 2007 2008 Japan ...North America ...Europe ...Asia ...Other*...Overseas total...Total... 2,364 2,556 1,023...

  • Page 77
    ... profits unpredictable. Changes in these laws, regulations, policies and other governmental actions may affect the production, licensing, distribution or sale of Toyota's products, cost of products or applicable tax rates. Toyota is currently one of the defendants in purported national class actions...

  • Page 78
    .... The credit card receivables at March 31, 2008 increased by ¥24.5 billion from March 31, 2007 to ¥225.7 billion. Other Business Operations Toyota's other business operations consist of housing, including the manufacture and sale of prefabricated homes; information technology related businesses...

  • Page 79
    ... based on the country location of the parent company or the subsidiary that transacted the sale with the external customer for the past three fiscal years. Revenues by Market 7.7% 10.6% 14.5% FY2008 32.0% 35.2% Japan Asia North America Europe All Other Markets • Annual Report 2008 • TOYOTA 77

  • Page 80
    ...markets, which was partially offset by changes in sales mix compared to fiscal 2007. Net revenues in North America were favorably impacted primarily by vehicle unit sales growth partially offset by fluctuations in foreign currency translation rates during fiscal 2008. Net revenues in Europe and Asia...

  • Page 81
    • Performance Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Research and development expenses (included in cost of products sold and selling, general and ...

  • Page 82
    ...value used for translation purposes, net revenues in fiscal 2007 would have increased by 5.4% in Japan, 13.9% in North America, 19.7% in Europe, and 17.0% in Other, and decreased by 2.4% in Asia compared with the prior year. The following is a discussion of net revenues for each of Toyota's business...

  • Page 83
    ... Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • • Financial Services Operations Segment Net revenues in fiscal 2007 for Toyota's financial services...

  • Page 84
    ...46.2% in Europe, a decrease of ¥27.9 billion, or 19.2%, in Asia, and an increase of ¥16.3 billion, or 24.3% in Other compared with the prior year. The increase in Japan relates primarily to the vehicle unit sales growth in the export markets partially offset by changes in sales mix, continued cost...

  • Page 85
    ...• Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Net Income Toyota's net income increased by ¥271.9 billion, or 19.8%, to ¥1,644.0 billion during fiscal 2007 compared with the prior year. Toyota's actual...

  • Page 86
    ... in finance leases offset by the impact of fluctuations in foreign currency translation rates. As of March 31, 2008, finance receivables were geographically distributed as follows: in North America 61.9%, in Europe 13.1%, in Japan 12.6%, in Asia 4.0% and in Other 8.4%. Toyota maintains programs...

  • Page 87
    ...Business Overview • Management & Corporate Information • Financial Section • Investor Information • unsecured notes and long-term capital lease obligations with interest rates ranging from 0.17% to 28.00%, and maturity dates ranging from 2008 to 2047. The current portion of long-term...

  • Page 88
    ..., referred to as dealer groups, often as part of a lending consortium, for wholesale inventory financing, business acquisitions, facilities refurbishment, real estate purchases, and working capital requirements. Toyota's outstanding credit facilities with dealers totaled ¥1,715.0 billion as...

  • Page 89
    ... date is effective for fiscal year ending after December 15, 2008. Management does not expect this provision to have a material impact on Toyota's consolidated financial statements. In February 2007, FASB issued FAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities...

  • Page 90
    ... 15, 2008. Management does not expect this Statement to have a material impact on Toyota's consolidated financial statements. location of the sale and other factors. All product warranties are consistent with commercial practices. Toyota includes a provision for estimated product warranty costs as...

  • Page 91
    ...part of sales promotion with the effect of reducing new vehicle prices, resale prices of used vehicles and, correspondingly, the fair value of Toyota's leased vehicles could be subject to downward pressure. If resale prices of used vehicles decline, future operating results of the financial services...

  • Page 92
    ... of return on plan assets, which we believe are critical estimates in determining pension costs and obligations, assuming all other assumptions are consistent. Yen in millions Effect on pre-tax income for the year ending March 31, 2009 Effect on PBO as of March 31, 2008 Marketable Securities Toyota...

  • Page 93
    ... • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Toyota uses a value-at-risk analysis ("VAR") to evaluate its exposure to changes in foreign currency exchange rates. The...

  • Page 94
    Financial Section Consolidated Balance Sheets Toyota Motor Corporation March 31, 2007 and 2008 Yen in millions U.S. dollars in millions ASSETS 2007 2008 2008 Current assets Cash and cash equivalents...Â¥ 1,900,379 Time deposits...26,709 Marketable securities ...435,463 Trade accounts and ...

  • Page 95
    ... Business Overview • Management & Corporate Information • Financial Section • Investor Information • Yen in millions U.S. dollars in millions LIABILITIES AND SHAREHOLDERS' EQUITY 2007 2008 2008 Current liabilities Short-term borrowings ...¥ 3,497,391 Current portion of long...

  • Page 96
    ...Section Consolidated Statements of Income Toyota Motor Corporation For the years ended March 31, 2006, 2007 and 2008 Yen in millions U.S. dollars in millions 2006 2007 2008 2008 Net revenues Sales of products ...Â¥20,059,493 Financing operations...977,416 21,036,909 Costs and expenses Cost of...

  • Page 97
    ... from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Consolidated Statements of Shareholders' Equity Toyota Motor Corporation For the years ended March 31, 2006, 2007 and 2008 Yen in...

  • Page 98
    ... severance costs, less payments...23,860 Losses on disposal of fixed assets...54,981 Unrealized losses on available-for-sale securities, net ...4,163 Deferred income taxes...33,262 Minority interest in consolidated subsidiaries...84,393 Equity in earnings of affiliated companies ...(164,366) Changes...

  • Page 99
    ... financing, vehicle and equipment leasing and certain other financial services primarily to its dealers and their customers to support the sales of vehicles and other products manufactured by Toyota. 2. Summary of significant accounting policies: The parent company and its subsidiaries in Japan...

  • Page 100
    ... such factors as operating results, business plans and estimated future cash flows. Fair value is determined principally through the use of the latest financial information. Property, plant and equipment Finance receivables Finance receivables are recorded at the present value of the related future...

  • Page 101
    ...-line method over the lease term, generally 5 years, to the estimated residual value. the overfunded or underfunded status of the defined benefit postretirement plans is recognized on the consolidated balance sheets as prepaid pension and severance costs or accrued pension and severance costs...

  • Page 102
    ...Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25"), and related Interpretations. No stock-based compensation expense was reflected in net income, as all options granted under Toyota's stock-based compensation plan had an exercise price higher than the market...

  • Page 103
    ... 15, 2007. Management does not expect this Statement to have a material impact on Toyota's consolidated financial statements. In September 2006, FASB issued FAS 158. FAS 158 requires employers to measure the funded status of their defined benefit postretirement plans as of the date of their year-end...

  • Page 104
    ... years ended March 31, 2006, 2007 and 2008, Toyota made several acquisitions, however the assets acquired and liabilities assumed were not material. 6. Marketable securities and other securities investments: Marketable securities and other securities investments include debt and equity securities...

  • Page 105
    ... Business Overview • Management & Corporate Information • Financial Section • Investor Information • U.S. dollars in millions March 31, 2008 Gross unrealized gains Gross unrealized losses Fair value Cost Available-for-sale Debt securities...Equity securities...Total...Securities...

  • Page 106
    ... are paid in full. Investors do not have recourse to other assets held by Toyota for failure of obligors on the receivables to pay when due or otherwise. During the year ended March 31, 2008, Toyota sold mortgage loan receivables, while no other retail and finance lease receivables were securitized...

  • Page 107
    ...Business Overview • Management & Corporate Information • Financial Section • Investor Information • fair values at the date of the sale. The key economic assumptions initially and subsequently measuring the fair value of retained interests include the market interest rate environment...

  • Page 108
    ... the years ended March 31, 2006, 2007 and 2008, respectively. Future minimum rentals from vehicles and equipment on operating leases are due in installments as follows: Years ending March 31, Yen in millions U.S. dollars in millions 2009 ...2010 ...2011 ...2012 ...2013 ...Thereafter...Total minimum...

  • Page 109
    ... financial information for affiliated companies accounted for by the equity method is shown below: Yen in millions March 31, U.S. dollars in millions March 31, 2007 2008 2008 Current assets ...Noncurrent assets...Total assets...Current liabilities...Long-term liabilities...Shareholders' equity...

  • Page 110
    ...-term lines of credit amounting to ¥2,629,245 million ($26,243 million) of which ¥768,877 million ($7,674 million) related to commercial paper Long-term debt at March 31, 2007 and 2008 comprises the following: programs. Under these programs, Toyota is authorized to obtain short-term financing...

  • Page 111
    ... mainly related to purchases of property, plant and equipment and non-manufacturing purchases. 16. Income taxes: The components of income before income taxes comprise the following: Yen in millions For the years ended March 31, U.S. dollars in millions For the year ended March 31, 2006 2007 2008...

  • Page 112
    ...2007 2008 2008 Deferred tax assets Accrued pension and severance costs ...Â¥ 104,470 Warranty reserves and accrued expenses...218,125 Other accrued employees' compensation...120,004 Operating loss carryforwards for tax purposes...35,629 Inventory adjustments...57,698 Property, plant and equipment...

  • Page 113
    ... allowance mainly relates to deferred tax assets of the consolidated subsidiaries with operating loss carryforwards for tax purposes that are not expected to be realized. The net changes in the total valuation allowance for deferred tax assets for the years ended March 31, 2006, 2007 and 2008...

  • Page 114
    ... year ended March 31, 2008 were not material. Toyota remains subject to income tax examination for the tax returns related to the years beginning on and after January 1, 2000, with various tax jurisdictions including Japan. 17. Shareholders' equity: Changes in the number of shares of common stock...

  • Page 115
    ... • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Detailed components of accumulated other comprehensive income (loss) at March 31, 2007 and 2008 and the related changes, net of taxes for the years ended...

  • Page 116
    ...6 years to 8 years and an exercise price equal to 1.025 times the closing price of Toyota's common stock on the date of grant. These options generally vest 2 years from the date of grant. On June 24, 2008, at the Ordinary General Shareholders' Meeting, the shareholders of the parent company approved...

  • Page 117
    ...Performance Overview • Messages from the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • The total intrinsic value of options exercised for the years ended March 31, 2006, 2007 and 2008 was...

  • Page 118
    ... benefit plans Information regarding Toyota's defined benefit plans is as follows: Yen in millions March 31, U.S. dollars in millions March 31, 2007 2008 2008 Change in benefit obligation Benefit obligation at beginning of year...Â¥1,582,958 Service cost ...80,414 Interest cost...48,128 Plan...

  • Page 119
    ...the net periodic pension cost are as follows: Yen in millions For the years ended March 31, U.S. dollars in millions For the year ended March 31, 2006 2007 2008 2008 Service cost ...Interest cost ...Expected return on plan assets...Amortization of prior service costs ...Recognized net actuarial...

  • Page 120
    ...follows: Plan assets at March 31, 2007 2008 Equity securities ...Debt securities ...Real estate ...Other...Total ... 67.2% 20.8 0.7 11.3 100.0% 60.5% 25.2 1.3 13.0 100.0% Toyota's policy and objective for plan asset management is to maximize returns on plan assets to meet future benefit payment...

  • Page 121
    ...the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Years ending March 31, Yen in millions U.S. dollars in millions 2009 ...2010 ...2011 ...2012 ...2013 ...from 2014 to 2018...Total... ¥ 86...

  • Page 122
    ...2007 and 2008. The fair value The fair values of short-term borrowings and total long-term debt including the current portion were estimated based on the discounted amounts of future cash flows using Toyota's current incremental borrowing rates for similar liabilities. 120 TOYOTA • Annual Report...

  • Page 123
    ... the Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • 22. Lease commitments: Toyota leases certain assets under capital lease and operating lease arrangements. An analysis of leased assets under...

  • Page 124
    ... concentrations and factors that may affect future operations: Commitments outstanding at March 31, 2008 for the purchase of property, plant and equipment and other assets totaled ¥173,720 million ($1,734 million). Toyota enters into contracts with Toyota dealers to guarantee customers' payments of...

  • Page 125
    ... related parts and accessories. The Financial Services segment consists primarily of financing, and vehicle and equipment leasing operations to assist in the merchandising of the parent company and its affiliate companies products as well as other products. The All Other segment includes the design...

  • Page 126
    ...year ended March 31, 2006: Yen in millions Inter-segment Elimination/ Unallocated Amount Japan North America Europe Asia Other Consolidated Net revenues Sales to external customers ...Inter-segment sales and transfers...Total...,572) ¥ 131 ¥ 2,328,972 - 124 TOYOTA • Annual Report 2008 •

  • Page 127
    ...Business Overview • Management & Corporate Information • Financial Section • Investor Information • As of and for the year ended March 31, 2007: Yen in millions Inter-segment Elimination/ Unallocated Amount Japan North America Europe Asia Other Consolidated Net revenues Sales...

  • Page 128
    ...Related Information ("FAS 131"), Toyota discloses this information in order to provide financial statement users with valuable information. Yen in millions For the years ended March 31, U.S. dollars in millions For the year ended March 31, 2006 2007 2008 2008 North America ...Â¥7,687,738 Europe...

  • Page 129
    ...Management • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • Yen in millions March 31, U.S. dollars in millions March 31, 2007 2008 2008 Non-Financial Services Businesses Current liabilities Short-term...

  • Page 130
    ... Statements of income Yen in millions For the years ended March 31, U.S. dollars in millions For the year ended March 31, 2006 2007 2008 2008 Non-Financial Services Businesses Net revenues ...Â¥20,068,284 Costs and expenses Cost of revenues ...16,335,340 Selling, general and administrative...

  • Page 131
    ... accounts and credit losses ...Pension and severance costs, less payments ...Losses on disposal of fixed assets...Unrealized losses on available-for-sale securities, net ...Deferred income taxes...Minority interest in consolidated subsidiaries...Equity in earnings of affiliated companies ...Changes...

  • Page 132
    ... accounts and credit losses ...Pension and severance costs, less payments ...Losses on disposal of fixed assets ...Unrealized losses on available-for-sale securities, net ...Deferred income taxes ...Minority interest in consolidated subsidiaries...Equity in earnings of affiliated companies...Changes...

  • Page 133
    ... • Special Feature • Business Overview • Management & Corporate Information • Financial Section • Investor Information • 25. Per share amounts: Reconciliations of the differences between basic and diluted net income per share for the years ended March 31, 2006, 2007 and 2008...

  • Page 134
    Financial Section Management's Annual Report on Internal Control over Financial Reporting Toyota's management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable ...

  • Page 135
    ...• Business Overview • Management & Corporate Information • Financial Section • Investor Information • Report of Independent Registered Public Accounting Firm To the Shareholders and Board of Directors of Toyota Jidosha Kabushiki Kaisha ("Toyota Motor Corporation") In our opinion...

  • Page 136
    Investor Information As of March 31, 2008 Corporate Information » Corporate Data Company Name: Established: Common Stock: Fiscal Year-End: Toyota Motor Corporation August 28, 1937 ¥397,049 million March 31 Number of Employees: 69,478 (Consolidated: 316,121) Corporate Web Site: [Corporate ...

  • Page 137
    ... • Business Overview • Management & Corporate Information • Financial Section • Investor Information • » Major Shareholders (Top 10) Name Number of Shares Held (Thousands) » Ownership Breakdown The Master Trust Bank of Japan, Ltd. Japan Trustee Services Bank, Ltd. Toyota...

  • Page 138
    http://www.toyota.co.jp Utilizing 70% post-consumer recycled paper pulp VOC free ink is used for CM YK p r o cess co lo r s Printed in Japan