22nd Dec 2005 09:20
Toyota Motor Corporation22 December 2005 Japanese-language Semi-Annual Securities Report for the six-month endedSeptember 30,2005, as filed with the Director of the Kanto Local Finance Bureauof the Ministry of Finance of Japan on December 22, 2005, and which includes thefollowing: I. Corporate information A. Corporate overview 1. History of changes in major business indices of the past threesemi-annual periods and two fiscal years 2. Overview of business 3. Associated companies 4. Employee information B. Business 1. Discussion of business results 2. Production, orders and sales 3. Management issues 4. Material contracts 5. Research and development C. Capital assets 1. Changes in important capital assets 2. Plans for new construction projects and disposition of facilities D. Company information 1. Share information a. Total number of shares b. Stock acquisition rights c. Number of shares outstanding, changes in capital stock d. Major shareholders e. Voting rights 2. Changes in share price 3. Directors and corporate auditors E. Financial information 1. Semi-annual consolidated financial statements and notes 2. Semi-annual unconsolidated financial statements and notes F. Reference materials II. Information on Guarantors Auditors Report Interim period for the fiscal year ending March 2005 Consolidated Interim period for the fiscal year ending March 2006 Consolidated Interim period for the fiscal year ending March 2005 Interim period for the fiscal year ending March 2006 Certificate by the Representative Director TOYOTA MOTORCORPORATION Consolidated Financial StatementsFor the six-month periodsended September 30, 2004 and 2005 ASSETS U.S. dollars in millions Yen in millions (Note 4) March 31, September 30, September 30, 2005 2005 2005Current assetsCash and cash equivalents 1,483,753 1,695,897 14,983Time deposits 63,609 59,988 530Marketable securities (Note 5) 543,124 517,784 4,574Trade accounts and notes receivable, less allowance 1,616,341 1,414,966 12,501for doubtful accounts of 18,656 million as of March31, 2005 and JPY19,063 million ($168 million) as ofSeptember 30, 2005Finance receivables, net 3,010,135 3,157,323 27,894Other receivables 438,676 459,202 4,057Inventories 1,306,709 1,443,333 12,751Deferred income taxes 475,764 498,101 4,401Prepaid expenses and other current assets 501,994 539,584 4,767Total current assets 9,440,105 9,786,178 86,458 Noncurrent finance receivables, net 3,976,941 4,547,430 40,175 Investments and other assetsMarketable securities and other securities investments 2,704,142 2,951,968 26,080(Note 5)Affiliated companies 1,570,185 1,663,859 14,699Employees receivables 49,538 73,518 650Other 798,506 797,201 7,043Total investments and other assets 5,122,371 5,486,546 48,472 Property, plant and equipmentLand 1,182,768 1,204,454 10,641Buildings 2,935,274 3,051,281 26,957Machinery and equipment 7,897,509 8,052,513 71,142Vehicles and equipment on operating leases (Note 6) 1,828,697 2,240,308 19,792Construction in progress 214,781 339,242 2,997 14,059,029 14,887,798 131,529Less - Accumulated depreciation (8,263,435) (8,450,360) (74,656)Property, plant and equipment, net 5,795,594 6,437,438 56,873 Total assets 24,335,011 26,257,592 231,978 LIABILITIES AND SHAREHOLDERS ' EQUITY U.S. dollars in millions (Note 4) Yen in millions March 31, September 30, September 30, 2005 2005 2005 Current liabilitiesShort-term borrowings 2,381,827 2,769,166 24,465Current portion of long-term debt 1,150,920 1,484,076 13,111Accounts payable 1,856,799 1,823,606 16,111Other payables 693,041 705,410 6,232Accrued expenses 1,289,373 1,409,570 12,453Income taxes payable 292,835 260,320 2,300Other current liabilities 562,411 622,458 5,499Total current liabilities 8,227,206 9,074,606 80,171 Long-term liabilitiesLong-term debt 5,014,925 5,307,694 46,892Accrued pension and severance costs 646,989 644,518 5,694Deferred income taxes 811,670 910,586 8,045Other long-term liabilities 84,342 100,635 889Total long-term liabilities 6,557,926 6,963,433 61,520 Minority interest in consolidated subsidiaries 504,929 526,788 4,654 Shareholders ' equityCommon stock, no par value, 397,050 397,050 3,508authorized: 9,740,185,400 shares at March 31, 2005and at September 30, 2005;issued: 3,609,997,492 shares at March 31, 2005and at September 30, 2005Additional paid-in capital 495,707 495,580 4,378Retained earnings 9,332,176 9,771,972 86,332Accumulated other comprehensive income (loss) (80,660) 187,280 1,655 Treasury stock, at cost (1,099,323) (1,159,117) (10,240)341,918,553 shares at March 31, 2005 and357,297,548 shares at September 30, 2005Total shareholders ' equity 9,044,950 9,692,765 85,633 Commitments and contingencies (Note 9) Total liabilities and shareholders ' equity 24,335,011 26,257,592 231,978 U.S. dollars in millions Yen in millions (Note 4) For the six-month For the six-month periods ended period ended September 30, September 30, 2004 2005 2005Net revenues Sales of products 8,651,257 9,500,166 83,931Financing operations 374,408 452,994 4,002 9,025,665 9,953,160 87,933 Costs and expensesCost of products sold 6,961,521 7,710,268 68,117Cost of financing operations (Note 7) 177,728 270,944 2,394Selling, general and administrative 1,020,167 1,162,457 10,270 8,159,416 9,143,669 80,781 Operating income 866,249 809,491 7,152 Other income (expense)Interest and dividend income 33,128 46,955 415Interest expense (7,944) (11,048) (98)Foreign exchange gain, net (Note 7) 6,196 5,584 49Other income, net 15,586 5,015 44 46,966 46,506 410 Income before income taxes, minority interest and equity in earnings of affiliated companies 913,215 855,997 7,562Provision for income taxes 361,338 325,116 2,872 Income before minority interest and equity in 551,877 530,881 4,690earnings of affiliated companiesMinority interest in consolidated subsidiaries (26,652) (31,003) (274)Equity in earnings of affiliated companies 58,813 70,642 624 Net income 584,038 570,520 5,040 Yen U.S. dollars (Note 4)Net income per common share (Note 11)-Basic 176.32 175.13 1.55-Diluted 176.28 175.10 1.55Interim cash dividends per common share 25.00 35.00 0.31 Yen in millions Common Additional Retained Accumulated Treasury Total stock paid-in earnings other stock, shareholders capital comprehensive at cost equity income (loss) Balances at 397,050 495,179 8,326,215 (204,592) (835,285) 8,178,567March 31, 2004Issuance during (748) (748)the periodComprehensiveincome:Net income 584,038 584,038Othercomprehensiveincome (loss)Foreign currency 119,499 119,499translationadjustmentsUnrealized (55,051) (55,051)losses onsecurities,net ofreclassificationadjustmentsMinimum pension 5,767 5,767liabilityadjustmentsTotal 654,253comprehensiveincomeDividends paid (83,250) (83,250)Purchase and (206,746) (206,746)reissuance ofcommon stockBalances at 397,050 494,431 8,827,003 (134,377) (1,042,031) 8,542,076September 30,2004 Balances at 397,050 495,707 9,332,176 (80,660) (1,099,323) 9,044,950March 31, 2005Issuance during (127) (127)the periodComprehensiveincome:Net income 570,520 570,520Othercomprehensiveincome (loss)Foreign currency 138,270 138,270translationadjustmentsUnrealized gains 129,991 129,991on securities,net ofreclassificationadjustmentsMinimum pension (321) (321)liabilityadjustmentsTotal 838,460comprehensiveincomeDividends paid (130,724) (130,724)Purchase and (59,794) (59,794)reissuance ofcommon stockBalances at 397,050 495,580 9,771,972 187,280 (1,159,117) 9,692,765September 30,2005 U.S. dollars in millions (Note 4) Common Additional Retained Accumulated Treasury Total stock paid-in earnings other stock, shareholders capital comprehensive at equity income (loss) cost Balances at 3,508 4,379 82,447 (713) (9,712) 79,909March 31, 2005Issuance during (1) (1)the periodComprehensiveincome:Net income 5,040 5,040Othercomprehensiveincome (loss)Foreign currency 1,222 1,222translationadjustmentsUnrealized gains 1,149 1,149on securities,net ofreclassificationadjustmentsMinimum pension (3) (3)liabilityadjustm-entsTotal 7,407comprehensiveincomeDividends paid (1,155) (1,155)Purchase and (528) (528)reissuance ofcommon stockBalances at 3,508 4,378 86,332 1,655 (10,240) 85,633September 30,2005 Yen in millions U.S. dollars in millions (Note 4) For the six-month For the periods ended six-month September 30, period ended September 30, 2004 2005 2005 Cash flows from operating activities (Note 12) Net income 584,038 570,520 5,040 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 485,311 547,036 4,833 Provision for doubtful accounts 31,966 28,923 256 and credit losses Pension and severance costs, 3,085 13,514 119 less payments Losses on disposal of fixed 18,914 26,993 238 assets Unrealized losses on 1,997 4,460 39 available-for-sale securities, net Deferred income taxes 49,858 (15,862) (140) Minority interest in 26,652 31,003 274 consolidated subsidiaries Equity in earnings of affiliated (58,813) (70,642) (624) companies Changes in operating assets and 224,965 203,513 1,798 liabilities, and other Net cash provided by operating 1,367,973 1,339,458 11,833 activities Cash flows from investing activities (Note 12) Additions to finance (4,358,871) (3,148,381) (27,815) receivables Collection of and proceeds from 3,837,570 2,638,589 23,311 sales of finance receivables Additions to fixed assets (538,886) (716,530) (6,331) excluding equipment leased to others Additions to equipment leased to (361,708) (624,732) (5,519) others Proceeds from sales of fixed 29,152 39,122 346 assets excluding equipment leased to others Proceeds from sales of equipment 152,433 195,222 1,725 leased to others Purchases of marketable (747,373) (401,268) (3,545) securities and security investments Proceeds from sales of and 226,907 430,054 3,799 maturity of marketable securities and security investments Payments for additional (683) (129) (1) investments in affiliated companies, net of cash acquired Changes in investments and other 1,168 (62,730) (554) assets, and other Net cash used in investing (1,760,291) (1,650,783) (14,584) activities Cash flows from financingactivitiesPurchases of common stock (206,917) (59,734) (528)Proceeds from issuance of 921,299 875,706 7,737long-term debtPayments of long-term debt (538,467) (508,550) (4,493)Increase in short-term 58,904 313,266 2,768borrowingsDividends paid (83,250) (130,724) (1,155)Net cash provided by financing 151,569 489,964 4,329activities Effect of exchange rate changes 39,216 33,505 296on cash and cash equivalentsNet increase (decrease) in cash (201,533) 212,144 1,874and cash equivalentsCash and cash equivalents at 1,729,776 1,483,753 13,109beginning of periodCash and cash equivalents at end 1,528,243 1,695,897 14,983of period 1. Basis of preparation: The accompanying semi-annual condensed consolidated financial statements ofToyota Motor Corporation (the "parent company ") as of September 30, 2005, andfor the six-month periods ended September 30, 2004 and 2005, respectively, havebeen prepared in accordance with accounting principles generally accepted in theUnited States of America and on substantially the same basis as its annualconsolidated financial statements. The semi-annual condensed consolidatedfinancial statements should be read in conjunction with the Annual Report onForm 20-F for the year ended March 31, 2005. The semi-annual condensedconsolidated financial statements reflect all adjustments, consisting of onlynormal recurring adjustments, necessary for a fair presentation of the resultsfor those periods and the financial condition at those dates. The consolidatedresults for six-month periods are not necessarily indicative of results to beexpected for the full year. 2. Nature of operations: The parent company and its subsidiaries (collectively "Toyota ") are primarilyengaged in the design, manufacture, and sale of sedans, minivans, compact cars,sport-utility vehicles, trucks and related parts and accessories throughout theworld. In addition, Toyota provides retail and wholesale financing, retailleasing and certain other financial services primarily to its dealers and theircustomers related to vehicles manufactured by Toyota. 3. Summary of significant accounting policies: The parent company and its subsidiaries in Japan maintain their records andprepare their semi-annual condensed financial statements in accordance withaccounting principles generally accepted in Japan, and its foreign subsidiariesin conformity with those of their countries of domicile. Certain adjustmentsand reclassifications have been incorporated in the accompanying semi-annualcondensed consolidated financial statements to conform with accountingprinciples generally accepted in the United States of America. Significant accounting policies after reflecting adjustments for the above areas follows: Basis of consolidation and accounting for investments in affiliated companies - The semi-annual condensed consolidated financial statements include the accountsof the parent company and those of its majority-owned subsidiary companies. Allsignificant intercompany transactions and accounts have been eliminated.Investments in affiliated companies in which Toyota exercises significantinfluence, but which it does not control, are stated at cost plus equity inundistributed earnings. Consolidated net income includes Toyota 's equity incurrent earnings of such companies, after elimination of unrealized intercompanyprofits. Investments in non-public companies in which Toyota does not exercisesignificant influence (generally less than a 20% ownership interest) are statedat cost. The accounts of variable interest entities as defined by the FinancialAccounting Standard Board ( "FASB ") Interpretation No. 46(R) Consolidation ofVariable Interest Entities (revised December 2003) - an interpretationof ARB No. 51 ( "FIN 46(R) ") are included in the semi-annual condensedconsolidated financial statements, if applicable. Estimates - The preparation of Toyota 's semi-annual condensed consolidated financialstatements in conformity with accounting principles generally accepted in theUnited States of America requires management to make estimates and assumptionsthat affect the amounts reported in the semi-annual condensed consolidatedfinancial statements and the accompanying notes. Actual results could differfrom those estimates. The more significant estimates include: productwarranties, allowance for doubtful accounts and credit losses, residual valuesfor leased assets, impairment of long-lived assets, postretirement benefitscosts and obligations, fair value of derivative financial instruments andother-than-temporary losses on marketable securities. Translation of foreign currencies - All asset and liability accounts of foreign subsidiaries and affiliates aretranslated into Japanese yen at the appropriate period-end current exchangerates and all income and expense accounts of those subsidiaries are translatedat the average exchange rates for each period. The foreign currency translationadjustments are included as a component of accumulated other comprehensiveincome. Foreign currency receivables and payables are translated at appropriateperiod-end current exchange rates and the resulting transaction gains or lossesare recorded in operations currently. Revenue recognition - Revenues from sales of vehicles and parts are generally recognized upon deliverywhich is considered to have occurred when the dealer has taken title to theproduct and the risk and reward of ownership have been substantivelytransferred, except as described below. Toyota 's sales incentive programs principally consist of cash payments todealers calculated based on vehicle volume or a model sold by a dealer during acertain period of time. Toyota accrues these incentives as revenue reductionsupon the sale of a vehicle corresponding to the program by the amount determinedin the related incentive program. Revenue from the sale of vehicles under which Toyota conditionally guaranteesthe minimum resale value is recognized on a pro rata basis from the date of saleto the first exercise date of the guarantee in a manner similar to leaseaccounting. The underlying vehicles of these transactions are recorded asassets and are depreciated in accordance with Toyota 's depreciation policy. Revenue from retail financing contracts and finance leases is recognized usingthe effective yield method. Revenue from operating leases is recognized on astraight-line basis over the lease term. Toyota on occasion sells finance receivables in transactions subject to limitedrecourse provisions. These sales are to trusts and Toyota retains the servicingrights and is paid a servicing fee. Gains or losses from the sales of thefinance receivables are recognized in the period in which such sales occur. Other costs - Advertising and sales promotion costs are expensed as incurred. Advertisingcosts were JPY175,343 million and JPY187,787 million ($1,659 million) for thesix-month periods ended September 30, 2004 and 2005, respectively. Toyota generally warrants its products against certain manufacturing and otherdefects. Provisions for product warranties are provided for specific periods oftime and/or usage of the product and vary depending upon the nature of theproduct, the geographic location of the sale and other factors. Toyota recordsa provision for estimated product warranty costs at the time the related sale isrecognized based on estimates that Toyota will incur to repair or replaceproduct parts that fail while under warranty. The amount of accrued estimatedwarranty costs is primarily based on historical experience as to productfailures as well as current information on repair costs. The amount of warrantycosts accrued also contains an estimate of warranty claim recoveries fromsuppliers. Research and development costs are expensed as incurred and were JPY351,419million and JPY373,168 million ($3,297 million) for the six-month periods endedSeptember 30, 2004 and 2005, respectively. Cash and cash equivalents - Cash and cash equivalents include all highly liquid investments, with originalmaturities of three months or less, that are readily convertible to knownamounts of cash and are so near to maturity that they present insignificant riskof changes in value because of changes in interest rates. Marketable securities - Marketable securities consist of debt and equity securities. Debt and equitysecurities designated as available-for-sale are carried at fair value withchanges in unrealized gains or losses included as a component of accumulatedother comprehensive income in shareholders ' equity, net of applicable taxes.Debt securities designated as held-to-maturity investments are carried atamortized cost. Individual securities classified as either available-for-saleor held-to-maturity are reduced to net realizable value for other-than-temporarydeclines in market value. In determining if a decline in value isother-than-temporary, Toyota considers the length of time and the extent towhich the fair value has been less than the carrying value, the financialcondition and prospects of the company and Toyota 's ability and intent toretain its investment in the company for a period of time sufficient to allowfor any anticipated recovery in market value. Realized gains and losses, whichare determined on the average-cost method, are reflected in the statement ofincome when realized. Security investments in non-public companies - Security investments in non-public companies are carried at cost as fair valueis not readily determinable. If the value of a non-public security investmentis estimated to have declined and such decline is judged to beother-than-temporary, Toyota recognizes the impairment of the investment and thecarrying value is reduced to its fair value. Determination of impairment isbased on the consideration of such factors as operating results, business plansand estimated future cash flows. Fair value is determined principally throughthe use of the latest financial information. Finance receivables - Finance receivables are recorded at the present value of the related future cashflows including residual values for finance leases. Allowance for credit losses - Allowances for credit losses are established to cover probable losses onreceivables resulting from the inability of customers to make required payments.The allowance for credit losses is based primarily on the frequency ofoccurrence and loss severity. Other factors affecting collectibility are alsoevaluated in determining the amount to be provided. Losses are charged to the allowance when it has been determined that paymentswill not be received and the collateral cannot be recovered or the relatedcollateral is repossessed and sold. Any shortfall between proceeds received andthe carrying cost of repossessed collateral is charged to the allowance.Recoveries are reversed from the allowance for credit losses. Allowance for residual value losses - Toyota is exposed to risk of loss on the disposition of off-lease vehicles tothe extent that sales proceeds are not sufficient to cover the carrying value ofthe leased asset at lease termination. Toyota maintains an allowance to coverprobable estimated losses related to unguaranteed residual values on its ownedportfolio. The allowance is evaluated considering projected vehicle returnrates and projected loss severity. Factors considered in the determination ofprojected return rates and loss severity include historical and marketinformation on used vehicle sales, trends in lease returns and new car markets,and general economic conditions. Management evaluates the foregoing factors,develops several potential loss scenarios, and reviews allowance levels todetermine whether reserves are considered adequate to cover the probable rangeof losses. The allowance for residual value losses is maintained in amounts considered byToyota to be appropriate in relation to the estimated losses on its ownedportfolio. Upon disposal of the assets, the allowance for residual losses isadjusted for the difference between the net book value and the proceeds fromsale. Inventories - Inventories are valued at cost, not in excess of market, cost being determinedon the "average-cost " basis, except for the cost of finished products carriedby certain subsidiary companies, which is determined on the "specificidentification " basis or "last in, first out " ( "LIFO ") basis. Inventoriesvalued on the LIFO basis totaled JPY233,440 million and JPY236,928 million($2,093 million) at March 31, 2005 and September 30, 2005, respectively. Hadthe "first in, first out " basis been used for those companies using the LIFObasis, inventories would have been JPY31,894 million and JPY34,233 million ($302million) higher than reported at March 31, 2005 and September 30, 2005,respectively. Property, plant and equipment - Property, plant and equipment are stated at cost. Major renewals andimprovements are capitalized; minor replacements, maintenance and repairs arecharged to current operations. Depreciation of property, plant and equipment ismainly computed on the declining-balance method for the parent company andJapanese subsidiaries and on the straight-line method for foreign subsidiarycompanies at rates based on the estimated useful lives of the respective assetsaccording to general class, type of construction and use. The estimated usefullives range from 3 to 60 years for building and from 2 to 20 years for machineryand equipment. Vehicles and equipments on operating leases to third parties are originated bydealers and acquired by certain consolidated subsidiaries. Such subsidiariesare also the lessors of certain property that they acquire directly. Vehiclesand equipment on operating leases are depreciated primarily on a straight-linemethod over the lease term, generally three years, to the estimated residualvalue. Long-lived assets - Toyota reviews its long-lived assets, including investments in affiliatedcompanies, for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. An impairment losswould be recognized when the carrying amount of an asset exceeds the estimatedundiscounted future cash flows expected to result from the use of the asset andits eventual disposition. The amount of the impairment loss to be recorded iscalculated by the excess of the carrying value of the assets over its fairvalue. Fair value is determined mainly using a discounted cash flow valuationmethod. Goodwill and intangible assets - Goodwill is not material to Toyota 's semi-annual condensed consolidated balancesheets. Intangible assets consist mainly of software. Intangible assets with a definitelife are amortized on a straight-line basis with estimated useful lives mainlyof 5 years. Intangible assets with an indefinite life are tested for impairmentwhenever events or circumstances indicate that a carrying amount of an asset(asset group) may not be recoverable. An impairment loss would be recognizedwhen the carrying amount of an asset exceeds the estimated undiscounted cashflows used in determining the fair value of the asset. The amount of theimpairment loss to be recorded is generally determined as the difference betweenthe fair value of the asset on a discounted cash flow valuation method and thecurrent book value. Employee benefit obligations - Toyota has both defined benefit and defined contribution plans for employees 'retirement benefits. Retirement benefit obligations are measured by actuarialcalculations in accordance with a Statement of Financial Accounting Standard ("FAS ") No. 87 Employers ' accounting for pensions ( "FAS 87 "), "Accruedpension and severance costs " are determined by amounts of obligations, planassets, unrecognized prior service costs and unrecognized actuarial gains/losses. A minimum pension liability is recorded for plans where the accumulatedbenefit obligation net of plan assets exceeds the accrued pension and severancecosts. Environmental matters - Environmental expenditures relating to current operations are expensed orcapitalized as appropriate. Expenditures relating to existing conditions causedby past operations, which do not contribute to current or future revenues, areexpensed. Liabilities for remediation costs are recorded when they are probableand reasonably estimable, generally no later than the completion of feasibilitystudies or Toyota 's commitment to a plan of action. The cost of eachenvironmental liability is estimated by using current technology available andvarious engineering, financial and legal specialists within Toyota based oncurrent law. Such liabilities do not reflect any offset for possible recoveriesfrom insurance companies and are not discounted. There were no material changesin these liabilities for all periods presented. Income taxes - The provision for income taxes is computed based on the pretax income includedin the semi-annual condensed consolidated statement of income. The asset andliability approach is used to recognize deferred tax assets and liabilities forthe expected future tax consequences of temporary differences between thecarrying amounts and the tax bases of assets and liabilities. Valuationallowances are recorded to reduce deferred tax assets when it is more likelythan not that a tax benefit will not be realized. Derivative financial instruments - Toyota employs derivative financial instruments, including forward foreignexchange contracts, foreign currency options, interest rate swaps, interest ratecurrency swaps and interest rate options to manage its exposure to fluctuationsin interest rates and foreign currency exchange rates. Toyota does not usederivatives for speculation or trading purposes. Changes in the fair value ofderivatives are recorded each period in current earnings or through othercomprehensive income, depending on whether a derivative is designated as part ofa hedge transaction and the type of hedge transaction. The ineffective portionof all hedges is recognized currently in operations. Net income per common share - Basic net income per common share is calculated by dividing net income by theweighted-average number of shares outstanding during the reported period. Thecalculation of diluted net income per common share is similar to the calculationof basic net income per common share, except that the weighted-average number ofshares outstanding includes the additional dilution from the assumed exercise ofdilutive stock options. Stock-based compensation - Toyota measures compensation expense for its stock-based compensation plan usingthe intrinsic value method. Toyota accounts for the stock-based compensationplans under the recognition and measurement principles of the AccountingPrinciples Board ( "APB ") Opinion No. 25, Accounting for Stock Issued toEmployees, and related Interpretations. No stock-based compensation cost isreflected in net income, as all options granted under those plans had anexercise price higher than the market value of the underlying common stock onthe date of grant. Other comprehensive income - Other comprehensive income refers to revenues, expenses, gains and losses that,under accounting principles generally accepted in the United States of Americaare included in comprehensive income, but are excluded from net income as theseamounts are recorded directly as an adjustment to shareholders ' equity. Toyota's other comprehensive income is primarily comprised of unrealizedgains/losses on marketable securities designated as available-for-sale, foreigncurrency translation adjustments, gains/losses on certain derivative instrumentsand adjustments attributed to additional minimum pension liabilities associatedwith Toyota 's defined benefit pension plans. Accounting changes - In December 2004, FASB issued FAS No. 153, Exchange of Nonmonetary Assets- an amendment of APB Opinion No. 29 ( "FAS 153 "). The guidance in APBOpinion No. 29, Accounting for Nonmonetary Transactions, is based on theprinciple that exchanges of nonmonetary assets should be measured based on thefair value of the assets exchanged. The guidance in APB Opinion No.29, however,included certain exceptions to that principle. FAS 153 amends Opinion 29 toeliminate the exception for nonmonetary exchanges of similar productive assetsand replaces it with a general exception for exchanges of nonmonetary assetsthat do not have commercial substance. A nonmonetary exchange has commercialsubstance if the future cash flows of the entity are expected to changesignificantly as a result of the exchange. Toyota has applied FAS 153 from thefiscal periods beginning after June 15, 2005. The application of FAS 153 didnot have material impact on Toyota 's consolidated financial statements. Recent pronouncements to be adopted in future periods - In November 2004, FASB issued FAS No. 151, Inventory Costs - anamendment of ARB No. 43, Chapter 4 ( "FAS 151 "). FAS 151 amends the guidancein ARB No. 43, Chapter 4, "Inventory Pricing," to clarify the accounting forabnormal amounts of idle facility expense, freight, handling costs, and wastedmaterial (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that". . . under some circumstances, items such as idle facility expense, excessivespoilage, double freight, and rehandling costs may be so abnormal as to requiretreatment as current period charges. . . ." FAS 151 requires that those itemsbe recognized as current-period charges regardless of whether they meet thecriterion of "so abnormal." In addition, this Statement requires thatallocation of fixed production overheads to the costs of conversion be based onthe normal capacity of the production facilities. FAS 151 shall be effectivefor inventory costs incurred during fiscal years beginning after June 15, 2005. Management believes that this statement does not have material impact on Toyota's consolidated financial statements. In December 2004, FASB issued FAS No. 123(R), Share - Based Payment(revised 2004) ( "FAS 123(R) "). FAS 123(R) is a revision of FASB Statement No.123, Accounting for Stock-Based Compensation, supersedes APB Opinion No. 25,Accounting for Stock Issued to Employees, and its related implementationguidance. FAS 123(R) requires a public entity to measure the cost of employeeservices received in exchange for an award of equity instruments based on thegrant-date fair value of the award. That cost will be recognized over theperiod during which an employee is required to provide service in exchange forthe award. FAS 123(R) also requires a public entity to initially measure thecost of employee services received in exchange for an award of liabilityinstruments based on its current fair value; the fair value of that award willbe remeasured subsequently at each reporting date through the settlement date.Changes in fair value will be recognized as compensation cost over that period.Although Toyota is required to implement the standard as of the beginning of thefirst interim or annual period that begins after June 15, 2005 under StatementNo.123(R), the Securities and Exchanges and Commission has amended thecompliance date and Toyota is required to adopt the Standard for the year endingMarch 31, 2007. Management does not expect this statement to have materialimpact on Toyota 's consolidated financial statements. In March 2005, FASB issued the FASB Interpretation No. 47, Accounting forConditional Asset Retirement Obligations - an interpretation of FASBStatement No. 143 ( "FIN 47 "). This Interpretation clarifies that the termconditional asset retirement obligation as used in FASB Statement No. 143,Accounting for Asset Retirement Obligations, refers to a legal obligation toperform an asset retirement activity in which the timing and (or) method ofsettlement are conditional on a future event that may or may not be within thecontrol of the entity. FIN 47 requires a company to recognize a liability forthe fair value of a conditional asset retirement obligation if the fair value ofthe liability can be reasonably estimated. The fair value of a liability forthe conditional asset retirement obligation should be recognized when incurred. FIN 47 is effective no later than the end of fiscal years ending after December15, 2005. Management does not expect this Statement to have material impact onToyota 's consolidated financial statements. In May 2005, FASB issued FAS No. 154, Accounting Changes and Error Corrections- a replacement of APB No. 20 and FAS No. 3 ( "FAS 154 "). FAS 154replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3,Reporting Accounting Changes in Interim Financial Statements, and changes therequirements for the accounting for and reporting of a change in accountingprinciple. FAS 154 applies to all voluntary changes in accounting principle.It also applies to changes required by an accounting pronouncement when thepronouncement does not include specific transition provisions. APB Opinion 20previously required that most voluntary changes in accounting principle berecognized by including in net income of the period of the change the cumulativeeffect of changing to the new accounting principle. FAS 154 requiresretrospective application to prior periods' financial statements of changes inaccounting principle. FAS 154 is effective for accounting changes andcorrections of errors made in fiscal years beginning after December 15, 2005.The impact of applying FAS 154 will depend on the change, if any, that Toyotamay identify and record in the future periods. In June 2005, FASB issued FASB Staff Position No. FAS 143-1, Accounting forElectronic Equipment Waste Obligations ( "FSP FAS 143-1 "), to address theaccounting for historical waste obligations associated with Directive 2002/96/ECon Waste Electrical and Electronic Equipment adopted by the European Union. Theguidance in FSP FAS 143-1 shall be applied the later of the first reportingperiod ending after June 8, 2005 or the date of the adoption of the law by theapplicable EU-member country. Management is evaluating the impact of FSP FAS143-1 on Toyota 's consolidated financial statements. Reclassifications - Certain prior year amounts have been reclassified to conform to the presentationfor the six-month period ended September 30, 2005. 4. U.S. dollar amounts: U.S. dollar amounts presented in the semi-annual condensed consolidatedfinancial statements and related notes are included solely for the convenienceof the reader. These translations should not be construed as representationsthat the yen amounts actually represent, or have been or could be convertedinto, U.S. dollars. For this purpose, the rate of JPY113.19 = U.S. $1, theapproximate current exchange rate at September 30, 2005, was used for thetranslation of the accompanying semi-annual condensed consolidated financialamounts of Toyota as of and for the six-month period ended September 30, 2005. 5. Marketable securities and other securities investments: Marketable securities and other securities investments include debt and equitysecurities for which the aggregate cost, gross unrealized gains and losses andfair value are as follows: Yen in millions March 31, 2005 Gross Gross unrealized unrealized gains losses Fair value Cost Available-for-saleDebt securities 2,205,420 14,113 6,928 2,212,605Equity securities 451,903 453,494 593 904,804 Total 2,657,323 467,607 7,521 3,117,409 Securities not practicableto determine fair valueDebt securities 19,917Equity securities 109,940 Total 129,857 Yen in millions September 30, 2005 Gross Gross unrealized unrealized gains losses Fair value Cost Available-for-saleDebt securities 2,171,426 5,956 10,578 2,166,804Equity securities 472,284 694,214 592 1,165,906 Total 2,643,710 700,170 11,170 3,332,710 Securities not practicable to determine fair valueDebt securities 18,222Equity securities 118,820 Total 137,042 U.S. dollars in millions September 30, 2005 Gross Gross unrealized unrealized gains losses Fair value Cost Available-for-saleDebt securities 19,184 53 94 19,143 Equity securities 4,172 6,133 5 10,300 Total 23,356 6,186 99 29,443 Securities not practicable to determine fair valueDebt securities 161Equity securities 1,050 Total 1,211 Unrealized losses continuously over a 12 month period or more in the aggregatewere not material both at March 31, 2005 and September 30, 2005. In the ordinary course of business, Toyota maintains long-term investmentsecurities, included in "Marketable securities and other securities investments" and issued by a number of non-public companies which are recorded at cost, astheir fair values were not readily determinable. Management employs asystematic methodology to assess the recoverability of such investments byreviewing the financial viability of the underlying companies and the prevailingmarket conditions in which these companies operate to determine if Toyota 'sinvestment in each individual company is impaired and whether the impairment isother-than-temporary. Toyota performs this impairment test semi-annually forsignificant investments recorded at cost. If the impairment is determined to beother-than-temporary, the cost of the investment is written-down by the impairedamount and the losses are recognized currently in operations. 6. Vehicles and equipment on operating leases: Vehicles and equipment on operating leases consist of the following: U.S. dollars in millions Yen in millions March 31, September 30, September 30, 2005 2005 2005 Vehicles 1,736,238 2,141,381 18,918Equipment 92,459 98,927 874 1,828,697 2,240,308 19,792 Less - Accumulated depreciation (424,609) (503,302) (4,446) Vehicles and equipment onoperating leases, net 1,404,088 1,737,006 15,346 Rental income from vehicles and equipment on operating leases were JPY140,711million and JPY157,551 million ($1,392 million) for the six-month periods endedSeptember 30, 2004 and 2005, respectively. Future minimum rentals from vehiclesand equipment on operating leases are due in installments as follows: 12-month periods ending U.S. dollars September 30: in millions Yen in millions 2006 363,758 3,214 2007 274,389 2,424 2008 163,999 1,449 2009 62,062 548 2010 15,257 135 Thereafter 9,058 80 Total minimum future rentals 888,523 7,850 The future minimum rentals as shown above should not be considered indicative offuture cash collections. 7. Derivative financial instruments: Toyota employs derivative financial instruments, including foreign exchangeforward contracts, foreign currency options, interest rate swaps, interest ratecurrency swaps and interest rate options to manage its exposure to fluctuationsin interest rates and foreign currency exchange rates. Toyota does not usederivatives for speculation or trading. Fair value hedges - Toyota enters into interest rate swaps, and interest rate currency swaps mainlyto convert its fixed-rate debt to variable-rate debt. Toyota uses interest rateswaps in managing its exposure to interest rate fluctuations. Interest rateswaps are executed as either an integral part of specific debt transactions oron a portfolio basis. Toyota uses interest rate currency swaps to entirelyhedge exposure to currency exchange rate fluctuations on principal and interestpayments for borrowings denominated in foreign currencies. Notes and loanspayable issued in foreign currencies are hedged by concurrently executinginterest rate currency swaps, which involve the exchange of foreign currencyprincipal and interest obligations for each functional currency obligations atagreed-upon currency exchange and interest rates. For the six-month periods ended September 30, 2004 and 2005, the ineffectiveportions of Toyota 's fair value hedge relationships, which are included in costof financing operations, were not material. For fair value hedgingrelationships, the components of each derivative 's gain or loss are included inthe assessment of hedge effectiveness. Undesignated derivative financial instruments - Toyota uses foreign exchange forward contracts, foreign currency options,interest rate swaps, interest rate currency swaps, and interest rate options, tomanage its exposure to foreign currency exchange fluctuations and interest ratefluctuations from an economic perspective, and which Toyota is unable or haselected not to apply hedge accounting. Unrealized gains or losses on thesederivative instruments are reported in the cost of financing operations andforeign exchange gain, net in the accompanying consolidated statements of incometogether with realized gains/losses on those derivative instruments. 8. Lease commitments: Toyota leases certain assets under capital lease and operating leasearrangements. An analysis of leased assets under capital leases is as follows: U.S. dollars in millions Yen in millions Class of property March 31, September 30, September 30, 2005 2005 2005 Building 11,762 11,530 102Machinery and equipment 162,938 137,753 1,217Less - Accumulated depreciation (128,578) (109,528) (968) 46,122 39,755 351 Amortization expenses under capital leases for the six-month periods endedSeptember 30, 2004 and 2005 were JPY6,674 million and JPY5,668 million ($50million), respectively. Future minimum lease payments under capital leases together with the presentvalue of the net minimum lease payments as of September 30, 2005 are as follows: 12-month periods ending September 30 Yen in millions U.S. dollars in millions 2006 18,006 1592007 17,385 1542008 6,564 582009 6,028 532010 19,129 169Thereafter 389 3Total minimum lease payments 67,501 596Less - Amount representing interest (6,517) (57)Present value of net minimum lease payments 60,984 539Less - Current obligations (16,245) (144) Long-term capital lease obligations 44,739 395 Rental expenses under operating leases for the six-month periods ended September30, 2004 and 2005 were JPY40,241 million and JPY44,572 million ($394 million),respectively. The minimum rental payments required under operating leases relating primarilyto land, buildings and equipment having initial or remaining non-cancelablelease terms in excess of one year at September 30, 2005 are as follows: 12-month periods ending September 30 Yen in U.S. dollars millions in millions 2006 9,357 832007 6,869 612008 5,380 472009 4,423 392010 3,417 30Thereafter 15,029 133 Total minimum future rentals 44,475 393 9. Other commitments and contingencies, concentrations and factorsthat may affect future operations: Commitments outstanding at September 30, 2005 for the purchase of property,plant and equipment and other assets amount to JPY130,744 million ($1,155million). Toyota enters into contracts with Toyota dealers to guarantee customers 'payments of their installment payables that arise from installment contractsbetween customers and Toyota dealers, as and when requested by Toyota dealers.Guarantee periods are set to match maturity of installment payments, and atSeptember 30, 2005, range from one month to 35 years; however, they aregenerally shorter than the useful lives of products sold. Toyota is required toexecute its guarantees primarily when customers are unable to make requiredpayments. The maximum potential amount of future payments as of September 30,2005 is JPY1,161,781 million ($10,264 million). Liabilities for guaranteestotaling JPY3,794 million ($34 million) have been provided as of September 30,2005. Under these guarantee contracts, Toyota is entitled to recover any amountpaid by Toyota from the customers whose obligations Toyota has guaranteed. In February 2003, Toyota, General Motors Corporation, Ford, DaimlerChrysler,Honda, Nissan, BMW and their U.S. and Canadian sales and marketing subsidiaries,the National Automobile Dealers Association and the Canadian Automobile DealersAssociation were named as defendants in purported nationwide class actions onbehalf of all purchasers of new motor vehicles in the United States sinceJanuary 1, 2001. 26 similar actions were filed in federal district courts inCalifornia, Illinois, New York, Massachusetts, Florida, New Jersey andPennsylvania. Additionally, 56 parallel class actions were filed in statecourts in California, Minnesota, New Mexico, New York, Tennessee, Wisconsin,Arizona, Florida, Iowa, New Jersey and Nebraska on behalf of the same purchasersin these states. As of September 30, 2005, actions filed in federal districtcourts were consolidated in Maine and actions filed in the state courts ofCalifornia and New Jersey were also consolidated, respectively. The nearlyidentical complaints allege that the defendants violated the Sherman AntitrustAct by conspiring among themselves and with their dealers to prevent the sale toUnited States citizens of vehicles produced for the Canadian market. Thecomplaints allege that new vehicle prices in Canada are 10% to 30% lower thanthose in the United States and that preventing the sale of these vehicles toUnited States citizens resulted in United States consumers paying excessiveprices for the same type of vehicles. The complaints seek permanent injunctionsagainst the alleged antitrust violations and treble damages in an unspecifiedamount. In March 2004, the federal district court of Maine (i) dismissed claimsagainst certain Canadian sales and marketing subsidiaries, including ToyotaCanada, Inc., for lack of personal jurisdiction but denied or deferred todismiss claims against certain other Canadian companies, and (ii) dismissed theclaim for damages based on the Sherman Antitrust Act but did not bar theplaintiffs from seeking injunctive relief against the alleged antitrustviolations. The plaintiffs have submitted an amended compliant adding a claimfor damages based on state antitrust laws and the case is still pending. Toyotabelieves that its actions have been lawful and intends to vigorously defendthese cases. Toyota has various legal actions, governmental proceedings and other claimspending against it, including product liability claims in the United States.Although the claimants in some of these actions seek potentially substantialdamages, Toyota cannot currently determine its potential liability or thedamages, if any, with respect to these claims. However, based upon informationcurrently available to Toyota, Toyota believes that its losses from thesematters, if any, would not have a material adverse effect on Toyota 's financialposition, operating results or cash flows. In September 2000, the European Union approved a directive that requires memberstates to promulgate regulations implementing the following by April 21, 2002:(i) manufacturers shall bear all or a significant part of the cost for takingback end-of-life vehicles put on the market after July 1, 2002 and dismantlingand recycling those vehicles. Beginning January 1, 2007, manufacturers willalso be financially responsible for vehicles put on the market before July 1,2002; (ii) manufacturers may not use certain hazardous materials in vehicles tobe sold after July 2003; (iii) vehicles type-approved and put on the market fromthree years after the amendment of the directive on type-approval shall bere-usable and/or recyclable to a minimum of 85% by weight per vehicle and shallbe re-usable and/or recoverable to a minimum of 95% by weight per vehicle; and(iv) end-of-life vehicles must meet actual re-use of 80% and re-use as materialor energy of 85%, respectively, of vehicle weight by 2006, rising respectivelyto 85% and 95% by 2015. Currently, there are numerous uncertainties surroundingthe form and implementation of the applicable regulations in different EuropeanUnion member states, particularly regarding manufacturer responsibilities andresultant expenses that may be incurred. All of the member states, other thanIreland and the 10 new member states, have adopted legislation to implement thedirective. In addition, Sweden, Denmark and Belgium have existing legislationthat partially implements the directive. The 10 new member states which joinedthe European Union in May 2004 are also in the process of adopting legislationto implement the directive. In addition, under this directive member statesmust take measures to ensure that car manufacturers, distributors and otherauto-related businesses establish adequate used vehicle disposal routes and toensure that hazardous materials and recyclable parts are removed from vehiclesprior to scrapping. This directive impacts Toyota 's vehicles sold in theEuropean Union and Toyota expects to introduce vehicles that are in compliancewith such measures taken by the member states pursuant to the directive. Basedon the legislation that has been enacted to date, Toyota has provided for itsestimated liability related to covered vehicles in existence as of September 30,2005. Depending on the legislation that is yet to be enacted by certain memberstates and subject to other circumstances, Toyota may be required to provideadditional accruals for the expected costs to comply with these regulations.Although Toyota does not expect its compliance with the directive to result insignificant cash expenditures, Toyota is continuing to assess the impact of thisfuture legislation on its results of operations, cash flows and financialposition. Toyota has a concentration of material purchases from a supplier which is anaffiliated company. These purchases approximate 10% of material costs. The parent company has a concentration of labor supply in employees workingunder collective bargaining agreements and a substantial portion of theseemployees is working under the agreement that will expire on December 31, 2005. 10. Segment data: The operating segments reported below are the segments of Toyota for whichseparate financial information is available and for which operating income/lossamounts are evaluated regularly by executive management in deciding how toallocate resources and in assessing performance. The major portions of Toyota 's operations on a worldwide basis are derived fromthe Automotive and Financial Services business segments. The Automotive segmentdesigns, manufactures and distributes sedans, minivans, compact cars,sport-utility vehicles, trucks and related parts and accessories. The FinancialServices segment consists primarily of financing operations, and vehicle andequipment leasing operations to assist in the merchandising of Toyota 'sproducts as well as other products. The All Other segment includes the design,manufacturing and sales of housing, telecommunications and other business. The following tables present certain information regarding Toyota 's industrysegments and operations by geographic areas and overseas revenues bydestination as of March 31, 2005 and September 30, 2005 and for the six-monthperiod ended September 30, 2004 and 2005. Toyota reports Asia information as ofand for the six-months period ended September 30, 2005, as an independentgeographic segment on operations by geographic areas and overseas revenues bydestination. In this connection, Toyota also provides Asia information as ofMarch 31, 2005 and for the six-months period ended September 30, 2004. Segment operating results and assets - As of March 31, 2005 and for the six-month period ended September 30, 2004: Yen in millions Automotive Financial All Other Inter-segment Total Services Elimination/ Unallocated AmountRevenues - - - - -External customers 8,332,161 374,408 319,096 - 9,025,665Inter-segment 7,477 9,958 147,795 (165,230) -Total revenues 8,339,638 384,366 466,891 (165,230) 9,025,665Operating expenses 7,582,799 281,699 454,143 (159,225) 8,159,416Operating income 756,839 102,667 12,748 (6,005) 866,249 Segment assets* 11,141,197 9,487,248 1,025,517 2,681,049 24,335,011Investment in equity 1,271,044 215,642 - 75,746 1,562,432method investees*Depreciation 378,416 96,252 10,643 - 485,311Expenditures for 543,568 295,427 21,357 40,242 900,594segment assets * Representing figures as of March 31, 2005 As of and for the six-month period ended September 30, 2005: Yen in millions Automotive Financial All Other Inter-segment Total Services Elimination/ Unallocated AmountRevenues - - - - -External customers 9,138,162 452,994 362,004 - 9,953,160Inter-segment 6,323 9,023 173,960 (189,306) -Total revenues 9,144,485 462,017 535,964 (189,306) 9,953,160Operating expenses 8,423,112 378,444 526,134 (184,021) 9,143,669Operating income 721,373 83,573 9,830 (5,285) 809,491 Segment assets 11,089,795 10,641,245 1,125,990 3,400,562 26,257,592Investment in equity 1,341,972 249,061 - 64,941 1,655,974method investeesDepreciation 396,984 137,153 12,899 - 547,036Expenditures for 747,597 552,965 17,960 22,740 1,341,262segment assets U.S. dollars in millions Automotive Financial All Other Inter-segment Total Services Elimination/ Unallocated Amount Revenues - - - - -External customers 80,733 4,002 3,198 - 87,933Inter-segment 56 80 1,537 (1,673) -Total revenues 80,789 4,082 4,735 (1,673) 87,933Operating expenses 74,416 3,343 4,648 (1,626) 80,781Operating income 6,373 739 87 (47) 7,152 Segment assets 97,975 94,012 9,948 30,043 231,978Investment in equity 11,856 2,200 - 574 14,630method investeesDepreciation 3,507 1,212 114 - 4,833Expenditures for 6,605 4,885 159 201 11,850segment assets Revenues to external customers and operating income of the Financial Servicessegment for the six-month period ended September 30, 2004, include the impact ofadjustments made by a sales financing subsidiary in the United States of Americafor the correction of errors relating to prior periods mainly in connection withcapitalizing of certain disbursements, including disbursements made in prioryears, directly related to origination of loans in accordance with Statement ofFinancial Accounting Standards No. 91. Geographic Information - As of March 31, 2005 and for the six-month period ended September 30, 2004: Yen in millions Japan North Europe Asia Others Inter-segment Total America Elimination/ Unallocated AmountRevenues - - - - - - -External customers 3,540,760 3,102,246 1,129,304 725,329 528,026 - 9,025,665Inter-segment 2,239,791 87,520 71,993 24,475 54,476 (2,478,255) -Total revenues 5,780,551 3,189,766 1,201,297 749,804 582,502 (2,478,255) 9,025,665Operating 5,289,985 2,944,990 1,135,027 706,307 555,105 (2,471,998) 8,159,416expensesOperatingincome 490,566 244,776 66,270 43,497 27,397 (6,257) 866,249 Segment assets* 10,740,796 7,738,898 2,242,566 945,635 998,172 1,668,944 24,335,011Long-lived 3,110,123 1,708,147 544,597 247,507 185,220 - 5,795,594assets* * Representing figures as of March 31, 2005 As of and for the six-month period ended September 30, 2005: Yen in millions Japan North Europe Asia Others Inter-segment Total America Elimination/ Unallocated AmountRevenues - - - - - - -External customers 3,575,909 3,545,517 1,241,163 891,755 698,816 - 9,953,160Inter-segment 2,457,008 81,835 59,691 105,234 61,242 (2,765,010) -Total revenues 6,032,917 3,627,352 1,300,854 996,989 760,058 (2,765,010) 9,953,160Operating 5,646,964 3,358,811 1,260,781 921,567 723,863 (2,768,317) 9,143,669expensesOperatingincome 385,953 268,541 40,073 75,422 36,195 3,307 809,491 Segment assets 11,141,157 8,311,313 2,207,943 1,037,792 1,173,355 2,386,032 26,257,592Long-lived 3,282,697 2,080,968 595,416 279,186 199,171 - 6,437,438assets U.S. dollars in millions Japan North Europe Asia Others Inter-segment Total America Elimination/ Unallocated Amount Revenues - - - - - - -External customers 31,592 31,324 10,965 7,878 6,174 - 87,933Inter-segment 21,707 723 527 930 541 (24,428) -Total revenues 53,299 32,047 11,492 8,808 6,715 (24,428) 87,933Operating 49,889 29,674 11,138 8,142 6,395 (24,457) 80,781expensesOperatingincome 3,410 2,373 354 666 320 29 7,152 Segment assets 98,429 73,428 19,506 9,169 10,366 21,080 231,978Long-lived 29,002 18,385 5,260 2,466 1,760 - 56,873assets Revenues are attributed to geographies based on the country location of theparent company or the subsidiary that transacted the sale with the externalcustomer. There are no any individually material countries with respect to revenues,operating expenses, operating income, segment assets and long-lived assetsincluded in Others. Unallocated amounts included in segment assets represent assets held forcorporate purposes, which mainly consist of cash and cash equivalents andmarketable securities. Such corporate assets were JPY3,308,055 million andJPY4,055,523 million ($35,829 million) as of March 31, 2005 and September 30,2005, respectively. Transfers between industry or geographic segments are made at amounts whichToyota 's management believes approximate arm's-length transactions. Inmeasuring the reportable segments ' income or losses, operating income consistsof revenues less operating expenses. Overseas Revenues by destination - The following information shows revenues that are attributed to countries basedon location of customers, excluding customers in Japan. In addition to thedisclosure requirements under FAS No. 131, Disclosure about Segments of anEnterprise and Related Information, Toyota discloses this information in orderto provide financial statement users with valuable information. Yen in millions U.S. dollars in millions For the six-month period ended For the six-month September 30, period ended September 30, 2004 2005 2005 North America 3,194,425 3,624,137 32,018Europe 1,139,092 1,257,310 11,108Asia 793,241 926,376 8,184Others 1,072,461 1,335,742 11,801 Certain financial statement data on non-financial servicesand financial services business - The financial data below presents separately Toyota 's non-financial servicesand financial services businesses. Balance sheets - Yen in millions U.S. dollars in millions March 31, September 30, September 30, 2005 2005 2005 Non-Financial Services BusinessesCurrent assetsCash and cash equivalents 1,324,126 1,512,054 13,359Time deposits 8,006 19,115 169Marketable securities 541,785 516,847 4,566Trade accounts and notes receivable, 1,640,155 1,438,329 12,707less allowance for doubtful accountsInventories 1,306,709 1,443,333 12,751Prepaid expenses and other current assets 1,580,371 1,664,331 14,704Total current assets 6,401,152 6,594,009 58,256Investments and other assets 4,804,843 5,097,316 45,033Property, plant and equipment 4,579,052 4,877,330 43,090 15,785,047 16,568,655 146,379 Total Non-Financial Services Businesses assetsFinancial Services BusinessesCurrent assetsCash and cash equivalents 159,627 183,843 1,624Time deposits 55,603 40,873 361Marketable securities 1,339 937 8Finance receivables, net 3,010,135 3,157,323 27,894Prepaid expenses and other current assets 609,946 607,703 5,369Total current assets 3,836,650 3,990,679 35,256Noncurrent finance receivables, net 3,976,941 4,547,430 40,175Investments and other assets 457,115 543,028 4,798Property, plant and equipment 1,216,542 1,560,108 13,783 9,487,248 10,641,245 94,012 Total Financial Services Businesses assets Eliminations (937,284) (952,308) (8,413) Total assets 24,335,011 26,257,592 231,978 Yen in millions U.S. dollars in millions March 31, September 30, September 30, 2005 2005 2005Non-Financial Services BusinessCurrent liabilitiesShort-term borrowings 713,474 755,204 6,672Current portion of long-term debt 60,092 56,890 502Accounts payable 1,847,036 1,814,732 16,033Accrued expenses 1,200,122 1,302,438 11,507Income taxes payable 263,291 237,302 2,096Other current liabilities 1,055,336 1,107,187 9,782Total current liabilities 5,139,351 5,273,753 46,592Long-term liabilitiesLong-term debt 747,911 738,723 6,526Accrued pension and severance costs 645,308 642,297 5,675Other long-term liabilities 564,185 672,090 5,938Total long-term liabilities 1,957,404 2,053,110 18,139Total Non-Financial Services Business liabilities 7,096,755 7,326,863 64,731Financial Services BusinessCurrent liabilitiesShort-term borrowings 2,269,197 2,646,087 23,377Current portion of long-term debt 1,092,328 1,486,186 13,130Accounts payable 15,542 19,292 170Accrued expenses 93,042 110,817 979Income taxes payable 29,544 23,018 203Other current liabilities 289,850 309,072 2,731Total current liabilities 3,789,503 4,594,472 40,590Long-term liabilitiesLong-term debt 4,503,247 4,728,210 41,772Accrued pension and severance costs 1,681 2,221 20Other long-term liabilities 331,827 339,131 2,996Total long-term liabilities 4,836,755 5,069,562 44,788Total Financial Services Business liabilities 8,626,258 9,664,034 85,378 Elimination of liabilities (937,881) (952,858) (8,418)Total liabilities 14,785,132 16,038,039 141,691 Minority interest in consolidated subsidiaries 504,929 526,788 4,654 Shareholders ' equity 9,044,950 9,692,765 85,633 Total liabilities and shareholders ' equity 24,335,011 26,257,592 231,978 Statements of income - U.S. dollars Yen in millions in millions For the six-month For the six-month periods ended period ended September 30, September 30, 2004 2005 2005 Non-Financial Services BusinessesNet revenues 8,655,852 9,504,502 83,969Costs and expensesCost of revenues 6,958,489 7,710,281 68,118Selling, general and administrative 925,295 1,060,448 9,369Total costs and expenses 7,883,784 8,770,729 77,487Operating income 772,068 733,773 6,482Other income, net 40,854 43,119 381Income before income taxes, minority interest 812,922 776,892 6,863and equity in earnings of affiliated companiesProvision for income taxes 319,354 290,583 2,567Income before minority interest and equity in 493,568 486,309 4,296earnings of affiliated companiesMinority interest in consolidated subsidiaries (26,413) (30,043) (265)Equity in earnings of affiliated companies 50,762 57,274 506Net income- Non- Financial Services Businesses 517,917 513,540 4,537 Financial Services BusinessesNet revenues 384,366 462,017 4,082Costs and expensesCost of revenues 182,535 272,732 2,409Selling, general and administrative 99,164 105,712 934Total costs and expenses 281,699 378,444 3,343Operating income 102,667 83,573 739Other expenses, net (2,395) (4,451) (40)Income before income taxes, minority interest 100,272 79,122 699and equity in earnings of affiliated companiesProvision for income taxes 41,976 34,539 305Income before minority interest and equity in 58,296 44,583 394earnings of affiliated companiesMinority interest in consolidated subsidiaries (239) (960) (9)Equity in earnings of affiliated companies 8,051 13,368 118Net income- Financial Services Businesses 66,108 56,991 503 Elimination of net income (loss) 13 (11) (0)Net income 584,038 570,520 5,040 Statement of cash flows - Yen in millions U.S. dollars in millions For the six-month For the six-month periods period ended September 30, ended September 30, 2004 2005 2005Non-Financial Services BusinessesCash flows from operating activitiesNet income 517,917 513,540 4,537 Adjustments toreconcile net income tonet cash provided byoperating activitiesDepreciation 389,059 409,883 3,621Pension and severance 2,857 12,982 115costs, less paymentsLosses on disposal of 18,540 26,774 237fixed assetsUnrealized losses on 1,997 4,460 39available-for-salesecurities, netDeferred income taxes 19,492 (35,348) (312)Minority interest in 26,413 30,043 265ConsolidatedsubsidiariesEquity in earnings of (50,762) (57,274) (506)affiliated companiesChanges in operating 22,187 124,373 1,099assets and liabilities,and other Net cash provided by operating activities 947,700 1,029,433 9,095 Cash flows from investing activitiesAdditions to fixed assets (531,073) (713,143) (6,301)excluding equipment leasedto othersAdditions to (74,094) (75,154) (664)equipment leased to others Proceeds from sales of fixed assets excluding 26,037 35,193 311equipment leased to others Proceeds from sales of equipment leased to others 38,576 42,397 375 Purchases of marketable securities and security (686,319) (297,235) (2,626)investments Proceeds from sales of and maturity of 166,815 358,417 3,166marketable securities and security investments Payments for additional investments in (683) (129) (1)affiliated companies, net of cash acquired Changes in investments and other assets, and other 42,691 (55,041) (486) Net cash used in investing activities (1,018,050) (704,695) (6,226) Cash flows from financing activities Purchases of common stock (206,917) (59,734) (528) Proceeds from issuance of long-term debt 13,463 20,766 183 Payments of long-term debt (28,653) (34,976) (309) Increase in short-term borrowings 45,804 40,055 354 Dividends paid (83,250) (130,724) (1,155) Other (7,000) - - Net cash used in financing activities (266,553) (164,613) (1,455) Effect of exchange rate changes on cash and cash 32,063 27,803 246equivalentsNet increase(decrease) in cash and cash equivalents (304,840) 187,928 1,660Cash and cash equivalents at beginning of period 1,618,876 1,324,126 11,699Cash and cash equivalents at end of period 1,314,036 1,512,054 13,359 Yen in millions U.S. dollars in millions For the six-month periods For the ended September 30, six-month period ended September 30, 2004 2005 2005 Financial ServicesBusinessesCash flows fromoperatingactivitiesNet income 66,108 56,991 503Adjustments toreconcile netincome to net cashprovided byoperatingactivitiesDepreciation 96,252 137,153 1,212Deferred income 30,358 19,493 172taxesMinority interest 239 960 9in consolidatedsubsidiariesEquity in earnings (8,051) (13,368) (118)of affiliatedcompaniesChanges in 163,504 52,051 460operating assetsand liabilities,and otherNet cash provided 348,410 253,280 2,238by operatingactivities Cash flows frominvestingactivitiesAdditions to (4,358,871) (5,393,541) (47,651)financereceivablesCollection of and 3,837,570 4,945,309 43,690proceeds from salesof financereceivablesAdditions to fixed (7,813) (3,387) (30)assets excludingequipment leased toothersAdditions to (287,614) (549,578) (4,855)equipment leased toothersProceeds from sales 3,115 3,929 35of fixed assetsexcluding equipmentleased to othersProceeds from sales 113,857 152,825 1,350of equipment leasedto othersPurchases of (61,054) (104,033) (919)marketablesecurities andsecurityinvestmentsProceeds from sales 60,092 71,637 633of and maturity ofmarketablesecurities andsecurityinvestmentsChanges in (20,247) (21,860) (193)investments andother assets, andotherNet cash used in (720,965) (898,699) (7,940)investingactivities Cash flows fromfinancingactivitiesProceeds from 928,861 884,941 7,819issuance oflong-term debtPayments of (543,592) (523,151) (4,622)long-term debtIncrease in 76,440 302,143 2,669short-termborrowingsOther 7,000 - - Net cash provided 468,709 663,933 5,866by financingactivities Effect of exchange 7,153 5,702 50rate changes oncash and cashequivalentsNet increase in 103,307 24,216 214cash and cashequivalentsCash and cash 110,900 159,627 1,410equivalents atbeginning ofperiodCash and cash 214,207 183,843 1,624equivalents at endof period Consolidated Effect of 39,216 33,505 296exchange ratechanges oncash and cashequivalentsNet increase (201,533) 212,144 1,874(decrease) incash and cashequivalentsCash and cash 1,729,776 1,483,753 13,109equivalents atbeginning ofperiodCash and cash 1,528,243 1,695,897 14,983equivalents atend of period 11. Per share amounts Reconciliations of the differences between basic and diluted net income pershare for the six-month periods ended September 30, 2004 and 2005 are asfollows: Yen in Thousands Yen U.S. millions of shares dollars Net Weighted- Net Net income average income income shares per share per shareFor the six-month periodended September 30, 2004Basic net income per 584,038 3,312,441 176.32common share Effect of dilutedsecurities Assumed exercise of 760 dilutive stock optionsDiluted net income per 584,038 3,313,201 176.28common share For the six-month periodended September 30, 2005Basic net income per 570,520 3,257,622 175.13 1.55common share Effect of dilutedsecurities Assumed exercise of (1) 604 dilutive stock optionsDiluted net income per 570,519 3,258,226 175.10 1.55common share Certain stock options were not included in the computation of diluted net incomeper common share for the six-month periods ended September 30, 2004 and 2005because the options ' exercise prices were greater than the average market priceper common share during the periods. The following table shows Toyota 's net assets per share as of March 31, 2005and September 30, 2005. Net assets per share amounts are calculated as dividingnet assets ' amount at the end of each period by the number of shares issued andoutstanding, excluding treasury stock at the end of corresponding period. Inaddition to the disclosure requirements under FAS No. 128, Earnings per Share,Toyota discloses this information in order to provide financial statement userswith valuable information. Yen in Thousands Yen U.S. millions of shares dollars Shares Net Net issued and Assets Assets outstanding Net at the end of per share per share assets the period As of March 31, 2005Net assets per common 9,044,950 3,268,078 2,767.67shareAs of September 30, 2005Net aassets per common 9,692,765 3,252,699 2,979.91 26.33share 12. Classification of wholesale finance receivables in the semi-annualcondensed consolidated statements of cash flows From the consolidated financial statements for the year ended March 31, 2005,Toyota changed its classification of cash flows attributed to a certain portionof finance receivables in the consolidated statements of cash flows. The changein classification was based on concerns raised by the staff of the Division ofCorporation Finance of the Securities and Exchange Commission. Historically, Toyota had reported the origination and collection activities ofits wholesale financing transactions as investing activities in the consolidatedstatements of cash flows. Consequently, when Toyota 's products were sold to itsdealers through the use of Toyota 's wholesale financing program, investing cashoutflows were reported on the basis that the Financial Services operationsoriginated the wholesale finance receivables, while operating cash inflows werereported on the basis that the Automotive sales operations collected the tradereceivables despite the fact that no cash received from a consolidatedperspective related to the trade receivables as it was an intercompanytransaction. The change in classification in the statements of cash flowsreflects the fact that no cash was received by Toyota upon a sale to dealers andas a result, eliminates the effects of the intercompany transactions andreflects cash receipts from the sale of inventory as operating activities. Inaddition, the cash flows from finance receivables relating to the sale of Toyotaproduct inventories, other than the above-described wholesale receivables, werealso reclassified from investing activities to operating activities. Such cashflows include cash flows from sales-type lease receivables attributed tosales-type lease transactions involving inventories of Toyota products. The table below is a reconciliation of Toyota 's current presentation of cashflows compared to the presentation of cash flows reported in semi-annualconsolidated financial statements for the six month period ended September 30,2004. Yen in millionsSix month period ended September 30, 2004Net cash provided by operating activities 1,367,973- As previously reportedAmount reclassified from investing activities 33,161Net cash provided by operating activities 1,401,134- After reclassification Net cash used in investing activities (1,760,291)- As previously reportedAmount reclassified from operating activities (33,161)Net cash used in investing activities (1,793,452)- After reclassification 13. Subsequent event Toyota received common shares of the Mitsubishi UFJ Financial Group, Inc.because of the merger between Mitsubishi Tokyo Financial Group, Inc., and UFJHoldings, Inc. on October 1, 2005 in exchange for common shares of UFJ HoldingsInc., which Toyota had held. As a result of this transaction, in accordancewith accounting principles generally accepted in the United States of America,Toyota will record a gain of approximately JPY140.0 billion ($ 1.2 billion) inincome before income taxes, minority interest and equity in earnings ofaffiliated companies in the fiscal year ending March 31, 2006 as a differencebetween acquisition costs of prior-merger shares and the fair market value ofpost-merger shares. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Toyota Motor