TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIOCONSULTING
TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIO
Annual Report 2006

For the year ended March 31, 2006

SENKO Co., Ltd.

Logistics of the Future Logistics of the Future Logistics

SENKO Co., Ltd.
Umeda Sky Bldg., Tower West, 1-30, Oyodonaka 1-chome, Kita-ku, Osaka 531-6115, Japan
Tel: 06-6440-5155 Fax: 06-6440-5175
URL http: //www.senko.co.jp/
Printed in Japan

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 theFirst Section of the Osaka Securities Exchange in 1975 and on the First Section of theTokyo Stock Exchange in 1990.
As of March 31, 2006, Senko boasted a national network in Japan of 251 offices, 2,477
vehicles, 17 owned and chartered ships, and 1,271,177 square meters of warehouse
space. The Company engages in wide-ranging business operations, centered ontrucking and extending to warehousing, marine transport, railway forwarding, infactory work, and multimodal international transportation.

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

Years ended March 31

These efficient integrated distribution services have an excellent reputation in themarket based on the provision of efficient transportation and distribution systems
centered on the Best Partner System that support the construction of customer
supply chain management systems. The Company’s Best Partner System is a newlogistics system that takes full advantage of information technology.

Contents

Consolidated Financial Highlights
A Message from the President
Corporate Social Responsibility
Review of Operations
Transport
Retail Distribution and Processing
Others
Product Categories Information
Financial Review
Financial Section
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Shareholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Board of Directors and Corporate Auditors, Executive Officers
Consolidated Subsidiaries and Affiliated Companies
Corporate Data

2005

2006

¥190,330¥179,501$1,620,244

Operating income

4,658

5,125

39,653

Net income

2,290

2,457

19,494

Total assets

127,353

126,041

1,084,132

Shareholders’ equity

46,81644,826

398,536¥ 20.52¥ 21.90

8.50

7.50

0.07

419.04403.78

3.57

At year end:

Per share data: (Yen and U.S. dollars)
Net income

Senko plans to take another major step forward in its transformation from an
integrated distribution services company to a logistics information company
through the even greater utilization of information technology to provide customers
with high-quality, efficient logistics solutions.

2006

For the year:
Operating revenues

Senko’s forte lies in supplying integrated distribution services, from distribution
consulting to system design and operations, that closely match customer needs.

Thousands of
U.S. dollars

Millions of yen

Cash dividends
Shareholders’ equity

$

0.17

Note : U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥117.47 to U.S.$1 on
March 31, 2006.

1
2
6
8
9
9
10
12
15
16
18
19
20
21
28
28
29

Cautionary Statement with Respect to Forward-Looking Statements
Plans and strategies concerning future business performance 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 the information currently
available to it, and thus involve a certain element of risk and uncertainty.

Operating revenues
200(Billions of yen)

Net income
2,500

Net income per share(Millions of yen)

25

2,000

20

1,500

15

1,000

10

500

5

(Yen)

150

100

50

0

02

03

04

05

06

0

02

03

04

05

05

0

02

03

04

05

06

1

A Message from the President
There was a headwind blowing in the Business
Sales Expansion and the Medium-Term BusinessBusiness Environment
In the fiscal year ended March 31, 2006, Senko attained growth in operating
revenue, but profit declined. Consolidated operating revenues rose 6.0%, to¥190,330 million, while consolidated operating income fell 9.1%, to ¥4,658
million and consolidated net income decreased 6.8%, to ¥2,290 million.
During the fiscal year under review, the Japanese economy mounted a mild
recovery supported expanding private sector capital investment,
improvement in the labor environment, and a continued upswing in thestock market. On the other hand, the high price of crude oil, the pending risein interest rates due to the end to quantitative monetary easing, and otherfactors combined to prevent the uncertainty about the future movement of
the economy from clearing up.
In the transport and distribution industry, there were signs of growth infreight volume during the fiscal year. Despite pressure on profits mounting due to the hike in crude oil
prices, against the backdrop of heightened competition the Company could not raise its prices and thebusiness climate continued.
Under these circumstances, the Company entered the second year of its new three-year medium-termbusiness plan, which is based on the theme of “The Challenge of Creative Logistics.” Under the plan,
the Company proceeded to establish and expand its distribution bases, actively built up its support for
construction of customer supply chain management (SCM) systems in the procurement logistics
business, and pursued the development of new business in the retail logistics business. At the sametime, the Company also worked to increase productivity while pursuing operating expense reductions
and strengthening its financial position through improvements in capital efficiency.
Consequently, operating revenues of the housing logistics business climbed 10.7%, to ¥49.0 billion,
generating 25.8% of total operating revenues, an increase of 1.1 percentage points from the previous
fiscal year. Operating revenues of the retail logistics business, which combines the wholesale and retailand medical treatment and pharmaceutical fields, rose 9.7% year on year, to ¥31.1 billion, accounting for16.4% of total operating revenues, up 0.6 percentage points year on year.
On the other hand, despite growth in operating revenues and benefits from cost structure reforms,
requests from customers for more efficient services, the rising price of diesel oil, increased vehicle rental
and operations costs, and start up costs of a major investment project had a large impact on profitability,with operating income and net income declining.

2

Environment, but
Plan Progressed Favorably
Outline of Medium-Term Business Plan
Founded on the value structure underpinning our slogan “The Challenge of Creative Logistics,” our
new medium-term business plan commenced in April 2004.
The main thrust of the plan’s strategy is to achieve originality and superiority in supporting the
optimization of our customers’ production and logistics activities. Senko is attaining this goal throughthe provision of logistics and information services offering “Greater Safety and Quality” and “MoreEfficient Costs.”
The plan’s strategy aims to achieve sales growth based on the development of supply chain
management (SCM) business while nurturing growth fields that will become important sources of
earnings in the future. Furthermore, we are progressing with strengthening of our financial andprofitability structures while also reinforcing our corporate social responsibility (CSR) activities.
Through these activities, we are striving to enhance the enterprise value of our entire corporate group.
Based on the implementation of the plan, Senko is targeting expansion of consolidated operating
revenues to ¥200 billion (¥190.3 billion last year), of operating income to ¥6.5 billion (¥4.7 billion lastyear), and of net income to ¥3.0 billion (¥2.3 billion last year) in the fiscal year ending March 2007.
Future Strategies
The current fiscal year is the final year of the medium-term business plan. In terms of the quantitative
goals set under the plan, I think we will achieve targeted operating revenues. However, our profitability
goals will be difficult to attain unless there is a significant change in the operating environment.
Nevertheless, to make further progress with the “offensive management” that we are targeting under the plan,we will proceed with upgrading and expanding our logistics bases nationwide. We will also proceed withbuilding a structure to better support the construction of our customers supply chain management systems. At
the same time, we will seek to develop demand for our services through the expansion of our distribution
systems. Among other efforts, we will work to increase enterprise value through low cost operations and fulfill
our corporate social responsibilities by strengthening our environmental and safety measures.
In the fiscal year under review, we established eleven distribution centers with a total of 210,000 square
meters of space. In the current fiscal year, we will add another eight distribution centers with a total of
220,000 square meters of space. The construction of these centers will be financed from internal funds of
the Company using various investment methods, including a Special Purpose Company (SPC), leaseagreements, and others.
As of July 31, 2006, three of the eight distribution centers, providing a total of 43,000 square meters ofspace, are already in operation. Among them is the Izumi North No. 2 PD Center, our largest center inthe Kansai region, which will mainly handle imports and exports and retail-related cargo. As a point of3

A Message from the President

interest, the new center has the Company’s first on-site nursery to enable employees who wish to workand raise a family, to do so.
We are planning to bring major distribution centers onstream one after the other starting in the current
fiscal year, including our largest center yet, the Urawa PD Center, and other large-scale centers such as
the AEON Tohoku RDC. The Urawa PD Center will primarily be handling the work of a major discountstore, a major apparel store, and a fixture and furniture manufacturer. The AEON Tohoku RDC was
built to upgrade the logistics function of the AEON Group in the Tohoku region.
We are also taking active steps to develop new business. Specifically, in April 2006, we established
Logistics Solution Division in Tokyo and Osaka to concentrate our administration for logistics
consulting for greater efficiency and to enter the fee-based consulting business.
In May 2005, we formed business alliances with Don Quijote Co., Ltd., and Fidec Corporation to
construct back office operations for Internet direct sales businesses. Through these alliances, we havebegun a comprehensive logistics outsourcing service for Internet direct sales businesses.
Among other measures, we are planning to further expand our IT solution BPS, which is alreadyinstalled at our major bases throughout Japan. To this end, we have introduced a supply chain event
management (SCEM) system, which began operations in April 2006. The SCEM system can integrate themanagement and monitoring of the inventories, delivery, and orders of multiple bases, increasing
business efficiency and reducing costs. In future, we plan to link up this system with IC tag data systems
to develop a global logistic business between China and Japan.
Senko is also proactively developing its overseas business. Since the second half of the fiscal year underreview, we have had a logistics business agreement with HANKYU EXPRESS INTERNATIONAL CO.,LTD., to utilize our separate strengths in joint sales activities in Japan and overseas. We also set up
several new local subsidaries during the fiscal year, including one in Shanghai for a medical equipment
manufacturer, one in Thailand to provide combined transport services mainly for chemical andelectronics products, and one in Georgia, U.S.A., to serve Japanese automotive-related companies in the
United States. As a result, we now have an international network of 9 subsidiaries and 16 bases, further
spreading the scope of our business activities.
Corporate Social Responsibility Activities
We are pursuing a structure that will ensure a high reputation for our corporate group among our customers
and in society for social responsibility (CSR). We are working toward that goal by bolstering the internalguidance and promotional organizations within the Group through thorough implementation of corporate
governance and compliance, improved safety and quality, and environmental preservation practices.
Among these efforts, Senko has made corporate governance its top priority management issue, and has

4given the board of directors an important role in this area. Meeting at least once a month, the board of
directors is responsible for monitoring compliance with matters stipulated in the law, deciding
important matters related to the management of the Company, and monitoring business execution.
The Company has adopted the auditor system by which four auditors including two external auditors
attend meetings of the board of directors, objectively monitor the directors’ execution of their duties, andcooperate with the internal audit department and the independent certified public accountant to
conduct rigorous audits of the Company and its subsidiaries.
On June 29, 2004, Senko reinforced the function of the board of directors by introducing a corporate
officer system. The purpose of the new system is to separate the business decision and monitoring rolesof the board from the business execution role of managers. In addition to clarifying the roles andresponsibilities of these two functions, the new system also aims to provide an opportunity to achieve
placement of the right person in the right job for a diverse range of the Company’s personnel.
Among other CSR activities, we have introduced an ISO 14001 environmental management system, andare promoting environmental preservation activities throughout the Company. Commencing with thefiscal year ended March 2006, we are issuing an annual environmental report.
To Our Shareholders
The Company regards distribution of to shareholders as a management priority. Our basic policy on profit
distribution is to continue to pay stable dividends that reflect underlying business performance while also
retaining the internal reserves necessary to provide for future business development and strengthenbusiness structure. We are committed to improving earnings and continuing to provide stable dividends toour shareholders. In commemoration of Senko’s 60th anniversary in July 2006, we added a commemorative
dividend of ¥1.0 per share to the year-end dividend of ¥3.75 per share. Combining the interim dividend of¥3.75 per share and the year-end dividend of ¥4.75 per share, total annual dividends amounted to ¥8.50 per
share.
As we face the challenges of the final year of our medium-term business plan, we look forward to thecontinued support of our shareholders.

June 2006

Yasuhisa Fukuda
President and Representative Director

5Corporate Social Responsibility

Relationship between Senko and the Environment
INPUT

Senko aims to contribute to and be trusted by society as well as all human beings throughEnergy conservation
facilities

Low environmentalimpact vehicles

the creation and provision of top class services based on its advanced logistics andHeavy oil
8,573 kL

Electricity
57,975,104 kWh

information technology.

Diesel oil
17,880 kL

Under the medium-term business plan that commenced in March 2005, Senko is emphasizing thestrengthening of its CSR activities by focusing the environment, quality, and safety as one of its mediumterm business strategies.

Procurement
Stage

The Company strongly recognizes its responsibility of preserving the environment of the Earth in the

Activities

activities of its logistics business. For its social mission as a logistics company, Senko is providing logistics

Areas in which the Company is directly involved withservices that contribute to environmental preservation, such as reverse-logistics and modal-shift services,

environmental issues include exhaust emissions frombased on its development of supply chain management systems.

the vehicles used in transport or at our logistics bases,

Procurementof facilities,
vehicles,ships

and the production of waste. Senko has divided its

works to improve quality and safety in its businesses.

environmental measures into such categories as

Factory
Shipment
Process

Vehicletransport

Logistics
bases,
warehouses,
etc.

Customers(Factories,
shops, etc.)

Ship
transportsound and vibration pollution, energy conservation,
Furthermore, the Company positions quality and safety as the foundations of its logistics services, andLogistics
Process

Preventing Global Warming, Greater Logistics
Efficiency, Preventing Pollution, Consideration for the

OUTPUT

Environmental Activities

Environment, and Waste Measures. Based on these

Measurescategories, the Company is implementing various

Waste

CO2 emissions
92,620 t-CO2

1. Through our environmental activities, we endeavor to reduce the impact of our business on theactivities to control the impact of its business on the

End of life
plants

Noise and vibration

End of life
vehiclesPP packaging band
Stretch Film
Unused raw materials

environment.
2. Aiming to spread environmental management throughout the Company, we continue to improve ourenvironmental preservation activities.
3. We make public environmental information on our business activities.

environment, such as converting to Eco-Drive, IdleStop, Modal-Shift systems; reducing the pollution

Waste

produced by its vehicles; preventing oil-spills by its

Waste
Packagingmaterials

ships, and recycling packaging and other materials.

4. We proactively propose services to customers that reduce environmental impact.
Environmental Promotion Organization

Head Office Administration Division

Promotional Organization

Head Office Sales Division

In December 2005, we established the Senko Environmental Management System (SEMS), which is inaccordance with ISO 14001 standards.

President

Production Division, Branches

The Company has also established an organization of environmental committees to promote SEMS andenvironmental preservation activities. Underneath the control of the President, we have formed the Clean
Energy, Energy Conservation, Green Logistics, and CSR promotional committees.

Clean Energy Promotional Committee

Senko Trading Co., Ltd.

Energy Conservation Promotional Committee

Senko Insurance Services Co., Ltd.

Green Logistics Promotional Committee

Senko Information Systems Co., Ltd.

CSR Promotional Committee

Transport-related affiliates

Environmental Committee

Operations-related affiliates

Other related affiliates

67

Review of Operations
Beginning with the fiscal year under review, the Company’s operations have been
categorized into three business segments—transport, retail distribution and processing,and others—in consideration of business content and interrelated operations.

Transport
In addition to truck transport operations, this businesssegment includes railway forwarding on trunk routes;
marine transport by container ship, mixed cargo steamer,and specialty ship; and intermodal international freight
forwarding.
The core truck transport operations have developed an
extensive nationwide network, providing our customers
with transportation and delivery services that match theirproducts and distribution structure, including exclusive,combination, route, and joint transport services.
We transport industrial raw materials, machine products,
construction materials, housing materials, agricultural
products, and consumer items and provide moving services.
In short, we handle almost any freight related to food,shelter, and clothing. We operate a diversified fleet
comprised of medium-duty trucks, heavy-duty trucks, andtractor-trailers as well as specialty transport trucks, such as
tankers, specialty loose powder carrying, and refrigerated
trucks. Senko’s diverse transportation capabilities have won
the Company high marks from manufacturers and othercustomers.

Retail Distribution and Processing
Transport Business Segment

This business segment comprises warehousing and infactory work operations.

Business segments

Operating revenues
Business segments

120(Billions of yen)

116.5
110.6 110.6

60(Billions of yen)

Senko warehouses present a very different image from thewarehouses of the past. These multifunctional distribution
centers offer services that combine the delivery to and fromthe warehouse, storage (temperature controlled), setassembly, and labeling processes as well as warehousing,
printing expiration dates, logistics history management,
adding IC tags, and other distribution services provided byadvanced warehousing management systems.

55.5
53.5

100

29.2%

50
61.2%

80

40

60

30

40

20

Retail distribution andprocessing sales composition

Transport sales composition
20
Others 1.4%

10

Others

7.5%
0

05

0

06

05

06

In-factory processing Warehousing

International freight forwarding 5.2%
Marine transport 4.8%
Railway forwarding 4.2%

28.2%

The Company's facilities provide a total storage space ofapproximately 1,270,000 square meters. With thesewarehousing bases as the core of our operations, wedevelop and install logistics information systems designed
in anticipation of diverse customer needs. These capabilities
allow us to offer a full range of logistics services that assist
our customers’ production and sales operations.

64.3%

In-factory work comprises distribution and production
processes spanning everything from loading and unloading
raw materials at our customers’ factories and warehouses towrapping, packaging, and loading finished products. These
professional distribution services give high priority to safe,
quality operations that support the management of the flowof materials and products within factories.

Truck transport

84.4 %

Operating revenues
20

Others(Billions of yen)

18.26

15.3

The others business segment includes petroleum sales;
merchandise sales; information processing and softwaredevelopment; and vehicle maintenance.

15

Business segments
10

Others sales composition
Others 0.1%
Vehicle maintenance

9.6%

7.0%
Information processing andsoftware development

10.2%

5

Petroleum
Merchandise

54.5%

28.2%

0

8

05

06

9

Review of Operations by Product Category
In addition to business segments, Senko discloses sales on

Sales compositiona product category basis determined based on groupingsof the special cargo and distribution characteristics ofcustomers. This information is provided as part of theCompany’s efforts to enable shareholders to gain a better
understanding of Senko’s business.

Housing
25.8%

Others38.8%
Petroleum-related
products and plastics

19.0%
Retaillogistics-related
products
16.4%

Retail Logistics-Related ProductsThis product category is the main pillar of Senko’s growthstrategy. The Company is acquiring new customers among
chain stores, adapting to customers’ expansion to otherlocations and regions, and pursuing outsourcing contracts
with apparel companies. Furthermore, in the medical andpharmaceutical fields, Senko also aims to be on of the top
third-party logistics (3PL) companies in the domestic market.
Some of the Company’s efforts in this area include
developing a nursing care product logistics service andcreating new logistics models for hospitals.

Housing
For a core group of three major prefabricated housing
manufacturers, Senko provides just-in-time delivery services
covering raw material procurement to delivery at the
installment location. In addition, the Company develops SCM
systems to comply with zero emissions at the installment siteand other requirements. Through this process, Senko is also
responding to the trend toward joint distribution system
within the prefabricated housing industry.

Change in sales volume of retail logistics-related products
35(Billions of yen)

es

25

t

ou

Ab

20

n

hi

wt

o
gr

im
5t

y
10

31.1

rs

ea

30

28.4

25.8
22.7

19.2
19.2
15.5

15

13.7
12.1

10

9.7

10.1

96

97

8.0

Petroleum-Related
Products and Plastics
Leveraging its nationwide business development capabilities
and its diversified transport system, Senko provides a fullrange of services, from raw material procurement andaccepting orders to delivery to end customers. The Company
can also accommodate customers moving into overseas
markets and develop SCM systems. These capabilities haveearned Senko the top share of the general-purpose plastics
transport market in Japan. The Company is also aiming tocapture the top share of the domestic lubricant oil market.

10

5

0

4.8

93

5.9

94

95

93

98

99

01

02

03

04

05

(Fiscal year)

11Financial Review

Performance
Consolidated operating revenues for the fiscal year ended March 2006
rose 6.0%, to ¥190,330 million. Although requests from customers formore efficient services had an impact on revenues during the fiscal
year, the Company’s core transport segment contributed increased
revenues to overall operating revenues.
Looking at profits, consolidated operating income decreased 9.1%, to¥4,658 million. Despite earning benefits realized from housing related
cargo and further benefits from costs structure reform, such as SG & A
expenses ratio improved 0.1 percentage points, to 4.5%, requests from
customers for more efficient services, the rising cost of fuel, start up costs
for major investments, vehicle rental, operating costs, and snow damages
offset benefits, resulting in the operating income ratio remaining declining
0.4 percentage points, to 2.5%.
In other income and expenses, a gain on the reduction in priorobligations on accrued severance indemnities was mostly offset by
impartment losses and a loss on valuation of fixed assets. Therefore,
income before income taxes and minority interests was chiefly affectedby the fall in operating income, declining 5.3% year on year, to ¥4,313
million. Moreover, although there was a decrease in the income taxes
due to the lower income before income taxes and minority interests,
deferred income taxes increased. Consolidated net income, therefore,
declined 6.8%, to ¥2,290 million, and the ratio of net income to operating
revenues improved 0.2 percentage points, to 1.2%.
Performance by Business Segment
By business segment, transport operating revenues for the fiscal year underreview rose ¥5,906 million, or 5.3%, to ¥116,516 million, generating 61.2% of

Operating revenues

total operating revenues. During the fiscal year, the Company expanded its
housing materials joint distribution center business, worked to develop
procurement cargo, and expanded and deepened its distribution of goods
for general merchandise stores and other chain stores and retailers.
The operating revenues of the retail distribution and processing businesssegment amounted to ¥55,552 million, climbing ¥2,008 million, or 3.8%
and accounting for 29.2% of total operating revenues. Contributing to
the growth in operating revenues were the opening of the AEON
Hokkaido RDC and the Sugito PD Center and the active acquisition ofcargo business wholesale and retail stores.
Operating revenues from the others business segment increased ¥2,915
million, or 19.0%, to ¥18,262 million, contributing 9.6% of total operating
revenues. Revenues increased due to the increase in sales prices in the
petroleum business during the fiscal year and revenues from expansionof the construction maintenance business.
Performance by Principal Products Category
The Company has three core product categories: housing-related,
petroleum-related and plastics, and retail logistics-related (wholesale
and retail and medical treatment and pharmaceuticals logistics fields).
For the fiscal year ended March 2006, these three core product categories
accounted for 61.2% of total operating revenues.
Accounting for 25.8% of operating revenue, housing-related products
can be separated into distribution services from the factories and supply
procurement services. During the fiscal year, factory distribution
services revenues exceeded forecast growth of 0.5%, rising 2.7%. Because
the interior housing materials distribution center network for major

Operating income

Net income

Ratio of SG&A
expenses to operating revenues

200(Billions of yen)

7,000(Millions of yen)

2,500(Millions of yen)

5(%)

Consolidated Operating Revenues by Products Handledhousing manufacturers was increased to 6 centers as of
October 2004 and 2 of 6 centers expanded in September andOctober 2005, the Company achieved favorable growth inpick-up style procurement material collecting anddistribution services with the cooperation of other major
housing manufacturers. As a result, supply procurement
services sales soared 43.0%. Overall, operating revenues fromhousing-related products increased ¥4,730 million, or 10.7%,
year on year to ¥49,010 million.

(Units: billions of yen, %)The petroleum-related and plastics product category, which
generates 19.0% of total operating revenues, experienced
growth in business volume from film manufacturers during
the fiscal year. Operating revenues, therefore, increased ¥560
million, or 1.6%, to ¥36,150 million.
The retail logistics-related product category, which
contributed 16.4% of total operating revenues, saw businessexpansion in the retail logistics field, which has recently beenrecording high growth. Contributing to the increase inbusiness were the opening of the AEON Hokkaido RDC in
July 2005, a higher volume of business from a major discountstore chain, and new business from an apparel wholesaler.
Consequently, operating revenues from retail logistics-related
products rose ¥2,760 million, or 9.7%, to ¥31,140 million.
Financial Position
Total assets at March 31, 2006 expanded compared with theprevious fiscal year, rising ¥1,312 million, to ¥127,353 million.
Current assets climbed ¥1,538 million, to ¥42,599 million. The

Operating income / net
income to operating revenues
4(%)

Net income per share

40

Year ended March 2006

Year ended March 2005

Revenues

Composition

Revenues

Composition

Change% Change

Housing

49.0

25.8

44.3

24.7

4.7

10.7

Petroleumrelated products,
and plastics

36.2

19.0

35.6

19.8

0.6

1.6

Retail logisticsrelated products

31.1

16.4

28.4

15.8

2.8

9.7

International
freight forwarding
and modal shifts

16.6

8.7

14.9

8.3

1.7

11.4

Chemicals andfertilizers

4.0

2.1

4.0

2.3

△((0.1)

(2.1)

Foods

4.0

2.1

4.1

2.3

(0.1)

(2.5)

Electronics
products andmachinery

3.5

1.8

3.8

2.1

(0.2)

(6.4)

Others

45.9

24.1

44.4

24.7

1.5

3.4

Total

190.3

100.0

179.5

100.0

10.8

6.0

Cash dividends per share(Year ended March 2006)

(Yen)

(Yen)

Operating income tooperating revenues

6,000

2,000

30

8

3

150

Composition of
products handled

25.8%

Housing

19.0%

Petroleum-related products
and plastics

16.4%

Retail logistics-related
products

38.8%

Others

5,000
1,500

20

4

4,000
100

2

1,000

3,000

10

Net income tooperating revenues

7

500

2,000

1

50
0

1,000

0

12

02

03

04

05

06

0

02

03

04

05

06

0

3

02

03

04

05

06

0

02

03

04

05

06

0

02

03

04

05

06

02

03

04

05

06

0

02

03

04

05

06

13

Report of Independent Certified Public Accountants

growth in assets could be mainly attributed to an increase in cash andcash equivalents and trade accounts and notes receivable due to the risein operating revenues.

As a result, interest-bearing debt at fiscal year-end rose ¥1,672 million, to¥39,894 million. The ratio of interest-bearing debt to total assets
increased 1.0 percentage points, to 31.3%.

Total fixed assets contracted ¥226 million year on year, to ¥84,754 million.

Shareholders' equity at fiscal year-end amounted to ¥46,816 million,
advancing ¥1,990 million from a year earlier. The rise in shareholders'equity came mainly from an increase in retained earnings as a result ofgrowth in net income. The equity ratio, therefore, improved 1.2
percentage points, to 36.8%.

Net property and equipment decreased ¥1,084 million, to ¥65,394
million. The decline can be mainly attributed to impairment losses and aloss on evaluation of fixed assets.
Investments and other assets rose ¥843 million, to ¥18,458 million. The
increase primarily resulted from increases in investment securities andinvestments in associated companies and other assets.
Major components of capital investment during the fiscal year were
investments for the expansion of the Ibaraki PD Center and for theconstruction of the Rinku Center, the Fukuoka No. 2 PD Center, theautomated warehouse for the AEON Hokkaido RDC, and the purchaseof land for the AEON Tohoku RDC.
At March 31, 2006, current liabilities totaled ¥43,036 million, increasing¥314 million from the previous fiscal year. Current liabilities were almost
the same as in the previous fiscal year despite an increase in tradeaccounts and notes payable due to the rise in operating revenues
because of the decrease in short-term loans.
Although long-term debt expanded, long-term liabilities decreased ¥995
million, to ¥37,498 million because of the large decline in accrued
severance indemnities.

Cash Flows
For the year ended March 31, 2006, net cash provided by operating activities
decreased ¥262 million, or 4.7%, to ¥5,347 million. This decline can mainly be
attributed to an increase in sales receivables and in purchase payables.
Net cash used in investing activities advanced ¥1,316 million, or 29.2%,
to ¥5,828 million from the previous fiscal year. Payments for purchasesof fixed assets were primarily responsible for this increase.
Consequently, free cash flow at fiscal year-end was minus ¥480 million,
down ¥1,577 million, from the previous fiscal year.
Net cash provided by financing activities increased ¥2,048 million fromnet cash used in the previous fiscal year, to ¥1,071 million. This increase
resulted primarily from an increase in interest-bearing debt due tocapital expenditures and to the sale of treasury stock.
As a result, cash and cash equivalents at end of year totaled ¥12,115
million, climbing ¥594 million, or 5.2% from the prior fiscal year.

To the Board of Directors of SENKO CO., Ltd.

We have audited the accompanying consolidated balance sheets of SENKO CO., Ltd. and its consolidated
subsidiaries as of March 31, 2006 and 2005, and the related consolidated statements of income, shareholders’ equity,and cash flows for the years then ended, all expressed in Japanese yen. These consolidated financial statements are
the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, theconsolidated financial position of SENKO CO., Ltd. and its consolidated subsidiaries as of March 31, 2006 and 2005,
and the consolidated results of their operations and their cash flows for the years then ended in conformity withaccounting principles generally accepted in Japan.
Supplemental Information
As described in Note 3, effective April 1, 2005, the Company and its consolidated subsidiaries adopted a new
accounting standard for impairment of fixed assets.
The United States dollar amounts shown in the accompanying consolidated financial statements have been translated
solely for convenience. We have reviewed this translation and, in our opinion, the consolidated financial statements
expressed in Japanese yen have been translated into United States dollars on the basis described in Note 1.

Total assets

200

Total shareholders’equity / equity ratio(Billions of yen)

(%)

35

6

50

30

5

45

25

4

40

20

3

35

15

2

55

150

(Billions of yen)

ROE / ROA
(%)

ROA

100

30

10

1

25

5

0

50

0

14

02

03

04

05

06

0

02

03

04

05

06

0

Ohtemae Audit Corporation
Osaka, Japan
June 29, 2006

ROE

02

03

04

05

06

15

Consolidated Balance Sheets
SENKO Co., Ltd. and Consolidated Subsidiaries
March 31, 2006 and 2005

Thousands of
U.S.dollars

Millions of yen

ASSETS

2005

2006

LIABILITIES AND SHAREHOLDERS' EQUITY

2006

Current assets:

Thousands of
U.S.dollars

Millions of yen

2006

2005

Short-term loans (Note 6)¥9,950¥9,750$84,702

Current portion of long-term debt (Note 6)

5,748

6,953

48,93230

5254

17,384

16,696

147,987

2006

Current liabilities:¥12,115

Cash and cash equivalents¥11,521$103,133

Trade accounts and notes receivable162

1,524

26,42026,031

224,908

(16)

(102)

(136)

771

632

6,563

Accrued expenses

5,040

2,504

42,905

1,447

1,350

12,318

Accrued income taxes

1,060

1,387

9,024

Other current liabilities

3,824

5,427

32,55343,03642,722366,357

179

Non-consolidated subsidiaries and affiliates
OthersLess allowance for doubtful accounts
Inventories
Deferred tax asset (Note 12)
Short-term loans to non-consolidated

Trade accounts and notes payable––Non-consolidated subsidiaries and affiliates
Others—7—Prepaid expenses and other current assets

1,683

1,460

14,327Long-term debt, less current portion (Note 6)

24,19721,519205,985

Total current assets

42,59941,061

362,637

Accrued severance indemnities (Note 7)

9,997

14,417

85,102Other long-term liabilities

3,304

2,557

28,126

Total liabilities

80,534

81,215685,5703—

26

18,296

18,296

155,750

Capital surplus

16,55916,508140,964Retained earnings

11,60910,15998,825

385

158

3,278

(33)

(295)

(281)

46,81644,826

398,536¥127,353¥126,041$1,084,132

subsidiaries and affiliates

Total current liabilities

891

599

7,585

1,898

1,416

16,157

118,694

120,380

1,010,420

Contingent liabilities (Note 9)Less accumulated depreciation(53,300)(53,902)(453,733)

Shareholders' equity (Note 11):

Net property and equipment

65,394

66,478556,687

Common stock:

Deferred tax assets (Note 12)

5,994

6,931

51,026

Authorized––294,999,000 shares

Other assets

10,577

9,556

90,040Issued––111,746,167 shares

Investments in and long-term loans to non-consolidated subsidiaries and affiliates
Investment securities (Notes 4 and 8)
Property and equipment, at cost (Notes 5 and 8)

Minority interests

Unrealized holding gain on securities
Less treasury stock, at cost
(86,526shares in 2006 and 804,414 shares in 2005)
Total shareholders’ equity
Total assets¥127,353¥126,041$1,084,132

See the accompanying notes to the consolidated financial statements.

16

Total liabilities and shareholders' equity

See the accompanying notes to the consolidated financial statements.

17

Consolidated Statements of Income

Consolidated Statements of Shareholders’ Equity

SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2006 and 2005

Operating revenues

SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2006 and 2005

Thousands of
U.S.dollars

Millions of yen

2006

2005

¥190,330¥179,501$1,620,244

177,038

166,194

1,507,091

8,634

8,182

73,500185,672

174,376

1,580,591

4,658

5,125

39,653

Common stock

111,746¥18,296¥16,387

Net income——

Cash dividends—

Bonuses to directors and statutory auditors

Unrealized
holding gain
on securities

Treasury stock¥8,577¥82¥(181)

—

2,457

—

—

—

—

(832)

—

—

—

—

—

(43)

—

—

Unrealized holding gain on securities

—

—

—

—

76

—

Treasury stock

—

—

121

—

—

(114)

111,746¥18,296¥16,508¥10,159¥158¥(295)Net income

—

—

—

2,290

—

—

Cash dividends

—

—

—

(825)

—

—

Bonuses to directors and statutory auditors

—

—

—

(29)

—

—

for a newly consolidated subsidiary

—

—

—

14

—

—

Unrealized holding gain on securities

—

—

—

—

227

—

Treasury stock

—

—

51

—

—

262

111,746¥18,296¥16,559¥11,609

¥385

¥(33)

Unrealized
holding gain
on securities

Treasury stock

Operating costs and expenses:
Operating costs of revenues
Selling, general and administrative expenses
Operating income
Other income (expenses):
Interest and dividend income

232

157

1,975

Interest expenses

(497)

(467)

(4,231)

Impairment loss

(2,122)—(18,064)

Amortization of prior service costs

3,804

—

32,383

Loss on revaluation of property(1,537)—(13,084)

(225)

(262)

(1,916)

(345)

(572)

(2,937)

4,313

4,553

36,716

Others, net
Income before income taxes and minority interests
Income taxes (Note12):Current

1,324

2,102

11,272

Deferred

699

(6)

5,950

2,023

2,096

17,222

(0)

—

(0)

¥2,290¥2,457$19,494

Minority interests in gain of a consolidated subsidiary
Net income

Millions of yen

Thousands
Number ofshares ofcommon stock
issued2006

Balance at April 1, 2004

Balance at March 31, 2005

Net income
Cash dividends applicable to the year

Yen

U.S.dollars¥20.52¥21.90

$0.17

8.50

7.50

0.07

Retainedearnings

Adjustment of retained earnings

Balance at March 31, 2006

Thousands of U.S. dollars

Common stock

Per share of common stock

CapitalsurplusCapitalsurplusRetainedearnings$155,750$140,529$86,482$1,345$(2,511)Net income——

19,494——

Cash dividends——(7,023)——

Bonuses to directors and statutory auditors

—

—

(247)

—

—

—

—

119

—

—

Unrealized holding gain on securities

—

—

—

1,933

—

Treasury stock

—

435

—

—

2,230

$155,750$140,964$98,825$3,278$(281)

Balance at March 31, 2005

Adjustment of retained earnings for a newly
consolidated subsidiary

Balance at March 31, 2006

See the accompanying notes to the consolidated financial statements.

18

See the accompanying notes to the consolidated financial statements.

19

Notes to the Consolidated Financial Statements

Consolidated Statements of Cash FlowsSENKO Co., Ltd. and Consolidated Subsidiaries

SENKO Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2006 and 2005

Thousands of
U.S.dollars

Millions of yen

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Impairment losses
Loss on revaluation of property
Loss on disposals of property and equipment
Loss on sale of property and equipment
Decrease in allowance for employee retirement
Increase (decrease) in accrued bonuses to employees
Interest and dividends income
Interest expense
Increase in trade receivables
Decrease (increase) in inventories
Increase in trade payables
Other
Sub totalInterest and dividend 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
Proceeds from sales of subsidiary
Payments for purchases of non-consolidated subsidiaries
Other
Net cash used in investing activities
Cash flows from financing activities:
Increase (decrease) in short-term loans, net
Proceeds from long-term debt
Repayment of long-term debt
Purchases of treasury stock
Sales of treasury stock
Dividends paid
Other
Net cash provided (used in) by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net increase in cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year

2006

2005

¥4,313¥4,553$36,716

2,860
2,122
1,537
320
––
(4,420)
158
(232)
497
(623)
(139)
1,219
(278)
7,334
168
(500)
(1,655)
5,347

2,854
––
––
128
24
(311)
(69)
(157)
467
(109)
33
1,367
(349)
8,431
159
(463)
(2,518)
5,609

24,34718,06413,084
2,724––(37,627)
1,345(1,975)4,231(5,303)(1,183)
10,377(2,367)62,433
1,430(4,256)(14,089)
45,518(4,793)
211
(239)
178
––
(45)
(1,140)(5,828)(3,397)
136
(415)
142
100
(50)
(1,028)(4,512)(40,802)
1,796(2,035)
1,515
––
(383)
(9,705)(49,614)200
8,450(6,978)
(675)
988
(825)
(89)
1,071
3
593
11,521
1¥12,115

(590)
2,950
(2,447)
(624)
631
(833)
(64)
(977)
1
121
11,400––¥11,521

1,703
71,933(59,402)(5,746)
8,411(7,023)
(758)
9,118
26
5,048
98,076
9$103,133

2006

1. 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 forthin the Commercial Code of Japan (the ”Code”) and the Securities and Exchange Law and in conformity with accounting principles and practices
generally accepted in Japan, which are different from the accounting and disclosure requirements of International Accounting Standards.
The accompanying consolidated financial statements are prepared based on 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 Securities and Exchange Law.
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 the Japanese yen amounts into U.S. dollars is included solely for the convenience of the reader, using the exchange rate
prevailing at March 31, 2006, which was ¥117.47 to US$1.00. These convenience translations should not be construed as representations that theJapanese yen amounts have been, could have been, or could in the future be, converted into U.S.dollars at this or any other rate of exchange.
2. 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.
Adjustment for consolidated account, at the time of acquisition, between the cost and underlying net equity of investments in consolidated
subsidiaries are amortized over a five-year period on straight-line method.
The Company has adopted the equity method of accounting for investments in a significant affiliate. The investments in other insignificant
unconsolidated subsidiaries and affiliate are stated at cost.
(b) 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,
which unrealized gains and losses, net of applicable taxes, reported in a separate component of shareholders’ equity.
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 oran evaluation of potential losses in the receivables outstanding.
(e) Inventories
Purchased goods are stated at cost determined by the first-in first-out method. Supplies are stated at cost determined by the moving-average
cost method. Real estate for sale and work in process are stated at cost determined by the specific cost method.
(f) Property and Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is principally computed at rates based on the estimated useful lives of assets using thedeclining-balance method except for buildings for which the straight-line method is applied.
The principal estimated useful lives are as follows:
Buildings and structures
3 to 60 years
Machinery and equipment
3 to 17 years(g) Accrued Severance Indemnities and Pension Plan
The Company and certain domestic consolidated subsidiaries have retirement benefit plans for their employees. Such benefits are provided
through the unfunded lump-sum severance indemnity plan and the funded noncontributory pension plan.
The amount of retirement benefits are determined on the basis of length of service, basic salary and certain other factors at the time oftermination of employment.
Allowance for retirement benefits has 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 14 years, which is within the estimated averageremaining years of service of the Companies’ employees. The amortization of such gains and losses is recognized effective the year subsequent to
the year in which they are incurred. Prior service costs are amortized in the fiscal year in which they are incurred.
The Company and 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.
(h) 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 theenacted tax rate and laws that will be in effect when the differences are expected to reverse.

See the accompanying notes to the consolidated financial statements.

20(i) Appropriation of Retained Earnings
Cash dividends and bonuses to directors and corporate auditors are recorded in the financial year in which a proposed appropriation ofretained earnings is approved by shareholders.

21

(j) Leases
In Japan finance leases other than those that are deemed to transfer the ownership of the leased assets to lessees are accounted for by a method
similar to that applicable to ordinary operating leases.
(k) Per Share information
Basic net income per share is computed based on the net income available for distribution to shareholders of common stock and the weightedaverage number of shares of common stock outstanding for the period.
Diluted net income per share for the year ended March 31, 2006 is not disclosed because there was no dilution.
Cash dividends per share are dividends applicable to the respective years including dividends to be paid after the end of the year.
(l) 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.

3. Change of accounting policies
Effective April 1, 2005 the Company and its consolidated subsidiaries adopted the new Japanese accounting standard for impairment of fixed
assets. The new standard requires that the book value of fixed assets should be devalued to the recoverable amount. The effect of this adoption
was to decrease income before income taxes and minority interests by ¥2,028 million ($17,264 thousand).

4. Investment Securities:
The carrying amounts of investment securities at March 31, 2006 and 2005, consisted of the following:—
Millions of yen
2006
2005
¥ 1,364
¥ 873
534
543
¥ 1,898¥ 1,416

Marketable securities
Non-marketable securities

Thousands of
U.S.dollars
2006$ 11,611
4,546$ 16,157

Acquisitioncost$ 5,993
93$ 6,0862006
Equity security
Bonds and Others

2006
Equity security
Bonds and Others

2005
Equity security
Bonds and Others

Book
value
(Market value)$ 11,518
93$ 11,611

Proceeds from sales of other securities were ¥178million (US$1,515 thousand) and ¥142million for the years ended March 31, 2006 and 2005,
respectively. The gross realized gains and losses on those sales were ¥44million (US$375 thousand) and ¥3 million (US$26 thousand), respectively,
for the year ended March 31,2006. The gross realized gains and losses on those sales were ¥19million and ¥1million for the ended March 31,2005.

5. Property and Equipment:
At March31, 2006 and 2005, property and equipment at cost consisted of the following:—

Land
Buildings and structures
Machinery and equipment, vehicle and vessels
Tools, furniture and fixtures
Construction in ProgressMillions of yen
2006
2005
¥ 32,976¥ 33,799
67,111
67,327
15,172
15,902
3,261
3,289
174
63
¥ 118,694¥ 120,380

Thousands of
U.S.dollars
2006$ 280,718
571,303
129,156
27,761
1,482$ 1,010,420

Millions of yen
2006
2005
¥ 9,950¥ 9,750

Thousands of
U.S.dollars
2006$ 84,702

Millions of yen
2006
2005
¥ 7,000¥ 7,000

Thousands of
U.S.dollars
2006$ 59,590

6. Short-term Loans and Long-term Debt:
At March 31, 2006 and 2005, short-term loans consisted of the following:—

0.05% to 0.73% unsecured loans from banks
The following is a summary of marketable securities included in investment securities, at March 31, 2006 and 2005.

Thousands of U.S.dollars
Gross
Gross
unrealized
unrealized
gains
losses$ 5,576$ (51)
0(0)$ 5,576$ (51)At March 31, 2006 and 2005, long-term debt consisted of the following:—

Acquisition
cost
¥ 704
11
¥ 715

Millions of yen
Gross
Gross
unrealized
unrealized
gains
losses
¥ 655
¥ (6)
0
(0)
¥ 655
¥ (6)

Book
value
(Market value)¥ 1,35311¥ 1,364

Acquisition
cost
¥ 594
11
¥ 605

Millions of yen
Gross
Gross
unrealized
unrealized
gains
losses
¥ 271
¥ (3)
—
(0)
¥ 271
¥ (3)

Book
value
(Market value)
¥ 862
11
¥ 873

0.92% bonds due 2009
0.62% to 2.12% loans from banks and insurance companies:
Unsecured

22,94529,945(5,748)¥ 24,197

Less current portion

21,47228,472(6,953)¥ 21,519

195,327
254,917(48,932)$ 205,985

The annual maturities of long-term debt at March 31, 2006 for the next five years are as follows:—
Year ending
March 31
2007
2008
2009
2010
2011
There after

Millions of yen¥ 5,748
3,902
4,590
7,480
5,525
2,700

Thousands of
U.S.dollars$ 48,932
33,21739,074
63,67647,033
22,985At March 31,2006, the Company has committed line and overdraft contracts with twelve banks aggregating ¥25,350 million ($215,800thousand).
Of the total credit limit, ¥7,750 million ($65,974thousand) was used as the above short-term and long-term borrowing, and the rest¥17,600 million($149,825thousand) was unused.

22

23

7. Accrued Severance indemnities:
The following table sets forth the changes in benefit obligation, plan assets and funded status of the Company and its certain subsidiaries at
March 31, 2006 and 2005.
Thousands ofMillions of yen
U.S.dollars
2006
2005
2006
Benefit obligation at the end of year
¥ (25,155)¥ (29,494)$ (214,140)
Fair value of plan assets at the end of the year
18,474
12,343
157,266
Funded status:
Benefit obligation in excess of plan assets(6,681)(17,151)(56,874)
Unrecognized actuarial loss
(3,316)2,734(28,228)
Accrued severance indemnities recognized in the consolidation balance sheets¥ (9,997)¥ (14,417)$ (85,102)

9. Contingent Liabilities:
At March 31, 2006 and 2005, contingent liabilities were as follows:

Millions of yen
2006
2005
¥ 74
¥ 605
9
21
469
509
¥ 552
¥ 1,135

Guarantees of installment obligation and lease obligation for the third parties
Trade notes discounted
Buyback obligations associated with securitization of receivables

Thousands of
U.S.dollars
2006
$ 630
77
3,993
$ 4,700

10. Lease:
At March 31, 2006 and 2005, financing lease transactions whose ownership are not to be transferred were as follows:
Thousands of
U.S.dollars
2006

Severance and pension costs of the Company and its certain subsidiaries included the following components for the year ended March 31, 2006 and 2005.

Service cost
Interest cost
Expected return on plan assets
Amortization:
Recognized actuarial loss
Prior service costs
Net periodic benefit cost

Millions of yen
2006
2005
¥ 1,184¥ 1,378
627
717
(361)
––
277
(3,804)¥ (2,077)¥ (2,077)

263––¥ 2,358¥ 2,358

Thousands of
U.S.dollars
2006$ 10,079
5,338(3,073)
2,358(32,383)$ (17,681)$ (17,681)

Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2006 and 2005 is as follows:

Method of attributing benefit to periods of service
Discount rate
Expected rate of return on fund assets
Amortization period of prior service costs
Amortization period of actuarial losses

2006
Straight-line basis
2.5%
3.0%
1 year14 yearMachinery and equipment
Tools, furniture and fixtures

Machinery and equipment
Tools, furniture and fixtures

2005
Straight-line basis
2.5%
0.0%
1 year14 years

8. Pledged Assets:
The following assets were pledged as collateral as at March 31, 2006 and 2005—

24

Book value$ 53,154
65,889$ 119,043

Millions of yen
2005
Accumulated
amortization¥ 4,434
7,057¥ 11,491

Book value¥ 5,426
7,426¥ 12,852

Millions of yen
2006
2005
¥ 4,608¥ 4,552
10,366
8,883¥ 14,974¥ 13,435

Thousands of
U.S.dollars
2006$ 39,227
88,244$ 127,471

At March 31, 2006 and 2005, obligations under noncancelable operating leases were as follows:
Millions of yen
2006
2005
¥ 2,393¥ 2,548
1,013
1,130
6
1
10
10
¥ 3,422¥ 3,689

Thousands of
U.S.dollars
2006$ 20,371
8,623
51
85
$ 29,130

Millions of yen
2006
2005
¥ 40
¥ 60

Thousands of
U.S.dollars
2006
$ 341

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

Long-term debt, including current portion

Purchase
Cost¥ 9,861
14,482¥ 24,343

Book value¥ 6,244
7,740¥ 13,984

At March 31, 2006 and 2005, obligations under finance leases were as follows:

Due within one year
Due after one year

Land
Buildings
VehiclesInvestment securities

Purchasecost¥ 11,518
14,587¥ 26,105Millions of yen
2006
Accumulated
Accumulated
depreciation
impairment loss
¥ 4,957
¥ 317
6,640
207
¥ 11,597¥ 524

Due within one year
Due after one year

Millions of yen
2006
2005
¥ 371
¥ ––
5,242
––
¥ 5,613¥ ––Thousands of
U.S.dollars
2006$ 3,158
44,624$ 47,782

11. Shareholders’ equity:
The Code 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 Code also stipulates that, on condition thatthe sum of the additional paid-in capital and the legal reserve exceeds 25% of the common stock account, the amount of any such excess isavailable for appropriation by resolution of the shareholders.
The retained earnings account in the accompanying consolidated financial statements at March 31, 2006, included the Company’s legal reserveof ¥1,506 million ($12,820 thousand).

25

Millions of yen

12. Income Taxes:
The Company and its domestic subsidiaries are subject to several taxes based on income, which in the aggregate resulted in a normal effective
statutory tax rates of approximately 40.6% for the years ended March31, 2006 and 2005.

Millions of yen
2006
2005

Thousands of
U.S.dollars
2006¥ 5,698
1,084
822
351
––
106
104
162
471
8,798
(80)
8,718

¥ 7,126
1,014
––
351
113
157
139
154
416
9,470
(30)
9,440

$ 48,506
9,228
6,998
2,988
––
902
885
1,379
4,010
74,896(681)
74,215

(989)
(264)
(187)
(1,440)¥ 7,278

(991)
(109)
(217)
(1,317)¥ 8,123(8,419)(2,247)(1,592)(12,258)$ 61,957(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, 2006 and 2005 were as follows:

Statutory tax rate
Adjustment:
Non-deductible expenses
Inhabitants’ per capita taxes
Non-taxable dividend income
Other
Income tax rate as a percentage of income before income taxes and minority interests

OthersTotal

a. Operating revenues and operating income:Customers¥110,610Intersegment
2,848
Total operating revenues
113,458
Operating costs and expenses
110,861
Operating income
2,597¥53,544
3,351
56,89554,685
2,210¥15,347
7,805
23,152
22,790362

b. Assets, depreciation and capital expenditures;
Assets¥40,238
Depreciation
1,046
Capital expenditures
1,185¥68,099
1,679
1,514

¥5,431
71
72

Transport(1) Significant components of deferred tax assets and liabilities at March 31, 2006 and 2005 were as follows:

Deferred tax assets:
Accrued severance indemnities to employees
Accrued bonuses to employees
Impairment losses
Loss on revaluation of land
Accrued severance indemnities to directors and corporate auditors
Loss on revaluation of golf club membership
Accrued enterprise tax
Social insurance premium
Other
Gross deferred tax assets
Less: Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for reduction in costs of fixed assets
Net unrealized holding gains on available-for-sale securities
Other
Gross deferred tax liabilities
Net deferred tax assets

2005
Retail Distribution
and Processing

2006
40.6%

2005
40.6%

2.3
3.6
(1.4)
1.8
46.9%

2.1
3.3
(0.7)
0.7
46.0%

Elimination or
Corporate

Consolidated¥179,501
14,004
193,505
188,336
5,169¥—(14,004)(14,004)(13,960)(44)¥179,501—
179,501
174,376
5,125¥113,768
2,796
2,771

¥12,27358
3¥126,041
2,854
2,774

Elimination or
Corporate

Consolidated

Thousands of U.S. dollars

2006
Retail Distribution
and Processing

OthersTotal

a. Operating revenues and operating income:Customers$991,879
Intersegment
25,887
Total operating revenues
1,017,766
Operating costs and expenses
997,114
Operating income$20,652$472,904
30,561
503,465
487,844$15,621$155,461
85,324
240,785
237,056$3,729$1,620,244
141,772
1,762,016
1,722,014$40,002$—(141,772)(141,772)(141,423)$(349)$1,620,244—
1,620,244
1,580,591$39,653b. Assets, depreciation and capital expenditures;
Assets$350,660
Depreciation
8,479
Impairment losses—
Capital expenditures
9,679$583,204
14,51418,01333,498$58,449
877
—
1,243

$992,313
23,87018,01344,420$91,819
477
51
2,384

$1,084,132
24,34718,06446,804

Transport

14. Subsequent Event
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 29, 2006

13. Segment information
Business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2006 and 2005 issummarized as follows:

Cash dividends
Bonuses to directors and statutory auditors

Millions of yen
¥ 530
26

Thousands of
U.S.dollars$4,512
221

Millions of yen

2006
Transport

a. Operating revenues and operating income:Customers¥116,516
Intersegment
3,041
Total operating revenues
119,557
Operating costs and expenses
117,131
Operating income¥2,426

Retail Distribution
and Processing

OthersTotal¥55,552
3,590
59,14257,307¥1,835¥18,262
10,02328,28527,847¥438¥6,866103—
146

b. Assets, depreciation Impairment losses and capital expenditures;
Assets¥41,192¥68,099
Depreciation
996
1,679
Impairment losses—
2,116
Capital expenditures
1,185
1,514

26

Elimination or
Corporate

Consolidated¥190,330
16,654
206,984
202,285¥4,699¥—(16,654)(16,654)(16,613)¥(41)¥190,330—
190,330
185,672¥4,658¥116,567
2,804
2,116
5,218

¥10,78656
6
280¥127,353
2,860
2,122
5,498

27

Board of Directors and Corporate Auditors, Executive Officers (As of June 29, 2006)

Chairman and Representative Director
Hiroshi Susumago

President and Representative Director
Yasuhisa Fukuda

Corporate Data (As of June 30, 2006)

Date of Establishment:

July 1946

Paid-in Capital:¥18,295,643,751

Authorized Shares:

294,999,000

Outstanding Shares:

111,746,167

Number of Shareholders: 8,984
Chairman and Representative Director
Hiroshi Susumago
President and Representative Director
Yasuhisa Fukuda
Directors, Managing Executive Officers
Tadao Ito
Takeyo Teduka
Kengo Tanaka

Full-time Corporate Auditors
Kunihiro Sanada
Kazuo Saga
Yutaka Kakuyama

Stock Listing:Corporate Auditor
Hiroshi Itawaki

Transfer Agent:

Executive Officers
Toshinori Mine
Shuji Wada
Shigeo Kimura
Masuo Tanaka

Osaka Securities Exchange
Mitsubishi UFJ Trust and Banking Corporation
4-5, Marunouchi, 1-chome Chiyoda-ku, Tokyo 100-8212, Japan

Senior Executive Officers
Mitsuru Muramoto Katsuhiko Miyagawa
Hisao Takahashi

Directors, Executive Officers
Tetsuo Hatano
Sadayuki Wada
Yutaka Toyama

Tokyo Stock Exchange

Network:(As of July 1, 2006)

Yasushi Morimoto
Kazuhiro Yamanaka
Takao Morita

Represents Branches
and Departments

Consolidated Subsidiaries and Affiliated Companies (As of March 31, 2006)

28

Company Name

Paid-in Capital

Equity Ownership Location

SENKO TRADING Co., Ltd.

¥300 million

100.0%Tokyo

SENKO INFORMATION SYSTEM Co., Ltd.
SENKO MOVING PLAZA Co., Ltd.
SAPPORO SENKO TRANSPORT Co., Ltd.
TOHOKU SENKO TRANSPORT Co., Ltd.
KANTO SENKO TRANSPORT Co., Ltd.
SAITAMA SENKO TRANSPORT Co., Ltd.
CHIBA SENKO TRANSPORT Co., Ltd.
FUJI SENKO TRANSPORT Co., Ltd.
TOKAI SENKO TRANSPORT Co., Ltd.
HOKURIKU SENKO TRANSPORT Co., Ltd.
SHIGA SENKO TRANSPORT Co., Ltd.
OSAKA SENKO TRANSPORT Co., Ltd.
CHUSHIKOKU LOGISTICS Co., Ltd.
SANKYO FREIGHT Co., Ltd.
SHIKOKU REEFER TRANSPORT AND WAREHOUSING Co., Ltd.
SANYO SENKO TRANSPORT Co., Ltd.
FUKUOKA SENKO TRANSPORT Co., Ltd.
MINAMI KYUSHU SENKO Co., Ltd.
MIYAZAKI SENKO TRANSPORT Co., Ltd.
ASICS PHYSICAL DISTRIBUTION CORPORATION¥60 million¥60 million¥30 million¥30 million¥90 million¥50 million¥30 million¥30 million¥30 million¥20 million¥30 million¥90 million¥80 million¥10 million¥50 million¥20 million¥50 million¥25 million¥90 million¥300 million

100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
95.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
20.0%

Osaka
Tokyo
SapporoMiyagi
Saitama
Saitama
Chiba
Shizuoka
Aichi
Fukui
Shiga
Osaka
Okayama
Hiroshima
KagawaYamaguchi
Fukuoka
Kumamoto
Miyazaki
Hyogo

Head Office
No. 2 Sales Division
West Japan
Division
EastSales
Japan
Sales DivisionMarket Development
Division
Chubu Sales Department

Main Business
Sales of petroleum-related products and distribution andinformation processing equipment
Information processing
Trucking, in-factory work, moving services
Trucking
Trucking, in-factory work
Trucking, in-factory work
Trucking, in-factory work, vehicle maintenance
Trucking, in-factory work, vehicle maintenance
Trucking, in-factory work
Trucking, in-factory work
Trucking, in-factory work
Trucking, in-factory work, vehicle maintenance
Trucking, in-factory work, vehicle maintenance
Trucking, in-factory work, warehousing
Trucking, in-factory work
Trucking, warehousing
Trucking, in-factory work
Trucking
Trucking, in-factory work
Trucking, in-factory work, vehicle maintenance
Product control, vehicle shipment agency

No. 1 Sales Division
East Japan Sales Division
Logistics Solution Division
China Project

West Japan Sales Division
Kyushu Sales Department

Branches:

Sapporo, Sapporo Minami, Sendai, Ibaraki, Kita Kanto, Saitama, Omiya, Saitama Minami, Kashiwa,
Tokyo, Kanagawa, Kanto Jyutaku, Chiba, Shizuoka Higashi, Shizuoka Nishi, Nagoya, Nagoya Higashi,Mie, Keiji, Keiji Higashi, Keiji Minami, Osaka, Hanshin, Minami Osaka, Nara, Okayama, Kurashiki,
Hiroshima, Yamaguchi, Fukuoka, Kita Kyushu, Minami Kyushu, Nobeoka

Departments:

International Distribution, Marine Transport, Railway Forwarding

29