A Message from the President

In this annual report, I would like to explain the YamatoGroup’s medium-term strategies in line with the following
four themes.
The Four Themes

1. The Yamato Group’s Vision
2. Our Unique Competitive Advantages
3. Tackling the Challenges of a Growing
E-Commerce Market
4. Fiscal 2014 Forecasts andShareholder Returns

Makoto Kigawa
Representative Director,
President and Executive Officer

1. The Yamato Group’s Vision
Through its network innovations, the Yamato Group will develop logistics as ameans for generating value. By reforming logistics, we will launch a value
networking concept that contributes to growth strategies in Japan’s economy.
Seeking to Become Asia’s No. 1 Solution Provider in Distribution and Lifestyle Support
In fiscal 2014, the final year of DAN-TOTSU Three-Year Plan HOP, we aim to link regional economic
zones and fully harness the unparalleled transportation speed of three logistics terminals. These are
the Atsugi Gateway, Haneda Chronogate, and the Okinawa International Logistics Hub.
We will seamlessly integrate the overwhelming speed of these three facilities with the strength of
our “last mile” network, which covers Japan and Asia, and our proprietary information technology (IT),logistics technology (LT), and financial settlement technology (FT), to launch new solutions that dramatically improve logistics speed, costs, and quality.
Through our network innovations, we will develop logistics as a means for generating value. By reforming logistics, we will launch a value networking concept that contributes to growth strategies in Japan’s
economy, thereby becoming Asia’s No. 1 solution provider in distribution and lifestyle support.

AnnuAl RepoRt 20135

Value Networking Concept
In an increasingly borderless age, boosting international competitiveness by reducing costs is a key
ongoing challenge for world-class Japanese manufacturers and companies in primary industries. However, they have already reached the limits to which they can trim production and personnel expenses.
But there is still great scope to lower costs in the logistics domain, our core business. The YamatoGroup believes that there are four issues that it can help resolve.
The first issue is that in the retail sector logistics costs are tending to rise as companies look tohandle many small orders and cut lead times to avoid losing sales opportunities amid stiffer competition with major e-commerce businesses.
The second is that logistics costs remain high at manufacturers, who have reached the limits towhich they can lower production costs, because they have left everything up to logistics companies
after shipment.
The third issue is that advancing globalization and borderlessness have resulted in increasing dispersion and complexity with respect to the locations of suppliers and production sites, meaning that
overall logistics, including inventory volume management, has not been optimized.
Finally, since the Great East Japan Earthquake of March 2011, there has been a growing needamong manufacturers, retailers, and other companies regardless of industry or size to control risks bydispersing inventory from a business continuity planning (BCP) perspective.
The Yamato Group aims to resolve these issues by seamlessly integrating the overwhelming speedof three facilities with our “last mile” network, which covers Japan and Asia and our proprietary IT, LT,
and FT, to launch new solutions that dramatically improve logistics speed, costs, and quality.
Specifically, we will leverage the five engines below to attain greater speed, lower costs, andhigher quality, and reduce overall inventor y volumes so we can reform logistics and contribute toJapan’s growth strategies.

The Five Engines of Value Networking(1) Non-stop logistics to add value by swiftly networking operations. This will be made possible by launching full-fledged operations at Haneda Chronogate, Atsugi Gateway, and the Okinawa International
Logistics Hub—multifunctional super-hubs that integrate speed and high value-added capabilities.
(2) Cloud-based networking regardless of shipping location, shipment type and shipment volume
through FRAPS*, which uses a network to swiftly and accurately ensure delivery to multiple locations
by optimizing the collection of goods.
(3) The world’s first network for the integrated global delivery of refrigerated packages through thelaunch of International Cool TA-Q-BIN.
(4) Visualization of logistics by both senders and receivers through seamless digital informatizationfrom shipment through arrival.
(5) Demand chain perspective innovations that satisfy needs of purchasers and suppliers.
*FRAPS is an acronym for the Free Rack Auto Pick System, a cloud-based setup that can use “last mile” networks. This picking system uses
proprietary flow-through racks. As the racks move along, items are sorted and cross-merged on the network, reducing overall inventory byenhancing flow speeds and visualizing inventory volumes and flows.

6

Yamato Holdings Co., ltd.

The Yamato Group offers fast delivery times as quick as four hours, with theminimum stock inventory dispersed close to the principal markets.
As only a quantity equivalent to items sold is speedily replenished, an improved
level of service is realized without increases in cost or inventory volume.

Example of “Logistics Reform” For Mail-Order Industry

Speedy Mail-Order Delivery
by Dispersed Warehousing
Mail-order company

FRAPS

Purchaser

Only a quantity equivalent toitems sold is replenished
Mail-order company:

Atsugi
Gateway

Improved speed; no picking;no logistics investment;
visualization of inventory;
reduced total inventory
volumeMinimumstock

Kansai

Minimum
stock

Minimumstock

Speedily replenishing stock by frequent
trunk-route transportation

Mail-order user:

Quicker receipt of item;
visualization of delivery

Purchaser

FRAPS

FRAPS

Example of “Logistics Reform” For Machine Builders

Component Procurement from Multiple Suppliers
Overseas component
supplier X

Purchaser

Chubu

Designated assembly plantLine 1

Domestic component
supplier Y

Purchaser:

Supplier:

Reduced operational burden;
extended production deadlines; visualization oflogistics

Purchaser

The Yamato Group provides a service for just-in-time bulk procurement fromsuppliers dispersed throughout Japan and Asia to factory lines.
This service shortens the procurement lead time, reduces inventory, and extends
delivery deadlines for suppliers.

Asian
network

Shorter lead time; just-intime line supply; visualizationof procurement; inventoryvolume/space minimization;
cost reduction

FRAPS
Sorting (Single picking)bundling of promotional
material, wrapping

Okinawa
Hub

HanedaChronogate

Designated assembly plant

Atsugi
Gateway

FRAPS at each
TA-Q-BIN base

Crossmerging(X+Y+Z)Line 2
Designated assembly plantLine 3
Domestic component
supplier Z

Designated assembly plantLine 4

We will harness these five engines to pursue logistics structure innovations extending from suppliers and manufacturers to end-users and retail stores.
To illustrate specific current and future initiatives, we present two business model examples above.

Establishing Platforms to Revitalize Communities and Provide Lifetime Lifestyle Support
Another key element in our drive to become Asia’s No. 1 solution provider in distribution and lifestyle support is establishing platforms to revitalize communities and provide lifetime lifestyle support.
Japan’s socioeconomic structure, values, and lifestyles are changing due to trends such as population aging, rural depopulation and greater social advancement by women. The Yamato Group is therefore forming partnerships with the government, local public bodies and other companies to establish
platforms for revitalizing communities and providing lifetime lifestyle support platforms closely tied to
local communities and lifestyles.

AnnuAl RepoRt 20137

Yamato Group Concept Map Ahead of 100th Anniversary
Customer Satisfaction (CS)
Create DAN-TOTSU businesses throughproviding high-quality service and CS
Enhancement of Asian network
Domestic parcel delivery market share: Over 50%
Non-delivery share of operating income: Over 50%
Overseas sales ratio: Over 20%

Business

Business groups
utilizing core competence

Business

Societal Satisfaction

Core competencies

Safety-Environment-CSR

IT

Become the company most loved andtrusted by society

LT

Business

Employee Satisfaction
Invigorating and fulfilling
workplace

FT“Last mile” network

Provision of improved labor
environment

Asia’s No. 1 solution provider in
distribution and lifestyle support
Business

Business
Business

Shareholder Satisfaction
Raise corporate value and pay
stable high dividends
ROE: Over 11%

Overall Image of Value-Networking Design
Customer

Customer

Sales Drivers
Sales Drivers
Base
Sales Drivers
Base

Customer

Customer

Sales Drivers

Sales Drivers
Sales Drivers

Base

Base
Base

Base

HanedaChronogate

Atsugi
Gateway

Okinawa
Hub

East Asia

Other
GatewaysBase

NaritaSoutheast
Asia

EuropeAmericasIT

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Yamato Holdings Co., ltd.

Sales Drivers

LT

FT

For example, we offer the Magokoro TA-Q-BIN service through a tie-up with the Iwate Prefectural
Council of Social Welfare. The service combines checking on the wellbeing of the elderly and daily package deliveries. In another example, we collaborated with Tottori Prefecture to jointly open the Sanin
Ryutsu Trinity Center, which is helping promote local industry and job creation.
Over the years, the Yamato Group has built its business through close ties with the lifestyles ofindividuals and communities. It is essential for us to co-exist with society so that we can continue togenerate sustainable corporate value. We believe that it is important to balance the optimization of
economic returns and the maximization of social contributions.
From this perspective, we are refining our past approach to CSR, deploying regional revitalization
measures and providing lifetime lifestyle support through our core businesses based on a Creating
Shared Value concept to help create an affluent society.

2. Our Unique Competitive Advantages
We will pursue sustainable growth by combining the unique strengths of our“last mile” network covering Japan and Asia and our non-delivery businesses,
which maintain high profitability, to enhance added value.
The Yamato Group has several unique competitive advantages.
The following three elements are the cornerstones to the Yamato Group attaining sustainable growth.
1. A network extending the “last mile” in the Delivery Business
2. Enhancing added value by combining services with non-delivery businesses
3. Building our Asian TA-Q-BIN network

A Network Extending the “Last Mile” in the Delivery Business
The TA-Q-BIN business, which started as a consumer-to-consumer (C2C) delivery service, has been
operating for 37 years since its launch in 1976.
We have run that service steadily from the outset through pioneering efforts to become as close as
possible to our customers by operating from their perspective.
As with electricity and water supplies, the “last mile” of our network has become essential to thelifestyles of end-users.
In the fiscal year ended March 31, 2013, our approximately 3,900 direct retail stores around Japan
employed about 54,000 sales drivers. We maintained the No. 1 industry share in terms of delivery
volumes as a result of our high-quality transportation and high value-added services.
The brand strength stemming from the Yamato Group’s TA-Q-BIN services and great customer trust
in its quality are tremendous assets of the Group.

AnnuAl RepoRt 20139

Delivery Volume(Including Taiwan)

Enhancing Added Value by Combining Services with Non-delivery
Businesses(Parcels)

The Yamato Group adopted a pure holding company structure in

90,00081,990We took advantage of that transition to reduce our reliance on

66,03260,000November 2005.
TA-Q-BIN and other Delivery Business services by organically linking

51,240resources with non-delivery businesses. These non-delivery busi30,000

nesses are the BIZ-Logistics, Home Convenience, e-Business, Financial and Truck Maintenance business segments. In this way, we are

0

2011

2012

2013

developing and deploying new business models, accelerating strategies to increase the earnings power of the entire Group.

Regarding the logistics reforms mentioned earlier, seamlessly integrating such non-delivery businesses as IT and FT with the “last mile” networks of our Delivery Business will empower us to provide
new solutions that dramatically improve logistics speed, costs, and quality.

Building Our Asian TA-Q-BIN Network
We launched Asian TA-Q-BIN services in 2000, expanding our business by providing know-how to
Taiwan’s Uni-President Enterprises Corp.
In January 2010, we took advantage of the economic growth potential of Asia by launching our own
businesses in the region, starting with Shanghai and Singapore.
In the fiscal year ended March 31, 2013, we also developed businesses in Hong Kong and Malaysia,
in addition to Shanghai and Singapore. Demand for delivery services is steadily rising in these locations.
Only a handful of companies anywhere have “last mile” networks in Asia.
We plan to engage in borderless logistics by reinforcing operations in countries in which wealready do business while reinforcing internationally integrated transportation services that link countries and regions.
Our first step toward building an internationally integrated transportation services structure in Asia
was in November 2012, when we used our Okinawa International Logistics Hub to launch a next-day
delivery service of documents to Shanghai, Singapore, Hong Kong, and Malaysia, where we have
TA-Q-BIN capabilities. In May 2013, we extended next-day deliveries to include small parcels.
Our Asian TA-Q-BIN network will likely play an important role as we roll out international Cool
TA-Q-BIN services and build a global supply chain.

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Yamato Holdings Co., ltd.

3. Tackling the Challenges of a Growing E-Commerce Market
The Yamato Group has successfully expanded its solutions business, byorganically combining consumer-driven differentiation strategies, which it
pioneered and has continued to rigorously deploy, with its non-delivery
businesses. And as a result we have quickly increased our presence in thegrowing e-commerce market.
The prime driver of the express home delivery market in Japan is expansion in the B2C segment, particularly mail-order customers. This trend should continue.
In fiscal 2013, TA-Q-BIN delivery volume increased 4.5% from a year earlier. As of the start of fiscal
2014, we project 8.6% growth for the year.
The e-commerce market has expanded on the strength of enabling people to buy quality products at
reasonable prices from the comfort of their homes, in what amounts to a change in lifestyles. TA-Q-BIN
services have underpinned the expansion of this market.
Since initiating TA-Q-BIN services, the Yamato Group has remained true to its pioneering commitment to becoming as close as possible to customers by operating from their perspective and continuing
to deploy its differentiation strategies while succeeding with its solutions proposals. As a result, wehave quickly increased our presence in the e-commerce market.
We draw on our 54,000 sales drivers, approximately 3,900 direct retail stores, and the channel
diversity of our roughly 250,000 express agencies around Japan, including convenience stores, to offer
uncompromising delivery quality, information and tracking management, and payment and settlement
systems. These and other resources comprehensively support e-commerce companies and consumers
alike, giving us large first-mover advantages in the e-commerce market.
We are endeavoring to enhance delivery quality and labor productivity by building a team-based
structure that covers part-time employees and sales drivers to concurrently deliver parcels during times
when customers are most likely to be home.
These efforts have enabled us to constrain additional cost pressures even as the number of packages in the e-commerce market increases.
We also offer solutions that satisfy the needs of mail-order businesses that are seeing logistics
costs rise as they try to handle many small orders more quickly to avoid losing sales opportunities.
For example, we can ensure speedy deliveries through our Today Shopping Service, which candeliver goods in as quick as four hours after an order, and our Distributed Inventory-based Fast Direct
Sales service quickly delivers orders and swiftly replenishes products sold, preventing costs and inventory volumes from increasing. This is achieved by maintaining minimal inventories near key markets.
We therefore satisfy the needs of both senders and recipients. In other words, we have organicallyintegrated a pioneering consumer-centric strategy of differentiation with non-delivery businesses tosuccessfully expand our solution business. This has enabled us to capture package delivery demand in
the growing mail-order market.
The Yamato Group is thus perfectly placed to do well in an e-commerce market that should steadily
expand in the years ahead.

AnnuAl RepoRt 201311

4. Fiscal 2014 Forecasts and Shareholder Returns
Our basic shareholder policy is to try to increase total returns through a
combination of dividends and share buybacks.
In fiscal 2014, the final year of DAN-TOTSU Three-Year Plan HOP, in the domestic market we aim tocontinue creating new businesses and leverage Group collaboration to engage in proposal-based sales,
while supplying services closely tied to communities.
In overseas markets, we will reinforce management in locations that our TA-Q-BIN business covers.
In addition, we will engage in borderless logistics in Asia by bolstering our internationally integrated
transportation services structure.
We will link our strategies in the domestic and overseas markets to build a network that accelerates our long-term growth strategies. This will be achieved by completing the Atsugi Gateway and
Haneda Chronogate and fully operating our Okinawa International Logistics Hub.
For fiscal 2014, we forecast that consolidated operating revenues will increase 4.9% year on yearto ¥1,345.0 billion. Operating income is projected to rise 7.2% to ¥71.0 billion, while net income isforecast to increase 15.2% to ¥40.5 billion. We expect to increase capital investment 70.5% to ¥90.0
billion, as we look to deliver record-setting performance.

Operating Income

Cash Dividends per Share(Millions of Yen)

(Yen)

80,00060,00030
61,38964,314

66,651

71,00066,203

22.0

22.0

22.0

22.0

2009

2010

2011

2012

55,721

23.0

24.0

20
40,00010
20,000

0

2009

2010

2011

2012

n Non-Delivery n Delivery

2013

0

2014
(forecast)Acquisition of own shares(Billions of Yen)
20

18.1

11.8
10

0

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Yamato Holdings Co., ltd.

9.8

9.9

9.9

10.3

2004

2005

2006

2007

10.0

0.2

0.2

0.0

2008

2009

2010

2011

2012

2013

2013

2014
(forecast)Capital investment will be higher than in previous
years because of several factors. These include spending to maintain existing businesses and investments ingrowth areas, one being emerging business opportunities that we have identified in intercompany logistics,
which encompasses e-commerce and procurements/
deliveries.
Under the DAN-TOTSU Three-Year Plan HOP, ending
in fiscal 2014, we are aiming for ROE exceeding 7.0%.
Meanwhile, we seek to generate an ROE of more than
11.0% under DAN-TOTSU Management Plan 2019, which runs through fiscal 2020.
Our basic shareholder returns policy is to try to increase the total return through a combination ofdividends and share buybacks.
We will continue to increase our earnings power by steadily executing our business plan, while raising capital efficiency by implementing flexible capital policies, as and when needed, by taking advantage
of our solid financial base.
For the fiscal year ended March 31, 2013, we paid dividends of ¥23 per share, up ¥1 from a year earlier.
For fiscal 2014, management plans to increase dividends by ¥1 per share, to ¥24.
The Yamato Group is striving concertedly to materialize its management philosophy, which is to help
enrich our society by enhancing the social infrastructure of TA-Q-BIN networks, creating more convenientservices for comfortable lifestyles and developing an innovative logistics system. By increasing thesatisfaction of all stakeholders, including shareholders, customers, society, and employees, we aim toenhance corporate value.
We ask our shareholders for their ongoing encouragement and support.
August 2013

Makoto Kigawa
Representative Director,
President and Executive Officer

AnnuAl RepoRt 201313