ANNUALREPORT2015

For the year ended March 31, 2015

Profile
Established in Osaka in July 1946, Senko Co., Ltd. is an integrated distribution services company. The Company has
grown steadily over the years, listing on the First Section of the Osaka Securities Exchange in 1975 and on the First
Section of the Tokyo Stock Exchange in 1990.
As of March 31, 2015, the Senko Group had a nationwide network with 451 locations in Japan, an overseas network withfacilities in 34 locations, approximately 2,809,000 square meters of distribution center space, and a fleet of 18 owned andchartered ships. The Company engages in wide-ranging business activities centered on trucking. Including partnercompanies, Senko operates more than 10,000 trucks each day. Activities also encompass warehousing, marinetransport, in-factory services, and multimodal international cargo transport.
Senko’s strength lies in supplying integrated distribution services, from distribution consulting to system design andoperations that closely match customer needs.
These efficient integrated distribution services have won an excellent reputation from our customers for the provision ofefficient transportation and distribution systems that support the construction of customer supply chain management
systems. These systems operate taking full advantage of information technology.
Senko will continue to leverage information technology to provide high-quality, efficient logistics solutions on a global
scale. The goal is to become a logistics information company with capabilities that go well beyond the conventional
activities of logistics companies.

Contents
01 Consolidated Financial Highlights
02 A Message from the President
04 Outline of the Medium-Term Business Plan (April 2013 to March 2017)06 Review of Operations
08 Topics
12 Corporate Governance and Compliance
13 Board of Directors, Corporate Auditors, and Executive Officers
14 Corporate Social Responsibility
18 Financial Review
Financial Section
21 Report of Independent Auditors
22 Consolidated Balance Sheets
24 Consolidated Statements of Income
24 Consolidated Statements of Comprehensive Income
25 Consolidated Statements of Changes in Net Assets
26 Consolidated Statements of Cash Flows
27 Notes to the Consolidated Financial Statements
47 Corporate/Stock Information
48 Domestic and Global Network / Subsidiaries

Cautionary Statement with Respect
to Forward-Looking Statements
Plans and strategies concerning future businessperformance included in this annual report are
forward-looking statements based not on
historical facts but on management’s
assumptions and beliefs in the light of theinformation currently available to it, and thus
involve a certain element of risk and uncertainty.

Consolidated Financial Highlights
SENKO Co., Ltd. and Consolidated Subsidiaries
2015

Years ended March 31

2014

2013

2015

Millions of yen

Thousands of
U.S. dollars*1

For the year:
Operating revenues
Operating income
Net income
Capital expenditures
Depreciation¥ 398,448
13,6507,074
14,1828,856¥ 333,884
12,122
6,504
24,0007,606¥ 293,534
9,909
5,203
4,404
6,738

$ 3,315,703
113,589
58,867118,016
73,696

At year end:
Total assets
Net assets

285,31092,745

243,570
72,303208,095
67,3282,374,220
771,782

Yen

U.S. dollars

Per share data:
Net income
Cash dividends
Net assets¥

Financial Ratios:
Operating profit margin (%)
Net profit margin (%)
Equity ratio (%)
Return on equity (ROE) (%)
Interest coverage ratio*2 (times)
Number of employees*3 (persons)
Number of vehicles
Distribution center space (thousand m2)

55.06
17.00
581.46

¥

51.89
16.00
539.52

¥

41.45
14.00
521.48

3.4
1.8
28.4
9.5
15.5

3.6
2.0
27.8
9.8
8.6

3.4
1.8
31.3
8.2
9.6

12,455
4,530
2,809

9,341
3,352
2,523

8,889
3,240
2,211

$

0.46
0.14
4.84

*1: U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥120.17 to U.S.$1 on March 31, 2015.
*2: Interest coverage ratio = Net cash provided by operating activities / interest cost.
*3: Excluding part-timers.

Operating revenues

Operating income ( ) /Operating profit margin ()(Millions of yen)

(Millions of yen)(%)

480,000

20,0003.4

398,448
333,884

360,000

3.6

4

Net income ( ) /Net profit margin ((Millions of yen)(%)

10,000

2.4

3.4

2.0

3.1
15,000293,534
270,361
241,046

13,6502.5

10,00037,500

6,504 7,074

12,122

1.3
2

8,274

5,000

0.9

6,100
120,000

0

5,000

11

12

13

14

15

0

11

12

1.8

1.8

9,909

240,000

)

13

14

15

1

2,500

0

0

5,203
1.2

3,479

2,261

11

1.8

0.6

12

13

14

15

0

SENKO ANNUAL REPORT 2015 01

The Second Year of the Four-Year Medium-TermBusiness Plan Saw the Further Expansion of Our
Business, Paving the Way to Achieving Its Goals
Efforts to Aggressively Expand
Sales and Promote M&A Led to
Increased Revenue and Income

low-temperature logistics business (in cold and freezer
storage) nationwide.
In South Korea we established an integrated distribution
system between Japan and South Korea, while in North
America we started transportation operations within Mexico

In fiscal 2014, the fiscal year ended March 31, 2015, the outlook

as well as between Mexico and the United States. In Thailand,of the Japanese economy remained uncertain amid a decline

we also advanced construction of a distribution center thatin consumer spending caused mainly by the consumption tax

handles import/export cargo.

rate hike as well as a slowdown in overseas economies.
In the logistics industry, cargo volumes declined in

Consolidated operating revenues for the fiscal year ended
March 31, 2015 increased 19.3% year on year to ¥398,448

consumer spending-related goods and construction-related

million due to efforts to aggressively expand sales and thematerials. Moreover, the industry environment remained

consolidation of AST CORPORATION, Runtec Corporation, andsevere due to a heavy cost burden as a result of risingother companies through M&A.

outsourcing costs caused by a shortage of trucks and drivers.
In this environment, the Senko Group established a four-year

Consolidated operating income grew to ¥13,650 million, up
12.6%, while consolidated ordinary income rose to ¥13,234

medium-term business plan that began in the fiscal year ended

million, up 17.1%. This reflected positive factors, such as a rise

March 31, 2014 and is based on the slogan “Moving Global.”in operating revenues, a price revision, M&A, and a drop in

The plan has three goals: “go beyond logistics,” “make thefuel costs, which compensated for cost increases, including

world go round,” and “revolutionize business.” The Group has

the hike in outsourcing costs, as well as the negative effects

been working to achieve growth in the distribution businessfrom the depreciation of the yen in the commerce and tradeand commerce and trade business as well as to foster an evenbusiness. Net income increased to ¥7,074 million, up 8.8%.

greater degree of trust among its customers by building a
structure for services with high quality and outstanding
performance in relation to cost.
In the fiscal year ended March 31, 2015, the Company
started operation of large-scale distribution centers in the
Kanto, Chubu and Kansai regions to expand its distribution

Our Objective for the Next Fiscal
Year: To Further Improve Profitability
in Accordance with the Four-Year
Medium-Term Business Planbusiness. The Company also made the following companies
into subsidiaries: In June 2014 Sankyo Butsuryu Niyaku Co.,The Japanese economy is expected to see a mild recovery,

Ltd. and Sankyo Logistics Co., Ltd., both of which engage in the

supported by a recovery in consumer spending, a rise in

distribution of agricultural products in Hokkaido, and incapital expenditure, and other favorable factors. In the

October 2014 Runtec Corporation, a company operating thelogistics industry, however, the business environment isMovin

A Message from the President

02 SENKO ANNUAL REPORT 2015

expected to remain severe, with outsourcing costs growing
sharply due to a shortage of human resources and trucks.
In this environment, the Senko Group will continue to focus
on improving its profitability, enhancing its competitiveness,and upgrading its operating system in accordance with theFour-Year Medium-Term Business Plan.

Annual Dividend Increases in View
of Financial Results for the Fiscal
Year Ended March 31, 2015
While securing internal reserves necessary for future businessdevelopment and management structure reinforcement, thebasic policy is to return profits to shareholders byimplementing stable dividends and dividends that are linked tobusiness results.
In accordance with this policy, the Company raised the annual
dividend payout for the fiscal year ended March 31, 2015 by ¥1 to¥17 per share, in view of operating results for the full year.
We ask for the continued support of our stockholders as weface new challenges in the fiscal year ending March 31, 2016.
August 2015

Yasuhisa Fukuda
President and Representative Director

g Global03

Outline of the Medium-Term Business Plan
April 2013 to March 2017

We are executing a Medium-TermBusiness Plan for the 100th anniversaryof the Group’s foundation
Senko is preparing to celebrate the 100th anniversary of its foundation in 2016.
The Medium-Term Business Plan covers the four-year period from April 2013 to March 2017and creates a growth strategy for the next 100 years in which Senko has set itself the goal ofachieving its aim of becoming a logistics information company trusted both in Japan and overseas.
In all its corporate activities, Senko strives to execute the practical measures it must adopt to become acompany that is trusted by all its stakeholders.

Corporate Image Targeted
A logistics information company that can be trusted upon bothin Japan and overseas

Customers and partners in Japan and overseas (collaborative companies, business partners)
Shareholders and investors in Japan and overseas
Society
Employees (full-time, part-time and casual workers) and their families
Note: A‌ logistics information company refers to a company with a good command of information, including logistics and trade
distribution, that provides the appropriate distribution and logistical services on a global scale.

Corporate Slogan
Our corporate slogan is “Moving Global” because it clearly and simply expresses the direction in which Senko should be heading
through the concepts of “go beyond logistics,” “make the world go round,” and “revolutionize business.” The slogan is shared by eachand every one of the Group’s employees as they work to meet the challenges that lie ahead as we celebrate our 100th anniversary.

Go beyond logistics, make the world go round, and revolutionize business.

04 SENKO ANNUAL REPORT 2015

Medium-Term Management Policies
As part of the Group’s Medium-Term Management Policy, the Company is promoting its business based on the following five principles.
1 Aiming at the provision of comprehensive and integrated services, challenging the creation of products together with expanding
the range of our businesses in distribution and in trade logistics operations.
2 Fostering a greater degree of trust among our customers, forming a high-quality and high-service structure.
3 Reinforcing our staff training and employment activities to foster and retain group human resources (including global humanresources, and in-house entrepreneurs within the Group).
4 Placing emphasis on compliance, and aiming to become a company that is in the vanguard of environmental, safety, and health issues.
5 Promoting financial policies that are based upon prioritizing the maintenance of financial soundness.

Medium-Term Business Plan Targets(FY2013-FY2016)

We have set the following quantitative targets for
our Medium-Term Business Plan and expect to achieve
the targets by as early as FY2015.
Aiming at operating revenues of ¥ 400 billion
Senko aims to increase sales by expanding the scope of its logistics center& trading and commerce businesses, boosting its international logistics
operations, taking on the challenge of creating products, and promoting
business partnerships and M&A activities.

(Billions of yen)

293.5

13

Aiming at operating income of ¥15 billion
Senko seeks to achieve operating income of ¥15 billion and an operating
profit margin of 3.8%.

400.0

17

440.0
16

(Initial target)(Forecast)

15.0

16.8

(Billions of yen)

Capital investment
The core aim of our capital investment program lies in establishing new facilities
to expand our operations, and in business partnerships and M&A activities.

9.9
13

17

(Initial target)

16(Forecast)Medium-Term Business Policies
The present development of the Group’s business operations is predominantly focused on achieving the following five policies.
1 Expanding the operational scope of our physical distribution business.
2 Expanding the operational scope of our commerce and trading business.
3 Developing an international distribution business that prioritizes earnings.
4 Taking on the challenge of making things.
5 Promoting business partnerships and M&A.
Please see our website for more details: http://www.senko.co.jp/en/ir/vision/plan/

SENKO ANNUAL REPORT 2015 05

Review of Operations
Reporting Results of the Fiscal
Year under Review (FY2014) by
Business Segment
Senko has three business segments:
Distribution, Trading & Commerce, andOthers. The Distribution segment is further
divided into the following four categories basedon the types of cargo and characteristics oflogistics services provided: Retail Product
Logistics, Housing Logistics, Chemicals
Logistics and Other Logistics.

Retail
Product
Logistics

Housing
Logistics

06 SENKO ANNUAL REPORT 2015

Operating revenues composition
Others 1.0%

Trading &commerce

30.3%

Operatingrevenues

Retail productlogistics

33.9%

398.4
Billion yen

Otherlogistics
Chemicals
logistics

6.7%
12.4%

Distribution

15.7%

The retail product logistics segment provides logistics services for volumeretailers, department stores, specialty stores, and other retailing businesses
as well as for food, electric appliance, and machinery industries.
In the fiscal year ended March 31, 2015, we commenced operation of
the Moriyama PD Center No. 3 Warehouse (Moriyama City, Shiga
Prefecture), Kitakanto PD Center (Ota City, Gunma Prefecture), Nagoya
No. 2 PD Center (Nagoya City, Aichi Prefecture), and other distribution
centers. We also obtained orders for distribution operations from CocaCola West Co., Ltd. and concluded a contract with Iwatani Corporation’s
distribution affiliate to take over some of the affiliate’s operations. We
thus expanded our distribution business by meeting the companies’
needs to outsource their distribution operations.
Due primarily to the above-mentioned outsourcing orders, increased
cargo volume for companies in the fashion industry, and the M&A of
Runtec Corporation and other companies, operating revenues for the
fiscal year ended March 31, 2015 increased by 34.0% year on year to¥135.0 billion.

Major activities of the housing logistics segment include the transportof products from the factories of housing makers to construction sites
and the transport of products for housing material manufacturers.
In the fiscal year ended March 31, 2015, we started operation of the
Yawara Housing Distribution Center (Tsukubamirai City, Ibaraki
Prefecture) in November 2014 to strengthen delivery capabilities of
housing material in the Kanto area. In addition, we obtained an
outsourcing order from a major solar panel manufacturer for all of its
logistics operations ranging from distribution within plants towarehousing, cargo handling, shipment, and delivery, some of whichwere launched in January 2015.
Since cargo volumes decreased despite aggressive sales
promotion activities due to the effect of the consumption tax rate hike,
operating revenues for the fiscal year ended March 31, 2015
decreased by 4.3% year on year to ¥62.5 billion.

Housing logistics

Operating revenues(Billions of yen)

135.0
100.7

Up

34.0%
14

15

Operating revenues(Billions of yen)

65.3

62.5
Down

4.3%

14

15

Chemicals
Logistics

Trading&
Commerce

The chemicals logistics segment provides logistics services for resinsused to make plastics and other products, and molded/processed plastic
products, as well as for lubricants for machinery and other applications.
In the fiscal year ended March 31, 2015, Senwamaru, a vessel used totransport cracked heavy oil and other industrial materials, enteredservice in November 2014. We also made proposals for efficienttransportation using bulk containers that we developed (containers used
to transport particulate resin materials and the like), which resulted in
obtaining new contracts and led to the expansion of our business.
Due primarily to a positive effect from large-scale capital expenditure,such as building the asphalt tanker Angel Blue in the previous fiscal
year, as well as to orders received in new expanded operations,operating revenues for the fiscal year ended March 31, 2015 increasedby 3.3% year on year to ¥49.3 billion.

The business of the trading & commerce segment comprises
petroleum marketing, commercial sales, and international trading.
Operations include the sales of fuel using petroleum cards and thesales of logistics equipment and materials, as well as the wholesale
sales of commodities, wrapping materials, alcoholic beverages, andpaper products used for households.
In the fiscal year ended March 31, 2015, we developed products with
our trade company subsidiaries using their expertise, and promoted
joint sales activities to customers of each trade company subsidiary.
We also worked to generate synergy with the distribution business byactively proposing our logistics service to the suppliers and customersof each trade company subsidiary as well as by carrying out logistics
operations of merchandise from subsidiaries within the Group.
Due primarily to the impact of acquiring AST CORPORATION as aconsolidated subsidiary and sales growth in the petroleum marketingbusiness, operating revenues for the fiscal year ended March 31, 2015
increased by 33.1% year on year to ¥120.7 billion.

Operating revenues(Billions of yen)

49.3

47.8
Up

3.3%

14

15

Operating revenues(Billions of yen)

120.7

90.7
Up

33.1%
14

15

Operating revenues

Other
Logistics(Billions of yen)This category includes all logistics services other than for retail products,
housing, and chemicals. Operating revenues for the fiscal year ended
March 31, 2015 increased by 3.6% year on year to ¥26.8 billion.

25.9

26.8

Up

3.6%
14

15

Operating revenues

OthersThis segment consists of activities other than the operations of logistics
and trading & commerce business segments, which include outsourced
data processing services, vehicle maintenance and repair, and insurance
agency services. Operating revenues for the fiscal year ended March 31,
2015 increased by 19.1% year on year to ¥4.1 billion.

(Billions of yen)

4.1

3.5
Up

19.1%
14

15

SENKO ANNUAL REPORT 2015 07

Topics 01

Runtec Joins
the Group,

Opening Up the Way for Senko’s Full-Scale Entry into
the Three-Temperature
Zone Logistics Business
Runtec, a Leading LowTemperature Logistics Company,
Joins the Senko Group
Senko welcomed Runtec Corporation, a leading lowtemperature (cold and freezer storage) logistics company, as aGroup subsidiary on October 2, 2014.
Runtec has one of the largest low-temperature logistics
networks in Japan with 31 service centers across the nation,
warehouses with a total area of approximately 70,000 square
meters, and more than 1,000 vehicles. The company has earned
itself one of the most impressive track records in the industry.
In addition, the Freshness Service—a nationwide, small-lot
consolidated cargo transportation service operated 24/7, using
the company’s extensive network and facilities—is attracting
a broad range of customers.

Developing Runtec’s Own Freezer
Vehicles and Temperature
Monitoring Systems
One of the greatest strengths of Runtec is its capability todevelop its own freezer vehicles and transportation systems.
The company cooperates with auto-makers and freezer
makers to develop high-performance freezer vehicles capableof carrying foods and other delicate cargo that require highquality and temperature control.
Runtec is also promoting the modal shift to railroad and sea
transportation as part of its efforts to reduce CO2 emissions. To
ensure that optimum temperature is maintained during railroadtransportation, the company has developed and operates atemperature monitoring system. The system monitors theinterior temperature, position, and opening/closure of the doorof each container on a real-time basis around the clock
throughout the year. The temperature setting and turning on/
off of freezers can also be remotely controlled online.

08 SENKO ANNUAL REPORT 2015

● Conceptual Diagram of the Temperature

Monitoring System
Runtec24/7
monitoringGPS
antenna

Temperature
sensors

Remote control:

Temperature setting

Remote monitoring:
The position,interior temperature,and the opening/closure of the doorof each container

DoorsensorAdvancing into the ThreeTemperature Zone Logistics Business
to Expand Senko’s Business Portfolio
Runtec’s inclusion in the Senko Group has made it possible
for the Group to offer three-temperature zone logistics (cold,
freezer and normal temperature storage) in addition to
Senko’s normal temperature logistics and Runtec’s lowtemperature logistics.
Senko’s current main business is to transport normaltemperature goods to leading supermarkets, DIY centers,
drugstores, department stores, volume retailers, and others.
We can now offer to these customers more efficient logistics
services that include the transportation of refrigerated andfrozen goods.
In addition, we can further expand our customer base by taking
advantage of the logistics expertise and facilities of both companies.
(As of March 31, 2015)

Company Name

Runtec Corporation

Established

July 1953

Head Office

Hakata Ward, Fukuoka City, Japan

Number of Business Sites

31

Number of Employees

2,291

Number of Vehicles Owned 1,040 (including containers)

Topics 02

Total Area of Warehouses

Approximately 70,000 m2

Annual Net Sales

Approximately ¥42 billion

Companies Specializing in Sorting and Shipping
Agricultural Products Join the Senko GroupIn June 2014, the Senko Group welcomed
as subsidiaries Sankyo Butsuryu Niyaku
Co., Ltd. and Sankyo Logistics Co., Ltd.,
companies based in Memuro Town, Kasai
District, Hokkaido that specialize inlogistics services for agricultural
products from Hokkaido. The twocompanies undertake an entire shipment
process from washing to sorting, packing,shipping, and transportation of potatoes,
Chinese yams, white radishes, and otheragricultural products produced in the
Tokachi and Obihiro areas.
We intend to integrate the companies’
expertise on logistics services for
agricultural products to expand our
agricultural-related business.

SENKO ANNUAL REPORT 2015 09

Topics 03

Meeting the Logistics Outsourcing
Needs of Companies

In May 2014, we won orders for
distribution operations in the Kyushu areafrom Coca-Cola West Co., Ltd. In October,
we also concluded a contract with
Iwatani Corporation’s distribution affiliate
to take over the affiliate’s customs
clearance business and logistics
business for cargo other than gas(since gas logistics is the affiliate’s
core business).
Many companies have recently begun
to outsource their logistics operations tomake their operations more efficient andto concentrate resources on their primarybusiness. We will make sure to meetthese needs to expand our business.

Topics 04

Moriyama PD Center No. 3 Warehouse
Starts Operation

In May 2014, we built and put into
operation the No. 3 Warehouse on thepremises of the Moriyama PD Center inMoriyama City, Shiga Prefecture. The
new warehouse is protected against
insects and dust, making it suitable forstorage of medical and pharmaceuticalproducts and foods. We began logistics
operations for pharmaceuticalpackaging materials outsourced by apharmaceutical maker in July 2014, andbegan those for products of a medical
device maker in January 2015.

10 SENKO ANNUAL REPORT 2015

Topics 05

Kitakanto PD Center Starts Operation

In July 2014, we established and put into
operation the Kitakanto PD Center on thepremises of the Kitakanto Logistics
Center in Ota City, Gunma Prefecture. As
the first distribution center with a seismic
isolation structure in Gunma Prefecture,
the new PD center is expected to appeal
to many customers who are eager toboost their business continuity
capabilities. We began logistics
operations for products of a health careproduct manufacturer in August 2014.

Topics 06

Senwamaru , a Heavy-Oil Vessel, Enters Service

Senwamaru, a vessel used to transport
cracked heavy-oil and other industrial
materials, entered service in November 2014.
The vessel is equipped with our own
ship dynamic positioning system and ourpatented ship safety management system
to ensure efficient and safe operation.
Senwamaru is also the first vessel inthe industry that has been built to meetthe requirements of the Ship Recycling
Convention*, which was adopted tocounter social and environmental
problems that often take place during
dismantling or recycling of end-of-life
ships, such as industrial accidents andenvironmental pollution. The vessel, forwhich the latest equipment to reduce
NOx emissions has also been employed,is thus designed to be socially andenvironmentally friendly.
* The‌ Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, 2009:
Under this convention, a list of all hazardous materials used is required to be created for each ship, approvedby the relevant competent authorities, and carried by each ship.

SENKO ANNUAL REPORT 2015 11

Corporate Governance and ComplianceCorporate Governance Philosophy and Systems
The Senko Group, as a business involved in logistics work of a highly public nature, makes every effort to ensure that its corporate
activities comply thoroughly with laws, based on awareness that proper corporate governance is the foundation of our existence as abusiness and is regarded as a high-priority managerial issue.

General Meeting of Shareholders
Appointment / Dismissal

Board ofCorporate Auditors

ReportAccounting Auditors

Appointment / Dismissal

Appointment / Dismissal

Audit

DialogueAccounting
Audit

Audit

ReportReportBoard of Directors
Appointment /Supervision

Assist /ReportPresident andRepresentative Director
Auditing Dept.

ReportInstruct

ReportLegal Counsel

Report

Audit

ReportAdviceCorporate Management Committee
Members of the Board of Directors /Executive Officers / Corporate Auditors

CSR Promotion Committee
Members of the Board of Directors /Corporate Auditors /Chairmen of Other Committees, etc.
Supervise

Compliance Committee
Corporate Ethics Committee
Risk Management Committee
Environmental Promotion Committee
Social Contribution Promotion Committee
Health and Safety Committee

Executive Officers / Departments /Branches / Group Companies

Internal Controls Committee

Compliance-Based Management

Reinforcing Risk Management System

The Senko Group has established the Senko Standards ofBusiness Conduct, which prescribe all items that executives andemployees must observe regarding every aspect of their job
activities based on a thorough understanding of the Group’ssocial obligations. Committees have been established to ensurethat everyone fully understands these standards and to
implement and upgrade these standards. In addition, there is a
Business Ethics Hotline.

We have built a risk management system for various risks that
may arise in the course of our business operations. In the eventof an emergency, this system prioritizes human life, limits
property damage (corporate losses), enables swift resumption ofbusiness, maintains social trust, and implements measures froma viewpoint that will support and contribute to local society.
To execute proper compliance (legal adherence) and social
responsibility, we worked to further minimize risks by creating
and disseminating our Risk Manual and by implementing
periodic training programs to truck drivers on the safe
transport of hazardous materials. We also operate a logistics
information back-up center to prepare for major disasters.

12 SENKO ANNUAL REPORT 2015

Implementing Responsibilities: Auditing and Monitoring

1
2
3

The Board of Directors meets at least once a month todecide upon important matters pertaining to the
management of the Company, in addition to legallyrequired items; it is also positioned as an organization forthe monitoring of business operations.
The Senko Group’s CSR management framework consistsof the CSR Promotion Committee, Workplace Health and
Safety Committee, and Internal Controls Committee.
The corporate auditors attend meetings of the Board of
Directors and observe the performance of directors froman objective perspective, work with the Auditing
Department and accounting auditors to ensure thoroughcompliance at both Senko and its subsidiaries, andperform strict audits.

4

Senko has a contract with accounting auditors inaccordance with laws and regulations and receives
guidance concerning accounting matters as required.

5

The Auditing Department checks the status of measuresconcerning risk and monitors business operations. To
ensure the suitability of systems for performing business
operations and make improvements, this department
performs audits of Senko and its subsidiaries. Audit
results are reported to the representative director andcorporate auditors.

Board of Directors, Corporate Auditors, andExecutive Officers

President andRepresentative Director

Executive Vice President
and Representative Director

Yasuhisa Fukuda

Masami Fujimori

President andRepresentative Director

Yasuhisa Fukuda

Senior Managing
Executive Officers

Kazumasa Murakami
Tomoyuki Osako

Executive Vice President andRepresentative Director

Masami FujimoriManaging Executive Officer

Kenichi Shiraki

Executive Vice President andDirector

Takeyo Teduka

Executive Officers

Directors andSenior Managing Executive Officers

Kengo Tanaka
Kazuhiro Yamanaka
Hiroshi Yoneji

Directors andManaging Executive Officers

Yoshihiro Kawase
Yoshiki Kanaga
Akira Taniguchi
Noburoh Sasaki

Outside Directors

Hiroko Ameno
Fumitaka Ojima

Full-Time Corporate Auditors

Takashi Sawada
Keiji Matsubara
Takanobu Ishioka
Keiichiro Yoshimoto

Masami Tada
Yoshihito Koresawa
Yukio Murozaki
Kiyoshi Rurigaki
Kanji Kawasaki
Tatsuhiro Maeda
Takeo Ikebe
Seiji Kono
Noboru Ogoshi
Shinichi Murao
Takeshi Matsui
Masanobu Uenaka
Toshihiro Kawai
Kouji Fujita
Nobuharu Shinohara
Tomoji Kanashima
Hiroyuki Takamizawa(As of June 26, 2015)

SENKO ANNUAL REPORT 2015 13

CSR

Corporate Social Responsibility
The transport industry, to which Senko’s core business belongs, has a highly public mission. It is essential
to its continued viability as a company that Senko contribute to society through the practice of its corebusiness and fulfill its public responsibilities.
In the Medium-Term Business Plan that began in the fiscal year ended March 31, 2014, one of the goals is
placing emphasis on compliance, and aiming to become a company that is in the vanguard ofenvironmental, safety, and health issues, in order to be recognized as a logistics information company thatcan be trusted both in Japan and overseas. We conduct CSR activities as one way to achieve this goal.
● Stakeholder Relationships in Senko´s BusinessBusiness
partners andvendors• Proper distribution of profits
Shareholders• Transparency in management• Proper disclosure of information• Services– High quality– Low cost
– Efficiency– Environmental awareness– Safety• Partnerships• Proper information disclosure

Transport anddelivery customers

Cooperative companies
and procurement sources

Senko

Customers• Partnership• Environmental awareness

Employees

Business Activities• Traffic safety• Environmental awarenessRegional• Regional exchange
communities• Social contribution• Proper disclosure of information

Government• Maintaining safety andhealth in the workplace• Nurturing personnel• Fairness in employment• Legal compliance• Traffic safety• Environmental awareness

Reinforcing Our CSR Initiatives
The Senko Group views regulatory compliance, environmental responsibility, and safety consciousness as the core elements ofmanaging our business in a socially responsible way in order to create a corporate culture that allows us to gain the trust of all of our
stakeholders. A high level of awareness among all of our employees will allow us to contribute to society through our business activities.

The Environment

SafetyHealthWe are aware of the critical importance ofconducting environmentally responsible
logistics operations with respect to protecting
the environment. Dedicated to green logistics,
we are taking actions to cut CO2 emissions
and conserve energy and have establishednumerical targets. To become a highly
advanced environmental organization, we are
implementing our Phase V Environmental
Master Plan.

To promote safety and achieve accident-freeworkplaces, we have established targets for
reducing vehicle accidents and workplace
accidents. We use a PDCA cycle for safety
management to assess every source of risk in
our operations.

We are committed to maintaining amanagement framework that reduces risks
involving health. We improve workplaces toprevent health problems, encourage
individuals to use self-care and othermeasures to lead a healthy life, maintain astaff of nurses and industrial doctors, andtake other actions to provide health-related
support for employees.

14 SENKO ANNUAL REPORT 2015

Measures to Reduce Our
Environmental Impact
As an advanced environmental organization, the Senko Group has been
implementing activities based on the Phase V Environmental Master
Plan from the fiscal year ended March 31, 2014 with the aim of reducing
its impact on the environment. Numerical targets had been established
for activities to combat global warming.
All of our business activities incorporate aggressive and voluntary
programs to conserve energy and resources and protect the environment inother ways. We are determined to play a part in preserving and consistently
improving the environment.
The Senko Group’s goal is to cut the environmental impact associatedwith business activities to the absolute minimum. To achieve this goal,
we determine the quantity of resources and energy used (the input) andthe quantity of CO2 and waste materials we produce (the output). By
using this approach, we are monitoring and lowering the burden that
our collective business operations place on the environment.

Customers
andbusiness partners

INPUT

INPUT

INPUT

INPUT

Diesel oil,natural gas

Electricity,water,
diesel oil,heavy oil,gasoline,natural gas,liquefied petroleum gas,
packaging material,
paper,
secondary materials

Diesel oil,natural gas,
heavy oil

Diesel oil,natural gas,
gasoline

Logistics Center

Sorting andshipment

Transport

Emission gases,
noise, vibration

Emission gases,
water pollution,
waste,
waste oil,vibration, noise

Emission gases,
noise, vibration

Emission gases,
noise, vibration,
waste

OUTPUTOUTPUTOUTPUTOUTPUT

Collection of cargo

INPUT
Diesel oil

10,338 kℓ

Heavy oil

7,834 kℓElectricity

67,168,558 kWh

OUTPUT
CO2 emissions

Logistics Center

86,889 t-CO2

Note: The CO2 emission
coefficients are the revised andpublicly announced values as ofDecember 27, 2013, based on the“Order for Enforcement of the
Act on Promotion of Global
Warming Countermeasures”
and the “Ministerial Order
Concerning the Calculation of
the Greenhouse Gas Emissions
in Conjunction with the Business
Activities of Specified Emitters.”

DeliveryStore,
customer’sdelivery center,
office and plant● CO2 Emissions Composition by Causes
Offices and warehouses,
etc. (electricity)

Others6,245 t-CO2
Automobile
8%

34,118 t-CO2
39%
Shipping(C heavy oil)

9,729 t-CO2
11%(diesel oil)

Total CO2
emissions

24,354 t-CO2
28%

Shipping(A heavy oil)

12,443 t-CO2
14%
SENKO ANNUAL REPORT 2015 15

Safety Initiatives
The Senko Group conducts safety programs based on thethemes of “respect for individuals” and “giving safety priority
above all else.” The goal is to eliminate serious accidents.
We have programs to ensure that every employee
understands that safety in our business operations is at thecore of how we do business and that everyone must work to
improve safety.
In addition, senior executives and all employees at the
Senko Group work as a unified team to maintain and enhance
workplace safety.

● Fundamental Stance1

The Senko Group has a strong commitment tothe social mission of the logistics business. We
will ensure that all employees have a proper
understanding of the critical importance ofsafety in our business operations and will takeactions aimed at further improving safety.

2

Senior executives will provide strong leadershipto improve safety by ensuring the safety for all
business operations based on unified activities
by everyone from the president to employees atbusiness sites.

3

The Senko Group will make all employees wellaware that a healthy mind and body are themost important element of safety and that theymust manage their health properly.

Activities to Promote Good Health● Activities to Enhance and Maintain

Employees’ Health

The Senko Group believes that employees’ health is the key
to the Group’s growth. Enhancing and maintaining
employees’ health is a priority issue of our medium-termbusiness plan, and we implement various measures toaddress this issue, including the promotion of the Healthy
Activity Campaign and the active recruitment of nurses.
Our efforts to enhance and maintain employees’ healthbenefit not just employees but also help to reduce the riskof employees’ health problems adversely affecting ourbusiness. Maintaining the health of drivers and workers is
also directly connected to the safety management
required by a logistics company. We will therefore
continuously strengthen our efforts in this area.
16 SENKO ANNUAL REPORT 2015

Major CSR Activity Topics
in the Fiscal Year Ended March 31, 2015

Awarded the Best
Modal Shift Award

A modal shift toward combined, optimum rail-sea transport is attracting great
attention as an environment-friendly solution to logistics that will lead to the
reduction of CO2 emissions. Senko is actively promoting the modal shift andproposing logistics plans for customers that will improve and innovate the way
customers distribute their goods.
In March 2015, our efforts toward the modal shift were recognized andawarded with the Prize for the Best Business Entities Working on Modal Shiftby the Japan Federation of Freight Industries (currently the Japan Association
for Logistics and Transport).

Craftsmanship Competition
Championship Held to Help
Employees Enhance theSafety and Quality Level of
Their Work

In September 2014, the 2014 Craftsmanship Competition Championship washeld in which employees competed in skills of driving trucks and operating
forklifts as well as in the safety and quality level of their work. This
competition, as well as onsite training, is conducted as part of the Senko
Group’s efforts to ensure that Senko’s own safety and quality standards arepromoted and observed across the Group. The 2014 competition saw
employees from overseas participating for the first time. We will continue
improving the safety and quality level of employees’ work on a global scale.

Healthy Activity
Campaign

The Senko Group started the Healthy Activity Campaign in the fiscal year
ended March 31, 2012 to help employees stay healthy. This campaign, in which
employees compete to see who exercises the most, provides for physicalactivity that matches each individual’s lifestyle and condition. The goal is tohelp prevent lifestyle diseases. Numerous events are held so that all
workplaces can enjoy taking part in this campaign. In addition, the Senko
Group encourages employees to quit smoking as part of the campaign.

SENKO ANNUAL REPORT 2015 17

Financial Review
Performancedrop in fuel costs. These factors outweighed cost increases,
including a hike in outsourcing costs, as well as negative
effects from yen depreciation in the trading & commercebusiness. Net income increased by 8.8% to ¥7,074 million.

Consolidated operating revenues for the fiscal year ended
March 31, 2015 increased by 19.3% year on year to ¥398,448
million. This results reflected efforts to aggressively expand
sales as well as the M&A of AST CORPORATION, whichbecame the Company’s consolidated subsidiary two fiscal
years ago, and Runtec Corporation, which became theCompany’s consolidated subsidiary in October 2014.
Consolidated operating income grew by 12.6% to ¥13,650
million, while consolidated ordinary income rose by 17.1% to¥13,234 million. These results were due to positive factors suchas a rise in operating revenues, price revision, M&A, and a

Consolidated Operating Revenues
by Segment
Business segment performance for the fiscal year ended
March 31, 2015 was as follows:
Billions of yen

For the fiscal years ended March 31

2015

2014

Operatingrevenues

Component
ratio (%)

Operatingrevenues

Component
ratio (%)

Difference

Growth rate(%)

Distribution¥ 273.6

68.7¥ 239.7

71.8¥ 33.914.2

Retail product logistics

135.0

33.9

100.7

30.2

34.3

34.0

Housing logistics

62.5

15.7

65.3

19.5

(2.8)

(4.3)

Chemicals logistics

49.3

12.4

47.8

14.3

1.5

3.3

Other logistics

26.8

6.7

25.9

7.8

0.9

3.6

Trading & commerce

120.7

30.3

90.7

27.2

30.0

33.1

Others

4.1

1.0

3.5

1.0

0.7

19.1

Total

¥ 398.4

100.0¥ 333.9

100.0¥ 64.6

19.3

Operating revenues

Operating income(Millions of yen)
400,000(Millions of yen)

(Millions of yen)

15,0008,000

320,000

12,0006,400

240,000

9,000

4,800

160,000

6,000

3,200

80,000

3,000

1,600

0

0

0

11

12

18 SENKO ANNUAL REPORT 2015

13

14

15

11

12

13

Net income

14

15

11

12

13

14

15

Financial Position

Distribution
In the retail product logistics business, we benefited fromorders for distribution operations from a leading soft drink
maker, increased cargo volume for companies in the fashionindustry, and the M&A of Sankyo Butsuryu Niyaku Co., Ltd.,Sankyo Logistics Co., Ltd. and Runtec Corporation. In the
housing logistics business, cargo volumes decreased despite
aggressive sales promotion activities due to the effect of theconsumption tax rate hike. In the chemicals logistics business,
we benefited from orders received in new expanded
operations as well as positive effects from large-scale capital
expenditure, such as the construction of an asphalt tanker inthe previous fiscal year. As a result, operating revenues in the
distribution business rose by 14.2% year on year to ¥273,663
million for the fiscal year ended March 31, 2015.

Total assets at the end of the fiscal year under review were¥285,310 million, ¥41,740 million higher than at the end of theprevious fiscal year.
Current assets amounted to ¥98,248 million, up ¥14,095
million from March 31, 2014. This was due to increases in cash
and equivalents of ¥7,809 million, trade accounts and notes
receivable of ¥4,845 million, and inventories of ¥608 million.
Noncurrent assets totaled ¥187,062 million, up ¥27,645 million
from March 31, 2014. This reflected increases in net property
and equipment of ¥21,353 million, goodwill of ¥1,132 million, andinvestments and other assets of ¥5,203 million.

Trading & Commerce

Liabilities

Due primarily to the impact of acquiring AST CORPORATION asa consolidated subsidiary and sales growth in the petroleum
marketing business, operating revenues in the trading &commerce business increased by 33.1% year on year to¥120,686 million for the fiscal year ended March 31, 2015.

Liabilities rose ¥21,298 million from the end of the previous
fiscal year to ¥192,565 million.
Current liabilities amounted to ¥92,553 million, up ¥13,213
million from March 31, 2014. This was due to increases in tradeaccounts and notes payable of ¥1,387 million and short-termloans of ¥13,050 million.
Noncurrent liabilities totaled ¥100,012 million, up ¥8,085
million from March 31, 2014. This was due to increases inbonds payable of ¥6,980 million, long-term loans payable of¥4,372 million, and net defined benefit liabilities of ¥2,576
million, despite a decrease in convertible bond-type bonds
with subscription rights to shares of ¥5,162 million.

AssetsOthersIn other business, operating revenues expanded by 19.1% year on
year to ¥4,099 million, reflecting the growth of outsourced dataprocessing services and commencement of the power tradingbusiness through solar power generation in September 2013.

Operating income ( )/net income to operating
revenues ( )(%)
5.0

Net income per share

Cash dividends per share

(Yen)

(Yen)

60

18

50

4.0

16

40
14

3.0
30

12

2.0
20
1.0

10

10

0

0

0

11

12

13

14

15

11

12

13

14

15

11

12

13

14

15

SENKO ANNUAL REPORT 2015 19

Depreciation increased ¥1,250 million (16.4%), to ¥8,856
million, compared with the previous fiscal year, and is
expected to rise ¥843 million (9.5%), to ¥9,699 million, in thefiscal year ending March 31, 2016.

Net Assets
Net assets expanded by ¥20,442 million from the end of theprevious fiscal year to ¥92,743 million. This reflected increases
in capital stock and capital surplus of ¥2,578 million each, due
to the conversion of convertible bond-type bonds with
subscription rights to common shares. Retained earnings, net
unrealized holding gains on securities, and minority interests
grew by ¥5,612 million, ¥1,081 million, and ¥7,181 million,
respectively. The equity ratio increased by 0.6 percentage
point from the end of the previous fiscal year to 28.4%.

Cash Flows
Cash and cash equivalents at the end of the term increased by¥7,809 million year on year to ¥25,476 million.
Net cash provided by operating activities totaled ¥19,228
million. This was mainly due to income before income taxes
and minority interests of ¥13,054 million and depreciation andamortization of ¥8,856 million, despite income taxes paid of¥4,231 million.
Net cash used in investing activities totaled ¥17,978 million.
This was mainly due to purchases of fixed assets of ¥13,031
million, purchase of shares of subsidiaries resulting in a change
in the scope of consolidation of ¥3,609 million, and the purchaseof shares of non-consolidated subsidiaries of ¥510 million.
Net cash provided by financing activities totaled ¥6,210
million. This was mainly due to an increase in short-term loans
payable of ¥13,033 million, proceeds from long-term loans
payable of ¥6,800 million, and proceeds from the issuance ofbonds of ¥7,000 million. Outflows included repayment of longterm debt of ¥9,404 million, repayments of finance leaseobligations totaling ¥2,135 million, redemption of bonds of ¥7,040
million, and cash dividends paid of ¥2,075 million.

Capital Expenditures andDepreciation
Capital expenditures in the fiscal year under review decreased¥9,818 million (40.9%), to ¥14,182 million, compared with theprevious fiscal year. The primary reason for the year-on-year
decrease was the Company’s commencement of operations oflarge-scale distribution centers in the Kanto, Chubu and Kansai
regions in the fiscal year under review, its acquisition of theTokyo head office building and purchase of rental properties
as well as its opening of large-scale distribution centers in theprevious fiscal year. In the fiscal year ending March 31, 2016,
capital expenditures are expected to decrease ¥357 million(2.5%), to ¥13,825 million. We will continue to upgrade andexpand distribution bases in Japan and overseas in the future
based on the new Medium-Term Business Plan.

Net assets ( ) /Equity ratio ( )Total assets

ROE ((Millions of yen)
300,000(Millions of yen)

(%)

(%)

100,00040

10

240,000

80,00032

8180,000

60,00024

6120,000

40,00016

460,00020,000

8

2

0

0

0

0

11

12

20 SENKO ANNUAL REPORT 2015

13

14

15

11

12

13

14

15

11

) / ROA (

12

13

)

14

15

Report of Independent Auditors

SENKO ANNUAL REPORT 2015 21

Consolidated Balance Sheets
SENKO Co., Ltd. and Consolidated Subsidiaries
March 31, 2015 and 2014

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

¥ 25,476¥ 17,667$ 212,000

ASSETS
Current assets:
Cash and cash equivalents
Trade accounts and notes receivable–
Non-consolidated subsidiaries
OthersLess: allowance for doubtful accounts

11

56

92

56,591

51,709470,925

(43)

(51)

(358)

Inventories

7,113

6,505

59,191

Deferred tax asset (Note 15)

2,516

2,398

20,937

Prepaid expenses and other current assets

6,584

5,869

54,78898,24884,153

817,575

Investments in and long-term loans receivable to non-consolidated subsidiaries

4,188

2,840

34,851

Investment securities (Notes 6 and 11)

6,987

4,904

58,143257,853

212,139

2,145,735

Less: accumulated depreciation(108,042)(83,681)(899,076)

Net property and equipment

149,811

128,458

1,246,659

Total current assets

Property and equipment, at cost (Notes 8 and 11)Long-term deferred tax assets (Note 15)

2,735

4,235

22,759Other assets

23,341

18,980194,233¥ 285,310¥ 243,570$ 2,374,220

Total assets

22 SENKO ANNUAL REPORT 2015

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

LIABILITIES AND NET ASSETS
Current liabilities:
7,490$ 170,925

Current portion of long-term debt (Note 9)

Short-term loans (Note 9)¥ 20,540
8,716¥

15,89572,531

Lease obligations

1,837

1,986

15,287

Trade accounts and notes payable–
Non-consolidated subsidiaries
Others
Accrued expenses

68

109

566

37,92236,494

315,570

8,007

7,430

66,630Accrued income taxes

3,415

2,767

28,418Other current liabilities (Note 15)

12,048

7,169

100,257

92,55379,340770,184

Long-term debt, less current portion (Note 9)80,84074,650672,714

Lease obligations

3,419

3,657

28,451

Total current liabilities

Net defined benefit liabilities (Note 10)

9,382

6,804

78,073

Other long-term liabilities

6,371

6,816

53,01623,09920,521

192,219

Capital surplus

21,915

19,337

182,367

Retained earnings

36,67731,065305,209

Less: Treasury stock, at cost–2,577,118 shares in 2015 and 3,284,287 shares in 2014

(1,183)(1,533)(9,844)80,50869,390669,951
15,145

Contingent liabilities (Note 12)
Net assets (Note 13):
Shareholders’ equity
Common stock:
Authorized–294,999,000 shares
Issued–141,927,426 shares in 2015 and 128,989,476 shares in 2014

Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized holdings gain on securities

1,820

739

Loss on deferred hedges

(4)

(9)

(33)

Translation adjustments

544

230

4,527

(1,840)(2,530)(15,312)520(1,570)4,327

Remeasurements of defined benefit plans
Total accumulated other comprehensive income:

289

236

2,405

Minority interests

Stock acquisition rights (Note 14)

11,428

4,247

95,099Total net assets

92,74572,303771,782¥ 285,310¥ 243,570$ 2,374,220

Total liabilities and net assets
See the accompanying notes to the consolidated financial statements.

SENKO ANNUAL REPORT 2015 23

Consolidated Statements of Income
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015, 2014 and 2013

Thousands of
U.S. dollars

Millions of yen

2015

2014

2013

2015

¥ 398,448¥ 333,884¥ 293,534$ 3,315,703

357,431
27,367

299,040
22,722

263,898
19,7272,974,378
227,736

384,798

321,762

283,625

3,202,114

13,65012,122

9,909

113,589

303(1,213)314

262(1,243)202

1,129(1,156)
(264)

2,521
(10,094)
2,613

(596)

(779)

(291)

(4,960)

Income before income taxes and minority interests

13,054

11,343

9,618

108,629

Income taxes (Note 15):
Current
Deferred

4,466
958

4,315
335

3,932
397

37,164
7,972

5,424

4,650

4,329

45,136

Income before minority interests

7,630

6,693

5,289

63,493

Minority interests in gain of consolidated subsidiaries

(556)

(189)

(86)

(4,626)

Operating revenues
Operating costs and expenses:
Operating costs of revenues
Selling, general and administrative expenses

Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Others, net

Net income

¥

7,074

¥

6,504

¥

Per share of common stock
Net income
Diluted net income
Cash dividends applicable to the year

5,203

$

Yen

¥

55.06
50.41
17.00

¥

51.89
45.17
16.00

¥

41.45
37.46
14.00

58,867
U.S. dollars

$

0.46
0.42
0.14

See the accompanying notes to the consolidated financial statements.

Consolidated Statements of Comprehensive Income
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015, 2014 and 2013
Thousands of
U.S. dollars

Millions of yen

2015

2014

2013

2015

Income before minority interests¥ 7,630¥ 6,693¥ 5,289$ 63,493

Other comprehensive income (Note 4):
Net unrealized holdings gain on securities
Gain (loss) on deferred hedges
Translation adjustments
Share of other comprehensive income of an affiliate accounted for using equity method
Remeasurements of defined benefit plans

1,258
8
257
–
652

70
(4)
286
–
–

563
(167)
153
(0)
–

10,469
67
2,139
–
5,425

Total other comprehensive income

2,175

352

549

18,100Comprehensive income¥ 9,805¥ 7,045¥ 5,838$ 81,593

Total comprehensive income attributable to:
Owners of the parent
Minority interests¥ 9,060¥ 745¥ 6,743¥ 302¥ 5,654¥ 184$ 75,393$ 6,200

See the accompanying notes to the consolidated financial statements.

24 SENKO ANNUAL REPORT 2015

Consolidated Statements of Changes in Net Assets
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2015, 2014 and 2013
Thousands

Balance at March 31, 2012

Millions of yen

Number ofshares ofcommonstock issued

Commonstock

CapitalsurplusRetainedearnings

Treasurystock(at cost)

128,989¥ 20,521¥ 18,782¥ 22,901¥ (1,049)

Net
Remeasurements
Stock
Gain (loss)
unrealized
Translationof definedacquisition
on deferredholdings gain
adjustments
benefit plansrightshedgeson securities

¥ 157

¥ 157

¥ (45)

¥

–

¥ 149

Minority
interests

Total net
assets¥ 1,701¥ 63,274

Net income

–

–

–

5,203

–

–

–

–

–

–

–

5,203

Cash dividends

–

–

–

(1,635)

–

–

–

–

–

–

–

(1,635)(310)

Purchases of treasury stock

–

–

–

–

(310)

–

–

–

–

–

–

Retirement of treasury stock

–

–

(0)

–

6

–

–

–

–

–

–

6

Other changes

–

–

–

–

–

517

(162)

97

–

47

291

790

128,989¥ 20,521¥ 18,782¥ 26,469¥ (1,353)

¥ 674

¥ (5)

¥ 52

–

¥ 196

¥ 1,992¥ 67,328

Balance at March 31, 2013¥

Net income

–

–

–

6,504

–

–

–

–

–

–

–

6,504

Cash dividends

–

–

–

(1,902)

–

–

–

–

–

–

–

(1,902)

Purchases of treasury stock

–

–

560

–

(567)

–

–

–

–

–

–

(7)

Retirement of treasury stock

–

–

(5)

–

387

–

–

–

–

–

–

382

Adjustment of retained earnings
for newly consolidated subsidiaries

–

–

–

(6)

–

–

–

–

–

–

–

(6)

Other changes

–

–

–

–

–

65

(4)

178

(2,530)

40

2,255

4

128,989¥ 20,521¥ 19,337¥ 31,065¥ (1,533)

¥ 739

¥ (9)

¥ 230

¥ (2,530)¥ 236¥ 4,247¥ 72,303

–

–

–

–

–

–

–

–

–

–

128,989¥ 20,521¥ 19,337¥ 31,595¥ (1,533)

¥ 739

¥ (9)

¥ 230

¥ (2,530)¥ 236¥ 4,247

Balance at March 31, 2014
Cumulative effects of changes
in accounting policies
Restated balance
Net income
Conversion of convertible bonds

530

530
¥ 72,833

–

–

–

7,074

–

–

–

–

–

–

–

7,074

12,938

2,578

2,578

–

–

–

–

–

–

–

–

5,156
(2,064)

Cash dividends

–

–

–

(2,064)

–

–

–

–

–

–

–

Purchases of treasury stock

–

–

–

–

(10)

–

–

–

–

–

–

(10)

Retirement of treasury stock

–

–

–

–

360

–

–

–

–

–

–

360

Adjustment of retained earnings for
newly consolidated subsidiaries

–

–

–

72

–

–

–

–

–

–

–

72

Other changes

–

–

–

–

–

1,081

5

314

690

53

7,181

9,324

141,927¥ 23,099¥ 21,915¥ 36,677¥ (1,183)¥ 1,820

¥ (4)

¥ 544

¥ (1,840)¥ 289¥ 11,428¥ 92,745

Balance at March 31, 2015

Thousand of U.S. dollars

Retainedearnings

Treasurystock(at cost)Net
unrealized
holdings gain
on securities$ 170,766 $ 160,914 $ 258,509$ (12,757)

Commonstock

Balance at March 31, 2014
Cumulative effects of changes inaccounting policies
Restated balance
Net income
Conversion of convertible bonds–

Capitalsurplus–4,410$ 170,766 $ 160,914 $ 262,919

Loss ondeferredhedgesTranslation
adjustments$ 6,150$ (75)––$ (12,757)$ 6,150

Remeasurements
Stockof definedacquisition
benefit plansrightsMinority
interests$ 1,914$ (21,054)$ 1,964$ 35,342 $ 601,673

–

–

–

–

$ (75)$ 1,914$ (21,054)$ 1,964–

Total net
assets4,410$ 35,342 $ 606,083––

58,867

–

–

–

–

–

–

–

58,86721,453

21,453

–

–

–

–

–

–

–

–

42,906(17,176)

Cash dividends––(17,176)

–

–

–

–

–

–

–

Purchases of treasury stock

–

–

–

(83)

–

–

–

–

–

–

(83)

Retirement of treasury stock

–

–

–

2,996

–

–

–

–

–

–

2,996

Adjustment of retained earnings for
newly consolidated subsidiaries

–

–

599

–

–

–

–

–

–

–

599

Other changes

–

–

–

–

8,995

42

2,613

5,742

441

59,757

77,590$ 192,219 $ 182,367 $ 305,209$ (9,844)$ 15,145$ (33)$ 4,527$ (15,312)$ 2,405

Balance at March 31, 2015

$ 95,099 $ 771,782

See the accompanying notes to the consolidated financial statements.

SENKO ANNUAL REPORT 2015 25

Consolidated Statements of Cash FlowsSENKO Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2015, 2014 and 2013

Thousands of
U.S. dollars

Millions of yen

2015

2014

2013

2015

¥ 13,054¥ 11,343¥ 9,618$ 108,629

8,856
192
(26)
–
(301)
–
(639)
(14)
–
(303)
1,213
773
(534)
(1,365)
3,577

7,606
212
(187)
–
(550)
(9,301)
6,804
84
–
(262)
1,243
(2,662)
(295)
1,924
(185)

6,738
201
(26)
77
–
(199)
–
(7)
(44)
(1,129)1,156(1,560)
(338)
526
729

73,696
1,598
(216)
–
(2,505)–(5,317)(117)–(2,521)
10,0946,433(4,444)(11,359)
29,76624,483214(1,238)(4,231)

15,774174(1,245)(4,014)

15,742216(1,148)(3,773)203,737
1,780(10,302)(35,208)

19,228

10,68911,037160,007(13,031)
431
(77)
126
(510)
9
(3,609)–(1,318)(23,608)
564
(43)
1,026
(160)
12
(2,365)–(382)(6,014)
191
(42)
111
(254)
25
–
24
(277)

(108,438)
3,587
(641)
1,048
(4,244)75(30,032)–(10,968)

Net cash used in investing activities(17,979)(24,956)(6,236)(149,613)

Cash flows from financing activities:
Increase (decrease) in short-term loans, net
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of convertible bondPayments for redemption of bondPayments for redemption of convertible bond
Repayments of finance lease obligations
Purchases of treasury stock
Sales of treasury stock
Dividends paid
Other

13,0336,800(9,404)7,000(7,040)–(2,135)(10)
360(2,075)(319)

850
20,520(9,549)
7,035
(20)
–
(2,439)(7)360(1,898)(301)(2,626)
8,870(4,378)5,000–(4,900)(2,282)(310)
0(1,635)(290)

108,455
56,586(78,256)
58,251(58,584)–(17,766)(83)
2,996(17,267)(2,655)

6,210

14,551(2,551)

51,677

Effect of exchange rate changes on cash and cash equivalents

124

100

54

1,031

Net increase in cash and cash equivalents

7,583

384

2,304

63,102

Cash and cash equivalents at beginning of year

17,667

15,691

13,354147,017

226

1,592

33

1,881

¥ 25,476¥ 17,667¥ 15,691$ 212,000

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Loss on disposals of property and equipment
Gain on sales of property and equipment
Loss on revaluation of investment securities
Gain on sales of investment securities
Decrease in accured retirement benefits
Increase (decrease) in net defined benefit liabilities
Increase (decrease) in accrued bonuses to employees
Decrease in provision for loss on disaster
Interest and dividends income
Interest expenses
Decrease (increase) in trade receivables
Increase in inventories
Increase (decrease) in trade payables
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of fixed assets
Proceeds from sales of fixed assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for purchases of non-consolidated subsidiaries
Proceeds from sales of subsidiaries
Payments for purchase of shares of newly consolidated subsidiaries
Proceeds from purchase of shares of newly consolidated subsidiary
Other

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year
See the accompanying notes to the consolidated financial statements.

26 SENKO ANNUAL REPORT 2015

Notes to the Consolidated Financial Statements
SENKO Co., Ltd. and Consolidated Subsidiaries

01

Basis of Presenting Consolidated Financial Statements

SENKO Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their accounts and records in accordance with the provisions set forth in theJapan Companies Act and the Financial Instruments and Exchange Law of Japan and in conformity with accounting principles generally accepted inJapan, which are different in several respects as to the accounting and disclosure requirements of International Accounting Standards.
The Company’s foreign subsidiaries maintain their accounts and records in conformity with generally accepted accounting principles and practices
prevailing in their respective countries of domicile.
The accompanying consolidated financial statements are prepared based on the consolidated financial statements of the Company and its subsidiaries(the“Companies”) which were filed with the Director of Kanto Local Finance Bureau as required by the Financial Instruments and Exchange Law of Japan.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan.
The translation of Japanese yen amounts into U.S. dollars is included solely for the convenience of the reader, using the exchange rate prevailingat March 31, 2015, which was ¥120.17 to US$1.00. These convenience translations should not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be, converted into U.S.dollars at this or any other rate of exchange.

02

Summary of Significant Accounting Policies(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant intercompany balances
and transactions are eliminated.
Non-consolidated subsidiaries, whose combined assets, net sales, net income and retained earnings in the aggregate are not significant inrelation to those of the consolidation with the Companies.
The investments in other insignificant unconsolidated subsidiaries and affiliates are stated at cost.

(b) Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, net of overdrafts and all highly liquid investments withmaturities of three months or less.

(c) Investment Securities
Investment securities are classified and accounted for, depending on management’s intent.
Marketable other securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value,with unrealized gains and losses, net of applicable taxes, reported in a separate component of net assets.
Non-marketable other securities are stated at cost.
The cost of other securities sold is determined by the moving-average method.
The Companies classified all securities as other securities.

(d) Allowance for Doubtful Accounts
The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Companies’ past credit loss experience or an
evaluation of potential losses in the receivables outstanding.

(e) Inventories
Purchased goods are stated principally at cost determined by the moving-average method (with book values written down on the balance sheets based on
decreased profitability of assets). Finished goods, real estate for sale and work in process are stated principally at cost determined by the specific method(with book values written down on the balance sheets based on decreased profitability of assets). Raw materials are stated at cost determined by the lastpurchase cost method (with book values written down on the balance sheets based on decreased profitability of assets). Supplies are principally stated atcost determined by the moving-average method (with book values written down on the balance sheets based on decreased profitability of assets).

(f) Property and Equipment and Depreciation (Except for Leased Assets)
Property and equipment are stated at cost. Depreciation is computed on the straight-line method for the buildings (including fixtures attached tothe buildings), structures and vehicles, and on the declining-balance method for the others, on the estimated useful lives of assets.
The principal estimated useful lives are as follows:
Buildings and structures

3 to 51 years

Machinery and equipment

3 to 17 years(g) Leased Assets
Financial leases other than those that are deemed to transfer the ownership of leased assets to the lessees are accounted for in a similar way topurchases and depreciation for lease assets is computed under the straight-line method with zero residual value over the lease term.
Financial leases other than those that are deemed to transfer the ownership of leased assets to the lessees, which commenced in fiscal years
beginning prior to April 1, 2008, are accounted for in a similar way to operating leases.
SENKO ANNUAL REPORT 2015 27

(h) Retirement Benefits
The Company and certain consolidated subsidiaries have retirement benefit plans for their employees that consist of funded and unfunded defined
benefit pension plans and a defined contribution pension plan. The Company terminated a part of the retirement lump-sum plan and transferred toa defined contribution pension plan on July 1, 2013.
Under the defined benefit pension plans (all of which are funded benefit plans), lump-sum benefits or pensions are paid based on salary and thelength of service. The Company has set up a retirement benefit trust scheme for certain defined benefit pension plans.
Under the retirement lump-sum plans (though the plans are basically unfunded, some were turned into funded plans after the setting up of aretirement benefit trust scheme), lump-sum benefits are paid based on salary and length of service.
Net defined benefit liabilities have been provided for employees’ retirement benefits, based on the amount of projected benefit obligation
reduced by pension plan assets at fair value at the balance sheet date.
Actuarial gains and losses are amortized by the straight-line method over a period of 13 years, which is within the estimated average remaining
years of service of the Companies’ employees. The amortization of such gains and losses is recognized effective the year subsequent to the year inwhich they are incurred. Prior service costs are amortized in the fiscal year in which they are incurred.
Certain consolidated subsidiaries also have a severance indemnity plan for directors and corporate auditors, whose accrued severance
indemnities are stated at 100% of the amount which is computed according to internal rules.

(i) Income Taxes
Deferred income taxes are recognized by the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are
determined based on difference of between financial reporting and the tax basis of the assets and liabilities, and are measured using the enacted
tax rate and laws that will be in effect when the differences are expected to reverse.

(j) Goodwill
Goodwill amortized over a period of 5 years by the straight-line method. If the economic useful life can be estimated, the useful life is used as theamortization period.

(k) Derivatives and Hedge Accounting
The Company and consolidated subsidiaries state derivative financial instruments at market value and recognize changes in the market value as
gain or loss unless the derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Company and consolidated subsidiaries defer recognition of gain or loss resulting from changes in the market
value of the derivative financial instrument until the related loss or gain on the hedged item is recognized. However, when forward foreignexchange contracts are used as hedges and meet certain hedging criteria, the foreign currency receivables or payables are translated at thecontracted rate. Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received
under the interest rate swap contract is added to or deducted from the interest on the asset or liability for which the swap contract was executed.

(l) Per Share Information
Basic net income per share is computed on the basis of the weighted-average number of shares of common stock outstanding for the period.
Diluted net income per share is computed on the basis of the weighted-average number of shares of common stock outstanding during eachyear after giving effect to the dilutive potential of the shares of common stock to be issued upon the conversion of convertible bonds and exerciseof stock acquisition rights.
Cash dividends per share are dividends applicable to the respective years including dividends to be paid after the end of the year.

(m) Translation of Foreign Currencies
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate at the balance sheet
date. Revenue and expenses are translated at the rate of exchange prevailing when transactions are made.
Foreign currency financial statements amounts of overseas consolidated subsidiaries are translated into Japanese yen at the exchange rate forprevailing at the respective balance sheet dates of those subsidiaries for assets and liabilities, and at the historical exchange rate for net assets.
All income and expense amounts are translated at the average rate of exchange during the fiscal year of those subsidiaries.
The resulting translation adjustments are included in net assets as translation adjustments.

(Additional Information)(Transaction of Delivering the Company’s Own Stock to Employees, etc., through Trusts)
The Company engages in transactions to deliver its own stock to the Senko Group Employees’ Stockholding (hereinafter, the “Employees’ Stock Holding”)
through the Employee Stock Ownership Plan (ESOP) Trusts (hereinafter, “ESOP Trusts”) with the aim of enhancing the welfare program for employees.
(1) Outline of the transaction
Under the ESOP Trusts plan, the ESOP Trusts, which are set up to deliver the Company’s own stock to the Employees’ Stock Holding, will makea lump purchase of the Company’s own stock, which the Employees’ Stockholding is expected to acquire over a period of four years and six
months, and transfer a certain quantity to the Employees’ Stockholding on a fixed day each month.
The Company accounts for the purchase and disposal of the Company’s stock by the ESOP Trusts as its own, since the Company guarantees
the liabilities of the ESOP Trusts.
(2) The Company’s own stock remaining in the trusts
The Company’s own stock remaining in the ESOP Trusts is posted as treasury stock under net assets at a book value recorded in the ESOP Trusts(excluding ancillary expenses). The amount and book value of the applicable treasury stock is 2,680,000 shares valued at ¥888 million ($7,389 thousand)for the previous consolidated fiscal year and 1,954,000 shares valued at ¥648 million ($5,392 thousand) for the current consolidated fiscal year.
(3) Book value of borrowings posted due to application of the gross method
Previous consolidated fiscal year: ¥1,502 million ($12,499 thousand)Current consolidated fiscal year: ¥1,126 million ($9,370 thousand)
28 SENKO ANNUAL REPORT 2015

03

Changes in Accounting Policies(Application of the Accounting Standards for Retirement Benefits)
Effective from the current consolidated fiscal year, the Accounting Standard for Retirement Benefits (ASBJ Statement No. 26, issued on May 17, 2012;
hereinafter, the “Retirement Benefits Accounting Standard”) and the Guidance on Accounting Standard for Retirement Benefits (ASBJ Guidance No.
25, issued on March 26, 2015; hereinafter, “Retirement Benefits Guidance”) have been applied with regard to the rules provided in paragraph 35 of the
Retirement Benefits Accounting Standard and in paragraph 67 of the Retirement Benefits Guidance. The Companies reviewed the calculation methods
for retirement benefit obligations and service costs, and changed the method of attribution over all periods to periods of service based on the benefit
formula on a straight-line basis, as well as the method of determining the discount rate from the use of a single discount rate to the use of a single
weighted average discount rate that reflects the estimated payment period of retirement benefits and the amount for that period.
In accordance with transitional accounting as provided in paragraph 37 of the Retirement Benefits Accounting Standard, the effects of the changes
in calculation methods for retirement benefit obligations and service costs have been reflected in retained earnings as of the beginning of the fiscal
year ended March 31, 2015.
As a result, net defined benefit liabilities decreased by ¥823 million ($6,849 thousand) and retained earnings increased by ¥530 million ($4,410 thousand) as of the
beginning of the fiscal year ended March 31, 2015. The impact of the above changes on profit and loss for the consolidated fiscal year under review is immaterial.
The effect of the above changes on per share information for the consolidated fiscal year ended March 31, 2015 is also immaterial.

(Application of the Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc.,
through Trusts)
Effective from the current consolidated fiscal year, the Practical Solution on Transactions of Delivering the Company’s Own Stock to Employees, etc.,
through Trusts (ASBJ Practical Issues Task Force No. 30, issued on March 26, 2015) has been applied. When the Company delivers treasury stock to
the trust, the Company recognizes the disposal balance. Profit or loss related to the sale of shares by the trust to the employee stock ownership plan,
dividends paid by the Company on shares held by the trust, and net charges related to the trust are included by the Company as liabilities. This changein accounting policy was applied retrospectively to past fiscal years, and the results are included in the relevant financial statements.
Consequently, compared with figures before this retroactive application, as of the end of the previous fiscal year, advances paid and deposits
received each decreased by ¥23 million ($191 thousand), treasury stock decreased by ¥440 million ($3,661 thousand), and capital surplus increased by¥440 million ($3,661 thousand).
And net income per share and diluted net income per share for the end of the previous fiscal year increased by ¥1.06 and ¥0.80, respectively.

04

Comprehensive Income

The amount of recycling and amount of income tax effect associated with other comprehensive income at March 31,2015, 2014 and 2013 consisted of
the following:Thousands of
U.S. dollars

Millions of yen

2015

2014

2013

2015

Net unrealized holdings gain on securities:
Amount recognized in the period under review
Amount of recycling¥ 2,090
(306)

¥ 646
(541)

¥ 795
77

$ 17,392(2,546)

Before income tax effect adjustments
Amount of income tax effect

1,784
(526)

105
(35)

872
(309)

14,846(4,377)Net unrealized holdings gain on securities
Gain (loss) on deferred hedges:
Amount recognized in the period under review

1,258

70

563

10,469

13

(6)

(269)

109

Before income tax effect adjustments
Amount of income tax effect

13
(5)

(6)
2

(269)
102

109
(42)

Gain (loss) on deferred hedges
Translation adjustments:
Amount recognized in the period under review

8

(4)

(167)

67

257

286

153

2,139

Remeasurements of defined benefit plans:
Amount recognized in the period under review
Amount of recycling

1,666
(555)

–
–

–
–

13,864(4,619)Before income tax effect adjustments
Amount of income tax effect

1,111
(459)

–
–

–
–

9,245
(3,820)

652

–

–

5,425

(0)

–

¥ 549

$ 18,100

Remeasurements of defined benefit plans
Share of other comprehensive income of an affiliate:
Amount recognized in the period under review
Total other comprehensive income–¥ 2,175¥ 352

SENKO ANNUAL REPORT 2015 29

05

Financial Instruments(a) Status of Financial Instruments(1) Policy on financial instruments
The Company and certain of its subsidiaries raise the funds required for capital investment plans for further growth from bank loans and theissuancee of bond. The Companies manage any temporary surplus funds using highly stable financial assets. The Companies use derivatives inorder to hedge against currency risks associated with merchandise imports as well as interest rate fluctuations risks in loans payable, and do
not engage in speculative transactions.
(2) Details of financial instruments, their risks and management systems
Trade accounts and notes receivable, which are operating receivables, are exposed to the credit risk of the customer and the Companies
operate systems to manage both payment deadlines and balances for each customer and grasp the credit status of each customer.
Investment securities are mainly the shares of companies with which the Companies have a business relationship and the shares related tocapital alliances, and these are exposed to the risk of fluctuations in market prices.
Trade accounts and notes payable, which are operating liabilities, have payment dates of within 1 year.
Trade accounts payable in foreign currencies are exposed to risks of foreign exchange fluctuations. To hedge such fluctuation risks, aconsolidated subsidiary has entered into foreign exchange forward contracts.
Short-term loans are fund procurement related mainly to operating transactions. Long-term debt are fund procurement related mainly tocapital investment.
Loans with variable interest rate are exposed to the risk of fluctuations in payable interest rates, but the Company conduct interest rate swap
transactions in order to hedge the risk of fluctuations in payable interest rates for some long-term debt among variable interest rate loans.
In addition, operating liabilities and loans payable are exposed to liquidity risk, but the Companies implement integrated fund management
through the concentration of funds in the Company, which carries out fund settlement, fund procurement, monitoring of balances and fundmanagement for the Companies.
Regarding derivatives, the Companies use foreign exchange forward contracts to hedge against foreign exchange rates fluctuation risks,
and interest rate swap transactions aimed at hedging against the risk of future interest rate fluctuations, and also reduce the cost of fundprocurement by converting variable interest rate liabilities into fixed interest rate liabilities.
Primary risks pertaining to derivative transactions include market risk and credit risk. Market risk is the risk that the value of an investment position
will decrease due to changes in market factors, and a derivative transaction is exposed to foreign exchange and interest rate fluctuation risks. The
Companies’ derivatives effectively offset the risks of assets and liabilities on the balance sheets, and there were no important transaction risks. Credit
risk is the risk that, in the case of default of the other party, the relevant party would become incapable of benefiting from the effect that would haveobtained in the future if the transaction had continued. The Companies’ derivative transaction partners are limited to financial institutions with highcredit ratings and the Companies do not foresee the occurrence of losses due to debt default on the part of transaction partners.
The Company manages derivatives based on authority-related regulations in the Business Management Division . The execution oftransactions requires the permission of the director responsible for the management of derivatives and the details of transactions are reported
to the general manager of the Business Management Division and the director after their execution.
Consolidated subsidiaries also manage derivatives based on authority-related regulations, as does the Company.
(3) Supplementary explanation of the estimated market values of financial instruments
The market value of financial instruments includes prices based on market prices and reasonably estimated prices if there are no market prices.
Because estimations of the prices incorporate fluctuating factors, application of different assumptions can in some cases change the prices.

(b) Market Value of Financial Instruments
The values on the consolidated balance sheets, market values and the differences between them are as follows. Financial instruments for which
apprehension of the market value is recognized to be extremely difficult are not included.

Millions of yen

2015Book value(1) Cash and cash equivalents(2) Trade accounts and notes receivable(3) Investment securities(4) Long-term loans receivable (including current portion)Less allowance for doubtful accounts (*1)

Market value

Difference¥ 25,684
56,602
6,543
5,106
(270)

¥ 25,684
56,602
6,543

4,836

5,373

537

Total assets¥ 93,665¥ 94,202¥ 537(1) Trade accounts and notes payable(2) Short-term loans(3) Bond(4) Convertible bond(5) Long-term debt (including current portion)(6) Lease obligations (including current portion)¥ 37,990
20,54012,0206,868
70,6675,255¥ 37,990
20,54011,816
6,658
71,238
5,026¥

Total liabilities¥ 153,340¥ 153,268¥ (72)

Derivatives (* )

¥

¥

¥

2

30 SENKO ANNUAL REPORT 2015

(4)

(4)

¥

–
–
–

–
–
(204)
(210)
571
(229)

–

Millions of yen

2014Book value(1) Cash and cash equivalents(2) Trade accounts and notes receivable(3) Investment securities(4) Long-term loans receivable (including current portion)Less allowance for doubtful accounts (*1)

Market value

Difference¥ 17,767
51,765
4,403
4,241
(239)

¥ 17,767
51,765
4,403

4,002

4,515

513

Total assets¥ 77,937¥ 78,450¥ 513(1) Trade accounts and notes payable(2) Short-term loans(3) Bond(4) Convertible bond(5) Long-term debt (including current portion)(6) Lease obligations (including current portion)¥ 36,603
7,490
12,06012,031
66,454
5,643¥ 36,603
7,490
12,076
11,59667,0895,466¥

Total liabilities¥ 140,281¥ 140,320¥ 39

Derivatives (*2)

¥

¥

¥

(9)

¥

(9)

–
–
–

–
–
16
(435)
635
(177)

–

Thousands of U.S. dollars

2015(1) Cash and cash equivalents(2) Trade accounts and notes receivable(3) Investment securities(4) Long-term loans receivable (including current portion)Less allowance for doubtful accounts (*1)

Book valueMarket value

Difference$ 213,731
471,01754,44742,490(2,247)$ 213,731
471,01754,44740,24344,711

4,468

Total assets$ 779,438$ 783,906$ 4,468(1) Trade accounts and notes payable(2) Short-term loans(3) Bond(4) Convertible bond(5) Long-term debt (including current portion)(6) Lease obligations (including current portion)$ 316,136
170,925
100,025
57,152
588,059
43,730$ 316,136
170,925
98,32755,405592,81041,824$

Total liabilities$ 1,276,027$ 1,275,427$ (600)Derivatives (*2)

$

$

$

(33)

(33)

$

–
–
–

–
–
(1,698)(1,747)
4,751(1,906)–*1 Allowance for doubtful accounts recognized in long-term loans receivable is offset.
*2 “Derivatives” shows net receivables and liabilities generated by derivative transactions, with net liabilities shown in parentheses.

Calculation of the market value of financial instruments and items relating to investment securities and derivatives● Assets(1) Cash and cash equivalents, (2) Trade accounts and notes receivable
Because these are settled in a short period of time and market values are roughly equivalent to book values, market value are calculated basedon book values.
(3) Investment securities
The market values of shares are based on stock exchange prices and the market values of bond are based on stock exchange prices and theprices offered by correspondent financial institutions. With regard to details of the investment securities by purpose, please see "Note 6."(4) Long-term loans receivable
The market values of long-term loans receivable are calculated based on the current value discounting future cash flow by a rate adding credit
risk to appropriate indices such as the yield on government bond.
● Liabilities(1) Trade accounts and notes payable, (2) Short-term loans
Because these are settled in a short period of time and market values are roughly equivalent to book values, market values are calculated
based on the book values.

SENKO ANNUAL REPORT 2015 31

(3) Bond, (4) Convertible bond
The market values of bond issued by the Company are calculated based on the current value discounting the total value of principal and interestby a rate adding the remaining period of the bond in question and credit risk.
(5) Long-term debt
The market values of long-term debt are calculated based on the current value discounting the total value of principal and interest by a rateenvisioned if a new loan of the same value was taken out. Long-term debt based on variable interest rates are subject to special processing
using interest rate swaps, and are calculated based on the current value discounting the total value of principal and interest processed as aunit with the relevant interest rate swaps by a rate estimated rationally and applied if a loan of the same value was taken out.
(6) Lease obligations
The market values of lease obligations are calculated based on the current value discounting the total value of principal and interest by a rateenvisioned if a new loan of the same value was taken out.
● Derivatives

See “Note 7”
Financial instruments for which it is extremely difficulty to determine market value

Thousands of
U.S. dollars

Millions of yen

2015
Unlisted shares2014¥ 1,8242015¥ 1,373$ 15,178

The financial instruments listed above are not included in “(3) Investment securities,” as there is no market price and determination of their market
value is extremely difficult.

(c) ‌Planned redemption amounts after the balance sheets date for monetary assets and investment securities withmaturity dates
Millions of yen

2015

Within 1 year

Over 1 year
Within 5 years

Over 5 years
Within 10 years

¥

¥

–
–
–

–
–
–

Over 10 years

Cash and cash equivalents
Trade accounts and notes receivable
Investment securities
Other securities with maturity period(1) Government bond, local government bond(2) Bond(3) Other
Long-term loans receivable¥ 25,684
56,602
–

¥

–
–
–

–
–
–
333

10
–
–
2,427

–
–
–
1,744

–
–
–
602

Total

¥ 82,619¥ 2,437¥ 1,744¥ 602
Millions of yen

2014

Within 1 year

Over 1 year
Within 5 years

Over 5 years
Within 10 years¥¥

Cash and cash equivalents
Trade accounts and notes receivable
Investment securities
Other securities with maturity period(1) Government bond, local government bond(2) Bond(3) Other
Long-term loans receivable¥ 17,767
51,765
–
–
–
–
467

10
–
–
1,693

–
–
–
1,378

–
–
–
703

Total

¥ 69,999¥ 1,703¥ 1,378¥ 703

32 SENKO ANNUAL REPORT 2015

–
–
–

–
–
–

Over 10 years
¥

–
–
–

Thousands of U.S.dollars

2015

Within 1 year

Over 1 year
Within 5 years

Over 5 years
Within 10 years

Over 10 years

$

$

$

Cash and cash equivalents
Trade accounts and notes receivable
Investment securities
Other securities with maturity period(1) Government bond, local government bond(2) Bond(3) Other
Long-term loans receivable$ 213,731
471,017
–
–
–
–
2,771

83
–
–
20,196–––
14,513

–
–
–
5,010

Total

$ 687,519$ 20,279$ 14,513$ 5,010

06

–
–
–

–
–
–

–
–
–

Investment Securities

The carrying amounts of investment securities at March 31, 2015 and 2014, consisted of the following:Thousands of
U.S. dollars

Millions of yen

2015
Marketable securities
Non-marketable securities

2014

2015

¥ 6,543444¥ 4,403501$ 54,447
3,696¥ 6,987¥ 4,904$ 58,143

The following is a summary of marketable securities included in investment securities, at March 31, 2015 and 2014.
Millions of yen

2015
Equity security
Bond and Others

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)¥ 3,238187¥ 3,12310¥ (14)(1)¥ 6,347196¥ 3,425¥ 3,133¥ (15)¥ 6,543
Millions of yen

2014
Equity security
Bond and Others

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)¥ 2,924153¥ 1,3778¥ (59)–¥ 4,242161¥ 3,077¥ 1,385¥ (59)¥ 4,403

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)$ 26,945
1,556$ 25,98883$ (117)(8)$ 52,816
1,631$ 28,501$ 26,071$ (125)$ 54,447

Thousands of U.S.dollars

2015
Equity security
Bond and Others

The proceeds from sales of , and gross realized gain and loss on , other securities for the years at March 31,2015 and 2014 are summarized as follows.
Thousands of
U.S. dollars

Millions of yen

2015
Proceeds from sales
Gross realized gain
Gross realized loss

2014
¥ 485
306
–

¥ 1,024550–

2015$ 4,036
2,546–

SENKO ANNUAL REPORT 2015 33

07

Derivatives

1. Derivative transactions to which hedge accounting is not applied
Not applicable.
2. Derivative transactions to which hedge accounting is applied(1) Currency transactions
Millions of yen

2015
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

Forward exchange contracts
Sell
U.S. dollars
Buy
U.S. dollars
Euros
Danish kroner
Chinese yen
Singapore dollar

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable

¥

7

¥–

¥ (1)

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable¥ 1,945
1,102
11
29
0

–
–
–
–
–

¥ 60
(51)
(1)
(0)
0

¥ 3,094

¥–

¥ 7

Total

Millions of yen

2014
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

Forward exchange contracts
Sell
U.S. dollars
Buy
U.S. dollars
Euros
Danish kroner
Pounds sterling
Chinese yen

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable

¥

2

¥–

¥ 0

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable¥ 3,209
507
38
2
0

–
–
–
–
–

¥ (5)
1
0
0
(0)

¥ 3,758

¥–

¥ (4)

Total

Thousands of U.S.dollars

2015
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

Forward exchange contracts
Sell
U.S. dollars
Buy
U.S. dollars
Euros
Danish kroner
Chinese yen
Singapore dollar
Total

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Trade accounts receivable

$

58

$–

$ (8)

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable$ 16,185
9,170
92
241
0

–
–
–
–

$ 499
(425)
(8)
(0)
0

$ 25,746$–$ 58

Market value is measured based on prices and other criteria presented by our correspondent financial institutions.

34 SENKO ANNUAL REPORT 2015

Market value(2) Interest rate swap
Millions of yen

2015
Hedge accounting method
Exceptional accounting
method for interest-rate
swap transactions

Type of contracts

Item hedged

Interest rate swap contracts
Floating rate receivable/
Fixed rate payable

Long-term debt

Contract
amounts

Over 1 year out ofcontract amounts¥ 38,257¥ 34,050

Market value¥ – (*)

Millions of yen

2014
Hedge accounting method
Exceptional accounting
method for interest-rate
swap transactions

Type of contracts

Item hedged

Interest rate swap contracts
Floating rate receivable/
Fixed rate payable

Long-term debt

Contract
amounts

Over 1 year out ofcontract amounts¥ 40,715¥ 35,257

Market value¥ – (*)

Thousands of U.S.dollars

2015
Hedge accounting method
Exceptional accounting
method for interest-rate
swap transactions

Type of contracts

Item hedged

Interest rate swap contracts
Floating rate receivable/
Fixed rate payable

Long-term debt

Contract
amounts$ 318,357

Over 1 year out ofcontract amounts$ 283,349

Market value$ – (*)* ‌Items treated under exceptional accounting method for interest-rate swap transactions are recorded together with long-term debt included in items hedged. Therefore, the market value of such items
is included in the market value of the relevant long-term debt.					

08Property and Equipment

At March31,2015 and 2014,property and equipment at cost consisted of the following:Thousands of
U.S. dollars

Millions of yen

Land
Buildings and structures
Machinery and equipment, vehicle and vessels
Tools, furniture and fixtures
Construction in Progress
Lease assets

09

2015

2014

2015

¥ 66,230
141,085
34,049
6,055
3,028
7,406

¥ 56,093
118,145
22,382
5,364
1,646
8,509

$ 551,136
1,174,045
283,340
50,38725,19861,629¥ 257,853¥ 212,139$ 2,145,735

Short-term Loans and Long-term Debt

At March31, 2015 and 2014, short-term loans consisted of the following:Thousands of
U.S. dollars

Millions of yen

2015
0.31% to 1.47% unsecured loans from banks¥ 20,5402014¥ 7,4902015$ 170,925

SENKO ANNUAL REPORT 2015 35

At March 31, 2015 and 2014, long-term debt consisted of the following:-

Thousands of
U.S. dollars

Millions of yen

2015
1.31% bond due 2014
0.60% bond due 2015
0.60% bond due 2016
0.80% bond due 2016
0.50% bond due 2021
Convertible bond due 2017
Convertible bond due 2018
0.20% to 4.50% loans from banks and insurance companies:
UnsecuredLess current portion

¥

2014

2015

–
–
20
5,000
7,000
–
6,869

¥ 7,000
20
40
5,000
–
5,000
7,031

$

–
–
166
41,60858,251–
57,161

70,66766,454

588,059

89,556(8,716)90,545(15,895)

745,245(72,531)¥ 80,840¥ 74,650$ 672,714

On July 20, 2012, the Company issued ¥5,000 million ($41,608 thousand) of zero coupon convertible bond with stock acquisition rights due in 2017. The
stock acquisition rights are exercisable during the period from July 6, 2017 at a conversion price of ¥394 ($3.28) per share.
On October 15, 2013, the Company issued ¥7,000 million ($58,251 thousand) of zero coupon convertible bond with stock acquisition rights due in 2018.
The stock acquisition rights are exercisable during the period from October 1, 2018 at a conversion price of ¥626 ($5.21) per share.
The annual maturities of long-term debt at March 31, 2015 are as follows:						Year ending March 31

2016
2017
2018
2019
2020
There after

Millions of yen

Thousands of
U.S. dollars¥ 8,716
16,751
16,91915,085
5,002
27,083$ 72,531
139,394
140,792
125,531
41,625
225,372

At March 31,2015, the Company has committed line and overdraft contracts with twenty one banks aggregating ¥37,250 million ($309,978 thousand).
Of the total credit limit, ¥17,630 million ($146,709 thousand) was used as the above short-term and long-term borrowing, and the rest ¥19,620 million($163,269 thousand) was unused.						

10Retirement Benefits(1) Defined benefit plana. Table for adjusting benefits obligation at the beginning and end of the year

Thousands of
U.S. dollars

Millions of yen

2015
Benefits obligation at the beginning of the year
Cumulative effects of changes in accounting policies

2014

2015

¥ 22,889(823)¥ 27,087–$ 190,472(6,849)

Restated balance

22,06627,087

183,623

Service cost
Interest costAccrued actuarial differences
Retirement benefits paid
Reversal due to the transfer to the defined contribution plan
Others

929
311
874
(918)
–
4,319

1,066
238
(286)
(1,707)(3,542)
32

7,731
2,588
7,273
(7,639)–35,941¥ 27,581¥ 22,888$ 229,517

Benefits obligation at the end of the year

36 SENKO ANNUAL REPORT 2015

b. Table for adjusting fair value of plan assets at the beginning and end of the year

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Fair value of plan assets at the beginning of the year
Expected return on plan assets
Accrued actuarial differences
Contribution by employers
Retirement benefits paid

¥ 16,084
483
2,609
1,033
–

¥ 14,552
436
850
1,046
(800)

$ 133,844
4,019
21,711
8,596–

Fair value of plan assets at the end of the year

¥ 20,209¥ 16,084$ 168,170c. ‌Table for adjusting benefits obligation, fair value of plan assets at the end of the year, and net defined benefit liabilities and net defined benefit
assets on the consolidated balance sheets							Thousands ofMillions of yen

2015

U.S. dollars

2014

2015

Benefits obligation under the funded benefit plan
Fair value of plan assets¥ 22,653(20,209)¥ 21,297(16,084)$ 188,508(168,170)

Benefits obligation under the unfunded benefit plan

2,444
4,928

5,213
1,591

20,33841,009Net amounts of assets and liabilities on the consolidated balance sheets

7,372

6,804

61,347

Net defined benefit assets
Net defined benefit liabilities

2,010
9,382

–
6,804

16,72678,073

Net amounts of assets and liabilities on the consolidated balance sheets¥ 7,372¥ 6,804$ 61,347

d. Breakdown of retirement benefit costs

Thousands of
U.S. dollars

Millions of yen

2015
Service cost

2014

2015

Expected return on plan assets
Recognized actuarial differences

¥ 929
311
(483)
556

¥ 1,066
238
(436)
1,054

$ 7,731
2,588(4,019)4,627

Retirement benefit costs for the defined benefit plan

¥ 1,313¥ 1,922$ 10,927

–

(239)

–

Interest cost

Gain associated with transfer to the defined contribution plan (*)* Gain posted as extraordinary income

e. Remeasurements of defined benefit plans (Other Comprehensive Income)The breakdown of items posted as re-measurement of defined benefit plans (before tax effect deduction) is as follows:

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Recognized actuarial differences¥ (1,112)¥–$ (9,254)

Total(1,112)–(9,254)f. Remeasurements of defined benefit plans (Accumluated Other Comprehensive Income)The breakdown of items posted as re-measurement of defined benefit plans (before tax effect deduction) is as follows:
Millions of yen

2015

2014

Thousands of
U.S. dollars

2015

Unrecognized actuarial differences¥ (2,817)¥ (3,928)$ (23,442)

Total(2,817)(3,928)(23,442)

SENKO ANNUAL REPORT 2015 37

g. Items concerning plan assets(i) Main items of plan assets
2015

2014

Bonds
StocksOthers

23%
62%
15%

29%
60%
11%

Total

100%

100%

(Note) 36% and 40% of total pension assets are in a "Retirements Benefit Trust" for the defined benefit pension plans as of March 31, 2015 and 2014,respectively.

(ii) Method of setting the expected rate of long-term return on plan assets
The Company has taken into account a forecasted allocation of plan assets and the present and expected long-term return on various assetsthat consist of the plan assets to determine the expected rate of long-term return on plan assets.
h. Items concerning the essential basis for actuarial calculation
2015
Discount rate
Defined benefit pension plans
Retirements lump-sum plans
Expected rate of return on plan assets

2014

1.64%
1.07%
3.00%

1.00%
1.00%
3.00%

(2) Defined benefit plan

Thousands of
U.S. dollars

Millions of yen

2015
Contributions to defind contribution plan by the Company and its consolidated subsidiaries

38 SENKO ANNUAL REPORT 2015

2014
¥ 503

2015
¥ 427

$ 4,186

11

Pledged Assets

The following assets were pledged as collateral as at March 31, 2015 and 2014.

Thousands of
U.S. dollars

Millions of yen

2015
Land
Buildings
VehiclesInvestment securities

2014

2015

¥ 8,0583,500
022¥ 2,225350
0
10$ 67,055
29,1250183¥ 11,580¥ 2,585$ 96,363

Obligations which were secured on the above assets were as follows:

Thousands of
U.S. dollars

Millions of yen

2015Long-term debt, including current portion

12

2014

¥ 5,845

2015
¥ 100

Contingent Liabilities

At March 31, 2015 and 2014, contingent liabilities were as follows:

Thousands of
U.S. dollars

Millions of yen

2015
Guarantees of some obligations
Buyback obligations associated with securitization of receivables
Recourse obligation associated with securitization of guarantee deposits
Trade notes endorsed

13$ 48,639

2014

2015

¥ 300
363
140
69

¥ 352
440
139
54

$ 2,496
3,021
1,165
574

¥ 872

¥ 985

$ 7,256

Net Assets

The Japan Companies Act provides that an amount equal to at least 10% of the amounts to be disbursed as distributions of earnings be appropriated to
the legal reserve until such reserve and additional paid-in capital equals 25% of the common stock account. The Japan Companies Act also stipulates
that, on condition that the sum of the additional paid-in capital and the legal reserve exceeds 25% of the common stock account, the amount of any
such excess is available for appropriation by resolution of the shareholders.
The retained earnings account in the accompanying consolidated financial statements at March 31, 2015, included the Company’s legal reserve of¥1,506 million ($12,532 thousand).

SENKO ANNUAL REPORT 2015 39

14

Stock Option Plans

The stock option plans of the Company approved by the shareholders in accordance with the Japan Companies Act at March 31, 2015 were as follows:(1) Description of stock options
Stock option

Grantees

Number of shares withwarrants granted

Date of
grant

Option priceper warrant

Shares withwarrants granted

Exerciseperiod2007 Stock options (1st)

10 directors
3 auditors

61,000 shares

July 20, 2007

¥1

Common stock

July 21, 2007June 30, 2027

2007 Stock options (2nd)

9 operating officers

18,000 shares

July 20, 2007

¥1

Common stock

July 21, 2007June 30, 2027

2008 Stock options (4th)

10 directors
3 auditors

71,000 shares

July 1, 2008

¥1

Common stock

July 2, 2008June 30, 2028

2008 Stock options (5th)

10 operating officers

22,000 shares

July 1, 2008

¥1

Common stock

July 2, 2008June 30, 2028

2009 Stock options (6th)

11 directors
4 auditors

74,000 shares

July 1, 2009¥1

Common stock

July 2, 2009June 30, 2029

2009 Stock options (7th)

12 operating officers

27,000 shares

July 1, 2009¥1

Common stock

July 2, 2009June 30, 2029

2010 Stock options (8th)

11 directors
4 auditors

90,000 shares

July 1, 2010

¥1

Common stock

July 2, 2010June 30, 2030

2010 Stock options (9th)

13 operating officers
13 assistant directors

42,000 shares

July 1, 2010

¥1

Common stock

July 2, 2010June 30, 2040

2011 Stock options (10th)

12 directors
4 auditors

102,000 shares

July 1, 2011

¥1

Common stock

July 2, 2011June 30, 2031

2011 Stock options (11th)

15 operating officers
20 assistant directors

96,000 shares

July 1, 2011

¥1

Common stock

July 2, 2011June 30, 2041

2012 Stock options (12th)

12 directors
4 auditors

107,000 shares

July 2, 2012¥1

Common stock

July 3, 2012June 30, 2032

2012 Stock options (13th)

16 operating officers
22 assistant directors

92,000 shares

July 2, 2012¥1

Common stock

July 3, 2012June 30, 2042

2013 Stock options (15th)

12 directors
4 auditors

71,000 shares

July 1, 2013

¥1

Common stock

July 2, 2013June 30, 2033

2013 Stock options (16th)

18 operating officers
26 assistant directors

82,000 shares

July 1, 2013

¥1

Common stock

July 2, 2013June 30, 2043

2014 Stock options (18th)

12 directors
4 auditors

56,000 shares

July 1, 2014

¥1

Common stock

July 2, 2014June 30, 2034

2014 Stock options (19th)

18 operating officers
32 assistant directors

74,000 shares

July 1, 2014

¥1

Common stock

July 2, 2014June 30, 2044

40 SENKO ANNUAL REPORT 2015

(2) Changes in the number of stock options
The following describes changes in the number of stock options that existed during the year ended March 31, 2015. The number of stock options istranslated into the number of shares.
Share subscription rights which have already been vested (shares):
Stock option

At March 31,
2014

Vested2007 Stock options (1st)––2007 Stock options (2nd)––2008 Stock options (4th)–2008 Stock options (5th)–2009 Stock options (6th)2009 Stock options (7th)Share subscription rights which are not yet vested (shares):

Forfeited

At March 31,
2015

At March 31,
2014

GrantedForfeited

VestedAt March 31,
2015

–

–

–

42,000–––42,000–––10,000–––10,000––––49,000–––49,000––––15,000–––15,000

–

–

–

–

–

60,000–––60,000

–

–

–

–

–

25,000–––25,0002010 Stock options (8th)

–

–

–

–

–

71,000–––71,0002010 Stock options (9th)

–

–

–

–

–

41,000–––41,0002011 Stock options (10th)

–

–

–

–

–

88,000–––88,0002011 Stock options (11th)

–

–

–

–

–

93,000–––93,0002012 Stock options (12th)

–

–

–

–

–

92,000–––92,0002012 Stock options (13th)

–

–

–

–

–

92,000–––92,0002013 Stock options (15th)

–

–

–

–

–

71,000–––71,0002013 Stock options (16th)

–

–

–

–

–

82,000–––82,0002014 Stock options (18th)–

56,000–56,000––56,000––56,0002014 Stock options (19th)–

74,000–74,000––74,000––74,00015

Exercised

Income Taxes

The Company and its subsidiaries are subject to several taxes based on income, which in the aggregate resulted in a normal effective statutory tax rates ofapproximately 35.6 % for the years ended March 31, 2015 and 38.0 % for the years ended March 31, 2014.
(1) Significant components of deferred tax assets and liabilities at March 31, 2015 and 2014 were as follows:

Thousands of
U.S. dollars

Millions of yen

2015
Deferred tax assets:
Net defined benefit liabilities
Accrued bonuses to employees
Loss carry forward
Impairment losses
Loss on revaluation of land
Accrued enterprise tax
Social insurance premium
Asset retirement obligations
Loss on revaluation of golf club membership
Other
Gross deferred tax assets
Less: valuation allowance

2014

2015

¥ 4,338
1,515
659
281
277
270
195
158
121
1,290

¥ 4,812
1,451
766
311
311
216
205
127
88
1,200

$ 36,099
12,607
5,484
2,338
2,305
2,247
1,623
1,315
1,007
10,734

9,104(1,425)

9,487(1,393)75,759(11,858)

Total deferred tax assets				Deferred tax liabilities:
Reserve for reduction in costs of fixed assets
Asset retirement obligations
Net unrealized holdings gain on other securities
Other

7,679

8,094

63,901(983)(38)(1,066)
(865)

(852)
(47)
(480)
(405)

(8,180)(316)(8,871)(7,198)Gross deferred tax liabilities				(2,952)(1,784)(24,565)

Net deferred tax assets				¥ 4,727¥ 6,310$ 39,336

SENKO ANNUAL REPORT 2015 41

(2) Reconciliation‌of the statutory effective income tax rate and the income tax rate as a percentage of income before income taxes and minority interests
at March 31, 2015 and 2014 were as follows:
2015

2014

Statutory tax rate
Adjustment:
Non-deductible expenses
Inhabitants’ per capita taxes
Non-taxable dividends income
Adjustments of deferred tax assets due to the change in statutory effective tax rates
Special deduction of income taxes
Other

35.6%

38.0%

1.4
1.8
(0.1)
3.5
(0.2)
0.0

1.5
1.9
(0.3)
1.3
(1.4)
0.0

Income tax rate as a percentage of income before income taxes and minority interests

41.9%

41.0%

(3) Adjusutments of deferred tax assets and liabilities due to the change in statutory effective tax rates
Following promulgation of the Act for Partial Amendment of the Income Tax Act (Act No. 9 of 2015) and the Act for Partial Amendment of the Local Tax Act(Act No. 2 of 2015) on March 31, 2015, the corporate tax rate, etc., will be reduced effective from the consolidated fiscal period starting on April 1, 2015.
Consequently, the statutory effective tax rate used to calculate deferred tax assets and liabilities for this consolidated fiscal period was changed from
35.6% in the previous consolidated fiscal period to 33.0%, for the temporary difference that is expected to be settled in the consolidated fiscal period
starting on April 1, 2015; and to 32.2%, for the temporary difference that is expected to be settled in the consolidated fiscal period starting on April 1, 2016.
Accordingly, deferred tax assets (after deducting deferred tax liabilities) decreased by ¥436 million ($3,628 thousand), while deferred income taxes andnet unrealized holdings gain on securities increased by ¥443 million ($3,686 thousand) and ¥102 million ($849 thousand) and remeasurements of defined
benefit plans decreased by ¥95 million ($791 thousand), respectively.

16

Business Combination Related(1) Outline of the business combinationa. Name of the acquired company and its business
Name of the acquired company
Runtec Corporation (hereinafter, “Runtec”) and Kouki Corporation (hereinafter, “Kouki”)
BusinessesTemperature controlled transportation of frozen food, chilled food, fresh food products, etc., warehousing business, automobile
maintenance business, etc.
b. Main reasons for the business combination
As a logistics information company, the Company has sought to make its entire supply chain more efficient and optimized to respond to thediversification and increasing sophistication of customer needs. In addition, the Company operates a logistics business for mass merchandisers
and retailers, such as major supermarkets, home improvement centers, drugstores, department stores, and specialty store chains, and hasreceived high ratings from its customers for its expertise in logistics.
At the same time, Runtec engages in the comprehensive logistics business, including refrigerated warehousing, etc., with temperaturecontrolled transportation as its mainstay operation.
With more than 1,000 units of cold storage trucks (including JR freezer storage containers) and cold and freezer warehouse bases covering
the Kyushu, Kansai, Kanto and Tohoku regions, Runtec has established a nationwide network in collaboration with its partner companies.
The Company decided to form a capital alliance with Runtec and acquire its stock based on the judgment that both firms would be able tofurther cultivate new customers while complementing customer needs on a mutual basis by combining the Company’s expertise in normal
temperature logistics services for mass merchandisers and retailers with Runtec’s expertise in controlled temperature logistics.
c. Date of business combination
October 2, 2014
d. Legal form of the business combination
Stock acquisitione. Name of the controlling entity after the business combination
The name remains unchanged.
f. Percentage share of voting rights acquired by the Company
29.8%
On the same day as the date of executing the stock transfer, the Company acquired a 100% stake in Kouki, a non-life insurance agency that held
a 17.9% stake in Runtec at the time. As a result, the percentage share of voting rights including indirect shareholdings is now 47.7%.

42 SENKO ANNUAL REPORT 2015

g. Main reason for the decision to acquire the company
As the payment of the consideration was designated in cash, it was decided that the Company would be the acquirer, paying the relevant
consideration in cash.
(2) Period of the acquired company’s financial results included in the consolidated statements of income
From October 2, 2014 to March 31, 2015
(3) Acquisition cost of the acquired company and breakdown

Thousands of
U.S. dollars

Millions of yen

Consideration for the acquisition
Expenses directly required for acquisition

Cash (Runtec)
Cash (Kouki)
Advisory fees, other¥ 4,1452,344
14$ 34,493$ 19,506
116¥ 6,503$ 54,115

Acquisition cost(4) Goodwill, reason for recognizing goodwill, amortization method and amortization perioda. Amount of goodwill¥830 million ($6,907 thousand)b. Reason for recognizing goodwill
Goodwill is attributable mainly to the excess earnings power expected from Runtec’s temperature controlled transportation of frozen food,chilled food, fresh food products, etc., warehousing business and automobile maintenance business.
c. Method and period of amortization of goodwill
Straight-line method over 20 years.
(5) Amounts of assets and liabilities acquired on the day of the business combination, and breakdown
Thousands of
U.S. dollars

Millions of yen

Current assets
Non-current assets¥ 9,242
20,409$ 76,908
169,834

Total assets¥ 29,651$ 246,742

Current liabilities
Long-term liabilities¥ 5,809
9,466$ 48,340
78,772

Total liabilities¥ 15,275$ 127,112(6) ‌Estimated amount and the calculation method of the impact on the consolidated statements of income for the year ended March 31, 2015, assumingthat the business combination has been completed on the first day of the fiscal year under review.
Thousands ofMillions of yen

Operating revenues
Operating income
Ordinary income
Income before income taxes
Net income

Net income per share

U.S. dollars¥ 42,455
2,808
2,923
2,965
906

$ 353,291
23,367
24,324
24,673
7,539

yen

U.S. dollars

7.05

$

¥

0.06

(Calculation method for estimated amount of impact)
Operating revenues and information on profit and loss computed on the assumption that the business combination was completed on April 1, 2014 aredefined as the estimated amount.						The relevant estimated amount is unaudited.						SENKO ANNUAL REPORT 2015 43

17Asset Retirement Obligations

Asset retirement obligations recorded in the consolidated balance sheetsa. Outline of the relevant asset retirement obligations Businesses
Of property lease contracts for the Company’s distribution centers, asset retirement obligations are recognized where restoration is required in the
fixed-term leasehold contracts and in the property lease contracts of some consolidated subsidiaries as well as expenses for removing asbestos inbuildings the Company owns.
b. Calculation method for the relevant asset retirement obligations
In calculating the amount of asset retirement obligations recorded under liabilities, an estimated period of use of 10 to 31 years and a discount rateof 0.7% to 2.5% were assumed.
c. Increase in the total amount of asset retirement obligations

Thousands of
U.S. dollars

Millions of yen

2015

2014

2015

Balance at the beginning of the term
Increase due to acquisition of a consolidated subsidiary
Increase due to acquisition of fixed assets
Reconciliation associated with the passage of time
Others

¥ 440
126
–
9
–

¥ 324
–
42
8
66

$ 3,661
1,049
–
75
–

Balance at the end of the term

¥ 575

¥ 440

$ 4,78518

Segment Information

1. Summary of reportable segment
The reportable segments of the Companies are components for which separate financial information is available and whose operating results are
regularly reviewed by the board of directors to make decisions about resource allocation and to assess performance.
The Companies divide business operations into three segments: Distribution, Trading & Commerce, and Others
Distribution mainly includes truck transport, railway forwarding, marine transport, global logistics service, integrated retail logistics (distribution
centers) etc.
Trading & Commerce mainly includes the sale of petroleum products and the trading business.
Others mainly includes data processing outsousing services, automobile maintenance and insurance agency services
2. Calculation of sales, profit (loss), and assets, etc. of each reportable segment
The accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies .”Profit (loss) of reportable segments is based on operating income or loss.
3. Sales, profit (loss), and assets, etc. of each reportable segment
Millions of yen

2015
Distribution

Trading &Commerce

Operating revenues:
Customers
Intersegment¥ 273,663
1,463¥ 120,686
11,309¥ 4,099
3,411¥ 398,448
16,183

Total operating revenues

275,126

131,995

7,510

Segment income (loss)

11,215

2,030

Segment assets

229,204

Other items
Depreciation
Increase in tangible and intangible fixed assets

7,620
11,39444 SENKO ANNUAL REPORT 2015

Others

Total

Adjustments andeliminations¥

Consolidated–(16,183)¥ 398,448–

414,631(16,183)

398,448664

13,909(259)

13,65038,11010,428

277,7427,568

285,310

267
343

274
262

8,161
11,999

695
4,395

8,856
16,394

Millions of yen

2014
Distribution

Trading &Commerce

Operating revenues:
Customers
Intersegment¥ 239,738
950¥ 90,704
11,925¥ 3,4423,436¥ 333,884
16,311

Total operating revenues

240,688

102,629

6,878

Segment income (loss)

9,922

1,938

Segment assets

192,529

Other items
Depreciation
Increase in tangible and intangible fixed assets

6,431
19,039Others

Total

Adjustments andeliminations¥

Consolidated–(16,311)¥ 333,884–

350,195(16,311)

333,884548

12,408(286)

12,122

38,2495,496

236,274

7,296

243,570

231
268

222
1,163

6,884
20,470

722
7,480

7,606
27,950Thousands of U.S. dollars

2015
Distribution

Trading &Commerce

Others

Total

Operating revenues:
Customers
Intersegment$ 2,277,299
12,174$ 1,004,294
94,108$ 34,110
28,385$ 3,315,703
134,667

Total operating revenues

2,289,473

1,098,402

62,495

Segment income (loss)

93,326

16,893

1,907,332
63,41094,816

Segment assets
Other items
Depreciation
Increase in tangible and intangible fixed assets

Adjustments andeliminations$

Consolidated–(134,667)$ 3,315,703–

3,450,370(134,667)

3,315,703

5,526

115,745(2,156)

113,589

317,134

86,7772,311,243

62,9772,374,220

2,223
2,854

2,280
2,180

67,91399,8505,783
36,57373,696
136,423(1) Products and Services Information
Information for specific products and services is not shown because the same information is in the segment information.
(2) Geographic Segment Informationa. SalesSales information by geographic segment is not shown because sales in Japan accounted for over 90% of operating revenue on the consolidated
statements of income.
b. Property, plant and equipment						Property, plant and equipment information by geographic segment is not shown because property, plant and equipment in Japan accounted forover 90% of property, plant and equipment on the consolidated balance sheets.
(3) Information by Major Clients
Information by major clients is not shown because sales to major clients accounted for less than 10% of operating revenue on the consolidated
statements of income.
(Information on impairment losses in fixed assets by business segment)(Information on impairment losses in fixed assets by business segment)
No significant items to be reported.
(Information on amortization of goodwill and amortization balance by business segment)
Millions of yen

2015

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce

¥ 117
1,867

¥ 154
2,349

Others¥ 2
95

Adjustments andeliminations

Consolidated

¥–
–

¥ 273
4,311

SENKO ANNUAL REPORT 2015 45

Millions of yen

2014
Distribution

Trading &Commerce

¥ 94
675

¥ 183
2,503

Amortization of goodwill
Balance at the end of period

OthersAdjustments andeliminations

Consolidated

¥–
–

¥ 277
3,178

¥–
–

Thousands of U.S. dollars

2015
Distribution
Amortization of goodwill
Balance at the end of period$

974
15,536

Trading &Commerce$ 1,282
19,547

OthersAdjustments andeliminations

Consolidated$––$ 2,273
35,874$ 17
791(Information on negative goodwill by business segment)
No significant items to be reported.

19

Subsequent Event(1) Payment of Dividends
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 26, 2015
Millions of yen

Cash dividends

46 SENKO ANNUAL REPORT 2015

¥ 1,272

Thousands of
U.S. dollars$ 10,585

Corporate/Stock Information
Corporate Data (As of March 31, 2015)
Date of Establishment

July 1946

Paid-in Capital¥23,098,633,751

Head Office

Umeda Sky Bldg, Tower West, 1-30, Oyodonaka 1-chome, Kita-ku, Osaka 531-6115, Japan

Fiscal Year End

March 31

Number of Domestic Offices

451

Number of Overseas Offices

34

Number of Vehicles

4,530

Number of Vessels

11

Total Warehouse Space

2,809,000 m2

Number of Employees

12,455

Stock Information (As of March 31, 2015)
Stock ListingTokyo

Stock Code9069

Authorized Shares

294,999,000

Outstanding Shares

141,927,426

Number of Shareholders

6,236

Administrator of
Shareholders’ Register

Mitsubishi UFJ Trust and Banking Corporation, Osaka Corporate Agency Division
3-6-3, Fushimi Machi, Chuo-ku, Osaka 541-8502, Japan

Independent Auditors

Ohtemae Audit Corporation

Largest Shareholders

Classification by Type of Shareholder
Number of
SharesPercentage
Held

Japan Trustee Services Bank, Ltd.
20,128,000(Trust Account)

14.18%

Asahi Kasei Corporation

11,676,726

8.23%

The Master Trust Bank of Japan, Ltd. 9,832,000

6.93%

Senko Group Employee’s Stockholding

6,907,743

4.87%

Sekisui Chemical Co., Ltd.

6,785,900

4.78%

NORTHERNTRUSTCO. (AVFC)

6,168,040

4.35%

Mitsubishi UFJ Trust and Banking
Corporation

4,252,000

3.00%

Isuzu Motors Limited

4,039,689

2.85%

Tokio Marine & Nichido Fire
Insurance Co., Ltd.

3,439,170

2.42%

Aioi Nissay Dowa Insurance Co., Ltd.

3,169,655

2.23%

Domestic financial
institutions

Individuals
and others

54,299,329

24,935,820

17.57%
Total

38.26%

15.22% 141,927,426

Foreign financial
institutions andindividuals

21,595,169

27.93%

1.02%
Securities firms

Other domestic
corporations

1,450,544

39,646,564
SENKO ANNUAL REPORT 2015 47

Domestic and Global Network
Sales Division:

Worldwide Locations:

Housing Distribution Sales Division,
Chemicals Distribution Sales Division,
Logistics Sales Division,
Fashion Logistics Sales Division

United States / Chicago, Atlanta,
Los Angeles, Kentucky
China / Dalian, Shenyang, Quingdao,
Shanghai, Suzhou, Changshu, Nantong,Hong Kong, Guangzhou, Zhang Jia Gang
Thailand / Bangkok, Chonburi, Rayong
Australia / Ingleburn
Singapore
Kazakhstan / Almaty
South Korea / Changwon

Branches:
Sapporo, Sapporo Minami, Tohoku,
Sendai Kita, Fukushima, Kanto, Kashiwa,
Kita Kanto, Ibaraki Jyutaku, Saitama,
Saitama Kita, Saitama Minami, Tokyo,
Higashi Tokyo, Kanagawa, Atsugi, Chiba,
Shizuoka, Nagoya, Komaki, Mie,
Hokuriku, Keiji, Keiji Higashi, Osaka,
Kita Osaka, Hanshin, Minami Osaka,
Okayama, Hiroshima, Kyushu, Kita Kyushu,
Minami Kyushu, Nobeoka(As of April 1, 2015)

Osaka
Headquarters

Japan
Tokyo
Headquarters

Departments:
International Business, Trading,Marine Transport

Represents Branches
and Departments

Subsidiaries(As of March 31, 2015)

Company Name

Main BusinessCompany Name

Main Business● Senko Trading Co., Ltd.

Trading & Commerce, Others● Fuji Senko Transport Co., Ltd.

Distribution, Others● AST CORPORATION

Trading & Commerce● Daito Senko Apollo Co., Ltd.

Distribution● Smile Corp.

Trading & Commerce● Tokai Senko Transport Co., Ltd.

Distribution● Marufuji Co., Ltd.

Trading & Commerce● Toyohashi Senko Transport Co., Ltd.

Distribution● Logi Solution Co., Ltd.

Distribution, Others● Mie Senko Logistics Co., Ltd.

Distribution● Senko Information System Co., Ltd.

Others● Shiga Senko Transport Co., Ltd.

Distribution, Others● Senko Moving Plaza Co., Ltd.

Distribution● Osaka Senko Transport Co., Ltd.

Distribution● Senko A Line Amano Co., Ltd.

Distribution● Tokyo Nohin Daiko West Japan Co., Ltd.

Distribution● Tokyo Nohin Daiko Co., Ltd.

Distribution● Minami Osaka Senko Transport Co., Ltd.

Distribution, Others● Inui Transport Co., Ltd.

Distribution● Hanshin Senko Transport Co., Ltd.

Distribution● Sapporo Senko Transport Co., Ltd.

Distribution● Esaka Logistics Service Co., Ltd.

Distribution● Tohoku Senko Transport Co., Ltd.

Distribution● Hanshin Transport Co., Ltd.

Distribution● Kanto Senko Transport Co., Ltd.

Distribution● Nara Senko Logistics Co., Ltd.

Distribution● Saitama Senko Transport Co., Ltd.

Distribution, Others● Okayama Senko Transport Co., Ltd.

Distribution● Senko Housing Logistics Co., Ltd.

Distribution● Chugoku Piano Transport Co., Ltd.

Distribution● Chiba Senko Transport Co., Ltd.

Distribution, Others● Sankyo Freight Co., Ltd.

Distribution● Senko Fashion Logistics Co., Ltd.

Distribution● Sanyo Senko Transport Co., Ltd.

Distribution● Kashiwa Senko Transport Co., Ltd.

Distribution● Chushikoku Logistics Co., Ltd.

Distribution

Noda Senko Logi Service Co., Ltd.

Distribution● Shikoku Reefer Transport and Warehousing Co., Ltd. Others● Kanagawa Senko Transport Co., Ltd.

Distribution● Fukuoka Senko Transport Co., Ltd.

Distribution● Atsugi Senko Transport Co., Ltd.

Distribution● Runtec Corporation

Distribution● Hokuriku Senko Transport Co., Ltd.

Distribution● Kyushu Senko Logistics Co., Ltd.

Distribution

48 SENKO ANNUAL REPORT 2015

EuropeNorth
AmericaAsia
SouthAmerica

Overseas Office
Overseas Agent

Company Name

Main Business● Minami Kyushu Senko Co., Ltd.

Distribution● Miyazaki Senko Transport Co., Ltd.
● Miyazaki Senko Apollo Co., Ltd.

Company Name

Main Business

Senko Logistics (U.S.A.) Inc.

OthersDistribution, Others

Senko (U.S.A.) Inc.

Distribution

Distribution

SK MARINE S.A.

Distribution● Senko Plantec Co., Ltd.

Distribution

Shenyang Senko Logistics Co., Ltd.

Distribution● Senko Insurance Services Co., Ltd.

Others● Dalian Tri-Enterprise Logistics Co., Ltd.

Distribution● Senko Foods Co., Ltd.

OthersQingdao Senko Logistics Co., Ltd.

Distribution

Crefeel Koto Co., Ltd.

OthersSenko Logistics (Shanghai) Co., Ltd.

Distribution● S-TAFF Co., Ltd.

Others● Shanghai Senko International Freight Co., Ltd.

Distribution

Senko Business Support Co., Ltd.

Others● Shanghai Smile Corp.

Trading & Commerce

Logi Factoring Co., Ltd.

Others● SHANGHAI SMILE PRINTING CORP.

Trading & Commerce

Senko Medical Logistics Co., Ltd.

Distribution● Guangzhou Senko Logistics Co., Ltd.

Distribution

Senko School Farm Tottori Co., Ltd.

OthersSenko International Logistics (Hong Kong) Ltd. Distribution● Fuji Label Co., Ltd.

Trading & Commerce● Takano Machinery Works Co., Ltd.

Trading & Commerce● HONG KONG SMILE CORP LIMITED

Senko (Thailand) Co., Ltd.

Trading & Commerce● Obata Co., Ltd.

Trading & Commerce

SENKO GLOBAL LOGISTICS (Thailand) CO., LTD. Distribution● Delivery Ace Co., Ltd.

Distribution● Senko International Logistics Pte. Ltd.

Distribution

PrettyPorters Co., Ltd.

Distribution

Senko Logistics Australia Pty Ltd.

Distribution

Senko Asset Management Co., Ltd.

Distribution

OthersSenko-Lancaster Silk Road Logistics LLP

Distribution● Sankyo Butsuryu Niyaku Co., Ltd.

Distribution

Japan Select LLP

Trading & Commerce● Sankyo Logistics Co., Ltd.

Distribution● KOREA SMILE CORP.

Trading & Commerce● Kouki Corporation

OthersSenko Facilities Co., Ltd.

Others●: Consolidated subsidiaries

SENKO ANNUAL REPORT 2015 49

SENKO Co., Ltd.
Umeda Sky Bldg., Tower West, 1-30, Oyodonaka 1-chome,
Kita-ku, Osaka 531-6115, Japan
URL http://www.senko.co.jp/en/