Seino Transportation Co., Ltd.
Annual Report 2004
Year Ended March 31, 2004Review of Operations

Transportation Services
Despite signs of recovery in the domestic economy, difficult conditions
persisted in the transportation industry amid a conspicuous downtrend in total
freight transportation volume and increasingly sophisticated customer needs, which
inevitably leads to difficulty in avoiding a high-cost, low-profit structure.
Within this continued harsh operating environment, Seino has been
implementing the Commercial Cargo No. 1 Plan with the goal of maintaining its
predominance in distribution services. In carrying out this plan, Seino is
implementing a policy of concentration and specialization of management resources
on LTL commercial cargo services. During the fiscal year under review, the Seino
Group aimed to standardize and raise the quality of its transportation services andworked in unison to secure as well as increase volumes of highly profitable freight.
During the fiscal year, Seino secured a 1.9% increase in the volume of freight
handled from the previous year, reflecting a pick-up in freight handled from
September 2003. As a result, operating revenues in the Transportation Services
segment edged up 1.1% to ¥300,645 million (US$2,863 million). Operating income
jumped 36.0% to ¥7,739 million (US$74 million), owing to continued efforts tosecure highly profitable LTL commercial cargo business and the contribution ofefforts aimed at curbing costs.
By business sector, the LTL commercial cargo transportation business posted a
1.5% increase in operating revenues to ¥178,880 million (US$1,704 million)*,thanks to a curbing of transportation costs resulting from the rationalization of routes
as well as an increase in transportation efficiency via a hub-and-spoke system using
two or three vehicles per staff and by introducing unit loads.
In the small parcel transportation business mainly entailing home delivery
service, operating revenues declined 1.9% to ¥49,165 million (US$468 million)*,due to intensifying competition with other companies in the industry in such market
sectors as corporate sales promotions targeting individual and mail-order items.
In the moving business, operating revenues rose 1.6% to ¥3,236 million(US$31 million)*, thanks largely to the securing of business throughout Japan forrelocating companies that have merged, as well as for the relocating of central
government offices.
In air and sea freight forwarding, Seino worked to bolster its nationwide
airfreight transportation network infrastructure that is centered on various airports,
and carried out proactive marketing activities under a cooperative structure withallied companies, with efforts focused on developing the LTL commercial cargobusiness. Nevertheless, the effects of a decrease in international air and sea freight
forwarding revenues due to the spin-off of businesses resulted in a 39.3% decline inoperating revenues to ¥6,635 million (US$63 million)*.
*As consolidated figures are not available, parent company figures are shown
throughout.

8

Merchandise Sales
Operating revenues in this segment increased 4.1% to ¥97,155 million(US$925 million) and operating income rose 8.4% to ¥3,086 million (US$29
million). The increases were due to favorable sales of trucks, which have remained
strong since the second half of the previous year owing to firm replacement demand
for trucks that meet exhaust emission regulations. These increases also resulted
from efforts to secure stable earnings for the entire year from three Toyota
dealerships in Gifu Prefecture. Also contributing to results were aggressive
marketing activities undertaken by Seino Trading Co., Ltd., which worked to
expand sales of products shipped directly from their place of origin using the Seino
Group’s extensive transportation network.

Information Services
Operating revenues in this segment declined 7.7% to ¥5,483 million (US$52
million), and an operating loss of ¥102 million (US$1 million) was recorded.
In this segment, amid successive streamlining and postponements of capital
investments by companies, we focused on aggressive marketing outside the Seino
Group by making use of our own network and know-how in logistics rationalization.
However, sales of systems operations services, sales for the development andimprovement of systems and sales of computer-related equipment declined due todifficult market conditions that included falling prices and requests for reductions indelivery times.

OthersThis segment includes leasing operations carried out by Asahi Leasing Co.,
Ltd., equipment installation subcontracting operations undertaken by Seino
Engineering Co., Ltd. and travel agency operations undertaken by Asahi Travel
Service Co., Ltd. The segment also includes a number of other businesses in thefields of real estate, advertising, taxi services, insurance, security services andmedical waste disposal. During the fiscal year under review, the Group carried out
business activities aimed at creating new demand and securing appropriate earnings
by providing value-added services.
During the fiscal year, operating revenues in this segment increased 14.2% to¥14,422 million (US$137 million) as a result of Groupwide efforts to provide highly
satisfying services along with the recovery in capital investment and a pick-up in
consumer spending. Nevertheless, operating income declined 1.2% to ¥2,083
million (US$20 million), owing to declines in revenue of Seino Engineering Co.,
Ltd. and lower revenue in the rental and lease business of Asahi Leasing.

9

Financial Review
Operating Results
Consolidated operating revenues for the year ended March 31,
2004 increased 2.0% to ¥417,705 million (US$3,978 million). Alongwith the rise in operating revenues, operating costs of revenues rose
1.8% to ¥375,403 million (US$3,575 million). The ratio of operating
costs of revenues to operating revenues was 89.9%, virtually thesame as in the previous fiscal year.
Selling, general and administrative expenses declined 2.3% to¥29,637 million (US$282 million). Operating income was up 24.2%
to ¥12,665 million (US$121 million).
Other income decreased ¥3,091 million to ¥8,556 million(US$81 million). Although Seino posted a ¥411 million gain on thesale of investment securities the Company also recorded a ¥1,882
million rise in loss on disposal of property and equipment to result in
the recording of a loss on sale or disposal of property and equipmentof ¥1,263 million.
As a result, income before income taxes and minority interests
declined 2.8% to ¥21,221 million (US$202 million), and net income
was down 1.3% to ¥13,439 million (US$128 million).
Net income to operating revenues was 3.2%, net income pershare fell ¥1.36 to ¥76.11 (US$0.72), and the return on equity ratio
was 5.3%. Annual cash dividends per share were maintained at¥11.00 (US$0.10).

investment securities.
Turning to liabilities, despite a rise in short-term borrowings,
total current liabilities declined 20.7% to ¥112,668 million(US$1,073 million) as a result of a decline in the current portion of
long-term debt.
Long-term debt declined 5.2% to ¥18,050 million (US$172
million). Total shareholders’ equity rose 14.2% to ¥272,694 million(US$2,597 million), reflecting the entire conversion of ¥20,000
million in convertible bonds to stock. The shareholders’ equity ratio
increased 6.8 percentage points to 55.1%.

Cash FlowsNet cash provided by operating activities declined ¥9,058
million to ¥16,534 million (US$157 million), reflecting increases intrade receivables and income taxes paid.
Net cash provided by investing activities dropped ¥16,862
million to ¥2,889 million (US$28 million), due to a decrease inproceeds from the sale of investment securities and an increase inproperty and equipment.
Net cash used in financing activities declined ¥32,318 million to¥8,645 million (US$82 million) due to a ¥16,586 net increase in
short-term borrowings.
As a result of the previous activities, cash and cash equivalents
at end of year increased ¥10,778 million to ¥65,320 million (US$622
million).

Financial Position
Total assets at the end of the fiscal year amounted to ¥494,743
million (US$4,712 million), virtually the same level (a ¥161 million
increase) as at the end of the previous fiscal year.
Total current assets rose 10.2% to ¥183,933 million (US$1,752
million). Net property and equipment increased 1.7% to ¥246,925
million (US$2,352 million). Investments and other assets were down
24.7% to ¥63,885 million (US$608 million) owing to a decline in

4

8
7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5
-6
-7
-8
-9

3
2
1
0
-1
-2
-3
-4
-5
-6
1999

10

2000

2001

2002

2003

2004

80

60

40

20

0
1999

2000

2001

2002

2003

2004

1999

2000

2001

2002

2003

2004

Seino Transportation Co., Ltd. and Consolidated Subsidiaries

Six-year Summary
For the Years Ended March 31, 2004, 2003, 2002, 2001, 2000 and 1999

Millions of Yen
2004
For the year:
Operating revenues:
Transportation services
Merchandise sales
Information services
OthersOperating costs of revenues
Selling, general andadministrative expenses
Operating income
Net income (loss)¥

At year-end:
Current assets
Total assets
Current liabilities
Short-term borrowings
Long-term debt, including current maturities
Shareholders’ equity

417,705
300,645
97,155
5,483
14,422375,403

2003¥

409,399
297,514
93,322
5,938
12,625368,866

2002
¥

2001

418,835
306,003
92,667
5,224
14,941
382,637¥

352,595
292,969
36,796
4,920
17,910334,034

2000¥

354,255
293,319
36,326
5,952
18,658336,311

1999¥

314,773289,376
20,934
4,463—
303,199

29,637
12,665
13,43930,33910,194
13,62232,655
3,543
16,475

17,666895(18,403)

15,798
2,146
3,043

9,910
1,664
2,991

183,933
494,743
112,668
31,17018,341
272,694

166,861494,583
142,085
14,59061,839238,825

167,395
522,753
129,11744,60170,853
227,104

97,645453,250
127,986
60,013
79,487201,912

194,804
447,304
122,397
57,64482,467220,092

190,931454,880
122,998
62,244
94,867220,792

Yen
Per share data:
Net income (loss):-Basic-Diluted
Cash dividends

¥

76.11
63.33
11.00

¥

77.47
63.41
11.00

¥

98.73
77.52
11.00

¥

(122.00)(122.00)
11.00

¥

20.11
16.63
11.00

¥

19.56
16.10
11.00

Thousands
Number of shares issued

198,631

176,820

176,820

152,919

152,919

152,919

0.3
(5.2)
(4.1)
(8.7)
44.5
76.3
120.6
(9.1)

0.6
0.9
0.7
1.4
49.2
159.2
99.6
55.3

0.5
1.0
0.7
1.4
48.5
155.2
103.8
56.2

Percent
Ratios:Operating income to operating
revenues
Net income to operating revenues
Net income to total assets
Return on equity ratio
Shareholders’ equity ratio
Current ratio
Debt equity ratio
Payout ratio

3.0
3.2
2.7
5.0
55.1
163.3
68.4
14.2

2.5
3.3
2.8
5.8
48.3
117.4
92.6
14.2

0.8
3.9
3.2
7.7
43.4
129.6
115.4
10.1

11

Seino Transportation Co., Ltd. and Subsidiaries

Consolidated Balance Sheets
For the Years Ended March 31, 2004 and 2003

Thousands of
U.S. Dollars

Millions of Yen

AssetsCurrent assets:
Cash and cash equivalents
Short-term investments (Notes 3 and 5)
Trade receivables
Inventories
Deferred tax assets (Note 11)
Other current assets
Allowance for doubtful accounts
Total current assets¥

Property and equipment, at cost
(Notes 4 and 5):Less, accumulated depreciation
Net property and equipment
Investments and other assets:
Investment securities (Note 3)
Investments in and long-term loans to affiliates (Note 3)
Deferred tax assets (Note 11)
Deferred tax assets arising on revaluation (Note 4)
Other assets¥
Liabilities, Minority Interests and Shareholders’ Equity
Current liabilities:
Short-term borrowings (Note 5)
Current portion of long-term debt (Note 5)
Trade payables
Accrued expenses
Income taxes payable
Employees’ savings deposits
Other current liabilities
Total current liabilities¥

Long-term debt (Note 5)
Employee retirement benefit liability (Note 6)
Deferred tax liabilities (Note 11)
Consolidating adjustment account (negative goodwill) (Note 2 (a-ii))
Other long-term liabilities
Commitments and contingent liabilities (Notes 7 and 8)
Minority interests in subsidiaries
Shareholders’ equity (Note 10):
Common stock, no par value – Authorized: 400,000,000 shares;
Issued: 198,631,167 shares in 2004 and 176,820,926 shares in 2003
Capital surplus
Retained earnings
Land revaluation decrement (Note 4)
Net unrealized gains on available-for-sale securities
Foreign currency translation adjustment
Less, treasury stock, at cost – 1,656,113 shares in 2004 and 2,103,326 shares in 2003
Total shareholders’ equity¥
See accompanying Notes to Consolidated Financial Statements.

12

2004

2003

2004

65,320 ¥23,70080,401
6,997
5,218
3,770
(1,473)
183,933

54,542 $622,095
18,903
225,714
74,794
765,724
5,655
66,638
6,258
49,6958,371
35,905(1,662)(14,028)
166,861
1,751,743

412,397(165,472)
246,925

408,145(165,281)
242,864

40,329
8,021
7,945
120
7,470
63,885494,743¥

62,714
384,086
6,093
76,3908,057
75,667
120
1,143
7,874
71,142
84,858608,428
494,583 $ 4,711,838

31,170 ¥291
51,375
13,555
3,942
3,871
8,464
112,668

14,590 $296,857
42,8062,771
51,686489,286
12,162129,095
5,984
37,5433,809
36,867
11,04880,610142,085
1,073,029

18,05039,007
2,398
13,051
1,364

19,03336,972
2,167
19,902
1,020

171,905
371,495
22,838124,295
12,99035,511

34,579338,200

42,48264,874
163,242
(413)
3,742
(676)
(557)
272,694494,743 ¥

32,471
404,590
54,876
617,848
151,797
1,554,686(413)(3,933)
1,642
35,638(745)(6,438)(803)(5,305)
238,825
2,597,086
494,583 $ 4,711,838

3,927,591(1,575,924)
2,351,667

Seino Transportation Co., Ltd. and Subsidiaries

Consolidated Statements of Income
For the Years Ended March 31, 2004, 2003 and 2002

Thousands of
U.S. Dollars

Millions of Yen

2004
Operating revenues (Note 12)¥

Operating costs and expenses (Notes 6 and 12):
Operating costs of revenues
Selling, general and administrative expenses

417,7052003¥

409,399

2002
¥

2004

418,835$ 3,978,143

375,403
29,637405,040
12,665368,866
30,339399,205
10,194

382,637
32,655415,292
3,543

3,575,267
282,257
3,857,524
120,619

Income before income taxes and minority interests

2,285
(648)
(1,263)
453
—
—
6,897
(21)
415
(74)
(256)
768
8,556
21,221

2,805
(803)
619
444
1,542
(863)
6,896
(288)
4
(4)
(14)
1,309
11,647
21,841

4,250(1,257)(2,664)(224)
18,895—
6,435(3,792)
(605)
—
(180)
635
21,49325,036

21,762(6,171)(12,029)
4,314——
65,686
(200)
3,952
(705)
(2,438)
7,315
81,486202,105

Income tax expenses (Note 11)Less, minority interests in net income of subsidiaries
Net income

6,819
963
13,4396,846
1,373
13,622

7,794
767
16,475 $64,943
9,172
127,990

Operating income
Other income (expenses):
Interest and dividend income
Interest expenses(Loss) gain on sale or disposal of property and equipment
Equity in net income (loss) of affiliates
Reversal of employee retirement benefit liability (Note 6)
Loss on settlement of qualified retirement benefit pension plan
Amortization of consolidating adjustment account (negative goodwill)
Loss on write-down of investment securities
Gain (loss) on sale of investment securities
Loss on investments in and loans to affiliates
Loss on cancellation of lease contracts
Miscellaneous, net

¥

¥

¥

Yen

Per share:
Net income:-Basic-Diluted
Cash dividends

¥

76.11
63.33
11.00

¥

77.47
63.41
11.00

U.S. Dollars

¥

98.73
77.52
11.00

$

0.72
0.60
0.10

See accompanying Notes to Consolidated Financial Statements.

13

Seino Transportation Co., Ltd. and Subsidiaries

Consolidated Statements of Shareholders’ Equity
For the Years Ended March 31, 2004, 2003 and 2002

Number ofcommonshares issued

Commonstock

CapitalsurplusRetainedearnings

Land
revaluation
decrement

Net unrealized
gains onavailable-forsale securities

Foreigncurrencytranslation
adjustment

TreasurystockMillions of Yen

Balance at March 31, 2001
Net income for the year
Stocks issued under exchange
offerings (Note 2 (a-ii))
Cash dividends
Bonuses to directors and statutory
auditors
Increase in retained earnings
through consolidation of
additional subsidiaries
Adjustments for elimination ofintercompany profits on
consolidation of additional
subsidiaries
Revaluation decrement on land
Net change in unrealized gains onavailable-for-sale securities, netof applicable income taxes
Translation adjustment
Fractional shares acquired, net
Balance at March 31, 2002
Net income for the year
Treasury stock issued upon
exercise of stock option
Cash dividends
Bonuses to directors and statutory
auditors
Net change in unrealized gains onavailable-for-sale securities, netof applicable income taxes
Translation adjustment
Adjustment for applicable income
taxes
Fractional shares acquired andotherBalance at March 31, 2003
Net income for the year
Conversion of convertible bonds
Treasury stock issued upon
exercise of stock option
Cash dividends
Bonuses to directors and statutory
auditors
Net change in unrealized gains onavailable-for-sale securities, netof applicable income taxes
Translation adjustment
Fractional shares acquired, net
Balance at March 31, 2004

152,919,216 ¥—

31,276 ¥—43,321 ¥ 125,436 ¥—
16,475— ¥—3,385 ¥—

(731) ¥—

(775)—

23,901,710
—

1,195
—

11,554——(1,669)

—
—

—
—

—
—

—
—

—

—

—

(50)

—

—

—

—

—

—

—

45

—

—

—

—

—
—

—
—

—
—

(68)
—

—
(425)

—
—

—
—

—
—

—
—
—
176,820,926————
32,471————54,875————140,169
13,622

—
—
—
(425)
—

(1,906)
—
—
1,479
—

—
77
—
(654)
—

—
—
(36)
(811)
—

—
—

—
—

1
—

—
(1,932)

—
—

—
—

—
—

43
—

—

—

—

(62)

—

—

—

—

—
—

—
—

—
—

—
—

—
—

124
—

—
(91)

—
—

—

—

—

—

12

39

—

—

—
176,820,926—
21,810,241—
32,471—
10,011—54,876—
9,989—
151,797
13,439
—

—
(413)
—
—

—
1,642
—
—

—
(745)
—
—

(35)
(803)
—
—

—
—

—
—

9
—

—
(1,914)

—
—

—
—

—
—

297
—

—

—

—

(80)

—

—

—

—

—
—
—
(413) ¥

2,100——
3,742 ¥—
69—(676) ¥

—
—
(51)
(557)

(3,933) $——15,638 $——(7,095) $——(7,648)—————
198,631,167 ¥———
42,482 ¥

—
—
—
—
—
—
64,874 ¥ 163,242 ¥Thousands of U.S. Dollars

Balance at March 31, 2003
Net income for the year
Conversion of convertible bonds
Treasury stock issued upon
exercise of stock option
Cash dividends
Bonuses to directors and statutory
auditors
Net change in unrealized gains onavailable-for-sale securities, netof applicable income taxes
Translation adjustment
Fractional shares acquired, net
Balance at March 31, 2004

$ 309,248 $ 522,629 $1,445,686 $——
127,990
95,342
95,133
—
—
—

86
—

—
(18,228)

—
—

—
—

—
—

2,829
—

—

—

(762)

—

—

—

—

—
—
—
(3,933) $20,000——35,638 $—657—(6,438) $

—
—
—
—
—
—
—
—
—
$ 404,590 $ 617,848 $1,554,686 $See accompanying Notes to Consolidated Financial Statements.

14

—
—
(486)
(5,305)

Seino Transportation Co., Ltd. and Subsidiaries

Consolidated Statements of Cash Flows
For the Years Ended March 31, 2004, 2003 and 2002

Thousands of
U.S. Dollars

Millions of Yen

2004
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation
Amortization of consolidating adjustment accountNet provision (reversal) for employee retirement benefit liability
Loss (gain) on sale or disposal of property and equipment
Equity in net (income) loss of affiliates
Loss on write-down of investment securities(Gain) loss on sale of investment securities
Loss on investments in and loans to affiliates(Increase) decrease in trade receivables(Increase) decrease in inventories
Increase (decrease) in trade payables and accrued expenses
Other, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities¥

Cash flows from investing activities:
Increase in property and equipment
Increase in long-term investments and loans
Decrease in property and long-term investments
Decrease in short-term investments
Net cash provided by investing activities
Cash flows from financing activities:
Increase in long-term debt
Repayment of long-term debt
Net increase (decrease) in short-term borrowings
Cash dividends paid
Other
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Increase in cash and cash equivalents upon inclusion of additional
subsidiaries on consolidation
Cash and cash equivalents at end of year¥

21,221

2003¥

21,841

2002¥

25,036

2004$

202,105

12,941(6,897)
2,035
1,263
(453)
21
(415)
74
(6,318)(1,474)
2,734(987)
23,7452,439(645)(9,005)
16,534

11,287(6,896)
1,710
(619)
(444)
288
(4)
4
5,340
1,436
(2,762)(2,255)28,926
2,978(844)(5,468)25,592

12,365(6,435)(20,345)
2,664
224
3,792
605
—
6,573
(297)
(4,529)(730)
18,923
4,557(1,221)(6,124)
16,135

123,248(65,686)
19,381
12,029(4,314)200(3,952)
705(60,172)(14,039)
26,038(9,400)226,143
23,229(6,143)(85,762)
157,467(21,351)(6,232)
21,3729,100
2,889(18,744)(4,964)
31,151
12,30819,751(15,728)(24,243)
56,04320,08536,157(203,343)(59,353)
203,543
86,66727,514410(23,881)
16,586(2,014)254(8,645)—
10,77854,542569(9,556)(29,927)(2,030)(19)(40,963)(56)
4,324
50,218

8,435(17,908)(18,928)(1,844)(38)(30,283)34
22,043
13,044

3,905(227,438)
157,962(19,181)2,419(82,333)—
102,648
519,447—
65,320¥—54,542¥

15,131
50,218$—622,095

See accompanying Notes to Consolidated Financial Statements.

15

Seino Transportation Co., Ltd. and Subsidiaries

Notes to Consolidated Financial Statements
1. Basis of Consolidated Financial Statements(a)Basis of presenting the consolidated financial statements(b) U.S. dollar amounts

The accompanying consolidated financial statements of Seino
Transportation Co., Ltd. (the "Company") and its subsidiaries (together
with the Company, the “Seino Group”) have been prepared in accordance with the provisions set forth in the Commercial Code of Japan,
the Securities and Exchange Law of Japan, and on the basis of accounting principles generally accepted in Japan, which are different in certain respects as to application and disclosure requirements ofInternational Financial Reporting Standards. These consolidated financial statements are compiled from the original consolidated financial
statements in Japanese prepared by the Company as required by the
Securities and Exchange Law of Japan and submitted to the Director of
Kanto Finance Bureau of Japan.

The Company maintains its accounting records in Japanese Yen.
The U.S. dollar amounts included in the accompanying consolidated
financial statements and notes thereto represent the arithmetic results oftranslating Japanese Yen into U.S. dollars at a rate of ¥105 to $1, theapproximate rate of exchange at March 31, 2004. The inclusion ofsuch dollar amounts is solely for the convenience of the readers and is
not intended to imply that Yen and the assets and liabilities originatingin Yen have been or could be readily converted, realized or settled indollars at ¥105 to $1 or at any other rate.

(c)

Reclassification
Certain comparative figures have been reclassified to conform tothe current year’s presentations.

2. Summary of Significant Accounting Policies(a-i) Principles of consolidation

general meeting held on June 28, 2001.
In accordance with this agreement, on August 10, 2001 (stock-forstock exchange date), the Company issued 23,901,710 shares of theCompany’s common stock at the exchange rates of a certain number ofshares of the Company’s common stock (see below) for one share ofcommon stock of the three affiliates to their respective shareholders.
As a result of this transaction, the common stock account of theCompany increased by ¥1,195 million and the capital surplus accountincreased by the aggregate amounts of the net assets of the respective
companies as of stock-for-stock exchange date except for the equity
interest in which the Company owned before the stock-for-stock
exchange, net of the increased common stock amount, which were
adjusted on consolidation based on the fair value of net assets acquiredat the time of acquisitions.
The details of information of stock-for-stock exchange transactions
for the three public companies were as follows:

The accompanying consolidated financial statements include theaccounts of the Company and all of its subsidiaries. Investment in significant affiliates is accounted for by the equity method. Investment inaffiliates not accounted for by the equity method is stated at cost.
Differences between the acquisition cost of investments in subsidiaries
and the underlying equity in their net assets adjusted based on the fairvalue at the time of acquisition are deferred and amortized over five
years. All intercompany transactions and accounts have been eliminated.
Under the accounting standard for consolidation, a subsidiary isdefined as an enterprise which is controlled by another enterprise, andthat is a majority (more than 50%) owned enterprise or 40% to 50%
owned enterprise that meets certain criteria. In addition, an affiliatedcompany is defined as an enterprise in which the investor has a significant influence, and that is an enterprise, other than a subsidiary, with
20% or more of voting stock as well as 15% to 19% owned enterprisethat meets certain criteria. For the years ended March 31, 2004, 2003
and 2002, the number of the companies with not exceeding 50% votinginterest classified as subsidiaries based on the self-judgment of theCompany in accordance with the accounting standard was sixteen, sixteen, and eighteen, respectively.
The number of subsidiaries and affiliates for the three years ended
March 31, was as follows:
Subsidiaries:
Domestic
Overseas
Affiliates, accounted for by the equity method
Affiliates, stated at cost

2004

2003

2002

39
7
6
13

39
8
6
14

39
9
6
14

Original
shares heldby theCompany

NOHI SEINO TRANSPORTATION
CO., LTD. (“NOHI”)
TOKAI SEINO TRANSPORTATION
CO., LTD. (“TOKAI”)
KANTO SEINO TRANSPORTATION
CO., LTD. (“KANTO”)

16

On May 29, 2001, the Company entered into the stock-for-stock
exchange agreements with its three public affiliates accounted for by
the equity method in order to make the Company’s respective equity
share in the three affiliates increase to 100%. This transaction was
expected to fully utilize the advantages and strengths of management
resources and maximize the integration of the Seino Group. The agreements were subsequently approved by the shareholders at the annual(shares)(shares)

26.2%

2.02

8,928,696

30.8%

0.81

2,184,849

35.6%

3.40

12,788,165

In addition, in June 2001, the Company acquired additional sharesof the common stock of two public affiliates accounted for by theequity method by takeover bid for an aggregate amount of ¥1,130 million in order to strengthen the integration of the Seino Group, which
resulted in an increase in equity share of the two affiliates held by theCompany to 40% each after this transaction.
The Company consolidated the five companies above as subsidiaries from the year ended March 31, 2002 as though the exchanges
or acquisitions were made as of the beginning of the period. The
excess of the Company’s equity in the fair value of the net assets
acquired of such new subsidiaries over the cost of the additional investments was recorded as consolidating adjustment account (negative
goodwill).

The Company’s overseas subsidiaries close their books at
December 31 every year, three months earlier than the Company andother domestic subsidiaries. The Company consolidated such subsidiaries’ financial statements as of their year-end. Significant transactions for the period between subsidiaries’ year-end and the Company’s
year-end are adjusted on consolidation.
Overseas subsidiaries adopt accounting principles generally
accepted in their respective countries, and no adjustments to conformto accounting principles generally accepted in Japan have been made totheir financial statements on consolidation as allowed under accounting
principles and practices generally accepted in Japan.

(a-ii) Change in consolidation scope

Exchange rateof the number Number ofof shares of the shares of theCompany for Company’scommonone share ofstock issued
affiliates(b) Cash and cash equivalents
The Seino Group considers cash equivalents to be highly liquiddebt instruments purchased with an original maturity of three months
or less.

(c)

Investments and marketable securities
The Seino Group classifies certain investments in debt and equity
securities as “held-to-maturity”, “trading” or “available-for-sale”,
whose classification determines the respective accounting method asstipulated by the accounting standard for financial instruments. Heldto-maturity securities are stated at amortized cost. Marketable securities with market quotations for available-for-sale securities are stated atfair value and net unrealized gains or losses on these securities arereported as a separate component of shareholders’ equity, net of applicable income taxes. Gains and losses on disposition of available-forsale securities are computed based on the moving-average method.
Nonmarketable securities without available market quotations foravailable-for-sale securities 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.

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 theenactment date.

(k) Revenue recognition for freight charges
The Seino Group recognizes freight charges as revenue when
freight is received for shipment. In relation to its revenue recognition,
the Seino Group records freight charges from customers and paid tointerline carriers as operating revenues and operating costs andexpenses, respectively.

(l)

Cash dividends and bonuses to directors and statutory auditors arerecorded in the fiscal year during which a proposed appropriation ofretained earnings is approved by the Board of Directors and/or shareholders.

(d) Accounting for derivatives
Derivatives are valued at fair value, if hedging accounting is not
appropriate or where there is no hedging designation, and the gains orlosses on derivatives are recognized in the current earnings. According
to the special treatment as permitted by the accounting standard forfinancial instruments, the hedging interest rate swap is accounted foron an accrual basis, and recorded net of interest income generated frominvestments, hedged items, if certain conditions are met.

(e)(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
the exchange rates at the fiscal year-end. Transactions in foreign currencies are recorded based on the prevailing exchange rates on thetransaction dates. Resulting translation gains or losses are included in
the current earnings.
In respect of the financial statement items of overseas subsidiaries,
all asset, liability, income and expense accounts are translated into Yen
by applying the exchange rates in effect at the fiscal year-end.
Translation differences, after allocating to minority interests portions
attributable to minority interests, are reported as foreign currency translation adjustment in a separate component of shareholders’ equity on
the accompanying consolidated balance sheets.

Allowance for doubtful accounts
Allowance for doubtful accounts has been provided for at theaggregate amount of estimated credit loss based on the individual
financial review approach for doubtful or troubled receivables and ageneral reserve for other receivables calculated based on the historicalloss experience for a certain past period.

(f)Inventories
Inventories for supplies are principally stated at moving-average
cost, and inventories for vehicles and work-in-process are principallystated at cost determined by the specific identification method.

(g)(n) Per share data
Basic net income per share is computed by dividing income available to common shareholders by the weighted-average number ofshares of common stock outstanding during the respective years.
Diluted net income per share is computed assuming convertible bonds
were converted at the time of issue unless having anti-dilutive effects
and as if warrants or stock options were exercised at the beginning of
the relevant year or (if later) on their first exercise date and as if thefunds obtained thereby were used to purchase common stock at the
average market price during the respective years under the treasury
stock method. The Seino Group adopted the new accounting standard
for earnings per share from the fiscal year ended March 31, 2003.
Prior-period per share data has been restated to conform to the current
computation.
Cash dividends per share shown for each fiscal year in the accompanying consolidated statements of income represent dividends
declared as applicable to the respective years.

Property and equipment, and depreciation
Property and equipment, including significant renewals and additions, are stated at cost. Property and equipment of the Company andits certain subsidiaries have been depreciated by the straight-line
method for buildings and vehicles, and by the declining-balancemethod for other property.
Property and equipment of the other subsidiaries have been principally depreciated by the declining-balance method, except for thebuildings acquired on and after April 1, 1998 and the property held forleases. The buildings acquired on and after April 1, 1998 by domestic
subsidiaries have been depreciated by the straight-line method.
Expenditure on maintenance and repairs is charged to operating
income as incurred. Upon the disposal of property, the cost and accumulated depreciation are removed from the accounts and any gain orloss is recorded as income or expenses.

(h) Leases
Where financing leases do not transfer ownership of the leased
property to the lessee during the term of the lease, the leased propertyof the Company and its domestic subsidiaries as lessee is not capitalized and the relating rental and lease expenses are charged to income as
incurred.
The leased property of a certain subsidiary engaged in the leasing
operations as lessor was recorded at cost as property held for leases,
which was included in property and equipment in the accompanying
consolidated balance sheets, and was depreciated over the lease contract terms by the straight-line method to the amount equal to the estimated disposal value at the lease termination date.

(i)

Employee retirement benefits

Appropriation of retained earnings(o)Adoption of new accounting standards
On August 9, 2002, the Business Accounting Council of Japanissued "Accounting Standard for Impairment of Fixed Assets". The
standard requires that fixed assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. An impairment loss shallbe recognized in the income statement by reducing the carrying amountof impaired assets or a group of assets to the recoverable amount to bemeasured as the higher of the asset’s net selling price and value in use.
The Company has not determined the timing of adoption and cannot
estimate the financial impact of this new accounting standard at thedate of adoption at present. However, the management of theCompany believes that any such impact would be a charge to earnings.

Employees who terminate their service with the Seino Group areentitled to retirement benefits generally determined by the reference of
current basic rates of pay, length of service and conditions under which
the termination occurs.
Unrecognized actuarial differences as changes in the projected
benefit obligation or pension plan assets resulting from the experience
different from that assumed and from changes in assumptions areamortized on a straight-line basis principally over ten years withinremaining service lives of employees from the next year in which theyarise. Unrecognized prior service cost is amortized using the straightline method over ten years from the year in which it occurs.

(j)Income taxes
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the carrying
amounts of existing assets and liabilities and their respective tax bases
and operating loss carryforward. Deferred tax assets and liabilities aremeasured using the enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected17

3. Investments
At March 31, 2004 and 2003, short-term investments consisted of thefollowing:
Millions of Yen

Thousands of
U.S. Dollars

2004
2003
Marketable securities:
Bonds¥ 13,853 ¥ 11,571 $Total marketable securities
13,853
11,571Time deposits with an original maturityof more than three months
9,847
7,332
¥ 23,700 ¥ 18,903 $2004
131,933
131,933
93,781
225,714At March 31, 2004 and 2003, investment securities consisted of
the following:
Millions of Yen

2004

Thousands of
U.S. Dollars

2003

2004

Marketable securities:
Equity securities¥ 13,561 ¥ 10,112 $Bonds
10,25933,971
Other
193
254
Total marketable securities
24,01344,337
Other nonmarketable securities
16,316
18,377¥ 40,329 ¥ 62,714 $

129,152
97,705
1,838
228,695
155,391
384,086

At March 31, 2004 and 2003, fair value of marketable securities
classified as held-to-maturity and related net unrealized gains were as
follows:
Net unrealized
Carrying value Fair value
gainsMillions of Yen

Bonds included in investment securities
At March 31, 2004¥
At March 31, 2003

4,493 ¥
4,392

4,959 ¥
4,887

466
495

Gross
Gross
unrealized unrealized
gains
lossesMillions of Yen

Cost

At March 31, 2004:
Equity securities
Bonds
Other
At March 31, 2003:
Equity securities
Bonds
Other

¥

6,938 ¥
19,258158¥ 26,354 ¥6,658 ¥
433
41
7,132 ¥¥

3,463 ¥ (302) ¥ 10,112
769
(695)
41,149—(25)
254
4,232 ¥ (1,022) ¥ 51,515

6,951 ¥
41,075279¥ 48,305 ¥4,438Marketable securities classified as available-for-sale are stated atfair value with unrealized gains and losses excluded from the current
earnings and reported as a net amount within the shareholders’ equity
account until realized. At March 31, 2004 and 2003, gross unrealized
gains and losses for marketable securities classified as available-forsale are summarized as follows:(35) ¥ 13,561(72)
19,619(6)193(113) ¥ 33,373

Thousands of U.S. Dollars

At March 31, 2004:
Equity securities
Bonds
Other

$ 66,076 $ 63,409 $ (333) $ 129,152
183,4104,124(686) 186,848
1,504
391
(57)
1,838
$ 250,990 $ 67,924 $ (1,076) $ 317,838

During the year ended March 31, 2003 and 2002, the Seino Group
recorded a loss on write-down of marketable investment securities due to apermanent diminution in value in the amount of ¥261 million and ¥652
million, respectively. During the year ended March 31, 2004, the Seino
Group recorded no loss on write-down of marketable investment securities.
During the years ended March 31, 2004, 2003 and 2002, the Seino
Group sold available-for-sale securities and recorded a gain of ¥585 million ($5,571 thousand), ¥7 million and ¥221 million, and a loss of ¥170
million ($1,619 thousand), ¥1 million and ¥900 million on the accompanying consolidated statements of income, respectively.
Expected maturities of held-to-maturity and available-for-salesecurities at March 31, 2004 were as follows:
Millions of Yen

Thousands of
U.S. Dollars¥$

Thousands of U.S. Dollars

Bonds included in investment securities
At March 31, 2004
$ 42,790 $ 47,228 $Fair andcarryingvalue

Due in one year or lessDue after one year through five years
Due after five years through ten years¥

14,233
17,5207,032
38,785$

135,552
166,857
66,972
369,381At March 31, 2004 and 2003, investments in and long-term loans
to affiliates consisted of the following:
Millions of Yen

Investments, accounted for by theequity method for significant
affiliates and at cost for others
Interest bearing long-term loans¥¥

Thousands of
U.S. Dollars

2004

2003

2004

4,029 ¥
3,992
8,021 ¥

3,909 $
2,184
6,093 $

38,37138,01976,3904. Property and Equipment
At March 31, 2004 and 2003, property and equipment consisted of thefollowing:
Millions of Yen

2004
Property held for own use, at cost:
Land
Buildings and structures
VehiclesMachinery and equipment
Construction in progress
Less, accumulated depreciation
Subtotal
Property held for leases, at cost:
Vehicles, equipment and otherLess, accumulated depreciation

2003

Thousands of
U.S. Dollars

2004¥ 137,288 ¥ 134,275 $ 1,307,505
179,437 177,189 1,708,924
72,644
72,104
691,848
21,03420,994200,323
1,309
2,923
12,467411,712 407,485 3,921,067(165,040) (164,843) (1,571,810)
246,672 242,642 2,349,257

685
660
6,524
(432)
(438)
(4,114)
253
222
2,410
Total property and equipment ¥ 246,925 ¥ 242,864 $ 2,351,667

18

One of the consolidated subsidiaries elected to carry out a onetime revaluation to restate the cost of land used for the business operations at values rationally reassessed effective on March 31, 2002,
reflecting appropriate adjustments for land shape and other factors,
based on the appraisal values issued by the Japanese National Tax
Agency in accordance with the Law Concerning Revaluation of Land(“Law”). According to the Law, the amount equivalent to the tax
effect on the excess of the original book values over sound reassessedvalues is recorded in the assets as deferred tax assets arising on revaluation account, and the rest of such excess, net of the tax effect andminority interests portion, is recorded in the shareholders’ equity as
land revaluation decrement account in the accompanying consolidatedbalance sheets. Carrying amounts of such land after and before revaluation at March 31, 2002 were ¥6,100 million and ¥6,576 million,
respectively. At March 31, 2004 and 2003, the differences between the
carrying values of land used for the business operations after revaluation over the current market value of such land at the fiscal year-end
amounted to ¥858 million ($8,171 thousand) and ¥465 million, respectively.

5. Short-term Borrowings and Long-term Debt
At March 31, 2004 and 2003, short-term borrowings consisted of thefollowing:
Millions of Yen

2004

At March 31, 2004 and 2003, the following assets were pledged ascollateral for certain short-term borrowings and long-term debt:

Thousands of
U.S. Dollars

2003

2004

Unsecured bank overdrafts withinterest rates ranging from 0.5%
to 10.75% per annum at March
31, 2004¥
679 ¥ 6,409 $6,467
Short-term bank borrowings
principally represented by notes
with interest rates ranging from
0.224% to 5.6% per annum at
March 31, 2004:
Secured
616
401
5,866
Unsecured
29,875
7,780
284,524¥ 31,170 ¥ 14,590 $ 296,857
At March 31, 2004, the Company and certain subsidiaries had
unsecured overdraft agreements with 11 banks. Under such agreements, the Company and such subsidiaries were entitled to withdraw
up to ¥8,582 million ($81,733 thousand). The Company and such subsidiaries are not obligated to pay commitment fees on the unused portions of such overdraft facilities.
At March 31, 2004 and 2003, long-term debt consisted of the following:Thousands ofMillions of Yen

2004
1.0% convertible bonds, due March 2004 ¥0.125% convertible bonds, due March
2004
1.1% convertible bonds, due March 2006
Loans from banks, partly secured, due
through 2017 repayable on an
installment basis with interest rates
ranging from 0.59% to 8.3% perannum at March 31, 2004
Loans from government agencies,
principally mortgage, repayable on
an installment basis with interest
rates ranging from 0.7% to 3.4%
per annum at March 31, 2004
Less, current portion

U.S. Dollars

2003— ¥ 22,452 $Thousands of
U.S. Dollars

Millions of Yen

2004

Land
Buildings and structures
Time deposits included in shortterm investments

¥

2004

2003

2004

888 ¥
1,064

653 $
1,316

8,457
10,133

147

40

1,400

The following is a summary of the conversion price and the termsof optional redemption of the convertible bonds as at March 31, 2004:
Conversion
price

1.1% convertible
bonds, due 2006

Redemption at the optionof the Company¥1,755.60 At 104% to 100% of principal after
April 1, 2001, decreasing 1%
annually

The Company reserves the right to redeem the outstanding convertible bonds, in whole or in part, at its call option, at the percentagesof the principal amount listed in the table above. At March 31, 2004,
the number of shares of common stock necessary for conversion of
convertible bonds outstanding was approximately 5 million.
The aggregate annual maturities of long-term debt as at March 31,
2004 were as follows:

—

—
9,017

20,0009,017—
85,876

9,003

9,925

85,743Years ending March 31,

2005
2006
2007
2008
2009
Thereafter

Millions of Yen¥

Thousands of
U.S. Dollars

291 $
10,086
7,436
146
92
290

2,771
96,05770,819
1,391
876
2,762

321
445
3,057
18,341
61,839174,676(291) (42,806)(2,771)¥ 18,050 ¥ 19,033 $ 171,905

6. Employee Retirement Benefits
The Seino Group has defined benefit pension plans, which substantially cover all employees.
On March 15, 2002, the Company received an approval from the
Minister of Health, Labor and Welfare for the liquidation of the welfare pension funds organized by the Company pursuant to the enforcement of the Defined Benefit Enterprise Pension Plan Law. Therefore,
the Seino Group recorded a gain of ¥18,895 million due to the extinguishment of retirement benefit obligation of the welfare pension funds
for the year ended March 31, 2002. In addition, on April 23, 2002, theMinister of Health, Labor and Welfare approved another liquidation of
the group welfare pension funds organized by some of the domestic
subsidiaries and affiliates pursuant to the enforcement of the Defined
Benefit Enterprise Pension Plan Law. As a result, the Seino Group
recorded a gain of ¥1,542 million due to the extinguishment of retirement benefit obligation of such welfare pension funds for the year
ended March 31, 2003. During the year ended March 31, 2003, theCompany and some of the domestic subsidiaries settled the qualified
retirement benefit pension plan, and the Seino Group recorded a loss of¥863 million in relation to this transaction.
The following table reconciles the benefit liability as at March 31,
2004 and 2003:

Millions of Yen

2004
Reconciliation of benefit liability:
Projected benefit obligationLess, fair value of pension plan
assets at end of year

2003

Thousands of
U.S. Dollars

2004¥ 45,584 ¥ 44,077 $ 434,133(1,322)44,262(1,208)42,869(12,590)
421,543

Less, unrecognized actuarial
differences (loss)(4,627)(5,188)(44,067)
Less, unrecognized prior service cost
(611)
(675)
(5,819)
Other
(17)
(34)
(162)
Net amounts of employee retirement
benefit liability recorded on the
consolidated balance sheets¥ 39,007 ¥ 36,972 $ 371,495
Notes: 1. Projected benefit obligation of subsidiaries was calculatedusing the simplified calculation method as permitted by theaccounting standard for employee retirement benefits.
2. The above table excluded the amounts for the assets not separately allocatable to some of the domestic subsidiaries in certain pension funds organized by others together with the subsidiaries or effectively restricted so that they cannot be usedby the employees for other purpose, which amounted to¥5,127 million ($48,829 thousand) and ¥4,327 million atMarch 31, 2004 and 2003, respectively.

19

The Component of net periodic retirement benefit expense for thethree years ended March, 2004 was as follows:
Thousands of
U.S. Dollars

Millions of Yen

Net periodic retirement
benefit expenses:¥
Service cost
Interest cost
Expected return on
pension plan assets
Amortization of
actuarial differences
Amortization of priorservice cost
Other
Sub-total
Reversal of employee
retirement benefit
liability
Loss on settlement ofqualified retirement
benefit pension plan
Total retirement
benefitexpense¥

Major assumptions used in calculation of the above information
for the three years ended March 31, 2004 were as follows:

2004

2003

2002

2004

2,766 ¥
866

2,373 ¥
1,105

5,100 $
4,776

26,343
8,247

(23)

(158)

(2,470)

(219)

618

530

1,221

5,886

65
17
4,309

(53)
17
3,814

—
17
8,644

619
162
41,038—(1,542)

—

—

—

863

—

—

4,309 ¥

3,135 ¥

8,644 $

2004
Method attributing the
projected benefits toperiods of services
Discount rate
Expected rate of return on
pension plan assets
Amortization of prior service
cost
Amortization of actuarial
differences

2003

2002

StraightStraightStraightline method line method line method
2.0%

2.0%

2.0%

2.5%

2.5%
principally
3.5%

10 yearsprincipally
10 years

10 yearsprincipally
10 years—principally
10 years

41,038

7. Contingent Liabilities
At March 31, 2004 and 2003, the Seino Group was contingently
liable for trade notes endorsed to affiliates and the third parties, fortrade notes discounted with banks in the normal course of business, andfor guarantees, including substantial guarantees, principally of indebt-

edness of affiliates and the third parties in the aggregate amounts of¥4,009 million ($38,181 thousand) and ¥4,579 million, respectively.

8. Lease Commitments
The Seino Group has entered into various rental and lease agreements for land and buildings to be used for truck terminals and warehouses which are generally cancelable with a few months' advancenotice and also non-cancelable lease agreements for computer equipment and radio facilities with three-to-seven year contract terms as
lessee. The aggregate minimum future lease payments for such noncancelable lease agreements, including the imputed interest portion, as
at March 31, 2004 and 2003 were as follows:

Millions of Yen

Due within one year
Due after one year¥¥

Thousands of
U.S. Dollars

2004

2003

2004

1,553 ¥
2,370
3,923 ¥

1,818 $
2,752
4,570 $

14,791
22,57137,362A certain consolidated subsidiary engaged in the leasing operations entered into various lease agreements principally for vehicles
with the third parties as lessor, which were categorized as financing
leases. At March 31, 2004 and 2003, the aggregate future minimum
lease commitments to be received for such non-cancelable lease agreements, excluding the imputed interest, were as follows:

Millions of Yen

2004¥

Due within one year
Due after one year¥

Thousands of
U.S. Dollars

2003

167 ¥
253
420 ¥

154 $
227
381 $

2004
1,590
2,410
4,000

In addition to above, a certain consolidated subsidiary engaged in
the leasing operations leases the property as lessee and also leases thesame property to affiliates and the third parties as lessor. At March 31,
2004 and 2003, the future minimum commitments under such agreements, including the imputed interest portion, were as follows:
Minimum rentals
Minimum rentals
to be paid to be received to be paid to be received
Millions of Yen
Thousands of U.S. Dollars

At March 31, 2004:
Due within one year
Due after one year¥¥

At March 31, 2003:
Due within one year
Due after one year¥¥

1,808 ¥
2,025
3,833 ¥

1,926 $ 17,219 $ 18,343
2,153
19,286
20,505
4,079 $ 36,505 $ 38,848

2,761 ¥
4,012
6,773 ¥

2,956
4,270
7,226

9. Derivative Instruments
The Seino Group is a party to derivative instruments such as interest rate swap in the normal course of business to reduce its own exposure to fluctuations in interest rates for the hedge purposes. The Seino
Group is exposed to credit loss in the event of nonperformance by theother parties. However, the Seino Group does not expect nonperfor-

20

mance by the counterparties. All derivative instruments are accounted
for by the certain hedge accounting methods as at March 31, 2004 and2003.

10. Shareholders' Equity
(a)

(b)

The authorized number of shares of common stock, without parvalue, is 400 million at March 31, 2004, unless there may be a
reduction due to a cancellation of treasury stock acquired.
Pursuant to the Commercial Code of Japan and the Company’s
amended articles of incorporation approved by shareholders at theannual general meeting on June 25, 2004, the Company can purchasethe treasury stock subject to the resolution of the Board of Directors
from that date.
Capital surplus principally consisted of additional paid-in capital.
At March 31, 2004 and 2003, retained earnings included legal reserveof the Company in the amount of ¥4,262 million ($40,590 thousand),
respectively. The Commercial Code of Japan provides that an amountequivalent to at least 10% of cash payments as an appropriation ofretained earnings shall be appropriated as a legal reserve until a total
amount of additional paid-in capital and such legal reserve equals 25%of common stock. Such legal reserve is not available for distribution as
dividends, but may be used to reduce a deficit or may be transferred tocommon stock by proper actions of the Board of Directors and/or
shareholders of the Company.
Under the terms of the 1.1% convertible bonds, as long as any of
the relevant bonds remains outstanding, the Company may not pay any
cash dividends if, upon giving effect thereto, the aggregate amount of
all cash dividends paid after March 31, 1995, less income before special credits or charges (as defined in the Ministry of FinanceOrdinance) net of income taxes since such a date, would exceed ¥15

(c)

(d)

billion ($143 million).
Under the Commercial Code of Japan, the carrying values of treasury stock purchased for stock option plan and net unrealized gains onavailable-for-sale securities are not available for the distribution as dividends.
On June 29, 2000, shareholders approved to implement the stock
option plan in accordance with the Commercial Code of Japan. The
stock option was granted to 15 members of the Board of Directors and575 executive employees as of June 29, 2000, and each stock option is
exercisable from July 1, 2002 to June 30, 2005. Up to 1,195,000
shares of common stock of the Company would be issuable for exercise of this option at the exercise price of ¥600 per share, which is subject to adjustment in certain circumstances including stock splits.
Although shareholders also approved to implement another stock
option plan using the new share subscription right method in accordance with the Commercial Code of Japan on June 27, 2002, no newshare subscription rights were issued as the Board of Directors of theCompany resolved to cancel this stock option plan on June 6, 2003.
The shareholders of the Company approved the followings
appropriations of retained earnings at the annual general meeting ofshareholders on June 25, 2004:
Thousands of
U.S. Dollars

Millions of Yen

Cash dividends¥
Bonuses to directors and statutory auditors

2,177
29

$

20,733276

11. Income Taxes
Income tax expenses for the three years ended March 31, 2004
consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2004
Income tax expenses:
Current
Deferred

¥
¥

2003

6,964 ¥ 8,636 ¥(145)(1,790)6,819 ¥ 6,846 ¥

2002

2004

5,686 $
2,108
7,794 $

66,324(1,381)64,943

The tax effects on temporary differences that give rise to a significant portion of deferred tax assets and liabilities at March 31, 2004 and2003 were as follows:
Millions of Yen

2004
Deferred tax assets:
Employee retirement benefit
liability
Enterprise tax accruals
Accrued bonuses
Intercompany capital gain
Loss on assets transferred
Unrealized losses on availablefor-sale securities
Other
Less, valuation allowance
Deferred tax liabilities:
Deferred capital gain
Unrealized gains on available-forsale securities
Consolidating valuation
adjustment
Other
Net deferred tax assets

2003

Thousands of
U.S. Dollars

2004¥ 14,436 ¥ 12,678 $ 137,486
344
524
3,276
3,889
3,226
37,038
1,081
1,091
10,295
1,582
4,098
15,06741
3,380
24,753(726)
24,027397
2,937
24,951(596)
24,355391
32,190235,743(6,914)
228,829

5,766

5,817

54,914

2,877

1,711

27,4004,619
4,619
43,991—
60—
13,262
12,207
126,305¥ 10,765 ¥ 12,148 $ 102,524

At March 31, 2004 and 2003, deferred tax assets and liabilities
were recorded as follows:

Millions of Yen

Deferred tax assets:
Current
Non-current
Deferred tax liabilities:
Non-current¥

Thousands of
U.S. Dollars

2004

2003

2004

5,218 ¥
7,945

6,258 $
8,057

49,69575,667

2,398

2,167

22,838In assessing the realizability of deferred tax assets, management of
the Seino Group considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generationof the future taxable income during the periods in which those temporary differences become deductible. At March 31, 2004 and 2003, avaluation allowance was provided to reduce the deferred tax assets tothe extent that the management believes that the amount of the deferred
tax assets is expected not to be realizable.
A reconciliation of the differences between the Japanese statutory
effective tax rate and the actual effective income tax rate on pretax
income reflected in the accompanying consolidated statements ofincome for the years ended March 31, 2004 and 2003 was as follows:
Percentage of pretax income

Japanese statutory effective tax rate
Increase (decrease) due to:Permanently nondeductible
expensesTax exempt income
Adjustment due to a change intax rates
Local minimum taxes-percapita levy
Amortization of consolidating
adjustment accountEquity in net (income) loss ofaffiliates
Other
Actual effective income tax rate

2004
41.7%

2003
41.7%

2002
41.7%

0.6
(0.1)

0.6
(0.5)

0.6
(0.4)

―

1.8

―

2.5

2.4

2.0

(13.6)(13.2)(10.7)

(0.9)
1.9
32.1%

(0.8)
(0.7)
31.3%

0.4
(2.5)
31.1%

With the implementation of the ‘Revision of the Local Tax Law’
on March 31, 2003, the Japanese statutory effective tax rate used in thecalculation of deferred tax assets or liabilities effective from the fiscal
year beginning on April 1, 2004 has been changed from 41.7% to40.4%. As a result, deferred income tax expenses increased by ¥392
million for the year ended March 31, 2003.

21

12. Segment Information
The Seino Group operates in four business segments: transportation services, merchandise sales, information services, and leasing and other services.
Information by industry segment for the three years ended March 31, 2004 was summarized as follows:
Transportation
services

Merchandise
sales

Information
services

OthersTotal

Elimination

Consolidated

Millions of Yen

For the year 2004:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating costs and expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditures
For the year 2003:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating costs and expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditures
For the year 2002:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating costs and expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditures

300,645
1,747
302,392
294,653
7,739¥

97,155
29,109126,264
123,178
3,086

¥

¥

352,938
11,24815,549¥91,672
1,472
3,164

¥

297,514
1,905
299,419
293,726
5,693

¥

¥

331,613
9,740
17,301

¥

¥

¥

¥

¥
¥

5,483
4,971
10,454
10,556
(102)

¥

¥

5,710
302
320

93,32228,514
121,836
118,990
2,846

¥

5,938
5,171
11,10911,259(150)¥

91,184
1,294
2,562

¥

4,954
293
76

306,003
1,593
307,596308,460(864)¥

92,667
24,259116,926
114,123
2,803

¥

5,224
5,619
10,843
11,029(186)

328,598
10,642
12,940¥88,237
1,270
2,101

¥

¥

¥

¥

¥

¥

¥

6,362
290
162

14,422
11,49925,921
23,8382,083¥

417,705
47,326
465,031452,225
12,806¥¥

14,191
118
491¥

464,511
13,14019,524¥

12,625
13,81826,44324,3352,108¥¥

25,471
140
51

¥

¥

¥

¥
¥

—
(47,326)(47,326)(47,185)
(141)

¥

¥

30,232
(199)
(612)

¥

494,743
12,941
18,912

409,399
49,408458,807448,310
10,497¥—(49,408)(49,408)(49,105)(303)¥

409,399—409,399399,205
10,194¥453,222
11,467
19,990¥41,361
(180)
(391)

¥

494,583
11,287
19,59914,941
12,442
27,38325,691
1,692¥

418,835
43,913
462,748459,303
3,445¥—(43,913)(43,913)(44,011)98¥

418,835—
418,835
415,292
3,543

26,953334
190¥

450,150
12,536
15,393¥72,603
(171)
(225)

¥

137,352
109,515
246,867
227,029
19,838$ 3,978,143
450,724
4,428,867
4,306,905$
121,962$—(450,724)(450,724)(449,381)(1,343)$ 3,978,143—
3,978,143
3,857,524$
120,619

135,152
1,124
4,676

$ 4,423,914
125,143
185,943$

287,924(1,895)(5,829)$ 4,711,838
123,248
180,114

¥

¥

¥

¥

¥

¥

¥

¥

¥

417,705—
417,705
405,040
12,665

522,753
12,365
15,168

Thousands of U.S. Dollars
For the year 2004:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating costs and expenses
Operating income (loss)
Identifiable assets
Depreciation
Capital expenditures$ 2,863,286
16,6382,879,924
2,806,219$
73,705$925,286
277,228
1,202,514
1,173,124$
29,390$$ 3,361,314
107,124
148,086$$

873,067
14,01930,133$52,21947,34399,562
100,533(971)
54,381
2,876
3,048

$

$
$

$

Geographic segment information is not shown as operating revenues and total assets of overseas subsidiaries were not material in the three years ended
March 31, 2004. Information for overseas sales is not disclosed as such sales were not material.
Notes: Identifiable assets in the elimination column represent unallocated general corporate items which were not assigned to a particular industry segment
such as cash, short-term and long-term investment securities, net of inter-segment balances.

22

Report of Independent Auditors
Report of Independent Auditors
To the Board of Directors and Shareholders of
Seino Transportation Co., Ltd.

We have audited the accompanying consolidated balance sheets of Seino Transportation Co., Ltd. and its subsidiaries (the“Seino Group”) as of March 31, 2004 and 2003, and the related consolidated statements of income, shareholders' equity,and cash flows for each of the three years in the period ended March 31, 2004, 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 thatwe plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believethat 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 the Seino Group as of March 31, 2004 and 2003, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended March 31, 2004 in conformity with accounting
principles generally accepted in Japan.
The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader, have been translatedon the basis set forth in Note 1 to the accompanying consolidated financial statements.

ChuoAoyama PricewaterhouseCoopers
Nagoya, Japan
June 25, 200423

Board of Directors(As of July 11, 2004)

Chairman andChief Executive Officer

Directors

Yoshikazu Taguchi

Kunihiko Oka

Hideyuki Abe
Hidemi Maruta

President andChief Operating Officer

Toshitaka Morita
Shizutoshi Otsuka

Yoshitaka Taguchi

Masayoshi Ichiyanagi
Hisao Sakashita

Senior Managing Directors
Atsuo Suzuki

Standing Statutory Auditors

Takao Taguchi

Yoshio Matsuoka
Yoshinori Takigawa

Managing Directors
Kunitoshi Yamanaka

Outside Statutory Auditors

Yoshitaka Nasuno

Fumio Kato

Masashi Otsuka

Eiji Kasamatsu

Takayoshi Mito

Corporate Data
(As of June 25, 2004)

Company Name:
Head Office:Date of Establishment:
Paid-in Capital:
Number of Shares Issued:
Stock Listings:
Transfer Agent:
Independent Auditors:

Seino Transportation Co., Ltd.
1, Taguchi-cho, Ogaki, Gifu 503-8501, Japan
Tel: 81-584-81-1111 Fax: 81-584-75-3366
November 1, 1946
¥42,482 million
198,631,167
The First Section of Tokyo Stock Exchange (code 9076)
The First Section of Nagoya Stock Exchange (code 9076)
The Mitsubishi Trust and Banking Corporation
ChuoAoyama PricewaterhouseCoopers
Nagoya, Japan
June 25, 2004

24

Seino Group☆Consolidated subsidiaries★Subsidiaries and affiliates accounted for by the equity method

Transportation Group★ Hokkaido Seino Transportation Co., Ltd.
General cargo haulage☆ Iwate Seino Transportation Co., Ltd.
General cargo haulage☆ Miyagi Seino Transportation Co., Ltd.
General cargo haulage
Fukushima Seino Transportation Co., Ltd.
General cargo haulage☆ Kanto Seino Transportation Co., Ltd.
General cargo haulage★ Saitama Seino Transportation Co., Ltd.
General cargo haulage★ Tokyo Seino Transportation Co., Ltd.
General cargo haulage☆ Kanagawa Seino Transportation Co., Ltd.
General cargo haulage
Enshu Seino Transportation Co., Ltd.
General cargo haulage
Mikawa Seino Transportation Co., Ltd.
General cargo haulage☆ Tokai Seino Transportation Co., Ltd.
General cargo haulage☆ Nohi Seino Transportation Co., Ltd.
General cargo haulage
Tango Seino Transportation, Inc.
General cargo haulage☆ Seino Tsu-un Transportation Co., Ltd.
Transportation and general cargo haulage☆ Seino Express Co., Ltd.
General cargo haulage☆ Mie Seino Transportation Co., Ltd.
General cargo haulage★ Hinomaru Seino Transportation Co., Ltd.
General cargo haulage★ Shikoku Seino Transportation Co., Ltd.
General cargo haulage★ Showa Seino Transportation Co., Ltd.
General cargo haulage
Takuma Seino Transportation Co., Ltd.
General cargo haulage☆ Okinawa Seino Transportation Co., Ltd.
General cargo haulage☆ Seino Logix Co., Ltd.
Intermodal transportation operator and agency☆ Seino Europe GmbHInternational air and sea cargo forwarder inGermany☆ Seino Hikkoshi Co., Ltd.
Moving service(As of March 31, 2004)☆ Göritz Intransco International
Speditionsgesellschaft m.b.H.
International air cargo forwarder and customs
broker in Germany☆ United-Seino Transportation (Malaysia)
Sdn. Bhd.
General cargo haulage in Malaysia☆ Nantong Seino Transportation Co., Ltd.
General cargo haulage in China☆ Seino Transportation (Thailand) Co., Ltd.
International air and sea cargo forwarder inThailand☆ Seino Merchants Singapore Pte Ltd.
International air and sea cargo forwarder in
Singapore
Schenker-Seino Logistics Co., Ltd.
Third Party Logistics (3PL) provider
Seino Hokkaido Express Co., Ltd.
General cargo haulage☆ Seino Tokyo Express, Inc.
General cargo haulage
Seino Kanagawa Express Co., Ltd.
General cargo haulage and automotive freight
handling☆ Seino Nagoya Express, Inc.
General cargo haulage☆ Seino Osaka Express, Inc.
General cargo haulage☆ Seino Hokuriku Express, Inc.
General cargo haulage☆ Seino ST Services, Inc.
General cargo haulage and security services
Seino Logistic Hokkaido, Inc.
General cargo haulage
Asahi Bangkok Co., Ltd.
Management in Thailand☆ Seino Customs Clearance Service Co., Ltd.
Customs Broker
Schenker-Seino Co., Ltd.
International sea and air cargo forwarder
Logiwell Co., Ltd.
Total logistics service provider

Information and Sales Group☆ Toyota Corolla Gifu Co., Ltd.
Automobile sales agency[Second section of the Nagoya Stock Exchange]☆ Netz Toyota Gifu Co., Ltd.
Automobile sales agency☆ Toyota Vista Gifu Co., Ltd.
Automobile sales agency☆ Seino Trading Co., Ltd.
General trading house☆ Seino Information Service Co., Ltd.
Advanced information services andinformation processing☆ Japan Logistics Development Co., Ltd.
Information and materials distribution
systems consulting☆ Asahi Leasing Co., Ltd.
Rental and lease of equipment and machines☆ Asahi Travel Service Co., Ltd.
Travel agency☆ Seino Engineering Co., Ltd.
Construction, drafting, and electrical and air
conditioning installation☆ Seino Family Co., Ltd.
Insurance agency services☆ Toyota Home Gifu Co., Ltd.
Housing sales☆ Asahi Agency Co., Ltd.
Comprehensive advertising agency☆ Asahi Create Co., Ltd.
Comprehensive printer☆ Asahi Enterprise Co., Ltd.
Automobile sales and export☆ Seino Do Brasil Armazens Gerais Ltda.
Storage and maintenance in Brazil☆ Seino Security Service Co., Ltd.
Security services☆ Jms Gifu Corporation
Merchandising of automobile components☆ Medical Support Co., Ltd.
Disposal of medical facility wastes☆ Suito Taxi Co., Ltd.
General passenger transportation
Tokyo Nohin Daiko Co., Ltd.
Value-added distribution services to the apparelindustry☆ Seino Enterprise Co., Ltd.
Group management and general consultation☆ Seino Sangyo Co., Ltd.
Merchandising of automobile components andtransportation-related services☆ Gifu Hino Motor Co., Ltd.
Automobile sales agency[Second section of the Nagoya Stock Exchange]

25Seino Transportation Co.,Ltd.
1, Taguchi-cho, Ogaki, Gifu 503-8501, Japan

Printed in Japan