Japan Transcity Corporation
Consolidated Financial Statements
March 31, 2014 and 2013

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Independent Auditor’s Report
To the Board of Directors of Japan Transcity Corporation:
We have audited the accompanying consolidated financial statements of Japan Transcity Corporationand its consolidated subsidiaries, which comprise the consolidated balance sheets as at March 31, 2014
and 2013, and the consolidated statements of income, statements of comprehensive income, statementsof changes in net assets and statements of cash flows for the years then ended, and a summary ofsignificant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in Japan, and for such internal
control as management determines is necessary to enable the preparation of consolidated financial
statements that are free from material misstatements, whether due to fraud or error.
Auditor’s Responsibility
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 comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the consolidated financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the consolidated financial statements. The procedures selected depend on our judgement, including
the assessment of the risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, we consider internal control relevant to theentity’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, while the objective of the financial
statement audit is not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.
OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of Japan Transcity Corporation and its consolidated subsidiaries as at March 31,
2014 and 2013, and their financial performance and cash flows for the years then ended in accordancewith accounting principles generally accepted in Japan.
Convenience Translation
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to theyear ended March 31, 2014 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 1 to the consolidated financial statements.

KPMG AZSA LLC
July 30, 2014
Nagoya, Japan

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2014 and 2013

Millions of yen
2014
2013
Current assets:
Cash and cash equivalents (Note 3)
Short-term investments (Notes 3, 4 and 5)¥

Trade receivables (Note 3)
Allowance for doubtful accounts
Inventories
Deferred tax assets (Note 10)
Other current assets
Total current assets

Property and equipment (Note 5):Land
Buildings and structures
Machinery and equipment
Vehicles and vessels
Construction in progress
Total property and equipment
Less accumulated depreciation
Net property and equipment

Investments and other assets:
Investment securities (Notes 3, 4 and 5)
Investments in unconsolidated subsidiaries andaffiliates
Employee retirement benefit asset (Note 6)
Deferred tax assets (Note 10)
Lease deposits
Other assets
Allowance for doubtful accounts
Total investments and other assets

Total assets¥-2-

12,648
48

¥

9,875
136

Thousands of
U.S. dollars
2014$

124,000
471

13,404(17)
13,38799
374
1,974
28,53013,832(16)
13,816
123
450
2,042
26,442

131,412(167)
131,245970
3,667
19,353279,706

30,06547,60911,882
6,685
2,353
98,594(49,263)
49,331

29,65649,155
12,952
6,585
75
98,423(50,897)
47,526

294,755
466,755
116,490
65,53923,069966,608(482,971)
483,637

6,268

5,936

61,451

5,804
2,961
653
505
1,512
(16)
17,687

5,338
658
667
4,311
(17)
16,89356,902
29,0296,402
4,951
14,824(157)
173,402

95,548¥90,861$

936,745

See accompanying Notes to Consolidated Financial Statements.

Millions of yen
2014
2013
Current liabilities:
Short-term borrowings (Notes 3 and 5)¥
Current maturities of long-term debt (Notes 3 and 5)
Trade payables (Note 3)
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities
Long-term debt (Notes 3 and 5)
Provision for employee retirement benefits (Note 6)
Employee retirement benefit liability (Note 6)
Guarantee deposits received (Note 3)
Deferred tax liabilities for revaluation
Deferred tax liabilities (Note 10)
Accrued severance indemnities for directors
Other long-term liabilities
Total liabilities
Commitments and contingent liabilities (Notes 8 and 9)
Net assets (Note 7):
Shareholders’ equity:
Common stock: 240,000,000 shares authorized
and 67,142,417 shares issued
Capital surplus
Retained earnings
Less treasury stock, at cost: 2,817,101 shares in2014 and 2,805,264 shares in 2013
Total shareholders’ equity
Accumulated other comprehensive income:Net unrealized gains on available-for-salesecurities
Land revaluation decrement
Foreign currency translation adjustment
Retirement benefit adjustment (Note 6)
Total accumulated othercomprehensive income
Minority interests
Total net assets
Total liabilities and net assets

¥

-3-

2,594
1,278
7,728
1,594
734
3,277
17,205

¥

2,741
4,374
7,374
1,602
373
2,019
18,483Thousands of
U.S. dollars
2014$

25,431
12,52975,765
15,627
7,196
32,128
168,676

21,062
1,839
3,401
4,545
1,607
19
764
50,442

17,788
1,470
3,547
4,619
1,410
14
697
48,028206,490
18,03033,34344,55915,755
186
7,490
494,529

8,428
6,733
30,5098,428
6,733
28,16082,62766,010299,108(1,104)44,566(1,100)42,221(10,823)436,922

1,198(1,503)
134
(362)

930
(1,367)(95)-

11,745(14,735)
1,314(3,549)

(533)
1,073
45,106(532)
1,144
42,833(5,225)
10,519442,216

95,548¥90,861$

936,745

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
For the Years Ended March 31, 2014 and 2013

Operating revenue (Note 13)¥

Operating costs and expenses(Notes 6 and 9)
Operating income

Millions of yen
2014
2013

Thousands of
U.S. dollars
2014

88,607$¥

84,698868,696

84,9693,638

81,582
3,116

833,029
35,667

353
(257)

465
(298)

3,461
(2,520)

493

510

4,833

17
157
763

(17)
(648)
185
197

167
1,539
7,480

4,401

3,313

43,147

Income taxes:
Current
Deferred
Total income taxes

1,371
256
1,627

1,133
186
1,319

13,441
2,510
15,951

Income before minority interests

2,774

1,994

27,196

88

88

863

Other income (expenses):
Interest and dividend income
Interest expenses
Equity in net earnings of unconsolidated
subsidiaries and affiliates
Loss on sale or disposal of property andequipment
Impairment loss on fixed assets (Note 2(i))
Others, net
Income before income taxes andminority interests

Less minority interests in net income of
consolidated subsidiaries
Net income

¥

2,686

¥

1,906

$

Yen
Per share:
Net income
Cash dividends

¥

41.75
9.00

See accompanying Notes to Consolidated Financial Statements.

-4-¥

26,333

U.S. dollars
29.63
9.00

$

0.41
0.09

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended March 31, 2014 and 2013

Millions of yen
2014
2013
Income before minority interests
Other comprehensive income (Note 11):
Net unrealized gains on available-for-salesecurities
Foreign currency translation adjustment
Share of other comprehensive income ofassociates accounted for using equity
methodTotal other comprehensive income
Comprehensive income

Comprehensive income attributable to:
Owners of the Company
Minority interests

¥

¥

¥

2,774

1,994

$

27,196

270
302

668
181

2,647
2,961

13
585
3,359

12
861
2,855

127
5,735
32,931

3,200
159

See accompanying Notes to Consolidated Financial Statements.

-5-¥

Thousands of
U.S. dollars
2014

¥

¥

2,694
161

$

$

31,372
1,559

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2014 and 2013
Shareholders' equity
Number ofshares ofcommonstock
issuedBalance at April 1, 2012
Net income for the year
Cash dividends
Change of scope ofequity method
Purchase of treasury stockand fractional shares, net
Net changes other thanshareholders’ equity
Balance at March 31, 2013
Net income for the year
Cash dividends
Change of scope of
consolidation
Purchase of treasury stockand fractional shares, net
Reversal of land revaluation
decrement
Net changes other thanshareholders’ equity
Balance at March 31, 2014

Commonstock

67,142,417-¥

Capitalsurplus

8,428
-

¥

Retainedearnings

6,733
-

¥

Accumulated other comprehensive income

Treasurystock

26,833
1,906
(579)

¥

(1,099)-Total
shareholders’
equityNet
unrealized
gains onavailable-forsale securities¥¥

40,895
1,906
(579)

Land
revaluation
decrement
Millions of yen
270
-

¥

(1,367)-

Total
accumulated
other

Foreigncurrencytranslation
adjustment

Retirement
benefitadjustment

comprehensiv
e income

¥

¥

¥

(223)
-

-

(1,320)-Minority
interests¥

Total net
assets

1,088-¥

40,663
1,906
(579)

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

(1)

(1)

-

-

-

-

-

-

(1)

67,142,417
-

8,428
-

6,733
-

28,1602,686(579)(1,100)-42,221
2,686
(579)

660
930
-

(1,367)
-

128
(95)
-

-

788
(532)
-

56
1,144
-

844
42,833
2,686
(579)

-

-

-

106

-

106

-

-

-

-

-

-

106

-

-

-

-

(4)

(4)

-

-

-

-

-

-

(4)

-

-

-

136

-

136

-

-

-

-

-

-

136

67,142,417

¥

8,428

¥

6,733

¥

30,509¥(1,104)¥44,566

¥

268
1,198

¥

(136)
(1,503)

¥

229
134

¥

(362)
(362)

¥

(1)
(533)

¥

(71)
1,073

¥

(72)
45,106

Thousands of U.S. dollars
Balance at March 31, 2013
Net income for the year
Cash dividends
Change of scope of
consolidation
Purchase of treasury stockand fractional shares, net
Reversal of land revaluation
decrement
Net changes other thanshareholders’ equity
Balance at March 31, 2014$$

82,627-66,010-$ 276,079
26,333(5,676)$ (10,784)-$ 413,932
26,333(5,676)

-

-

1,039

-

-

-

-

-

66,01082,627

$

$

9,118
-

$ (13,402)
-

1,039

-

-

-

(39)

(39)

-

-

1,333

-

1,333

-

-

$ 299,108$ (10,823)$ 436,922

2,627
11,745(1,333)$ (14,735)

See accompanying Notes to Consolidated Financial Statements.
-6-

$

$

$

$

(931)
-

(5,215)-$ 11,215-$ 419,932
26,333(5,676)

-

-

-

1,039

-

-

-

-

(39)

-

-

-

-

1,333

(10)
(5,225)(696)$ 10,519(706)$ 442,216

2,245
1,314

$

$

-

(3,549)(3,549)$$Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2014 and 2013

Millions of yen
2014
2013
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation
Net change in employee retirement benefit asset/liability
Gain (loss) on sale or disposal of property and equipment
Impairment loss on fixed assets
Decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payables
Others, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

¥

4,401

¥

3,313

Thousands of
U.S. dollars
2014$

43,147

2,661
(779)
(17)
694
(11)
171
(472)
6,648
532
(275)
(1,012)
5,893

2,638
(720)
17
648
274
8
(655)
(1,342)
4,181
604
(297)
(1,597)
2,891

26,088(7,637)
(167)
6,804
(108)
1,676
(4,627)65,176
5,216(2,696)(9,922)
57,774

Cash flows from investing activities:
Increase in property and equipment and intangible assets
Decrease in property and equipment and intangible assets
Decrease in short-term investments
Payments for sales of investments in subsidiaries resulting in change in scope of consolidation
Others, net
Net cash used in investing activities(3,412)
301
278
(96)
241
(2,688)(2,624)147
185
133(2,159)(33,451)
2,951
2,725
(941)
2,363
(26,353)

Cash flows from financing activities:
Increase in long-term debt
Repayment of long-term debt
Decrease in short-term borrowings
Purchase of treasury stock and fractional shares, net
Dividends paid
Others, net
Net cash used in 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
Increase in cash and cash equivalents upon inclusion of additional subsidiaries on consolidation
Cash and cash equivalents at end of year

4,550
(4,376)
(223)
(4)
(579)
(246)
(878)
267
2,594
9,875
179
12,6486,900(7,722)
(100)
(1)
(579)
(318)
(1,820)174(914)
10,7899,875

44,608(42,902)(2,187)(39)(5,676)(2,412)(8,608)2,618
25,431
96,814
1,755
124,000¥

See accompanying Notes to Consolidated Financial Statements.

-7-

¥

$

Japan Transcity Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements

1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements of Japan Transcity Corporation (the“Company”) and its consolidated subsidiaries (together with the Company, the “Japan Transcity
Group”) have been prepared in accordance with the provisions set forth in the Financial Instrumentand Exchange Law of Japan and its related accounting regulations and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements from International Financial
Reporting Standards.
The accompanying consolidated financial statements have been restructured and translated into
English from the consolidated financial statements of the Company prepared in accordance withJapanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as
required by the Financial Instrument and Exchange Law of Japan. Certain supplementary
information included in the statutory Japanese language consolidated financial statements, but notrequired for fair presentation, has not been presented in the accompanying consolidated financial
statements.
Comparative figures have been reclassified to conform to the current year’s presentation.
The translation of the Japanese yen amounts into U.S. dollar amounts is included solely for theconvenience of readers outside Japan, using the prevailing exchange rate at March 31, 2014, which
was approximately ¥102 to U.S. $1.00. Such translation should not be construed as arepresentation that the Japanese yen amounts have been, could have been or could in the future beconverted into U.S. dollars at this or any other rate of exchange.
2. Summary of Significant Accounting Policies(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries. Investments in certain unconsolidated subsidiaries and significant
affiliates are accounted for using the equity method. Investments in unconsolidated subsidiaries
and affiliates not accounted for using the equity method are stated at cost. Differences between
the acquisition cost of investments in subsidiaries and the underlying equity in their net assets,adjusted based on the fair value at the time of acquisition, are principally deferred as goodwill andamortized over five years or recognized as gain on negative goodwill.
The numbers of consolidated subsidiaries, unconsolidated subsidiaries and affiliates for the years
ended March 31, 2014 and 2013 were as follows.
2014
2013
Consolidated subsidiaries:
Domestic
23
24
Overseas53
Unconsolidated subsidiaries and affiliates accounted forusing the equity method
98Unconsolidated subsidiaries stated at cost
12
14
Affiliates stated at cost
4
4

-8-

All intercompany accounts and transactions have been eliminated on consolidation.
The accompanying consolidated financial statements include the accounts of overseas consolidated
subsidiaries (five subsidiaries in 2014). These overseas consolidated subsidiaries close theirbooks at December 31, which is three months earlier than the closing of the books of the Company
or its domestic consolidated subsidiaries. The Company consolidated its overseas subsidiaries’
financial statements as of their year-end date. Significant transactions for the period between thesubsidiaries’ year-end date and the Company’s year-end date have been adjusted on consolidation.
(Unification of Accounting Policies Applied to Foreign Subsidiaries for Consolidated Financial
Statements)
The “Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for
Consolidated Financial Statements” issued by the Accounting Standards Board of Japan (“ASBJ”)(Practical Issues Task Force (“PITF”) No. 18) generally requires that accounting policies andprocedures applied by a parent company and its subsidiaries to similar transactions and events
under similar circumstances be unified for the preparation of the consolidated financial statements.
As a tentative measure, however, PITF No. 18 allows a parent company to prepare consolidated
financial statements using foreign subsidiaries’ financial statements prepared in accordance witheither International Financial Reporting Standards or U.S. generally accepted accounting principles.
In this case, adjustments for the following five items are required in the consolidation process sothat their impact on net income is accounted for in accordance with Japanese GAAP, unless suchimpact is immaterial.
(a) Goodwill not subject to amortization(b) Actuarial gains and losses of defined-benefit retirement plans recognized outside profit or loss(c) Capitalized expenditures for research and development activities(d) Fair value measurement of investment properties and revaluation of property, plant andequipment and intangible assets(e) Accounting for net income attributable to minority interests
The accounts of the Company’s overseas consolidated subsidiaries were prepared in accordancewith either International Financial Reporting Standards or U.S. generally accepted accounting
principles, with adjustments having been made for the five items specified above as needed.

(b) Cash equivalents
The Japan Transcity Group considers cash equivalents to be highly liquid debt instrumentspurchased with an original maturity of three months or less.

(c) Investments and marketable securities
The Japan Transcity Group classifies certain investments in debt and equity securities as“held-to-maturity,” “trading” or “available-for-sale” securities for the purpose of determining theapplicable accounting method as stipulated by the accounting standard for financial instruments.
Marketable available-for-sale securities with available market quotations are stated at fair value,
and net unrealized gains or losses on these securities are reported as a component of net assets, netof applicable income taxes. Gains or losses on the disposition of available-for-sale securities arecomputed based on the moving-average method. Non-marketable available-for-sale securities
without available market quotations are carried at cost determined by the moving-average method.
Adjustments in carrying values of individual securities are charged to income through write-downs
when a decline in value is deemed other than temporary.

-9-(d) Accounting for derivatives
Derivatives are valued at fair value if hedge accounting is not appropriate or where there is no
hedging designation, and gains or losses on the derivatives are recognized in current earnings.
Under the special treatment permitted by the accounting standard for financial instruments,
hedging interest rate swaps are accounted for on an accrual basis and recorded net of interest
expenses generated from the hedged borrowings if certain conditions are met.
(e) Inventories
Inventories consist of supplies and others.
method.

Supplies are stated at cost using the moving-average(f) Allowance for doubtful accounts
An allowance for doubtful accounts is provided for certain doubtful or troubled receivables at theaggregate amount of estimated credit losses based on individual financial reviews. For otherreceivables, a general reserve calculated based on historical loss experience for a certain past
period is provided.
(g) Property and equipment, and depreciation (except for leases)
Property and equipment, including significant renewals and additions, are stated at cost, and are
depreciated principally using the declining-balance method at rates based on the estimated usefullife of the asset. Buildings acquired on or after April 1, 1998 are depreciated using thestraight-line method.
Expenditures on maintenance and repairs are charged to operating income as incurred.
The capital gains directly offset against the acquisition costs of tangible fixed assets to obtain tax
benefits were ¥100 million ($980 thousand) for the years ended March 31,2014 and 2013.
(Change in accounting policies with amendment of respective law or regulation that is notdistinguishable from change in accounting estimates)
From the year ending March 31, 2013, in accordance with the amendment of the Corporate Tax
Law of Japan, the Company and its domestic consolidated subsidiaries have changed its
depreciation method for property and equipment. Assets acquired on or after April 1, 2012 havebeen depreciated using the method prescribed in the amended Corporate Tax Law of Japan. Suchchange did not have a material effect on operating income or income before taxes and minority
interests.
(h) Accounting for leases
Assets of finance leases that transfer ownership of the leased property to the lessee are depreciatedusing the same method for property.
Assets of finance leases that do not transfer ownership of the leased property to lessee aredepreciated over the lease term using the straight-line method with the assumption that the residual
value (or guaranteed residual value when set by agreement) is zero.
Prior to April 1, 2008, the Company and its domestic consolidated subsidiaries accounted forfinance leases which do not transfer ownership of the leased property to the lessee as operatingleases, provided they disclosed certain “as if capitalized” information in the notes to theconsolidated financial statements.
The Company and its domestic consolidated subsidiaries have adopted ASBJ Statement No. 13,
entitled the “Accounting Standard for Lease Transactions,” and ASBJ Guidance No. 16, entitledthe “Guidance on Accounting Standard for Lease Transactions.” The accounting standard requiresthat all finance lease transactions be treated as capital leases. As permitted, finance leases which
do not transfer ownership of leased property to the lessee that commenced prior to April 1, 2008

- 10 -

and have been accounted for as operating leases continue to be accounted for as such provided thatcertain “as if capitalized” information thereof have been disclosed.
(i) Accounting standard for impairment of fixed assets
The Company and its domestic consolidated subsidiaries adopted the “Accounting Standard for
Impairment of Fixed Assets” issued by the Business Accounting Council of Japan and related
practical guidance issued by ASBJ. The standard requires that a fixed asset be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of such
asset may not be recoverable. Impairment loss is to be recognized in the income statement by
reducing the carrying amount of an impaired asset or group of assets to the recoverable amount,measured at the higher of the net selling price or value in use. Fixed assets include land,buildings and other forms of property as well as intangible assets, and are to be grouped at thelowest level for which there are identifiable cash flows separate from those of other groups ofassets. For the purpose of recognition and measurement of impairment loss, fixed assets otherthan idle or unused property are principally grouped into cash-generating units such as regional
business divisions and the like. With respect to a certain golf club, the recoverable amount wasmeasured based on the value in use calculated using discounted future cash flows by an interest
rate of 3.67%. While the Japan Transcity Group recognized no impairment loss for the year
ended March 31, 2014, the Japan Transcity Group recognized impairment loss on a certain golfclub for the year ended March 31, 2013 as follows.
Millions of
Yen
Buildings and structures
Land

¥
¥

199
449
648

(j) Revaluation of land
In accordance with the Law Concerning Revaluation of Land (the “Revaluation Law”), theCompany elected a one-time revaluation to restate the cost of land used for the Company’sbusiness at values rationally reassessed effective on March 31, 2002, reflecting adjustments forland shape and other factors and based on municipal property tax bases. In accordance with the
Revaluation Law, an amount equivalent to the tax effect on the difference between the original
book value and the reassessed value was recorded as deferred tax liability under the revaluationaccount. The remaining difference, net of the tax effect and minority interests’ portions, wasrecorded as a component of the net assets under land revaluation decrement account in theaccompanying consolidated balance sheets. At March 31, 2014 and 2013, the differences of thecarrying value of land used for the Company’s business after reassessment over the current market
value at the fiscal year-end amounted to ¥8,898 million ($87,235 thousand) and ¥8,842 million,
respectively.
(k) Employee retirement benefits
Employees who terminate their service with the Japan Transcity Group are entitled to retirement
benefits generally determined by current basic rates of pay, length of service and conditions underwhich the termination has occurred.
In accordance with the accounting standard for employee retirement benefits, the Japan Transcity
Group recognizes retirement benefits for employees, including pension costs and related liabilities,
based on the actuarial present value of retirement benefit obligation using the actuarial appraisal
approach and the value of pension plan assets available for benefits at the fiscal year-end.
Actuarial differences arising from changes in the retirement benefit obligation or pension plan

- 11 -

assets not anticipated under previous assumptions or from changes in the assumptions themselves
are amortized on a straight-line basis over 10 years, a period within the remaining service years of
the employees, measured from the year after such differences arise. Past service cost is amortizedusing the straight-line method over 10 years, measured from the year in which such cost arises.
Some consolidated subsidiaries provide accrued retirement benefits for their employees mainly at
the amounts of the projected benefit obligations calculated by the simplified method.
Effective from the year ended March 31, 2014, the Company and its domestic consolidated
subsidiaries have applied the “Accounting Standard for Retirement Benefits” (ASBJ Statement No.
26, May 17, 2012 (“Statement No. 26”)) and the “Guidance on Accounting Standard for
Retirement Benefits” (ASBJ Guidance No. 25, May 17, 2012 (“Guidance No. 25”)), with the
exceptions of Article 35 of Statement No. 26 and Article 67 of Guidance No. 25, and, accordingly,
actuarial differences and past service costs that are yet to be recognized have been recognized andthe difference between retirement benefit obligations and plan assets has been recognized as
employee retirement benefit liability.
In accordance with Article 37 of Statement No. 26, this accounting change has not been
retrospectively applied to the consolidated financial statements in prior years, and the effect of thechange in accounting policies arising from initial application has been recognized in retirement
benefit adjustment in accumulated other comprehensive income.
As a result of the application, employee retirement benefit asset in the amount of ¥2,961 million($29,029 thousand) and employee retirement benefit liability in the amount of ¥1,839 million($18,030 thousand) have been recognized and a credit balance of accumulated othercomprehensive income of ¥362 million ($3,549 thousand) was recorded at March 31, 2014.
(l) Accrued severance indemnities for directors
Some domestic consolidated subsidiaries may pay severance indemnities to directors, which are
subject to the approval of the shareholders. Some domestic consolidated subsidiaries haveprovided for the full amounts of liabilities for directors’ severance indemnities at the respectivebalance sheet dates.
(m) Translation of foreign currency accounts
Receivables, payables and securities other than stocks of subsidiaries and certain other securities
are translated into Japanese yen at year-end exchange rates. Transactions in foreign currencies
are recorded at the prevailing exchange rates on the transaction dates. Resulting translation gains
or losses are included in current earnings.
For financial statement items of overseas consolidated subsidiaries, all assets and liabilities
accounts are translated into Japanese yen by applying the exchange rates in effect at the fiscal
year-end. All income and expense accounts are translated at the average rates of exchange
prevailing during the fiscal year. Translation differences have been reported as foreign currencytranslation adjustments under a component of net assets in the accompanying consolidated balance
sheets.
(n) Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets andliabilities are recognized as future tax consequences attributable to differences between the
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss
carry-forwards. Deferred tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in the period that includes the promulgation date.

- 12 -

(o) Enterprise taxes
The Japan Transcity Group records enterprise taxes based on the “added value” and “capital”
amounts when levied as size-based corporate taxes for local government enterprise taxes, and suchtaxes are included in operating costs and expenses.
(p) Appropriation of retained earnings
Cash dividends are recorded in the fiscal year when a proposed appropriation of retained earnings
is approved by the board of directors and/or shareholders.
(q) Per share data
Net income per share is computed by dividing income available to common shareholders by theweighted-average number of shares of common stock outstanding during the fiscal year. Cashdividends per share for each fiscal year in the accompanying consolidated statements of income
represent dividends declared by the Company as applicable to the respective years. Diluted net
income per share was not presented as of March 31, 2014 or 2013 due to the lack of any dilutive
shares.
(ｒ) Yet to be applied accounting standard
The following standards and guidance have been issued but not yet adopted under theaccompanying consolidated financial statements.
(Accounting standard for retirement benefits)
ASBJ issued Statement No. 26 and Guidance No. 25 on May 17, 2012, which will replace thecurrent standards and related practical guidance. The revised standards amend the determination ofretirement benefit obligations and current service costs and enhancement of disclosures from theviewpoint of improvements to financial reporting and international convergence. The Japan
Transcity Group will adopt the revised standard in relation to the method for calculating retirement
benefit obligation and current service costs effective from the beginning of the fiscal year ending
March 31, 2015. As a result of the application, operating income and income before income tax
and minority interests will decrease by ¥51 million ($500 thousand) for the year ending March 31,
2015.
(Accounting standard for business combination)
ASBJ issued revised ASBJ Statement No. 21, entitled the “Accounting Standard for Business
Combinations,” revised ASBJ Guidance No. 10, entitled the “Guidance on Accounting Standard
for Business Combinations and Business Divestitures,” and revised ASBJ Statement No. 22,
entitled the “Accounting Standard for Consolidated Financial Statements,” on September 13, 2013.
Under these revised accounting standards, the accounting treatment for changes in a parent's
ownership interest in a subsidiary when the parent retains control over the subsidiary throughadditional acquisition of shares therein and for acquisition-related costs were amended. In addition,
the presentation method of net income was amended, “minority interests” was amended to“non-controlling interest,” and transitional provisions for accounting treatments were defined.
The Company expects to apply these revised accounting standards and guidance from the
beginning of the fiscal year ending March 31, 2016. However, the transitional provisions foraccounting treatments will be applied for business combination performed on or after the
beginning of the fiscal year ending March 31, 2016.
The Company is currently in the process of assessing the impact of these standards on the
consolidated financial statements.

- 13 -

3.

Fair values of financial instruments(a) Qualitative information on financial instruments① Policies for using financial instruments
The fund operation of the Company is limited to short-term deposits, and the Company
raises fund through bank loans and bond issuances. Derivative instruments are mainly
used to hedge against variable interest rate risk and to compensate a loss when an
earthquake occurs, and are not used for speculative purpose.
② Details of financial instruments, risks and risk management system
Trade receivables (notes and accounts) carry a credit risk of trading partners. In
response to such risk, pursuant to internal regulations of the Company, the due dates andbalances of such receivables are managed appropriately for each counterparty and thecredit risks of main trading partners are identified every half year.
Although investments in securities are exposed to market price fluctuation risk, theCompany stays abreast of the fair values of shares of companies with which the Company
has business relationships on a regular basis.
Trade payables (notes and accounts) are due within one year.
With regard to loans payable, short-term borrowings are mainly used to raise capital for
operational dealings and long-term debt fund capital investment.
Loans with variable interest rates involve the risk of interest rate fluctuation. For
hedging purposes, the Japan Transcity Group is a party to derivative instruments, such as
interest rate swap contracts and the like, in the normal course of business to reduce its
own exposure to fluctuations in interest rates. Evaluating the effectiveness of the hedge
has not been required because of the exceptional treatment of interest rate swaps.
Guarantee deposits received consist mainly of deposit money for golf club memberships.
The Company enters into derivative contracts with financial institutions of highcreditworthiness to reduce credit risk.
The Japan Transcity Group controls liquidity risk associated with operating payables andloans by cash management systems which control the fund of the Japan Transcity Group
as a whole.
③ Supplemental information on fair values
The contract amounts of derivative instruments under Note 3 (Fair Values of Financial
Instruments) do not necessarily represent the market risk in themselves.

- 14 -

(b) Fair values of financial instruments
The carrying values of financial instruments included in the consolidated balance sheet andtheir fair values at March 31, 2014 and 2013 were as follows. Some financial instruments
were excluded because it was extremely difficult to identify their fair values.

At March 31, 2014:(1) Cash and cash equivalents(2) Short-term investments(3) Trade receivables(4) Investment securities
Marketable securities
Total assets(1) Trade payables(2) Short-term borrowings(3) Long-term debt
Total liabilities
At March 31, 2013:(1) Cash and cash equivalents(2) Short-term investments(3) Trade receivables(4) Investment securities
Marketable securities
Total assets(1) Trade payables(2) Short-term borrowings(3) Long-term debt
Total liabilities

Carrying value

Fair value
Millions of yen¥¥

12,64848
13,404
5,894
31,994
7,728
2,594
22,34032,662

¥
¥

¥

¥

9,875
136
13,832
5,469
29,3127,374
2,741
22,16232,277¥¥¥

Carrying value
At March 31, 2014:(1) Cash and cash equivalents(2) Short-term investments(3) Trade receivables(4) Investment securities
Marketable securities
Total assets(1) Trade payables(2) Short-term borrowings(3) Long-term debt
Total liabilities

$

$
$

$

124,000
471
131,41257,784
313,667
75,76525,431
219,019
320,215- 15 -

¥
¥

¥

¥

¥
¥

¥

12,64848
13,404
5,894
31,994
7,728
2,594
22,15632,4789,875
136
13,832
5,469
29,3127,374
2,741
22,10332,218Difference

¥

¥
¥

¥

$
$

$

124,000
471
131,41257,784
313,667
75,76525,431
217,216
318,412

(184)
(184)

¥

¥
¥

¥

Fair value
Thousands of U.S. dollars
$

-

$

$
$

$

(59)
(59)

Difference(1,803)(1,803)

Note 1. Method of calculating the fair values of financial instruments and other mattersconcerning securities and derivatives
Assets(1) Cash and cash equivalents, (2) Short-term investments and (3) Trade receivables
The carrying values of cash and cash equivalents, short-term investments and tradereceivable approximate their fair values because of their short maturities.
(4) Investment securities
The fair values of listed equity shares in investment securities are based on quoted
market prices. For matters concerning securities according to the purpose forwhich they are held, see Note 4.
Liabilities(1) Trade payables and (2) Short-term borrowings
The carrying values of trade payables and short-term borrowings approximate theirfair values because of their short maturities.
(3) Long-term debt
The fair value of long-term debt is computed based on the total amount of principal
and interest discounted at an interest rate applicable to new loans under the same
conditions.
Derivatives① Derivative transactions to which hedge accounting was not applied: notapplicable.
② Derivative transactions to which hedge accounting was applied: the contract
amounts or amounts equivalent to the principal set forth in the contracts as of the
fiscal year-end date were as follows.

Millions of yen
2014
2013
10,066¥
10,274

Thousands of
U.S. dollars
2014$
98,686

Contract amount¥Contract amount due after one
9,500
8,236
93,137year
Fair value
(97)
(147)
(951)
Method of hedge accounting applied: exceptional treatment for interest rate swap
Type of derivative transaction: interest rate swap (fixed rate payment, floating rate receipt)
Hedged item: long-term debt
The Company used prices presented by the applicable financial institutions.
Note 2. Financial instruments whose fair values could not be reliably determined
Thousands ofMillions of yen
U.S. dollars
2014
2014
2013
Non-marketable securities
¥
374
¥
467
$
3,667
(*1)
Guarantee deposits received
¥
3,401
¥
3,547
$
33,343(*2)
Derivative relating to
¥
17
¥
17
$
167
earthquakes (*3)(*1) It is extremely difficult to determine the fair values of non-marketable securities
because they do not have quoted market prices and their future cash flows cannot
be estimated. Therefore, they were excluded from item (4) (Investment securities)
above.

- 16 -

(*2)

It is extremely difficult to determine the fair values of guarantee deposits received
because their scheduled redemption amounts cannot be estimated.

(*3)

During the year ended March 31, 2007, the Company entered into a derivative
contract relating to earthquakes for hedging purposes. The outstanding contract
amount was ¥300 million ($2,941 thousand) at both March 31, 2014 and 2013.
As the fair value for such a contract was not considered determinable, such contract
has not been accounted for at fair value.

Note 3. Scheduled redemption amounts after the fiscal year-end date for monetary claims andsecurities with maturity periods
Due in one
year or less

Cash and cash equivalents
Short-term investments
Trade receivables
Total

4.

¥

¥

Due after
Due in one
Due after
one yearyear or lessone year
Millions of yen
2014
2013
12,648
¥
¥
9,875
¥
48
136
13,404
13,832
26,100¥¥ 23,843¥-

Due in one
Due after
year or lessone yearThousands of U.S. dollars
2014$ 124,000$
471
131,412$ 255,883$-

Investments
At March 31, 2014 and 2013, short-term investments consisted of time deposits with an original
maturity of more than three months.
At March 31, 2014 and 2013, investment securities consisted of the following.

Millions of yen
2014
2013
Marketable securities:
Equity securities
Other

¥

Other non-marketable securities
¥

5,885
9
5,894
374
6,268

¥

¥

Thousands of
U.S. dollars
2014

5,460 $
95,469
467
5,936 $

57,69688
57,784
3,667
61,451Marketable investment securities classified as available-for-sale securities are stated at fair value
with unrealized gains and losses excluded from current earnings and reported as net amount within
net assets until realized. At March 31, 2014 and 2013, gross unrealized gains and losses formarketable securities classified as available-for-sale securities were as follows.

- 17 -

Cost

Available-for-sale securities at March 31, 2014:
Equity securities
¥
3,957
Other
9
¥
3,966
Available-for-sale securities at March 31, 2013:
Equity securities
¥
3,945
Other
9
¥
3,954

Cost
Available-for-sale securities at March 31, 2014:
Equity securities$
38,794Other
88$
38,882
5.

Gross
Gross
unrealized
unrealized
lossesgains
Millions of yen

Fair andcarrying
value

¥

(167)
(167)

¥

(225)
(0)
(225)

¥

¥

¥
¥

2,095
0
2,095

1,740
1,740

¥
¥

¥
¥

¥

¥

5,885
9
5,894

5,460
9
5,469

Gross
Gross
unrealized
unrealized
gains
lossesThousands of U.S. dollars

Fair andcarryingvalue$$ 57,696
88$ 57,784$

20,5390
20,539$ (1,637)$ (1,637)

Short-term Borrowings and Long-term Debt
At March 31, 2014 and 2013, short-term borrowings consisted of the following.
Millions of yen
2014
2013
Short-term bank loans and bank overdrafts withinterest rates ranging from 0.30% to 5.60%
per annum at March 31, 2014:
Unsecured¥

2,594 ¥

Thousands of
U.S. dollars
2014

2,741 $

25,431At March 31, 2014 and 2013, long-term debt consisted of the following.
Millions of yen
2014
2013
Long-term loans from banks and other financial
institutions due through 2022 with interest rates
ranging from 0.21% to 6.50% per annum at
March 31, 2014:
Collateralized¥
UnsecuredLess portions with current maturities¥- 18 -

257
22,083
22,340(1,278)21,062¥¥287
21,87522,162(4,374)
17,788

Thousands of
U.S. dollars
2014

$

$

2,519
216,500
219,019(12,529)
206,490

The aggregate amounts of long-term debt due annually at March 31, 2014 were as follows.
Millions ofyenYear ending March 31,
2015
2016
2017
2018
2019
2020 and thereafter¥Thousands of
U.S. dollars

1,278 $
8,113
1,612
462
612
10,263
22,340 $¥12,52979,53915,8044,529
6,000
100,618
219,019

The aggregate amounts of long-term lease obligations, which were other current liabilities andother long-term liabilities, due annually at March 31, 2014 were as follows.
Millions ofyenYear ending March 31,
2015
2016
2017
2018
2019
2020 and thereafter¥¥Thousands of
U.S. dollars

268 $
238
203
120
42
7
878 $

2,627
2,333
1,990
1,177
412
69
8,608

At March 31, 2014 and 2013, the following assets were pledged as collateral.
Millions of yen
2014
2013
Time deposits included in short-term
investments
Buildings and structures

¥

509

¥

Thousands of
U.S. dollars
2014

13 $
556

4,990

As is customary in Japan, substantially all loans from banks (including short-term loans) are madeunder general agreements which provide that, at the request of the relevant bank, the Japan
Transcity Group is required to provide collateral or guarantees (and additional collateral or
guarantees, as appropriate) with respect to loans and that all assets pledged as collateral under suchagreements will be used as collateral for all present and future indebtedness to the bank concerned.
The Japan Transcity Group has not yet received such requests. The general agreements further
provide that the banks have the right, as indebtedness matures or becomes due prematurely byreason of default thereon, to offset deposits at such banks against indebtedness due to such banks.

- 19 -

6.

Employee Retirement Benefits
The Company has defined benefit retirement plans. Some of the consolidated subsidiaries havedefined benefit plans to which the simplified method is applied. In addition, two consolidated
subsidiaries have a defined contribution pension plan under certain pension funds organized bythird parties.
The following table reconciles the benefit liability and net periodic retirement benefit expense asat and for the year ended March 31, 2013.
Millions ofyen
Reconciliation of benefit liability:
Retirement benefit obligation
Less fair values of pension plan assets at
end of year¥

Unrecognized actuarial differences (losses)
Unrecognized past service cost of
retroactive benefits granted by the pension
plan amendment
Accrued retirement and severance benefits
Prepaid pension cost
Provision for employee retirement
benefits recognized in the consolidatedbalance sheets
Note:

10,247(10,029)
218(1,294)

177
(899)
2,369

¥

1,470

Retirement benefit obligations of certain consolidated subsidiaries were calculated using
the simplified calculation method as permitted by the accounting standard for employee
retirement benefits.
Millions ofyen

Components of net periodic retirement benefit expense:
Service cost
Interest cost
Expected return on pension plan assets
Amortization of actuarial differences
Amortization of past service cost
Net periodic retirement benefit expense

¥

¥

428
172
(166)
165
(60)
539

Major assumptions used in the calculation of the above information for the year ended March 31,
2013 were as follows.
Method to attribute projected benefits toperiods of service
Discount rate
Expected rate of return on pension plan assets
Amortization of actuarial differences
Amortization of past service cost

- 20 -

Straight-line method
1.4%
2.0%
10 years
10 years

The following table reconciles the benefit liability (assets) and net periodic retirement benefit
expense as at and for the year ended March 31, 2014.
Defined benefit plans excepting those to which the simplified method has been applied:
Millions ofThousands ofyen
U.S. dollars
Movement in retirement benefit obligations
Balance at April 1, 2013
Service cost
Interest cost
Actuarial differences
Benefits paid
Other
Balance at March 31, 2014
Movement in plan assets
Balance at April 1, 2013
Expected return on plan assets
Actuarial differences
Contributions paid by the employer
Benefits paid
Other
Balance at March 31, 2014

¥

¥

¥

¥

8,277 $
305
117
39
(876)
(1)
7,861 $

81,147
2,990
1,147
383
(8,588)(10)
77,0699,009 $
127
679
920
(783)
(1)
9,951 $

88,323
1,245
6,657
9,020
(7,676)(10)
97,559Millions ofyen

Thousands of
U.S. dollars

Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement
benefits
Funded retirement benefit obligations¥
7,022 $
68,843
Plan assets(9,951)(97,559)¥(2,929) $(28,716)
Unfunded retirement benefit obligations
839
8,226
Total net liability (asset) for employee
retirement benefit at March 31, 2014¥
(2,090) $(20,490)
Employee retirement benefit liability
Employee retirement benefit asset
Total net liability (asset) for retirement
benefits at March 31, 2014¥

849
(2,939)8,324(28,814)(2,090) $(20,490)

Millions ofyen
Retirement benefit costs
Service cost
Interest cost
Expected return on plan assets
Actuarial differences amortization
Past service costs amortization
Total retirement benefit costs for fiscal
year ended March 31, 2014

- 21 -

Thousands of
U.S. dollars

¥

305 $
117
(127)
(20)
(60)

2,990
1,147
(1,245)
(196)
(588)

¥

215

2,108

$

Millions ofyen
Accumulated adjustments for retirement benefit
Actuarial differences that are yet to berecognized
Past service costs that are yet to berecognized
Total balance at March 31, 2014

Thousands of
U.S. dollars¥(118) $

(1,157)

¥

672
554

6,588
5,431

$

Plan assets(1) Plan assets
Bonds
9%
Equity securities
35%
General account15%
Commingled funds
29%
Other
12%
Total
100%
Assets under the retirement benefit trust set up for corporate pension plans account for 35% of
the total plan assets.
Commingled funds consist of bonds (65%) and equity securities (35%).
(2) Long-term expected rate of return
Current and target asset allocations and historical and expected returns on various categories ofplan assets have been considered in determining the long-term expected rate of return.

Principal actuarial assumptions at March 31, 2014 (expressed as weighed averages)
Discount rate
1.4%
Long-term expected rate of return
1.4%
Defined benefit plans to which the simplified method has been applied:
Millions ofyen
Movement in liability for retirement benefits
Balance at April 1, 2013
Retirement benefit costs
Benefits paid
Contributions paid by employer
Other
Balance at March 31, 2014- 22 -¥¥

Thousands of
U.S. dollars

947 $
157
(42)
(96)
1
967 $

9,284
1,539
(412)
(941)
10
9,480

Millions ofyen

Thousands of
U.S. dollars

Reconciliation from retirement benefit obligations and plan assets to liability (asset) for retirement benefits

Funded retirement benefit obligations
Plan assets¥¥

Unfunded retirement benefit obligations
Total net liability (asset) for employee
retirement benefit at March 31, 2014
Employee retirement benefit liability
Employee retirement benefit asset
Total net liability (asset) for retirement
benefit at March 31, 2014¥

1,884 $
(1,104)780 $
187

18,471(10,824)
7,647
1,833

967

9,480

$

990
(23)
¥

967

9,706
(226)
$

9,480

Total retirement benefit costs for the fiscal year ended March 31, 2014 based on the simplified
method
¥
157 $
1,539
7.

Net Assets
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the board of directors,
designate an amount not exceeding one-half of the prices of the new shares as additional paid-in
capital, which is included in capital surplus.
Under the Corporate Law, in cases where a dividend distribution of surplus is made, the smaller of
the amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the
total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in
capital or legal earnings reserve. The legal earnings reserve has been included in retained
earnings in the accompanying consolidated balance sheets.
Under the Corporate Law, the legal earnings reserve and additional paid-in capital can be used toeliminate or reduce a deficit by a resolution at the shareholders’ meeting. The additional paid-in
capital or legal earnings reserve may not be distributed as dividends. All additional
paid-in-capital and legal earnings reserve may be transferred to other capital surplus and retained
earnings, respectively, which may become available for distribution as dividends.
At both March 31, 2014 and 2013, capital surplus principally consisted of additional paid-in capital.
In addition, retained earnings included the legal earnings reserve of the Company in the amount of¥1,200 million ($11,765 thousand) at both March 31, 2014 and 2013.
The maximum amount that the Company can distribute as dividends is calculated based on the
non-consolidated financial statements of the Company in accordance with Japanese laws andregulations.
During the year ended March 31, 2014, the Company paid interim dividends of ¥4.00 per share.
In addition, at the annual shareholders’ meeting held on June 27, 2014, the shareholders approved
cash dividends of ¥5.00 per share amounting to ¥322 million ($3,157 thousand). These
appropriations have not yet been accrued in the consolidated financial statements as of March 31,
2014 as such appropriations are recognized in the period in which they are approved by theshareholders.

- 23 -

8.

Contingent Liabilities
At March 31, 2014 and 2013, the Japan Transcity Group was contingently liable for guarantees ofindebtedness of others in the amounts of ¥306 million ($3,000 thousand) and ¥467 million,
respectively. Such amounts included reserved guarantees of unconsolidated subsidiaries in theamounts of ¥279 million ($2,735 thousand) and ¥306 million at March 31, 2014 and 2013,
respectively.

9.

Lease Commitments
The Japan Transcity Group leases, as lessee, land and buildings to be used for office spaces andwarehouses principally under long-term cancelable or non-cancelable operating lease agreements.
The Japan Transcity Group also leases computer equipment, other equipment and vehicles underleases which are not generally cancelable.
For the years ended March 31, 2014 and 2013, lease expenses under non-cancelable leaseagreements which were categorized as finance leases entered into before March 31, 2008
amounted to ¥271 million ($2,657 thousand) and ¥317 million, respectively.
The aggregate future minimum payments for non-cancelable operating leases and finance leases,
including imputed interest, at March 31, 2014 and 2013 were as follows.

Millions of yen
2014
2013
Operating leases:
Due within one year
Due after one year

¥
¥

1,016
1,840
2,856

¥
¥

1,032
2,797
3,829

Thousands of
U.S. dollars
2014
$
$

Finance leases, which were entered into before March 31, 2008 and not capitalized :Due within one year
¥
218 ¥
271 $
Due after one year
316
534
¥
534 ¥
805 $

- 24 -

9,961
18,03928,000
2,137
3,098
5,235

10. Income Taxes
The tax effects of temporary differences that gave rise to a significant portion of deferred tax
assets and liabilities at March 31, 2014 and 2013 were as follows.
Thousands ofMillions of yen
U.S. dollars
2014
2013
2014
Deferred tax assets:
Enterprise tax accruals
¥
54 ¥
32 $
529
Accrued bonuses to employees
353
369
3,461
Provision for employee retirement benefits
564
Employee retirement benefit liability
479
4,696
Accrued severance indemnities for directors
7
5
68
Long-term accounts payable
27
40
265
Intercompany capital gains
265
275
2,598
Net operating loss carry-forwards
262
244
2,569
Impairment loss on fixed assets
1,286
1,288
12,608Others
432
373
4,235
3,165
3,190
31,029Less valuation allowance(1,651)(1,598)(16,186)
Deferred tax assets
1,514
1,592
14,843

Deferred tax liabilities:
Deferred capital gain
Unrealized gains on available-for-salesecurities
OthersDeferred tax liabilities
Net deferred tax liabilities

¥

910

952

8,921

679
505
2,094
(580)

535
407
1,894
(302)

6,657
4,951
20,529(5,686)¥$At March 31, 2014 and 2013, deferred tax assets and liabilities were as follows.

Millions of yen
2014
2013

Thousands of
U.S. dollars
2014

Deferred tax assets:
Current
¥
374 ¥
450 $
3,667
Non-current
653
658
6,402
Deferred tax liabilities:
Non-current
1,607
1,410
15,755In assessing the realizability of deferred tax assets, management of the Japan Transcity Groupconsiders whether part or all of the deferred tax assets will be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. At March 31, 2014 and 2013, avaluation allowance was provided to reduce the deferred tax assets to amounts management
believed would be realizable.
Reconciliations for the differences between the Japanese statutory effective tax rate and the actual
effective income tax rate on pre-tax income reflected in the accompanying consolidated statements
of income for the years ended March 31, 2013 were as follows.

- 25 -

Japanese statutory effective tax rate
Increase (decrease) due to:Permanently non-deductible expenses
Tax exempt income
Local minimum taxes per capita levy
Equity in net earnings of unconsolidated
subsidiaries and affiliates
Valuation allowance
OthersActual effective income tax rate

Percentage ofpre-tax income
37.5%
1.6
(3.9)
1.2
(5.8)
(7.0)
2.2
39.8%

Reconciliation for the year ended March 31, 2014 was not disclosed because the difference was
immaterial.
Adjustment of deferred tax assets and liabilities due to change in income tax rate
The “Act on Partial Amendment to the Income Tax Act” (Act No. 10 of 2014) was promulgated on
March 31, 2014, and, accordingly, the special corporate tax for reconstruction has been abolishedfrom the fiscal year beginning on or after April 1, 2014.
Due to this change, the effective statutory tax rate used for the calculation of deferred tax assets
and deferred tax liabilities for temporary differences expected to expire or be deducted or taxed in
the fiscal year beginning on April 1, 2014 has been revised from the previous rate of 37.5% to35.1%.
Such change did not have a material effect on operating income or income before taxes andminority interests for the year ended March 31, 2014.
11. Comprehensive income
The amounts reclassified to net income (loss) in the current period that were recognized in othercomprehensive income in the current or previous periods and the tax effects for each component ofother comprehensive income for the years ended March 31, 2014 and 2013 were as follows.

Millions of yen
2014
2013
Net unrealized gains on available-for-sale securities
Increase (decrease) during the year
Reclassification adjustments to profit or loss
Sub-total, before tax
Tax (expense) or benefit
Sub-total, net of tax
Foreign currency translation adjustment
Increase (decrease) during the year
Share of other comprehensive income of affiliates
accounted for using equity method
Increase (decrease) during the year
Total other comprehensive income- 26 -

Thousands of
U.S. dollars
2014

¥
¥
¥
¥
¥

417
0
417
(147)
270

¥
¥
¥
¥
¥

1,031
1,031
(363)
668

$
$
$
$
$

4,088
0
4,088
(1,441)
2,647

¥

302

¥

181

$

2,961

¥
¥

13
585

¥
¥

12
861

$
$

127
5,735

12. Related Party Transaction
ASBJ Statement No. 11, entitled the “Accounting Standard for Related Party Disclosures,” andASBJ Guidance No. 13, entitled the “Guidance on Accounting Standard for Related Party
Disclosures,” both issued by ASBJ on October 17, 2006, require certain additional related party
disclosures. Pursuant thereto, information on Chubu Coal Center Co., Ltd. has been disclosed
for the year ended March 31, 2013.
Millions ofyen
Total current assets
Total fixed assets

¥
¥

665
10,225

Total current liabilities
Total fixed liabilities

¥
¥

2,680
1,938

Total net assets

¥

6,272

Operating revenue
Income before income taxes
Net income

¥
¥
¥

3,102
850
530

The information for the year ended March 31, 2014 was not disclosed because the amount was
immaterial.

- 27 -

13.

Segment Information
1. General information about reportable segments
The reportable segments are constituent business units of the Japan Transcity Group for which separate financial information is obtained, andwhich are examined regularly by the board of directors to evaluate their business performance. The Japan Transcity Group provides mainly
integrated logistics services that consist of warehousing, coastal shipping, trucking and international multimodal transportation. Therefore, theJapan Transcity Group’s reported segment is of “Integrated Logistics Services.”
2. Basis of measurement about reported segment profit, segment assets and other material items
The principle of accounting for the segment is presented on an operating income basis. Intersegment operating revenues or transfer amounts are
based on the market price.
As disclosed under Note 2(g) (Property and equipment, and depreciation (except for leases)), the Company and its domestic consolidated
subsidiaries changed the depreciation method for property and equipment acquired on or after April 1, 2013 to the method provided under theamended Corporate Tax Law of Japan. This change did not have a material effect on operating income.
3. Information about reported segment profit, segment assets and other material items
Information by segment for the years ended March 31, 2014 and 2013 are as follows.
Integrated
Logistics Services
For the year ended March 31, 2014:
Operating revenue:
External customers
Intersegment sales
Total operating revenue
Operating income¥¥

Identifiable assets¥
Depreciation
Investments in affiliates accounted for using theequity method
Capital expenditures
Amortization of negative goodwill
Negative goodwill
For the year ended March 31, 2013:
Operating revenue:
External customers
Intersegment sales
Total operating revenue
Operating income¥¥

Identifiable assets¥
Depreciation
Investments in affiliates accounted for using theequity method
Capital expenditures
Impairment loss on fixed assets
Amortization of negative goodwill
Negative goodwill

87,57927
87,6063,512
94,783
2,611

Others

¥

¥
¥

5,480
4,761
7
-

83,653
26
83,6793,027
89,922
2,586
4,869
3,126
7
7

Total
Millions of yen

1,028
1,047
2,075
93
1,747
50

¥

¥
¥

33
-

¥

¥
¥

1,045
1,082
2,127
99
1,730
52
147
648
-

88,607
1,074
89,681
3,605
96,5302,661

Adjustment

Consolidated

¥

¥

¥
¥

5,480
4,794
7
-

¥

¥
¥

¥

91,652
2,638¥- 28 -

(981)
-

¥
¥

-

84,6981,10885,806
3,126

4,869
3,273
648
7
7

(1,074)(1,074)33¥(1,108)(1,108)
(10)
(791)
-

88,60788,607
3,638
95,549
2,661
5,480
4,794
7
-

¥

¥
¥

84,69884,6983,116
90,861
2,638
4,869
3,273
648
7
7

Integrated
Logistics Services
For the year ended March 31, 2014:
Operating revenue:
External customers
Intersegment sales
Total operating revenue
Operating income$$

Identifiable assets$
Depreciation
Investments in affiliates accounted for using theequity method
Capital expenditures
Amortization of negative goodwill
Negative goodwill

858,618
264
858,882
34,431
929,245
25,598Others
Total
Thousands of U.S. dollars$

10,078
10,265
20,343912$$

17,127
490

$

$
$

324
-

53,72546,67669-

868,696
10,529879,225
35,343Adjustment$$

946,372
26,088

Consolidated- $(10,529)(10,529)324 $

868,696868,696
35,667(9,617) $-936,755
26,088-53,72547,00069-$

53,72547,00069-

Note: For the year ended March 31, 2013, impairment loss on fixed assets arose with respect to the golf club business.
This amount was included in “Others” in the above table.
(Related information)
1. Information about product and service
Coastalshipping

Warehousing

Trucking
Millions of yen

International
multimodaltransportation

Total

For the year ended March 31, 2014:
Operating revenue to external customers¥

34,597¥

21,103¥

17,164¥

14,715¥87,579For the year ended March 31, 2013
Operating revenue to external customers¥

33,958¥21,122¥

16,722¥

11,851¥

83,653

144,265$

858,618

Thousands of U.S. dollars
For the year ended March 31, 2014
Operating revenue to external customers$

339,186$

206,892$

168,275$

2. Information about geographic areas(1) Operating revenue
The Company has omitted the disclosure of operating revenue because operating revenue from external customers in Japan accounted formore than 90% of the amounts of operating revenue reported in the consolidated statements of income.
(2) Property, plant and equipment
The Company has omitted the disclosure of property, plant and equipment because property, plant and equipment in Japan accounted formore than 90% of the amounts of property, plant and equipment reported in the consolidated balance sheets.

- 29 -

3. Information about major customers
Information on operating revenue from major customers for the years ended March 31, 2014 and 2013 are as follows.
Customer’s name

Relevant reportable segment

Aeon Global SCM Co., Ltd.

Integrated logistics services

Thousands of
U.S. Dollars
2014

Millions of Yen
2014
2013
¥

10,015

¥

9,182

$

98,186(Gains arising from negative goodwill)
The Company has omitted information by segment on gains arising from negative goodwill due to the negligible importance of suchinformation.

- 30 -