TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIOCONSULTING
TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIO
Annual Report 2007

For the year ended March 31, 2007

SENKO Co., Ltd.

Logistics of the Future Logistics of the Future Logisti

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, 2007, Senko boasted a national network in Japan of 267 offices, 2,489
vehicles, 17 owned and chartered ships, and 1,433,296 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
Review of Operations by Product Category
Financial Review
Financial Section
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
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

2006

2007

¥198,189¥190,330$1,678,856

Operating income

5,491

4,658

46,514

Net income

2,536

2,290

21,482

Total assets

135,690

127,353

1,149,428

Net assets

47,95446,819406,218¥22.80¥20.52

$0.19

8.00

8.50

0.07

433.57419.04

3.67

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.

2007

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
Net assets

Note : U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥118.05 to U.S.$1 on
March 31, 2007.

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

Operating revenues
200(Billions of yen)

Net income
3,000

Net income per share(Millions of yen)

25

2,400

20

1,800

15

1,200

10

600

5

(Yen)

150

100

50

0

03

04

05

06

07

0

03

04

05

06

07

0

03

04

05

06

07

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.

1

A Message from the President
Under a new medium-term business plan,“Logistics Information Company” while
Business Environment
In the fiscal year ended March 31, 2007, Senko posted growth in revenue
and profit. Consolidated operating revenues advanced 4.1%, to ¥198,189
million, while consolidated operating income rose 17.9%, to ¥5,491
million and consolidated net income increased 10.7%, to ¥2,536 million.

commenced in April 2004. Looking at results, in comparison with our final targets under the plan of
consolidated operating revenues of ¥200 billion and operating income of ¥6.0 billion, we fell below
our goals, ending with consolidated operating revenues of ¥198.2 billion and operating income of¥5.5 billion. The unexpected sharp rise in the price of crude oil was a major factor behind notreaching our objectives.

During the fiscal year under review, the Japanese economy mounted amild recovery despite the high price of crude oil and rising interest rates.
Strong corporate performances supported firm capital investment and an
improvement in the labor environment.

Nevertheless, over the three years, we did implement “aggressive management”, making capital
investments of more than ¥40 billion. As a result, we expanded sales by approximately ¥25.0 billion,
and we have achieved a steady strengthening of our growth base.

In the transport and distribution industry, the uncertain business climate
continued as the high price of crude oil drove up fuel costs and thedomestic freight market softened.
Under these conditions, the Senko Group continued to press forward with the expansion of its
logistics network during final year of its three-year medium-term business plan, which is foundedon the value structure underpinning the Group’s slogan “The Challenge of Creative Logistics”.
Among the new facilities opened during the fiscal year were the Senboku No. 2 PD Center inIzumiotsu, Osaka; the AEON Tohoku RDC, in Yamatocho, Kurogawa Gun, Miyagi Prefecture; theUrawa PD Center, the Company’s largest center, in Saitama, Saitama Prefecture; and the Oguchi PD
Center in Oguchicho, Tanbagun, Aichi Prefecture. Moreover, we actively continued to maintain andpromote expansion of its support business for the supply chain management (SCM) systems ofcustomers in the procurement logistics field. In addition, we aimed to promote lower operating
expenses and to improve financial structure by endeavoring to increase productivity and reduce
costs.
Consequently, operating revenues of the housing logistics business rose 5.6%, to ¥51.8 billion,
generating 26.1% of total operating revenues, edging up 0.3 percentage points from the previous
fiscal year. Operating revenues of the retail logistics business, which combines the wholesale andretail and medical treatment and pharmaceutical fields, increased 9.6% year on year, to ¥34.1 billion,
accounting for 17.2% of total operating revenues, up 0.8 percentage points year on year.
Although the higher fuel costs due to the hike in crude oil prices had an impact, we were able toincrease prices to compensate. In addition, efforts to improve the cost structure and the growth inearnings by the core business resulted in operating income and net income expanding.
Outline of Medium-Term Business Plan
The first year under review was the final year of our medium-term business plan, which

2

Senko targeted becoming apursuing sales growth and improved profitability.

Beginning in the fiscal year ending March 2008, we have created a new medium-term business plan,
the final year of which is the fiscal year ending March 2010. Continuing on with the goal of
becoming a “Logistics Information Company,” which was one of the goals of the previous businessplan, we will be fully committing ourselves to achieving the final year goals of consolidated
operating revenues of ¥250 billion and operating income of ¥7.5 billion, recurring income of ¥7.0
billion, and net income of ¥3.5 billion.
Specifically, we will be concentrating on expanding revenues in its three core businesses (Housing,Petroleum-related products and plastics, and retail logistics-related products businesses) whiledeveloping and reinforcing high-priority businesses and new businesses. In addition, we will
endeavor to expand the foundations for growth for the entire Group, including the use of businessalliances and mergers and acquisitions.
During the three years of the plan, we intend to make capital investment on the same level as in theprevious medium-term business plan, ¥40 billion. This figure combines expenditures formaintenance and renewal as well as strategic investments. In terms of our distribution center
network, new construction and expansion during the medium-term business plan will increase thetotal warehouse capacity of our distribution centers to 2.0 million square meters from 1.5 million
square meters.
Outlook
The current fiscal year is the first year of the new medium-term business plan. We will be
implementing various measures in accordance with our strategies under the plan.
In the housing materials logistics business, we will be constructing a comprehensive housingmaterials distribution center that has added functions of producing and commercial distribution
such as parts and materials processing and quantity survey. Based on the new facilities, we willpropose distribution services for construction industry, such as joint distribution or shared
distribution bases.

3

A Message from the President

Our goal in the petrochemical and plastics logistics business is to increase our comprehensive
business contracts to provide customers with all domestic and international distribution services(3PL). At the same time, we will be developing the door-to-door bulk container business in Japan.
In the retail logistics business, our emphasis is on adjusting to changes due to the reorganization of
the distribution systems of each retail company while adding new distribution centers andstrengthening our controlled temperature distribution and settlement agency services. In addition,
we will endeavor to expand our fashion apparel distribution business for both Japan and China for
department stores and specialty shop chains.
In our overseas distribution business, are strengthening our distribution network to enable us toattract more petrochemical and apparel business. Specifically, we will add six new bases, includingbases in Tianjin and Tsingtao in China, in Korea, Taiwan, India, and Vietnam. As a result, ourinternational network will expand to 26 bases from 20 bases and our overseas warehousing capacity
will increase to 28 thousand square meters from 9 thousand square meters.
Targeting improvement in profitability, we will continue to on cost reduction measures andthorough management of individual businesses based on the linkage of productivity withprofitability. In addition, we are planning implement measures to improve efficiency of vehicle
allocation and operations, refine our administration outsourcing and centralization, and to upgrade
our accounting system.
Corporate Social Responsibility Activities
We are pursuing a structure that will ensure a high reputation for our corporate group among ourcustomers and in society for social responsibility (CSR). We are working toward that goal bybolstering the internal guidance and promotional organizations within the Group throughthorough implementation of corporate governance and compliance, improved safety and quality,and environmental preservation practices.

operations, and risk management done by the internal audit department (staff of 7) and do theirsurveys as necessary.
On June 29, 2004, we 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 monitoringroles of the board from the business execution role of managers. In addition to clarifying the roles
and responsibilities of these two functions, the new system also aims to provide an opportunity toachieve 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,
and are promoting environmental preservation activities throughout the Company. Commencing
with the fiscal year ended March 2006, we began issuing an annual environmental report.
To Our Shareholders
Senko regards distribution of to shareholders as a management priority. Until now, our basic policy
on profit distribution has been to continue to pay stable dividends that reflect underlying businessperformance while also retaining the internal reserves necessary to provide for future businessdevelopment and strengthen business structure. In future, to further increase the return of profits toshareholders, we plan to link dividends to performance as well as maintaining stable dividends.
For the fiscal year under review, to step up our distribution of profits, we plan to pay a dividend of¥8.0 per share (interim and year-end dividends of ¥4.00 per share), up ¥0.5 per share from ourcustomary annual dividend of ¥7.5 per share (interim and year-end dividends of ¥3.75 per share).
Heading into the first year of a new medium-term business plan, we look forward to the continued
support of our shareholders.

Among these efforts, we have made corporate governance its top priority management issue, andhas given the board of directors an important role in this area. Meeting at least once a month, theboard 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 businessexecution.

Yasuhisa Fukuda
President and Representative Director

June 2007
We have 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. In
addition, the auditors receive reports on the Group’s compliance, business

4

5

Corporate Social Responsibility
Senko aims to contribute to and be trusted by society as well as all human beings throughthe creation and provision of top class services based on its advanced logistics andCustomer

information technology.

Orderstrengthening of its CSR activities by focusing on the environment, quality, and safety as one of its medium-

Activities

term business strategies.

We endeavor to reduce the environmental

Distribution center

burden caused by its operations in all of its

Manufacturer
or Customer

Senko computer terminal

emissions from the vehicles used in transport

contribute to environmental preservation, such as reverse-logistics and modal-shift services, based on its

or at our logistics bases, sound and vibration

Reception

pollution, energy consumption at ourwaste as well as promoting recycling. We

works to improve quality and safety in its businesses.

have divided its environmental measures

Waste water, Garbage, Disposal of paper waste

Gas emissions,sound andvibration pollution

Gas emissions,sound andvibration pollution

Use of diesel oil, electricity, LPG,
gasoline, and water

into such categories as Preventing Global
Warming, Greater Logistics Efficiency,
Preventing Pollution, and Waste Measures.

Inventory Attachment Storage Selection Inspection

For each of these categories, we are
Environmental Activities

implementing various activities to control

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

2. Aiming to spread environmental management throughout the Company, we continue to improve ourenvironmental preservation activities.

Receipt ofInventory
Confirmation Account
instructions management slip issued
debit
Use of diesel

distribution centers, and the production ofenvironment.

Delivery
Return item, Collect item

Use of diesel

Furthermore, the Company positions quality and safety as the foundations of its logistics services, andThe single theme that runs throughout and supports Senko’s business activities is “Sincerity.”

Major customers
and customers

Use of electricity, gas, water,
office supplies, copymachine paper,
packaging material, sundry materials,
and facilities and equipment

Inventory

business processes, including exhaust

logistics business. For its social mission as a logistics company, we are providing logistics services thatdevelopment of supply chain management systems.

Order received

Scheduled in-inventory date, Shipment instructions

Under the medium-term business plan that commenced in March 2005, Senko is emphasizing the

We strongly recognize our responsibility of preserving the environment of the Earth in the activities of its

INPUT
OUTPUT

Sorting and
Returned
Shipment
packaging
items

Emission of industrial waste and garbage,gases, waste water, sound, vibration,oil, and parts and fixtures

environment, such as converting to EcoDrive, Idle-Stop, Modal-Shift systems;

INPUT

OUTPUT•Diesel oil
16,359 kL•Heavy oil
9,098 kL
•Electricity 55,966,156 kWh•CO2 emissions 99,237 t-CO2 (Note)

reducing the pollution produced by its

3. We make public environmental information on our business activities.

vehicles; preventing oil-spills by its ships, and

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

recycling packaging and other materials.

Note:The CO2 emissions-related figures are according to theenforcement regulations of the Law Regarding the Promotion of
Measures Against Global Warming, which was revised on March
29, 2006.

Environmental Activity Promotional Organization
We have established the Senko Environmental Management System (SEMS), which is in accordance with
ISO 14001 standards, and is spreading its use throughout the Company.

Environmental Promotion Organization
Head office and business sections

The Company has also set up an organization directly under the control of the president to promote SEMS
and environmental preservation activities. The nucleus of the organization is the Environmental Committee,

President

Production Division, Branches

which considers individual issues regarding the Group’s activities to improve the environment. The matters

Clean Energy Promotional Committee

Other related affiliates

decided by the Environmental Committee are passed on to the Clean Energy, Green Logistics, CSR
Promotional, and Energy Conservation committees for the formulation of detailed measures for
implementing environmental activities.

Green Logistics Promotional Committee
Environmental Committee
CSR Promotional Committee

Energy Conservation Promotional Committee

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. Our diverse transportation capabilities have won the
Company high marks from manufacturers and othercustomers.

Retail Distribution and Processing
Transport Business Segment(Billions of yen)

120

122.2

116.5

(Billions of yen)

60

110.6

This business segment comprises warehousing and infactory work operations.

Business segments

Operating revenues
Business segments

58.7

Our 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, IC
tag-based distribution and inventory management, andother distribution services provided by advanced
warehousing management systems.

55.6

29.6%
100

50
61.7%

80

40

60

30

40

20

Retail distribution andprocessing sales composition

Transport sales composition
20
Others 1.3%

10

Others

7.4%
0

06

0

07

06

07

In-factory processing Warehousing

International freight forwarding 5.6%
Marine transport 5.0%
Railway forwarding 4.2%

27.5%

65.1%

Our facilities provide a total storage space of approximately
1,500,000 square meters. With these warehousing bases as
the core of our operations, we develop and install logistics
information systems designed in anticipation of diverse
customer needs. These capabilities allow us to offer a fullrange of logistics services that assist our customers’
production and sales operations.

Truck transport

83.9 %

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.
Operating revenues

Others(Billions of yen)

20
18.3
17.3

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

15

Business segments

Others sales composition

10

Others0.2%

Vehicle maintenance

8.7%

8.8%
Information processing andsoftware development

10.0%

5

Petroleum
Merchandise

53.6%

27.4%

0

8

06

07

9

Review of Operations by Product Category
In addition to business segments, we disclose sales on a

Sales composition

product category basis determined based on groupings ofthe special cargo and distribution characteristics ofcustomers. This information is provided as part of ourefforts to enable shareholders to gain a better
understanding of our business.

Housing
26.1%

Others38.1%
Petroleum-related
products and plastics

18.6%
Retaillogistics-related
products
17.2%

Retail Logistics-Related ProductsThis product category is the main pillar of our growthstrategy. We are acquiring new customers among chain
stores, adapting to customers’ expansion to other locations
and regions, and pursuing outsourcing contracts with apparelcompanies. Furthermore, in the medical and pharmaceuticalfields, we also aim to be on of the top third-party logistics(3PL) companies in the domestic market. Some of our efforts
in this area include developing a nursing care productlogistics service and creating new logistics models for
hospitals.

Housing
For a core group of three major prefabricated housing
manufacturers, we provide just-in-time delivery services
covering raw material procurement to delivery at the
installment location. In addition, we develop SCM systems tocomply with zero emissions at the installment site and otherrequirements. Through this process, we are 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)

th

.5

t3

ou

Ab

25

e
tim

34.1
31.1

row

sg

30

rs

ea

0y

1
in

28.4
25.8

22.7
19.2
19.2

20

15.5
15

13.7
12.1

Petroleum-Related
Products and Plastics
Leveraging its nationwide business development capabilities
and its diversified transport system, we provide a full-rangeof services, from raw material procurement and accepting
orders to delivery to end customers. We can also
accommodate customers moving into overseas markets anddevelop SCM systems. These capabilities have earned Senko
the top share of the general-purpose plastics transport market
in Japan. We are also aiming to capture the top share of thedomestic lubricant oil market.

10

10

9.7

10.1

96

97

5

0

98

99

00

01

02

03

04

05

06

(Fiscal year)

11Financial Review

Performance
Consolidated operating revenues for the fiscal year ended March 2007
advanced 4.1%, to ¥198,189 million. These results can be attributed torevenues growth in transport segment and retail distribution segment,
mainly in accordance with the business expansion of housing material
distribution and the effect of newly opened distribution centers.
In terms of profits, consolidated operating income increased 17.9%, to¥5,491 million. Due to the hike in crude oil prices, fuel expenses, themajor cost of the transport segment, increased. In addition, startup costs
related to large-scale capital investment for new facilities at our bases
expanded. However, the earnings growth of the core transport segment
was able to absorb these additional costs, resulting in an increase inprofits. Consequently, the operating income ratio improved 0.3
percentage points, to 2.8%.
Income before income taxes and minority interests climbed 11.7% year
on year, to ¥4,818 million, reflecting the higher operating income and asubstantial decline in impairment losses and fixed asset evaluation
losses.
Moreover, despite an increase in deferred income taxes, consolidated
net income rose 10.7%, to ¥2,536 million. The ratio of net income tooperating revenues improved 0.1 percentage points, to 1.3%.
Performance by Business Segment
By business segment, transport operating revenues for the fiscal year underreview increased ¥5,688 million, or 4.9%, to ¥122,204 million, generating
61.7% of total operating revenues. Sales growth can be attributed to a
substantial increase in housing materials distribution center business,

Operating revenues

additional revenues related to the opening of a new distribution center, andincreased distribution of goods for a major discount store chain.
The operating revenues of the retail distribution and processing businesssegment amounted to ¥58,680 million, rising ¥3,128 million, or 5.6% andaccounting for 29.6% of total operating revenues. The sales benefits from the
new AEON Hokkaido RDC and AEON Tohoku RDC centers andaggressive efforts to win new distribution business from wholesaler andretailer were behind the successful performance.
Operating revenues from the others business segment decreased ¥957
million, or 5.2%, to ¥17,305 million, contributing 8.7% of total operating
revenues. Performance was affected by a decline in the number of largescale projects handled by the segment’s trading company.
Performance by Principal Products Category
We have three core product categories: housing-related, petroleumrelated and plastics, and retail logistics-related (wholesale and retail andmedical treatment and pharmaceuticals logistics fields). For the fiscal
year ended March 2007, these three core product categories accounted
for 61.9% of total operating revenues.
Accounting for 26.1% of operating revenue, housing-related products
can be separated into distribution services from the factories andhousing materials distribution services. During the fiscal year, factory
distribution services revenues grew 1.5%. In housing materials
distribution services, there was favorable growth in the interior housingmaterials distribution center business from major housing
manufacturers and expansion in our pick-up style procurement material
collecting and distribution services with the cooperation of other major

Net income

Operating income

Ratio of SG&A
expenses to operating revenues

200(Billions of yen)

7,000(Millions of yen)

2,500

6,000

(Millions of yen)

5(%)

(Units: billions of yen, %)The petroleum-related and plastics product category, which
generates 18.6% of total operating revenues, aimed at
expanding its bulk container comprehensive distribution
system business during the fiscal year. This system uses
containers that can hold 16 metric tons of plastic resin orother materials. After filling the container at the factory, wedeliver the container using its rail, trucking, and marine
distribution network, unloads the container, and returns theempty container to the customer. Based on large lots, thisdoor-to-door system provides cost reducing for transport,
contamination-prevention, and operating efficiency
advantages. As a result of these measures, operating
revenues rose ¥730 million, or 2.0%, to ¥36,880 million.
The retail logistics-related product category, which
contributed 17.2% 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 and
AEON Tohoku RDC centers and a higher volume of businessfrom a major discount store chain. Consequently, operating
revenues from retail logistics-related products advanced¥2,990 million, or 9.6%, to ¥34,130 million.
Financial Position
Total assets at March 31, 2007 increased from a year earlier,Operating income / net
income to operating revenues
4(%)

Net income per share

40

Year ended March 2007

Year ended March 2006

Revenues

Composition

Revenues

Composition

Change% Change

Housing

51.8

26.1

49.0

25.8

2.8

15.6

Petroleumrelated products,
and plastics

36.9

18.6

36.2

19.0

0.7

2.0

Retail logisticsrelated products

34.1

17.2

31.1

16.4

3.0

9.6

International
freight forwarding
and modal shifts

18.0

9.1

16.6

8.7

1.4

8.3

Chemicals andfertilizers

3.6

1.8

4.0

2.1

△((0.4)

(9.0)

Foods

3.8

1.9

4.0

2.1

(0.2)

(5.7)

Electronics
products andmachinery

4.2

2.1

3.5

1.8

0.7

19.8

Others

45.8

23.2

45.9

24.1

(0.1)

(0.2)

Total

198.2

100.0

190.3

100.0

7.9

4.1

Cash dividends per share

8
30

5,000

Composition of
products handled(Year ended March 2007)

(Yen)

(Yen)

Operating income tooperating revenues

2,000

3

150

Consolidated Operating Revenues by Products Handledhousing manufacturers. As a result, operating revenues fromhousing-related products increased ¥2,740 million, or 5.6%,
year on year to ¥51,750 million.

26.1%

Housing

18.6%

Petroleum-related products
and plastics

17.2%

Retail logistics-related
products

38.1%

Others

1,500
4

4,000
100

2

1,000

3,000

20
Net income tooperating revenues

7

500

2,000

1

50
0

1,000

0

12

03

04

05

06

07

0

03

04

05

06

07

10

3

03

04

05

06

07

0

03

04

05

06

07

0

03

04

05

06

07

0

03

04

05

06

07

0

03

04

05

06

07

13

Report of Independent Certified Public Accountants

rising ¥8,337 million, to ¥135,690 million. Current assets declined ¥1,618
million, to ¥40,981 million, primarily because of major capital investmentthat reduced cash and cash equivalents.

As a result, interest-bearing debt at fiscal year-end expanded ¥5,473
million, to ¥45,368 million. The ratio of interest-bearing debt to total assets
increased 2.1 percentage points, to 33.4%.

Total fixed assets expanded ¥9,955 million year on year, to ¥94,709
million.

Net assets at fiscal year-end amounted to ¥47,954 million, improving¥1,135 million from a year earlier. The rise in shareholders' equity camemainly from an increase in retained earnings as a result of growth in net
income.

Net property and equipment increased ¥5,560 million, to ¥70,954 million.
The growth can be mainly attributed to increases in facilities andequipment due to active outfitting of distribution bases.
Investments and other assets climbed ¥4,395 million, to ¥23,755 million.
The increase primarily resulted growth in special purpose company (SPC)
loans and other assets at the end of the fiscal year related to theconstruction of distribution centers.
Major components of capital investment during the fiscal year were
investments for the construction of the AEON Tohoku RDC, the Rinko
PD Center, and the Hamamatsu PD Center. In addition, we made loans
for the construction of the Senboku No. 2 PD Center, the Urawa PD
Center, and the Nishi-Kobe PD Center (Temporary name).
At March 31, 2007, current liabilities totaled ¥45,138 million, increasing¥2,102 million from the previous fiscal year. The significant growth incurrent liabilities could be attributed to an increase in trade accounts andnotes payable due to the rise in operating revenues and to an increase in
short-term loans.
Long-term liabilities advanced ¥5,100 million, to ¥42,598 million. A ¥4,961
million increase in long-term debt because of the aggressive capital
investment was the cause of the jump in long-term liabilities.

Although the equity ratio decreased 1.5 percentage points, to 35.3%, there
was positive growth in net assets.
Cash Flows
For the year ended March 31, 2007, net cash provided by operating activities
increased ¥654 million, or 12.2%, to ¥6,001 million. This increase can mainly be
attributed to an increase in income before income taxes and minority interests
and a decrease in sales receivables.
Net cash used in investing activities jumped ¥5,772 million, or 99.0%, to¥11,600 million from the previous fiscal year. Payments for purchases of fixed
assets were primarily responsible for this increase.
Consequently, free cash flow at fiscal year-end was minus ¥5,599 million,
down ¥5,118 million, from the previous fiscal year.
Net cash provided by financing activities increased ¥2,918 million, or 272.5%,
to ¥3,989 million. This increase resulted primarily from an increase inborrowings due to capital expenditures.
As a result, cash and cash equivalents at end of year totaled ¥10,590 million,
declining ¥1,525 million, or 12.6% 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

Net assets /net assets ratio(Billions of yen)(Billions of yen)

(%)

55

150

ROE / ROA

35

50

30

45

25

40

20

35

15

6

5

(%)

ROE

4

3

100

Ohtemae Audit Corporation
Osaka, Japan
June 29, 2006

2
30

10

ROA

50
25

0

14

03

04

05

06

07

0

5

03

04

05

06

07

0

1

0

03

04

05

06

07

15

Consolidated Balance Sheets
SENKO Co., Ltd. and Consolidated Subsidiaries
March 31, 2007 and 2006

Thousands of
U.S.dollars

Millions of yen

ASSETS

2007

2006

LIABILITIES AND NET ASSETS

2007

Current assets:

Thousands of
U.S.dollars

Millions of yen

2007

2006

2007

¥11,950¥9,950$101,228

4,260

5,748

36,086

34

30

288

18,362

17,384

155,544

Current liabilities:¥10,590

Cash and cash equivalents¥12,115$89,708

Trade accounts and notes receivable-

Short-term loans (Note 6)
Current portion of long-term debt (Note 6)

167

179

1,415

26,107

26,420221,152

(20)

(16)

(169)

585

771

4,956

Accrued expenses

5,118

5,040

43,355

Deferred tax asset (Note 12)

1,548

1,447

13,113

Accrued income taxes

1,192

1,060

10,097

Prepaid expenses and other current assets

2,004

1,683

16,975

Other current liabilities

4,222

3,824

35,76540,981

42,599347,150

45,13843,036382,363

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

29,15824,197

246,997

Non-consolidated subsidiaries and affiliates
OthersLess allowance for doubtful accounts
Inventories

Total current assets

Trade accounts and notes payable––Non-consolidated subsidiaries and affiliates
OthersTotal current liabilities

879

891

7,446

Accrued Retirement Benefits (Note 7)

9,670

9,997

81,914

1,670

1,898

14,147

Other long-term liabilities

3,770

3,304

31,936125,129

118,694

1,059,966

Contingent liabilities (Note 9)Less accumulated depreciation(54,175)(53,300)(458,916)

Net property and equipment

70,95465,394

601,050

18,296

18,296

154,985

Capital surplus

16,55916,559140,271Retained earnings

13,201

11,609111,825

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)

Net assets (Note 11):
Common stock:

Long-term deferred tax assets (Note 12)

5,480

5,994

46,421

Authorized––294,999,000 shares

Other assets

15,726

10,577133,214Issued––111,746,167 shares

Less treasury stock, at cost-1,151,067shares

Total assets¥135,690¥127,353$1,149,428

See the accompanying notes to the consolidated financial statements.

16

in 2007 and 86,526 shares in 2006

(419)

(33)

(3,549)Net unrealized holdings gain on securities

291

385

2,465

Loss on deferred hedges

(2)

—

(16)

Translation adjustments

25

—

212

Minority interests

3

3

25

Total net assets

47,95446,819406,218¥135,690¥127,353$1,149,428

Total liabilities and net assets

See the accompanying notes to the consolidated financial statements.

17

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2007, 2006 and 2005

Operating revenues

SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2007, 2006 and 2005

Thousands of
U.S.dollars

Millions of yen

2007

2006

2005

¥198,189¥190,330¥179,501

2007

Thousands$1,678,856

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

183,621

177,038

166,194

1,555,451

9,077

8,634

8,182

76,891

192,698

185,672

174,376

1,632,342

5,491

4,658

5,125

46,514

Other income (expenses):
Interest and dividend income

439

232

157

3,719

Interest expenses

(630)

(497)

(467)

(5,337)

Impairment loss

(177)

(2,122)—(1,499)Amortization of prior service costs
Loss on revaluation of property
Others, net
Income before income taxes and minority interests

—

3,804

—

—

—

(1,537)

—

—

(305)

(225)

(262)

(2,584)

(673)

(345)

(572)

(5,701)

4,818

4,313

4,553

40,813

Income taxes (Note12):Current
Deferred

1,805

1,324

2,102

15,290

477

699

(6)

4,041

2,282

2,023

2,096

19,331

Net income

(0)

(0)

—

(0)

¥2,536¥2,290¥2,457$21,482

Number ofshares ofcommonstock issued

Commonstock

CapitalsurplusRetainedearnings

Treasury stock(at cost)

Net unrealized
holding gain
on securities

Loss ondeferredhedgesTranslation
adjustment

Minority
interests

Total
net
assets111,746¥18,296¥16,387¥8,577¥(181)

¥82

¥—

¥—

¥—

¥43,161

Net income

—

—

—

2,457

—

—

—

—

—

2,457

Cash dividends

—

—

—

(832)

—

—

—

—

—

(832)

Bonuses to directors and statutory auditors

—

—

—

(43)

—

—

—

—

—

(43)

Unrealized holding gain on securities

—

—

—

—

—

76

—

—

—

76

Treasury stock

—

—

121

—

(114)

—

—

—

—

7

111,746¥18,296¥16,508¥10,159¥(295)

¥158

¥—

¥—

¥—

¥44,826

Net income

—

—

—

2,290

—

—

—

—

—

2,290

Cash dividends

—

—

—

(825)

—

—

—

—

—

(825)

Bonuses to directors and statutory auditors

—

—

—

(29)

—

—

—

—

—

(29)

for a newly consolidated subsidiary

—

—

—

14

—

—

—

—

—

14

Unrealized holding gain on securities

—

—

—

—

—

227

—

—

—

227

Balance at April 1, 2004

Balance at March 31, 2005

Adjustment of retained earnings

Treasury stock

—

—

51

—

262

—

—

—

—

313

111,746¥18,296¥16,559¥11,609

¥(33)

¥385

¥—

¥—

¥—

¥46,816

Reclassified balance as of March 31, 2006

—

—

—

—

—

—

—

—

3

3

Net income

—

—

—

2,536

—

—

—

—

—

2,536

Cash dividends

—

—

—

(975)

—

—

—

—

—

(975)

Bonuses to directors and statutory auditors

—

—

—

(26)

—

—

—

—

—

(26)

Purchases of treasury stock

—

—

—

—

(387)

—

—

—

—

(387)

Retirement of treasury stock

—

—

(0)

—

1

—

—

—

—

1

—

—

—

51

—

—

—

—

—

51

—

—

—

6

—

—

—

—

—

6

—

—

—

—

—

(94)

(2)

25

0

(71)

¥111,746¥18,296¥16,559¥13,201¥(419)

¥291

¥(2)

¥25

¥3

¥47,954

Balance at March 31, 2006

Adjustment of retained earnings
for newly consolidated subsidiaries

Minority interests in gain of a consolidated subsidiary

Millions of Yen

Adjustment of retained earnings
for a newly share subsidiary
Other changes
Balance at March 31, 2007

Thousands of U.S. dollars

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

Yen

U.S.dollars¥22.80¥20.52¥21.90

$0.19

8.00

8.50

7.50

0.07

Commonstock

CapitalsurplusRetainedearnings

Treasury stock(at cost)

Net unrealized
holding gain
on securities

Loss ondeferredhedgesValuation andtranslation
adjustment

Minority
interests

Total
net assets$396,577$154,985$140,271$98,340$(280)$3,261$—$—$—

Reclassified balance as of March 31, 2006

—

—

—

—

—

—

—

25

25

Net income——

21,482

—

—

—

—

—

21,482

Cash dividends——(8,259)

—

—

—

—

—

(8,259)Bonuses to directors and statutory auditors

—

—

(220)

—

—

—

—

—

(220)

Purchases of treasury stock

—

—

—

(3,278)

—

—

—

—

(3,278)Retirement of treasury stock

—

(0)

—

9

—

—

—

—

9

—

—

432

—

—

—

—

—

432

—

—

50

—

—

—

—

—

50

—

—

—

—

(796)

(16)

212

0

(600)

$154,985$140,271$111,825$(3,549)$2,465

$(16)

$212

$25

$406,218

Balance at March 31, 2006

Adjustment of retained earnings for
newly consolidated subsidiaries
Adjustment of retained earnings for a
newly share subsidiary
Other changes
Balance at March 31, 2007

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
Year ended March 31, 2007, 2006 and 2005

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Loss on disposals of property and equipment
Impairment losses
Loss on revaluation of property
Decrease in allowance for employee retirement
Increase (decrease) in accrued bonuses to employees
Interest and dividends income
Interest expense
Decrease (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 (decrease) 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

SENKO Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S.dollars

Millions of yen

2007

2006

2005

2007

¥4,818¥4,313¥4,553$40,813

2,693
296
177
—
(327)
(0)
(439)
630
264
186
921
(874)
8,345
155
(631)
(1,868)
6,001

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

2,854
128
—
—
(311)
(69)
(157)
467
(109)
33
1,367
(325)
8,431
159
(463)
(2,518)5,609

22,812
2,507
1,499
—
(2,770)(0)(3,719)
5,337
2,236
1,576
7,802
(7,403)70,6901,313(5,345)(15,824)
50,834(7,874)
167
(39)
55
—
(44)
(3,865)(11,600)(4,793)
211
(239)
178
—
(45)
(1,140)(5,828)(3,397)
136
(415)
142
100
(50)
(1,028)(4,512)(66,701)
1,415
(330)
466
—
(373)
(32,740)(98,263)

2,000
9,400
(5,927)
(387)
1
(973)
(125)
3,989
9
(1,601)
12,11576¥10,590

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

16,942
79,627(50,208)(3,278)8(8,242)(1,059)33,79077(13,562)
102,626644$89,708

See the accompanying notes to the consolidated financial statements.

20

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 Corporation Law of Japan and Securities Exchange Law and in conformity with accounting principles generally accepted in Japan, which are
different from 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 andpractices prevailing in their respective countries of domicile.
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.
Effective the year ended March 31, 2007, the Company has adopted a new accounting standard for the presentation of net assets in the balance
sheet and the related implementation guidance. In addition, effective the year ended March 31, 2007, the Company is required to prepare
consolidated statements of changes in net assets. In this connection, the previously reported consolidated balance sheet as of March 31, 2006 andconsolidated statement of shareholders’ equity for the year then ended have been restated to conform to the presentation and disclosure of theconsolidated financial statements for the year ended March 31, 2007.
Through March 31, 2006, the Company voluntarily prepared the statement of shareholders’ equity for the convenience of readers outside Japan.
Reclassification
Certain amounts in the consolidated balance sheet as of March 31, 2006 have been reclassified to conform to the 2007 presentation.
The translation of Japanese yen amounts into U.S. dollars is included solely for the convenience of the reader, using the exchange rate prevailing at
March 31, 2007, which was ¥118.05 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.

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, 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 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 computed on the straight-line method for the buildings (including fixtures attachedto the 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 60 years
Machinery and equipment
3 to 17 years(g) Accrued Retirement Benefits
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.

21

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.

2006
Equity security
Bonds and Others

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

Acquisitioncost$ 5,99785$ 6,082

Thousands of U.S.dollars
Gross
Gross
unrealized
unrealized
gains
losses$ 4,168$ (59)
0(0)$ 4,168$ (59)

Book
value(Market value)$ 10,10685$ 10,191(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.
(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 is not disclosed because there was no dilutive potential common shares that were outstanding during each of thethree years in the period ended March 31, 2007.
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(Property and equipment)
With effect from the year ended March 31, 2007, the Company changed its depreciation method of fixtures attached to the buildings, structuresand vehicles from the declining-balance method to the straight-line method. The change of depreciation method of vehicles was made for the
purpose of improving the matching of revenue and costs by leveling out depreciation expenses over the useful lives of the vehicles following theend to widespread replacement of vehicles to meet new emissions control standards. The use of these existing vehicles is expected to remain stable in
the future owing to improvement of their performance and durability.
Also, the change of depreciation method of fixtures attached to the building and structures was made for the purpose of adapting the samedepreciation method that was applied to the building, since they were used with building, inseparably.
As a result of these changes, depreciation expense for the year ended March 31, 2007 decreased by ¥543million ($4,600thousand) and operating
income and income before income taxes and minority interests increased by ¥543million ($4,600thousand) as compared with the previous method.
(Bonuses to directors)
Effective the year ended March 31, 2007, the Company and its domestic consolidated subsidiaries have adopted “Accounting Standard for
Directors’ Bonuses” (Accounting Standards Board of Japan (“ASBJ”) Statement No.4 issued on November 29, 2005).
As a result of the adoption of this accounting standard, income before income taxes and minority interests decreased by 40million($339thousand) for the year ended March 31, 2007 from the amount which would have been recorded under the method applied in the previous year.

Marketable securities
Non-marketable securities

Thousands of
U.S.dollars
2007$ 10,191
3,956$ 14,147

The following is a summary of marketable securities included in investment securities, at March 31, 2007 and 2006.

2007
Equity security
Bonds and Others

22

Acquisition
cost
¥ 708
10
¥ 718

Millions of yen
Gross
Gross
unrealized
unrealized
gains
losses
¥ 492
¥ (7)
0
(0)
¥ 492
¥ (7)

Proceeds from sales of other securities were ¥35million (US$ 296 thousand) and ¥178million for the years ended March 31, 2007 and 2006,
respectively. The gross realized gains and losses on those sales were ¥2million (US$ 17 thousand) and ¥12 million (US$ 102 thousand), respectively,
for the year ended March 31, 2007. The gross realized gains and losses on those sales were ¥44million and ¥3million for the ended March 31, 2006.

5. Property and Equipment:
At March31, 2007 and 2006, 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 Progress

Book
value
(Market value)¥ 1,19310¥ 1,203

Millions of yen
2007
2006
¥ 33,098¥ 32,976
72,282
67,111
15,864
15,172
3,577
3,261
308
174
¥ 125,129¥ 118,694

Thousands of
U.S.dollars
2007$ 280,372
612,300
134,384
30,301
2,609$ 1,059,966

Millions of yen
2007
2006
¥ 11,950¥ 9,950

Thousands of
U.S.dollars
2007$ 101,228

Millions of yen
2007
2006
¥ 7,000¥ 7,000

Thousands of
U.S.dollars
2007$ 59,297

6. Short-term Loans and Long-term Debt:
At March 31, 2007 and 2006, short-term loans consisted of the following:—

0.70% to 1.28% unsecured loans from banks
At March 31, 2007 and 2006, long-term debt consisted of the following:—

0.92% bonds due 2009
0.74% to 2.37% loans from banks and insurance companies:
Unsecured

4. Investment Securities:
The carrying amounts of investment securities at March 31, 2007 and 2006, consisted of the following:—
Millions of yen
2007
2006
¥ 1,203¥ 1,364467
534¥ 1,670¥ 1,8982007
Equity security
Bonds and Others

26,41833,418(4,260)¥ 29,158

Less current portion

22,94529,945(5,748)¥ 24,197

223,786
283,083(36,086)$ 246,997

The annual maturities of long-term debt at March 31, 2007 for the next five years are as follows:—
Year ending
March 31
2008
2009
2010
2011
2012
There after

Millions of yen¥ 4,260
4,948
7,838
5,883
5,908
4,581

Thousands of
U.S.dollars$ 36,086
41,914
66,396
49,83550,04738,805At March 31,2007, the Company has committed line and overdraft contracts with twelve banks aggregating ¥22,600 million ($191,444thousand).
Of the total credit limit, ¥8,250 million ($69,885thousand) was used as the above short-term and long-term borrowing, and the rest ¥14,350 million($121,559thousand) was unused.

23

7. Accrued Retirement Benefit:
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, 2007 and 2006.
Thousands ofMillions of yen
U.S.dollars
2007
2006
2007
Benefit obligation at the end of year
¥ (24,733)¥ (25,155)$ (209,513)
Fair value of plan assets at the end of the year
17,801
18,474
150,792
Unfunded retirement benefit obligation(6,932)(6,681)(58,721)
Unrecognized actuarial loss
(1,747)(3,316)(14,799)
Net retirement benefit obligation(8,679)(9,997)(73,520)
Prepaid pension cost
991
—
8,394
Accrued retirement benefit¥ (9,670)¥ (9,997)$ (81,914)
Retirement benefit costs of the Company and its certain subsidiaries included the following components for the year ended March 31, 2007, 2006 and 2005.

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

2007
¥1,355612(543)

Millions of yen
2006
2005
¥ 1,184¥ 1,378
627
717
(361)
—

(136)
—
¥(1,288)¥(1,288)277(3,804)¥ (2,077)¥ (2,077)

Thousands of
U.S.dollars
2007$ 11,478
5,184(4,600)263—¥ 2,358¥ 2,358

9. Contingent Liabilities:
At March 31, 2007 and 2006, contingent liabilities were as follows:

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

Discount rate
Expected rate of return on fund assets
Amortization period of prior service costs
Amortization period of actuarial losses

2007
Straight-line
basis
2.5%
3.0%
1 year14 years

2006
Straight-line
basis
2.5%
3.0%
1 year14 years

Machinery and equipment
Tools, furniture and fixtures

Machinery and equipment
Tools, furniture and fixtures

8. Pledged Assets:
The following assets were pledged as collateral as at March 31, 2007 and 2006—

24

Book value¥ 7,416
8,220¥ 15,636

Book value$ 62,821
69,632$ 132,453

Millions of yen
2006
Accumulated
Accumulated
depreciation
impairment loss
¥ 4,957
¥ 317
6,640
207
¥ 11,597¥ 524

Book value¥ 6,244
7,740¥ 13,984

Millions of yen
2007
2006
¥ 4,740¥ 4,608
12,214
10,366¥ 16,954¥ 14,974

Thousands of
U.S.dollars
2007$ 40,152
103,465$ 143,617

At March 31, 2007 and 2006, obligations under non-cancelable operating leases were as follows:
Millions of yen
2007
2006
¥ 2,393¥ 2,393
1,024
1,013
4
6
10
10
¥ 3,431¥ 3,422

Thousands of
U.S.dollars
2007$ 20,271
8,674
34
85
$ 29,064

Millions of yen
2007
2006
¥ 20
¥ 40

Thousands of
U.S.dollars
2007
$ 169

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

Long-term debt, including current portion

Purchasecost¥ 11,518
14,587¥ 26,105

Thousands of
U.S.dollars
2007

At March 31, 2007 and 2006, obligations under finance leases were as follows:

Due within one year
Due after one year

Land
Buildings
VehiclesInvestment securities

Purchasecost¥ 12,593
14,493¥ 27,086

Millions of yen
2007
Accumulated
Accumulated
depreciation
impairment loss
¥ 4,860
¥ 317
6,060
213
¥ 10,920¥ 530(1,152)—$ (10,910)$ (10,910)

2005
Straight-line
basis
2.5%
0.0%
1 year14 yearsThousands of
U.S.dollars
2007
$ 42
127
3,160
$ 3,329

10. Lease:
At March 31, 2007 and 2006, financing lease transactions whose ownership are not to be transferred were as follows:

Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2007, 2006 and 2005 is as follows:

Method of attributing benefit to periods of service

Millions of yen
2007
2006
¥5
¥ 74
15
9
373
469
¥ 393
¥ 552

Due within one year
Due after one year

Millions of yen
2007
2006
¥ 1,554¥ 371
14,4895,242¥ 16,043¥ 5,613

Thousands of
U.S.dollars
2007$ 13,164
122,736$ 135,900

11. Net assets:
The Corporation Law of Japan(the “Law”) provides that an amount equal to at least 10% of the amounts to be disbursed as distributions ofearnings be appropriated to the legal reserve until such reserve and additional paid-in capital equals 25% of the common stock account. The Law
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, theamount 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, 2007, included the Company’s legal reserveof ¥1,506 million ($12,757thousand).

25

Millions of yen

12. 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 of approximately 40.6% for the years ended March31, 2007 and 2006.
(1) Significant components of deferred tax assets and liabilities at March 31, 2007 and 2006 were as follows:

Millions of yen
2007
2006
Deferred tax assets:
Accrued severance indemnities to employees
Accrued bonuses to employees
Impairment losses
Loss on revaluation of landSocial insurance premium
Loss carry forward
Accrued enterprise tax
Loss on revaluation of golf club membership
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

Thousands of
U.S.dollars
2007¥ 5,127
1,085
853
351
169
128
123
––
596
8,432
(193)
8,239

¥ 5,698
1,084
822
351
162
––
104
106
471
8,798
(80)
8,718

$ 43,431
9,191
7,226
2,973
1,432
1,084
1,042
––
5,049
71,428(1,635)69,793

(987)
(199)
(185)
(1,371)¥ 6,868

(989)
(264)
(187)
(1,440)¥ 7,278(8,361)(1,686)(1,567)(11,614)$ 58,179(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, 2007 and 2006 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

2007
40.6%

2006
40.6%

2.2
3.2
(1.2)
2.5
47.3%

2.3
3.6
(1.4)
1.8
46.9%

2006
Transport

Retail Distribution
and Processing

OthersTotal

Elimination or
Corporatea. Operating revenues andoperating income:Customers
Intersegment
Total operating revenues
Operating costs and expenses
Operating income

Consolidated¥116,516
3,041
119,557
117,131¥2,426¥55,552
3,590
59,14257,307¥1,835¥18,262
10,02328,28527,847¥438¥190,330
16,654
206,984
202,285¥4,699¥—(16,654)(16,654)(16,613)¥(41)¥190,330—
190,330
185,672¥4,658b. Assets, depreciation andcapital expenditures;
AssetsDepreciation
Impairment losses
Capital expenditures¥41,192
996
—
1,137

¥68,509
1,705
2,116
3,935

¥6,866103—
146¥116,567
2,804
2,116
5,218

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

Elimination or
Corporate

Consolidated

Thousands of U.S. dollars

2007
Transport

Retail Distribution
and Processing

OthersTotal

a. Operating revenues andoperating income:Customers
Intersegment
Total operating revenues
Operating costs and expenses
Operating income$1,035,188
25,9381,061,126
1,033,596$27,530$497,078
31,046528,124
513,426$14,698$146,590
93,825
240,415
235,875$4,540$1,678,856
150,8091,829,665
1,782,897$46,768$—(150,809)(150,809)(150,555)$(254)$1,678,856—
1,678,856
1,632,342$46,514b. Assets, depreciation, Impairment
losses and capital expenditures;
AssetsDepreciation
Impairment losses
Capital expenditures$386,379
7,336—
16,849$636,662
14,493
1,499
55,273$55,705627—
440$1,078,746
22,456
1,499
72,562$70,682
356
—
2,202

$1,149,428
22,812
1,499
74,764

14. Subsequent Event
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 28, 2007

13. Segment information
Business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2007 and 2006 is summarized asfollows:
Millions of yen

2007
Transport

Retail Distribution
and Processing

a. Operating revenues andoperating income:Customers
Intersegment
Total operating revenues
Operating costs and expenses
Operating income¥122,204
3,062
125,266
122,016¥3,250¥58,680
3,665
62,34560,610¥1,735¥17,305
11,07628,381
27,845¥536¥198,189
17,803215,992
210,471¥5,521¥—(17,803)(17,803)(17,773)¥(30)¥198,189—
198,189
192,698¥5,491b. Assets, depreciation, Impairment
losses and capital expenditures;
AssetsDepreciation
Impairment losses
Capital expenditures¥45,612
866
—
1,989

¥75,158
1,711
177
6,525

¥6,57674—
52¥127,346
2,651
177
8,566

¥8,34442—
260¥135,690
2,693
177
8,826

26

OthersTotal

Elimination or
Corporate

Consolidated

Cash dividends
Bonuses to directors and statutory auditors

Millions of yen
¥ 442
26

Thousands of
U.S.dollars$3,744
221

27

Board of Directors and Corporate Auditors, Executive Officers (As of June 29, 2007)

President and Representative Director
Yasuhisa Fukuda

Executive Vice President and Representative Director
Kenichi Shibukawa

Corporate Data (As of June 30, 2007)

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: 8,430
President and Representative Director
Yasuhisa Fukuda
Executive Vice President and Representative Director
Kenichi Shibukawa
Directors and Managing Executive Officers
Takeyo Teduka
Mitsuru Muramoto
Kengo Tanaka
Hisao Takahashi
Sadayuki Wada

Full-time Corporate Auditors
Kunihiro Sanada
Masakazu Tsuji
Kazuo Saga

Stock Listing:Corporate Auditor
Hiroshi Itawaki

Transfer Agent:

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

Senior Executive Officers
Katsuhiko Miyagawa
Masuo Tanaka

Directors and Executive Officers
Yutaka Toyama
Masahito Kanno
Yasushi Morimoto

Tokyo Stock Exchange
Osaka Securities Exchange

Executive Officers
Toshinori Mine
Koujirou Matsuda
Kazuhiro Yamanaka Yoshihiro Kawase
Takao Morita
Kazuaki Oike
Yoshio Shigeno

Network:(As of July 1, 2007)

Represents Branches
and Departments

Consolidated Subsidiaries and Affiliated Companies (As of March 31, 2007)

28

Company Name

Paid-in Capital

Equity Ownership Location

SENKO TRADING Co., Ltd.

¥300 million

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.
TOKYO SENKO TRANSPORT Co., Ltd.
KANAGAWA SENKO TRANSPORT Co., Ltd.
CHIBA SENKO TRANSPORT Co., Ltd.
FUJI SENKO TRANSPORT Co., Ltd.
TOKAI SENKO TRANSPORT Co., Ltd.
TOYOHASHI SENKO TRANSPORT Co., Ltd.
HOKURIKU SENKO TRANSPORT Co., Ltd.
SHIGA SENKO TRANSPORT Co., Ltd.
OSAKA SENKO TRANSPORT Co., Ltd.
CHUSHIKOKU LOGISTICS Co., Ltd.
SHIKOKU REEFER TRANSPORT AND WAREHOUSING Co., Ltd.
SANKYO FREIGHT Co., Ltd.
SANYO SENKO TRANSPORT Co., Ltd.
FUKUOKA SENKO TRANSPORT Co., Ltd.
MINAMI KYUSHU SENKO Co., Ltd.
MIYAZAKI SENKO TRANSPORT Co., Ltd.
Guangzhou Senko Logistics Co., Ltd.
SENKO International Logistics Pte. Ltd.
ASICS PHYSICAL DISTRIBUTION CORPORATIONDFTZ Best International Trade & Logistics Co., Ltd.

¥60 million
100.0%¥60 million
100.0%¥30 million
100.0%¥30 million
100.0%¥90 million
100.0%¥50 million
100.0%¥30million
100.0%¥10million
100.0%¥30 million
100.0%¥30 million
100.0%¥30 million
100.0%¥30million
100.0%¥20 million
95.0%¥30 million
100.0%¥90 million
100.0%¥80 million
100.0%¥50 million
100.0%¥10 million
100.0%¥20 million
100.0%¥50 million
100.0%¥25 million
100.0%¥90 million
100.0%
US$200thousand 100.0%
S$860thousand
100.0%¥300 million
20.0%
US$1,800thousand
33%

100.0%

Head Office
Housing Distribution
Sales Department
East Japan Sales DivisionMarket Development
Division
Chubu Sales Department

Main Business

Tokyo

Sales of petroleum-related products and distribution andinformation processing equipment
Osaka
Information processing
Tokyo
Trucking, in-factory work, moving services
SapporoTrucking
MiyagiTrucking, in-factory work
SaitamaTrucking, in-factory work
SaitamaTrucking, in-factory work, vehicle maintenanceTokyo
Trucking, in-factorywork
Kanagawa
Trucking, in-factorywork
Chiba
Trucking, in-factory work, vehicle maintenanceShizuoka
Trucking, in-factory work
Aichi
Trucking, in-factory work
Aichi
Trucking, in-factory work, moving services
Fukui
Trucking, in-factory work
Shiga
Trucking, in-factory work, vehicle maintenance
Osaka
Trucking, in-factory work, vehicle maintenanceOkayamaTrucking, in-factory work, warehousing
KagawaTrucking, warehousing
Hiroshima
Trucking, in-factory work
Yamaguchi
Trucking, in-factory work
FukuokaTrucking
Kumamoto
Trucking, in-factory work
Miyazaki
Trucking, in-factory work, vehicle maintenance
Guangzhou (China) Freight forwarding, trucking
Singapore
Freight forwarding, trucking
Hyogo
Product control, vehicle shipment agency
Dalian (China) Freight forwarding, trucking, warehousing

Branches:

Chemicals Distribution
Sales Department
Logistics Sales Department

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

Departments:

International Business, Marine Transport, Railway Forwarding, Air Cargo & KYN, Logistics Solution

29