TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIOCONSULTING
TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIO
Annual Report 2000

For the year ended March 31, 2000

SENKO Co., Ltd.

Logistics of the Future Logistics of the Future Logisti

Profile

Established in July 1946, Senko Co., Ltd. is an integrated distribution services
company. In addition to the parent company, a total of 39 subsidiaries and 7
affiliates operate under the umbrella of the Senko Group. One of the leading
distribution services companies in Japan, Senko boasts a national network ofmore than 200 offices, 2,877 trucks, 7 cargo ships, and 673,931 square meters of
warehouse space.
Listed on the first sections of the Tokyo Stock Exchange and the Osaka
Securities Exchange, the Company’s operations cover a wide-range ofbusinesses, centering on its nationwide trucking network but extending towarehousing, marine transport, railway forwarding, in-factory work, and doorto-door international transportation.
Senko specializes in supplying integrated distribution services, from
distribution consulting to system design and operations, that closely matchcustomer needs.
The Company plans to further expand services that improve the efficiency of the
supply chain, including sourcing, production, and sales, by combining its
systems with the latest information technology. Through these and other efforts,
Senko will continue to develop as a logistics information company.

Contents

Consolidated Financial Highlights

1

A Message from the President

2

Review of Operations
Truck Transport

4

Warehousing

5

In-factory Work

6

Others7

Financial Review

8

Financial Section
Report of Independent Certified Public Accountants

11

Consolidated Balance Sheets

12

Consolidated Statements of Income

14

Consolidated Statements of Shareholders’ Equity

15

Consolidated Statements of Cash Flows

16

Notes to Consolidated Financial Statements

17

Consolidated Subsidiaries and Affiliated Companies

23

Board of Directors and Corporate Auditors

24

Corporate Data

25

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

Thousands of
U.S. dollars

Millions of yen
For the years ended March 31

Operating revenues

1999

2000

2000

¥173,872¥180,553$1,700,923

Operating income

4,601

6,380

60,104

Net income (loss)

1,075(6,144)(57,880)

Total assets

150,653

151,459

1,426,840

Shareholders’ equity

52,091

44,764

421,706

For the years ended March 31

1999

2000

2000

Net income (loss)

9.21(53.02)(0.50)Cash dividends

7.50

7.50

0.70

446.21392.05

3.69

Yen

U.S. dollars

Per share of common stock:

Shareholders’ equity

Note : U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥106.15 to U.S.$1 on
March 31, 2000.

Operating revenues
200(Billions of yen)

Net income (loss)
2,500(Millions of yen)

Net income (loss) per share
25

2,000

20

1,500

15

1,000

10

500

5

0

0

(Yen)

150

100

50

0

96

97

98

99

00

-10,000

96

97

98

99

00

-100

96

97

98

99

00

1

A Message from the President

Business Environment
During the fiscal year under review, Japan’s economy showed signs ofbottoming out, supported by the Japanese government’s economic stimulus
measures and a recovery in Asian economies. There continued to be little
sign of a full-fledged economic recovery, however, with capital investmentby the private sector stuck in the doldrums, personal consumption
remaining weak, and labor conditions worsening.
In the distribution industry, there was a slight increase in demand for truck
transport services, but the business climate remained difficult because
freight commissions continued to move downward and customer demand
for lower rates intensified.
Facing these conditions, the Senko Group placed its first priority on
meeting the changing needs of its customers. Pursuing high-quality, highvalue-added distribution services, we proceeded to develop new demandfor distribution services and continued to steadily implement our Business
Structure Reform Plan, which has been ongoing since the fiscal year ended
March 1997.
Consequently, operating revenues advanced 3.8%, to ¥180,553 million. This
increase can be attributed to growth in housing-related business due to arecovery in housing starts supported by the low interest rates that havepersevered for the past two years and a beefing up of tax incentive
measures to promote housing sales. We also gained revenues bydeveloping the housing-related market. In addition, distribution services
for home centers, drug stores, and other chain stores increased. Business expansion by our sales-related
subsidiaries, dealing mainly in petroleum, also contributed to the growth in operating revenues.
Operating income surged 38.6%, to ¥6,380 million despite customer demand for price cuts thanks to theimpact of our Business Structure Reform Plan. Over the past three years, we have improved profitability
by increasing the efficiency of our organization and staff, reducing our interest burden, reforming
unprofitable offices, and other measures.
Net income, however, dropped by ¥7,219 million from the previous fiscal year, to a net loss of ¥6,144
million because of extraordinary losses totaling ¥13,613 million, mainly related to a special loss onprovision for accrued severance indemnities for the previous period. The special loss on accrued
severance indemnities occurred as a result of a change in accounting standards for severance indemnities
and was taken to strengthen our financial position and clear the way for profit growth in the future.
Perspectives
Our Business Structure Reform Plan, which we have been implementing for the past three years,
beginning with the fiscal year ended March 1997, ended during the fiscal year under review, having
achieved its goals.
In the future, we plan to proceed with achieving a balance between aggressive business expansion andlow-cost operations for the overall Group. We are currently creating a new medium-term business plan to2

guide those efforts that will be implemented in the next fiscal year.
The new medium-term business plan will be based on our “transformation into a logistics informationcompany.” A logistics information company is a company that aims to achieve efficiency throughout theentire supply chain to provide the greatest value to corporate customers and to consumers. Furthermore,
it is a company that provides appropriate distribution solutions by collecting and analyzing information
for the entire distribution process and integrating this information into a system that utilizes information
technology.
First, we will expand the scope of our distribution services to the entire supply chain by offering raw
material sourcing transportation, placing and receiving orders, and other business services that havepreviously been the preserve of the customer. In particular, we will be focusing on the chain store
distribution business, which has been expanding substantially recently. To achieve maximum use of ournationwide network of offices, we intend to expand our services to handle distribution needs from thepoint of production to the store counter or even into consumers’ hands. We plan to expand our chain store
business revenues from their current ¥13.7 billion to ¥20.0 billion by the end of March 2004.
Second, we are entering promising new growth fields. These include providing distribution services forcompanies that combine a e-commerce business system with comprehensive distribution function, fornursing care products, for pharmaceuticals (using know-how acquired in providing services to our drug
store business), and for reverse logistics (product recalls or returns). Developing these fields will require alogistics system that utilizes information technology. We already have developed our Best Partner System,
which can receive or make orders over the Internet and uses Global Positioning System (GPS) technology
to track our trucks by satellite. Since this new system allows us to comprehensively handle the needs ofthe entire supply chain, we believe it will be a powerful tool for expanding Group revenues.
Although we are still planning our medium-term business plan based on these strategies, we will beaiming for an operating income ratio of greater than 4% (3.5% at end of March 2000) when the period
covered by the plan ends in March 2004.
To Our Shareholders
As a Company, we consider the distribution of profits to shareholders as one of our most importantmanagement issues. For that purpose, our basic dividend policy is to target stable dividend payments thatreflect underlying corporate performance while also retaining sufficient internal capital reserves toprovide for business development and strengthening our business structure.
During the fiscal year under review, we paid interim and year-end cash dividends of ¥3.75 per share for afull-year cash dividend of ¥7.50 per share.
In meeting the challenges of the current fiscal year, we look forward to the continued support of ourshareholders.
June 2000

Hiroshi Koike
President and Representative Director

3

Review of Operations

Truck Transport
Truck transport operating revenues climbed 3.4%, to ¥92,086 million,
accounting for 51.0% of total operating revenues. This growth resulted
from the transportation of a greater volume of prefabricated housing
panel due to the recovery in housing starts and increased chain storerelated business from home centers, drug stores, direct sales companies,
and wholesalers.

Operating revenues
120(Billions of yen)100

Share of revenues

80

60

40
51.0%
20

0

4

96

97

98

99

00

The Senko Group’s truck transport operations have developed an
extensive nationwide network, providing our customers withtransportation and delivery services that match their products anddistribution structure, including exclusive, combination, route, and joint
transport services. We transport industrial raw materials, manufactured
products, construction materials, housing materials, agricultural
products, and general commodities as well as providing moving services–handling almost anything to do with clothing, food, and housing.
Moreover, our fleet comprises regular trucks, large-trucks, and trailers aswell as specialty cargo trucks, such as tanker, loose powder carrying, andrefrigerated trucks. Consequently, our ability to transport items andmaterials correctly is highly evaluated by manufacturers and othercustomers.

Warehousing

Share of revenues

Warehousing operating revenues declined 3.1%, to¥20,571 million, accounting for 11.4% of total operating
revenues. The decrease in operating revenues can be
attributed to declining demand, particular for storage ofgeneral commodities, and to the impact of a slow downin cargo movement.
Our warehouses present a very different image from thewarehouses of the past. They are integrated function
distribution centers that combine a warehouse’s
distribution processing functions, such as storage,
delivery, set assembly, and labeling with advanced
information system services.
Currently, we have approximately 170 facilities at our
major distribution points nationwide, with total storage
space of 674,000 square meters. Based on thesewarehousing bases, we combine information services
with distribution services that utilize a system that
anticipates the needs of our diversified customers tooffer a full range of distribution services that support
our customers’ production and sales operations.

11.4%

Operating revenues
25(Billions of yen)

20

15

10

5

0

96

97

98

99

00

5

Review of Operations

Share of revenues

In-Factory WorkIn-factory work operating revenues edged up 0.5%, to¥15,084 million, accounting for 8.4% of total operating
revenues. An increased volume of business related to
the favorable conditions in the housing-related markets
and new business orders related to the businessexpansion of existing customers contributed to growthin operating revenues.
In-factory work comprises such distribution andproduction processes as unloading raw materials at ourcustomers’ factories, warehouses, and other sites andwrapping, packaging, and loading products. Our
professional distribution services support the
management of the flow of materials and products
within the factory.

8.4%

Operating revenues
20(Billions of yen)

15

10

5

0

6

96

97

98

99

00

Others
Others operating revenues increased 8.6%, to ¥52,812 million, generating
29.2% of net sales. This growth was mainly supported by an increase in
distribution business related to the opening of several distribution centers forcustomers since the second half of the fiscal year ended March 1999 related to
new wholesale and retail sales and by expanded petroleum-related sales
because of new customers.

Share of revenues

Operating revenues
60

The others business category of the Senko Group includes railway
forwarding on trunk routes; marine transport by container, mixed cargoscheduled and specialty ships; leasing of specialized warehouses forcustomers and warehouse space; door-to-door international freight
forwarding; petroleum sales; merchandise sales; data processing; softwaredevelopment; general leasing; and vehicle maintenance.

(Billions of yen)

29.2%
50

40

30

20

10

0

96

97

98

99

00

7

Financial Review

Performance
Operating revenues for the fiscal year ended March 2000
rose 3.8%, to ¥180,553 million. This increase can be attributed
to growth in the volume of housing-related cargo against the
backdrop of a recovery in the housing market due to lowinterest rates over the past two years and the strengtheningof tax incentives to promote housing sales. Other factors that
contributed to the rise in operating revenues were therecapture of business from competitors, increased housingrelated cargo due to our development of the market, moreretail and wholesale distribution business, and increased
revenue contribution by our sales-related subsidiaries,
which deal mainly in petroleum.
Operating income grew 38.6%, to ¥6,380 million. Despite adecline in contract prices and customer demand for morecost efficient distribution services, the Company was able toachieve substantial growth in operating income bydecreasing its fixed expenses. Among other efforts, theCompany reduced the overall number of employees byimproving business and organizational efficiency, cutting
labor expenses by revising employment conditions, andreducing warehouse rental expenses by discontinuing rentalof unprofitable storage space. Consequently, the operating
income ratio rose 0.9%, to 3.5%. Management views thissignificant improvement in profitability as the result of thesteady progress made over the past three years under the

Operating revenues

Company’s Business Structure Reform Plan.
Income before income taxes, however, dropped by ¥13,195
million to ¥10,195 million, principally as a result of a special
charge of ¥13,613 million for provision for accrued severance
indemnities for prior years. Based on a change in theaccounting method for severance indemnities, we booked an
special loss to cover the shortfall in our accrued severance
indemnities reserves under the new system to achieve amore sound financial position and clear the way for
improved profitability in the next fiscal year and onward. In
addition, we recorded a ¥4,400 million obligatory loss on
evaluation of a certain portion of our investment securities.
Consequently, despite favorable taxes adjustments resulting
from the application of the tax effect accounting, theCompany recorded net loss of ¥6,144 million.
Performance by Business Category
Truck transport operating revenues climbed 3.4%, to ¥92,860
million, generating 51.0% of total operating revenues. A
5.5% increase in prefabricated housing panel and otherhousing-related cargo and a greater volume of cargohandled for chain stores, such as home centers, drug stores,
direct sales companies, and wholesalers, contributed to thegrowth in operating revenues.
In our warehousing business, which accounted for 11.4% of

Net income

Operating income

Ratio of SG&A
expenses to operating revenues

200(Billions of yen)

7,000(Millions of yen)

2,500

6,000
150

(Millions of yen)

5

(%)

2,000

5,000
1,500
4

4,000
1,000

100
3,000

500
2,000
50

0

8

96

97

98

99

00

0

3

0

1,000

96

97

98

99

00

-10,000

96

97

98

99

00

0

96

97

98

99

00

Consolidated Operating Revenues by Products Handled

total operating revenues, operating revenues
declined 3.1%, to ¥20,571 million. This decrease
resulted from worsening cargo movement becauseof a drop in demand for general commodity cargo,
reduced storage of cargo because of a distribution
rationalization trend among customers, and lower
fees.

(Units: billions of yen, %)Accounting for 8.4% of total operating revenues,
in-factory work’s operating revenues edged up
0.5%, to ¥15,084 million thanks to an increased
volume of housing-related business as well as new
business.
Others operating revenues advanced 8.6%, to¥52,812 million, mainly because of a greater
contribution to operating revenues frompetroleum-related and other merchandise sales.
The others segment comprises railway forwarding,marine transport, leasing of specialized
warehouses for customers and warehouse space,door-to-door international freight forwarding,petroleum-related sales, merchandise sales, andothers.
Performance by Products Handled
The three core products types handled by the

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

Net income per share

25

Year ended March 1999

Year ended March 2000

Revenues

Composition

Revenues

Composition

Change% Change

Housing

39.6

22.8

41.8

23.2

2.1

5.5

Petroleumrelated products,
and plastics

34.4

19.8

34.4

19.1

0.0

–

Wholesaleand retail

12.0

6.9

13.6

7.6

1.6

13.6

Chemicals andfertilizers

6.0

3.5

6.0

3.3

0.0

-0.1

Foods

4.2

2.4

4.2

2.3

0.0

0.5

Electronics
products andmachinery

3.7

2.1

2.9

1.6

-0.8

-21.7

Textile goods

3.1

1.8

3.1

1.7

0.0

-2.6

Others

70.5

40.6

74.3

41.2

3.8

5.3

Total

173.8

100.0

180.5

100.0

6.7

3.8

Cash dividends per share(Yen)

Composition of
products handled(Year ended March 2000)(Yen)

Operating income tooperating revenues
20

3

8

23.2%

Housing

19.1%

Petroleum-related products
and plastics

7.6%

Wholesale and retail

50.2%

Others

15
2
10
1

7
5
Net income tooperating revenues

0
0

-5

96

97

98

99

00

100

96

97

98

99

00

0

96

97

98

99

00

9

Company are housing-related, petroleum-related andplastic, and wholesale and retail-related products. They
account for approximately half of our operating revenues.
Among these three core product types, operating revenues
from housing-related products increased 5.5%, to ¥41,850
million and accounted for 23.2% of total operating revenues.
Petroleum-related and plastic operating revenues were¥34,420 million, approximately the same as in the previous
fiscal year, and contributed 19.1% of total operating
revenues. Operating revenues from wholesale and retailrelated products gained 13.6%, to ¥13,690 million,
accounting for 7.6% of total operating revenues.
The major causes of the increase in housing-related
operating revenues was a recovery in housing starts against
a background of low interest rates and a strengthening of thetax incentive system to promote housing purchases and oureffort to develop the market. The principal reason for thesubstantial growth in chain store-related operating revenues,
which rose a substantial 13.6%, was the acquisition of new
home center and drug store chain customers. We expect ourchain-store-related business to continue to grow.
Financial Position
Total assets at the end of the fiscal year under review wereapproximately the same as in the previous fiscal year, atTotal assets

160¥151,459 million. Current assets decreased by ¥676 million,
mainly because of evaluation losses on marketable securities
related to the application of lower of cost or market
valuation and to a change in the disclosure methods forother current assets. Fixed assets declined ¥2,967 million
because the Company curtailed capital investment. Total
capital investment decreased by ¥2,172 million, to ¥5,655
million. Accumulated depreciation increased to ¥7,771
million. Investments and other assets rose substantiallybecause of the booking of deferred tax assets related to theapplication of tax effect accounting.
Among liabilities, long-term liabilities expanded
significantly because, based on the introduction of a new
accounting method for severance indemnities, the Company
recorded its remaining obligations to accrued severance
indemnities in prior years under other long-term liabilities.
To strengthen our financial position, we worked to reduce
our interest-bearing debt during the fiscal year underreview. At the end of March 2000, interest-bearing debt
amounted to ¥66,460 million, down more than ¥9,400 million
compared with two years ago.
Shareholders’ equity fell more than ¥7,300 million because of
the cancellation of treasury shares and the loss recorded forthe fiscal year.

Total shareholders’equity / ratio(Billions of yen)

35

(Billions of yen)(%)

ROE / ROA

35

34

30

33

25

32

20

31

15

30

10

29

5

5

(%)

4
ROE

150

3

2

140

1
ROA

130

0

10

96

97

98

99

00

0

96

97

98

99

00

0

0

-15

96

97

98

99

00

Report of Independent Certified Public Accountants

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

We have examined the accompanying consolidated balance sheets of SENKO Co.,Ltd. and its consolidated
subsidiaries at March 31, 1999 and 2000 and the related consolidated statements of income and shareholders’ equity
for the years then ended, and the related consolidated cash flows for the year ended March 31, 2000, all expressed inJapanese yen. Our examinations were made in accordance with auditing standards, procedures and practices
generally accepted and applied in Japan and, accordingly, included such tests of the accounting records and suchother auditing procedures as we considered necessary in the circumstances.
In our opinion, the consolidated financial statements referred to above, expressed in Japanese yen, present fairly the
consolidated financial position of SENKO Co.,Ltd. and its consolidated subsidiaries at March 31, 1999 and 2000, theresults of their operations for the years then ended, and their cash flows for the year ended March 31, 2000, in
conformity with accounting principles practices generally accepted in Japan applied on a consistent basis, except forthe change effective April 1, 1999, with which we concur, in the method of accounting for Marketable securities andAccrued severance indemnities and pension cost described in Note 3.
As explained in Note 2(i) to the consolidated financial statements, since April 1, 1999, the new Financial AccountingStandard on Accounting for Effects of Income Taxes has been adopted by the Company and its domestic subsidiaries.
The United States dollar amounts shown in the accompanying consolidated financial statements have been translated
solely for convenience. We have reviewed this translation and, in our opinion, the consolidated financial statements
expressed in Japanese yen have been translated into United States dollars on basis described in Note 1.

Ohtemae Audit Corporation
Osaka, Japan
June 29, 2000

11

Consolidated Balance Sheets
SENKO Co., Ltd. March 31, 1999 and 2000
Thousands of
U.S.dollars

Millions of yen

ASSETS

1999

2000

2000

¥ 17,998¥ 17,882$ 168,460

2,215

638

6,010

135

101

951

23,88323,741

223,655

Current assets:
Cash and cash equivalents
Marketable securities (Note 4)
Trade accounts and notes receivable Non-consolidated subsidiaries and affiliates
OthersLess allowance for doubtful accounts
Inventories
Short-term loans to non-consolidated subsidiaries and affiliates
Prepaid expenses and other current assets
Total current assets
Investments in and long-term loans to non-consolidated subsidiaries and affiliates
Investment securities (Notes 4 and 7)

(29)

(42)

(396)

3,698

4,126

38,870

428

508

4,786

1,742

2,440

22,98750,07049,394465,323

952

909

8,563

9,438

9,240

87,047

139,657

140,000

1,318,888

Less accumulated depreciation(60,022)(63,332)(596,627)

Net property and equipment

79,63576,668722,261

Deferred tax assets-non-current

—

5,651

53,236

10,4199,522

89,703

139

75

707

¥150,653¥151,459$1,426,840

Property and equipment,at cost (Notes 5 and 7)

Other assets
Translation adjustments of foreign currency financial statements

Total assets

12Thousands of
U.S.dollars

Millions of yen

LIABILITIES AND SHAREHOLDERS’ EQUITY

1999

2000

2000

Short-term loans (Note 6)¥2,786¥2,755$25,954

Current portion of long-term debt (Note 6)

13,021

8,310

78,285

339

364

3,429

15,965

16,386

154,366

Accrued expenses

2,871

2,915

27,461

Accrued income taxes

1,092

832

7,838

Other current liabilities

5,941

5,911

55,68542,01537,473353,018

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

50,97750,788478,455

Accrued severance indemnities

4,438

10,640100,236

Other long-term liabilities

1,078

7,721

72,73798,508106,622

1,004,446

54

73

688

March 31, 2000

18,296

18,296

172,360

Additional paid-in capital

17,66417,001

160,161Retained earnings

16,133

9,467

89,18552,09344,764

421,706

(2)

(0)

(0)

52,091

44,764

421,706¥150,653¥151,459$1,426,840

Current liabilities:

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

Total liabilities
Minority Interests
Shareholders’ equity (Note 9):
Common stock, ¥50 per value
Authorised - 300,000,000 shares
Issued - 116,747,167 shares at March 31, 1999 and 114,180,167 shares at

Less: treasury stock
Total shareholders’ equity
Total liabilities and shareholders’ equity

See the accompanying notes to the consolidated financial statements.

13

Consolidated Statements of Income
SENKO Co., Ltd. Years Ended March 31, 1999 and 2000
Thousands of
U.S.dollars

Millions of yen

1999

2000

2000

Truck transport¥89,024¥92,086$ 867,508

Others84,84888,467

833,415

173,872

180,553

1,700,923

Truck transport

82,772

84,940800,188

Operating revenues:

Total operating revenues
Operating costs and expenses:
Others78,71681,898771,531

Selling, general and administrative expenses

7,783

7,335

69,100Total operating costs and expenses

169,271

174,173

1,640,819

4,601

6,380

60,104

Operating income
Other income (expenses):
Interest and dividend income

551

369

3,476

(1,335)(1,190)(11,211)(817)(15,754)(148,412)(1,601)(16,575)(156,147)

3,000(10,195)(96,043)

Current

1,926

1,717

16,175

Deferred—(5,795)(54,593)

1,926(4,078)(38,418)

1,074(6,117)(57,625)

Minority interests

1

(27)

(255)

Net income (loss)¥1,075¥(6,144)$(57,880)

Interest expenses
Others; net

Income (loss) before income taxes and minority interests
Income taxes:

Income before minority interests

Yen

Net income (loss) per share¥9.21

U.S.dollars¥(53.02)$(0.50)

See the accompanying notes to the consolidated financial statements.

14

Consolidated Statements of Shareholders' Equity
SENKO Co., Ltd. Years Ended March 31, 1999 and 2000
Thousands

Millions of yen

Number ofshares ofcommonstock issued

Commonstock

Additional
paid-in
capitalRetainedearnings

Treasurystock

116,747¥18,296¥17,664¥15,980¥(0)

Net income

—

—

—

1,075

—

Cash dividends

—

—

—

(875)

—

Bonuses to directors and statutory auditors

—

—

—

(47)

—

Increase of treasury stock

—

—

—

—

(2)

Balance at March 31, 1999

116,747

18,296

17,664

16,133(2)

Balance at March 31, 1998

Prior years’ tax effect

—

—

—

404

—

Net income

—

—

—

(6,144)—

Cash dividends

—

—

—

(901)

—

Bonuses to directors and statutory auditors

—

—

—

(25)

—

Decrease of treasury stock
Retirement of treasury stock
Balance at March 31, 2000

—

—

—

—

2

(2,567)

—

(663)

—

—

114,180¥18,296¥17,001¥ 9,467¥(0)

Thousands of U.S.dollars (Note 3)
Commonstock

Additional
paid-in
capitalRetainedearnings

Treasurystock$172,360$166,407$151,983$(19)

Prior years’ tax effect

—

—

3,806

—

Net income——(57,880)—

Cash dividends——(8,488)—Bonuses to directors and statutory auditors

—

—

(236)

—

Decrease of treasury stock

—

—

—

19

Retirement of treasury stock—(6,246)——$172,360$160,161$ 89,185$ (0)Balance at March 31, 1999

Balance at March 31, 2000

See the accompanying notes to the consolidated financial statements.

15

Consolidated Statements of Cash FlowsSENKO Co., Ltd. Year Ended March 31, 2000
Millions of yen

Thousands of
U.S.dollars

2000

2000

¥(10,195)$(96,043)

Depreciation and amortization

7,771

73,208Provision for accrued severance indemnities

6,202

58,427

Interest and dividends income(369)(3,476)

Interest expense

1,190

11,210Equity in loss of affiliated companies

283

2,666

Write-down of marketable securities

Cash flows from operating activities:
Loss before income tax and minority interest
Adjustments for:

1,221

11,503

Increase in inventories(428)(4,032)

Increase in trade payable

529

4,983

7,113

67,009

Increase in long term accrued expenseOther
Sub totalInterest and dividend income received
Interest expenses paid
Income tax paid
Net cash provided by operating activities

1,517

14,291

14,834

139,746

374

3,523

(1,176)(11,079)(1,976)(18,615)

12,056

113,575

(92)

(867)

Cash flows from investing activities:
Payments for purchases of marketable securities
Proceeds from sales of marketable securities

141

1,328

(5,496)(51,776)

Proceeds from sales of fixed assets

114

1,074

Proceeds from sales of investment securities

91

857

Payments for purchases of fixed assets

Payments for long-term loans receivable(388)(3,655)

Other

(110)

(1,036)(5,740)(54,075)

Net cash used in investing activities
Cash flows from financing activities:
Proceeds from long-term debt

8,231

77,541

Payments of long-term debt

(13,132)(123,712)

Purchases of treasury stock retired(662)(6,236)

Dividends paid

(901)

(8,488)

Other

(29)

(273)

Net cash provided by financing activities(6,493)(61,168)

Effect of exchange rate changes on cash and cash equivalents

61

575

(116)

(1,093)Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year

17,998

169,553

Cash and cash equivalents at end of year

17,882

168,460

See the accompanying notes to the consolidated financial statements.

16

Notes to the Consolidated Financial Statements
1. Basis of Presenting Consolidated Financial Statements:
SENKO Co.,Ltd. (the “Company”) and its domestic subsidiaries maintain their accounts and records in accordance with the provisions set forth in
the Commercial Code of Japan (the“Code”) and the Securities and Exchange Law and in conformity with accounting principles and practices
generally accepted in Japan, which are different from the accounting and disclosure requirements of International Accounting Standards.
The Company’s overseas subsidiary maintains its accounts and records in conformity with generally accepted accounting principles and practices
prevailing in the country of its domicile.
The accompanying consolidated financial statements are prepared based on the consolidated financial statements of the Company and its
subsidiaries (the “Companies”) which were filed with the Minister of Finance (“MOF”) as required by the Securities and Exchange Law.
In preparing the accompanying consolidated financial statements, certain reclassifications and rearrangements have been made to theconsolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan.
The translation of the Japanese yen amounts into U.S. dollars is included solely for the convenience of the reader, using the exchange rate
prevailing at March 31, 2000, which was ¥106.15 to US$1.00. These convenience translations should not be construed as representations that theJapanese yen amounts have been, could have been, or could in the future be, converted into U.S.dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies:(a) Principles of consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant intercompany
balances and transactions are eliminated. Non-consolidation of subsidiaries, whose combined assets, net sales, net income and retained earnings in
the aggregate are not significant in relation to those of the consolidated with the Companies.
Adjustment for consolidated account, at the time of acquisition, between the cost and underlying net equity of investments in consolidated
subsidiaries are amortised over a five-year period on a straight-line method.
The Company has adopted the equity method of accounting for investments in significant affiliates. The investments in other insignificant
unconsolidated subsidiaries and affiliates are stated at cost.
(b) Consolidated Statement of Cash Flows
In 2000, the Companies adopted the Accounting Standards for Consolidated Statement of Cash Flows, etc. which was issued by the BusinessAccounting Deliberation Council.
For the purposes of cash flow statements, cash and cash equivalents comprise cash in hand, deposits held at call with banks, net of overdrafts andall highly liquid investments with maturities of three months or less.
(c) Marketable and Investment Securities
Listed marketable securities in current assets are stated at the lower of cost or market value, cost being determined by moving average method.
Other securities are stated at cost determined by the moving average method. However, appropriate write-downs are recorded for investment
securities with values considered to have been permanently or substantially impaired.
(d) Allowance for Doubtful Accounts
The allowance for doubtful receivables is provided in amounts sufficient to cover possible losses on collection. It is determined by adding theuncollectable amounts individually estimated for doubtful receivables to a amount based on the actual rate of uncollected receivables of theCompanies in the prior years permitted by the Corporation Tax Law.
(e) Inventories
Purchased goods are stated at cost which is determined by the first-in first-out method and Supplies are stated at moving-average cost. Real estate
for sale is stated at cost which is determined by the specific cost method.
(f) Property and Equipment and Depreciation
Depreciation of property and equipment is principally computed on the declining-balance method, based on the estimated useful lives of assets
prescribed by Japanese tax law.
(g) Bond issue expenses
Bond issue expenses are deferred and amortised on the straight-line method over 3 years .
(h) Accrued Severance Indemnities and Pension Plan
Employees’ retirement benefits, covering employees of the Company and certain consolidated subsidiaries, are provided through unfunded
lump-sum benefit plans and funded noncontributory pensions plans.

17Under the plans, eligible employees are entitled, under most circumstances, to severance payments based on compensation at the time ofseverance and years of service.
The liability for accrued severance indemnities under the lump-sum benefit plan is provided at 100% of the amount that would be required if alleligible employees voluntarily retired at the balance sheet date.
In addition, the Company and certain consolidated subsidiaries have a contributory funded pension plan for most employees.
The Company and certain consolidated subsidiaries also have a severance indeminity plan for directors and statutory auditors, whose accrued
severance indemnities are stated at 100% of the amount which is computed according to internal rules.
(i) Income Taxes
The Companies recorded income taxes payable based upon taxable income determined for each group company in accordance with applicable tax
laws. The Campany and its domestic subsidiaries did not recognize deferred income taxes arising from temporary differences between the tax basisof assets and liabilities and their reported amounts in the financial statements at March 31, 1999.
Effective April 1, 1999, the Group adopted the Financial Accounting Standard on Accounting for Effects of Income Taxes which was issued by the
Financial Accounting Deliberation Council.
This standard requires that income taxes be accounted for under the asset and liability method.
The effect of the initial application of this policy for the year ended March 31, 2000 was to decrease net loss by ¥5,795 million ($54,593 thousand).
The cumulative effect up to the beginning of the current year of ¥404 million ($3,806 thousand) has been reported as a prior years’ tax effect frominitial application of accounting for income taxes in the consolidated statement of shareholders’ equity. As a result of the above, total assets andretained earnings at March 31, 2000 increased by ¥6,199 million ($58,399 thousand).
(j) Revenue
The Companies recognises freight charges as revenue when freight is shipped out. Other service revenues are recognised at completion ofprovision of the relevant services.
Sales of purchased goods are recognised when they are shipped to customers.
(k) Appropriation of Retained Earnings
Cash dividends, transfers to legal reserve and bonuses to directors and statutory auditors are recorded in the financial year in which a proposed
appropriation of retained earnings is approved by shareholders.
(l) Net Income Per Share
Net income per share is based on the weighted average number of shares of common stock outstanding during the relevant year.
(m) Translation of Foreign Currencies
Current monetary assets and liabilities denominated in foreign currencies are translated into yen at the rate of exchange in effect at the balance
sheet date. Long-term monetary assets and liabilities denominated in foreign currencies are translated at the historical exchange rate. However
foreign currency receivables and payables covered by forward exchange contracts are translated at the contracted rates. Revenues and expenses aretranslated at the rates of exchange prevailing when transactions are recorded.
Assets and liabilities of foreign subsidiary are translated into Japanese yen at the exchange rates in effect on the respective balance sheet dates.
Revenue and expenses are also translated at the exchange rates in effect on the respective balance sheet dates. Translation adjustments resulting fromtranslating foreign currency financial statements are not included in the determination of net income and are reported in consolidated balance
sheets.
(n) Consumption Tax
The consumption tax is not included in the amount of “Operating revenues” and “Operating costs and expenses.”18

3. Accounting change(a) Marketable securities
Prior to April 1, 1999, listed marketable securities in current assets were stated at the moving average cost. Effective April 1, 1999, the Company
changed the method of valuation of such listed marketable securities from the moving average cost to the lower of moving average cost or market
value. The effect of this change was to increase loss before income taxes and minority interests for the year ended March 31, 2000, by ¥1,221 million($11,503 thousand).
(b) Accrued severance indemnities and pension cost
Prior to April 1, 1999, the Company and certain consolidated subsidiaries provided for employees’ retirement benefits at 40% of the amountwhich would be required to be paid if all eligible employees left the employment of the Company voluntarily at the balance sheet date. Effective
April 1, 1999, the Company and certain consolidated subsidiaries changed their accounting for employees’ retirement benefits to provide for the fullamount which would be required. The effect of this change was to increase loss before income taxes and minority interests by ¥6,148million ($57,918
thousand).
Also, effective April 1, 1999, regarding funding policy to the outside financial institutions for the contributory and the non-contributory fundedpension plans, the Company changed the accounting method for prior service pension costs from a cash basis to an accrual basis. The effect of thischange was to increase loss before income taxes and minority interests by ¥7,084 million ($66,736 thousand).

4. Marketable Securities and Investment Securities:
At March 31, 1999 and 2000, marketable securities consisted of the following:Thousands of
U.S.dollars

Millions of yen

Marketable equity securities
Bonds and otherMarket value of marketable equity securities

1999¥2,2096¥2,215¥1,623

2000
¥635
3
¥638
¥843

2000
$5,98228$6,010$7,942At March 31, 1999 and 2000, investment securities consisted of the following:Thousands of
U.S.dollars

Millions of yen

Marketable equity securities
Other equity securities
Bonds and other1999¥8,375453
610¥9,4382000¥8,144455
641¥9,240

2000$76,7224,286
6,039$87,047

Market value of marketable equity securities¥8,916¥7,834$73,801

5. Property and Equipment:
At March 31, 1999 and 2000, property and equipment at cost consisted of the following:
Millions of yen

Land
Buildings and structures
Machinery and equipment Vehicles and vessels
Tools, furniture and fixtures
Construction in Progress

1999¥31,858
60,40425,21822,011
166¥139,657

2000¥31,883
61,511
25,05021,46393¥140,000Thousands of
U.S.dollars

2000$300,358
579,472
235,987
202,195876$1,318,888

19

6. Short-term Loans and Long-term Debt:
At March 31, 1999 and 2000, short-term loans consisted of the following:
Millions of yen

1999¥2,7861.375% to 3.125% unsecured notes payable to banks

2000¥2,755

Thousands of
U.S.dollars

2000$25,954

At March 31, 1999 and 2000, long-term debt consisted of the following:Thousands of
U.S.dollars

Millions of yen

1999
45
13,837
10,00010,0002.30% mortgage convertible bonds due 2002
0.45% convertible bonds due 2003
3.25% bonds due 2004
2.025% bonds due 2002
1.2% to 6.0% loans from banks:
SecuredUnsecured¥Less current portion

2000
45
13,837
10,00010,0002000
424
130,353
94,206
94,206¥$

9,400
20,716

7,400
17,81669,713
167,838

63,998(13,021)¥50,977

59,098(8,310)¥50,788556,740(78,285)$478,455

In August 1987, the Company issued ¥5,000 million principal amount of 2.3 per cent. mortgage convertible bonds due 2002. At
April 1, 1999, holders of the bonds were entitled to convert such bonds into 82 thousand shares of common stock of the Company.
The bonds are convertible at any time before September 27, 2002 at a conversion price of ¥545.90 per share.
In April 1996, the Company issued ¥15,000 million principal amount of 0.45 per cent. convertible bonds due 2003. At April 1,
1999, holders of the bonds were entitled to convert such bonds into 21,520 thousand shares of common stock of the Company. The
bonds are convertible at any time before September 29, 2003 at a conversion price of ¥697 per share.
The annual maturities of long-term debt at March 31, 2000 for the next five years are as follows: –20

Year ending
March 31

Millions of yen

2001
2002
2003
2004
2005

¥ 8,310
6,666
19,10914,743
10,270Thousands of
U.S.dollars$ 78,285
62,798180,019
138,888
96,7507. Pledged Assets:
The following assets were pledged as collateral as at March 31, 1999 and 2000:
Thousands of
U.S.dollars

Millions of yen

1999¥5,6673,438
10
1012,793¥21,918

Land
Buildings
VehiclesInvestment securities
Lease receivables

2000¥5,514
3,186
6
10
9,842
¥18,558

2000$51,945
30,01457
94
92,718$174,828

Obligations which were secured on the above assets were as follows:
Thousands of
U.S.dollars

Millions of yen

1999¥4,250¥5,745

Lease debt
Long-term debt, including current portion

2000¥3,969¥4,026

2000$37,390$37,927

8. Commitments and Contingent Liabilities:
At March 31, 2000, the Companies were contingently liable for trade notes discounted with banks and for guarantees of loans to
non-consolidated subsidiaries and affiliates in the amounts of ¥4,607 million ($43,401 thousand) and ¥76 million ($716 thousand),
respectively.
The Companies have entered into various rental and lease agreements for office spaces, housing for employees and warehouses
which are generally cancellable upon a few months’ notice and also non-cancellable lease agreements for computer equipment,
telecopiers, pallets, forklifts, trucks, flexible bags and other equipment. Such rent and lease charges for the year ended March 31,
2000 amounted to ¥12,431 million ($117,108 thousand).
The aggregate annual lease expenses for the non-cancellable lease agreements for the next five years are as follows: –Year ending
March 31

Millions of yen

Thousands of
U.S.dollars

2001
2002
2003
2004
2005

¥1,741
1,233
868
755
203

$16,401
11,616
8,177
7,113
1,912

9. Shareholders’ Equity:
The Code provides that an amount equal to at least 10% of appropriations paid in cash be transferred to the legal reserve until
such reserve equals 25% of stated capital. This reserve amounted to ¥1,284 million and 1,377 million ($12,972 thousand) at March 31,
1999 and 2000, respectively. This reserve, included in retained earnings, is not available for distribution as dividends but may be
used to reduce a deficit or be transferred to stated capital.

10. Subsequent Events:
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 29, 2000
Cash dividends
Transfer to legal reserve

Millions of yen

Thousands of
U.S.dollars

¥428
43

$4,032405

21

11. Segment information
Business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 1999 and 2000 issummarized as follows:
Millions of yen

1999
Truck
transport

Warehousing

In-factory
works

Other

Total

Elimination or
Corporate Consolidated

a. Operating revenues and operating income:Customers¥89,024
Intersegment
1,738
Total operating revenues
90,762
Operating costs and expenses
88,074
Operating income¥ 2,688¥21,22562
21,287
20,575¥ 712¥15,012
1,718
16,73016,097¥ 633¥48,611
8,562
57,17356,738¥ 435¥173,872
12,080185,952
181,484¥ 4,468¥—(12,080)(12,080)(12,213)¥ 133¥173,872—
173,872
169,271¥ 4,601b. Asset, depreciation and capital expenditures:
Assets¥31,242
Depreciation
1,818
Capital expenditures
1,744¥38,891
2,146
2,991

¥7,614239
247¥45,066
3,631
3,931

¥122,813
7,834
8,913

¥27,84076
186¥150,653
7,910
9,099

Millions of yen

2000
Truck
transport

Warehousing

In-factory
works

Other

Total

Elimination or
Corporate Consolidated

a. Operating revenues and operating income:Customers¥92,086
Intersegment
2,277
Total operating revenues
94,363Operating costs and expenses
90,600Operating income¥ 3,763¥20,571
120
20,691
20,115¥ 576¥15,084
2,669
17,753
16,692¥ 1,061¥52,812
8,461
61,27360,355¥ 918¥180,553
13,527
194,080
187,762¥ 6,318¥—(13,527)(13,527)(13,589)¥62¥180,553—
180,553
174,173¥ 6,380b. Asset, depreciation and capital expenditures:
Assets¥33,532
Depreciation
1,233
Capital expenditures
1,040¥38,083
1,689
1,233

¥7,765217
113¥44,969
4,551
3,171

¥124,349
7,690
5,557

¥27,11081
152¥151,459
7,771
5,709

Thousands of U.S. dollars

2000
Truck
transport

Warehousing

In-factory
works

Other

Total

a. Operating revenues and operating income:Customers$867,508
Intersegment
21,451
Total operating revenues
888,959
Operating costs and expenses
853,509
Operating income$ 35,450$193,792
1,130
194,922
189,496$ 5,426$142,101
25,144
167,245
157,249$ 9,996$497,522
79,708577,230
568,582$ 8,648$1,700,923
127,433
1,828,356
1,768,836$ 59,520

b. Asset, depreciation and capital expenditures:
Assets$315,893
Depreciation
11,616
Capital expenditures
9,797$358,766
15,912
11,616$ 73,151
2,044
1,065

$423,636
42,87329,873$1,171,446
72,44552,35122

Elimination or
Corporate Consolidated$—(127,433)(127,433)(128,017)$
584$1,700,923—
1,700,923
1,640,819$ 60,104$ 255,393
763
1,432

$1,426,839
73,20853,783

Consolidated Subsidiaries and Affiliated Companies

Company Name

Paid-in
CapitalEquityOwnership

Location

Main Business

SENKO TRADING Co., Ltd.

¥300 million

100.0%

Tokyo

Sales of petroluem-related products anddistribution and information processing
equipment

SENKO LEASING Co., Ltd.

¥350 million

100.0%

Tokyo

General leasing

SENKO INFORMATION SYSTEM Co., Ltd.

¥60 million

100.0%

Osaka

Information processing

TOKYO SENKO AUTO MAINTENANCE Co., Ltd.

¥40 million

80.0%

Saitama

Vehicle maintenance

KANSAI SENKO AUTO MAINTENANCE Co., Ltd.

¥40 million

93.8%

Osaka

Vehicle maintenance

SENKO MOVING PLAZA Co., Ltd.

¥50 million

100.0%Tokyo

Trucking, moving services

SAPPORO SENKO TRANSPORT Co., Ltd.

¥30 million

100.0%

SapporoTrucking

TOHOKU SENKO TRANSPORT Co., Ltd.

¥30 million

73.4%

MiyagiTrucking, in-factory work

GUNMA SENKO TRANSPORT Co., Ltd.

¥90 million

100.0%

Gunma

Trucking

OMIYA SENKO TRANSPORT Co., Ltd.

¥50 million

100.0%

SaitamaTrucking, in-factory work

TOKYO SENKO TRANSPORT Co., Ltd.

¥40 million

100.0%

Chiba

Trucking, in-factory work

CHIBA SENKO TRANSPORT Co., Ltd.

¥30 million

73.4%

Chiba

Trucking, in-factory work, vehicle maintenance

FUJI SENKO TRANSPORT Co., Ltd.

¥30 million

100.0%

Shizuoka

Trucking, in-factory work

TOKAI SENKO TRANSPORT Co., Ltd.

¥30 million

100.0%

Aich

Trucking, in-factory work

SHIGA SENKO TRANSPORT Co., Ltd.

¥30 million

82.0%

Shiga

Trucking, in-factory work, vehicle maintenance

NARA SENKO TRANSPORT Co., Ltd.

¥35 million

100.0%

Nara

Trucking, in-factory work

OSAKA SENKO TRANSPORT Co., Ltd.

¥50 million

100.0%

Osaka

Trucking, in-factory work

OKAYAMA SENKO TRANSPORT Co., Ltd.

¥30 million

100.0%OkayamaTrucking, in-factory work

SANYO SENKO TRANSPORT Co., Ltd.

¥20 million

61.0%

Yamaguchi

Trucking, in-factory work

FUKUOKA SENKO TRANSPORT Co., Ltd.

¥50 million

100.0%

FukuokaTrucking

KUMAMOTO SENKO TRANSPORT Co., Ltd.

¥25 million

86.0%

Kumamoto

Trucking, in-factory work

MIYAZAKI SENKO TRANSPORT Co., Ltd.

¥90 million

100.0%

Miyazaki

Trucking, in-factory work, vehicle maintenance

SANKYO FREIGHT Co., Ltd.

¥10 million

100.0%

Hiroshima

Trucking, in-factory work

SHIKOKU REEFER TRANSPORT AND
WAREHOUSING Co., Ltd.

¥50 million

100.0%

KagawaTrucking, warehousing

SENKO LOGISTICS COMPANY, INC.

US$2 million

100.0%

USA

International freight forwarding

OSAKA KAIUN Co., Ltd.

¥20 million

30.0%

Osaka

Domestic air freight

ASICS PHYSICAL DISTRIBUTION CORPORATION¥300 million

20.0%

Hyogo

Product control, vehicle shipment agency

23

Board of Directors and Corporate Auditors (As of June 29, 2000)

Chairman and Representative Director
Eiji Baba

President and Representative Director
Hiroshi Koike

Chairman and Representative Director
Eiji Baba

Vice-president and Representative Director
Akio Tanaka

Full-time Corporate Auditors
Masahiro Hayashi
Saburo Takahashi

President and Representative Director
Hiroshi Koike

Hideo Asano
Corporate Auditor
Hideyuki Tonomura

Vice-president and Representative Director
Akio Tanaka
Managing Directors
Fujio Shudo
Yasuhisa Fukuda
Isao Kagi
Yasuyuki Kiyomiya
Directors
Kiyonori Inayama
Yoshio Ikeda
Sadayuki Wada
Michiyoshi Tsuge
Tadao Ito
Kazuo Saga
Kazuo Goto24

Corporate Data (As of March 31, 2000)

Date of Establishment:

July 1946

Paid-in Capital:¥18,295,643,751

Authorized Shares:

300,000,000

Outstanding Shares:

114,180,167

Number of Shareholders: 8,694
Stock Listing:Tokyo Stock Exchange
Osaka Securities Exchange

Transfer Agent:

The Mitsubishi Trust and Banking Corporation
11-1, Nagata-cho 2-chome, Chiyoda-ku, Tokyo 171-8508, Japan

Network:

Represents Branches
and Departments

Chubu Business Division

Kyushu Business Division

Branches:

No. 1 Sales Division
Kanto Business Division

Head Office
No. 2 Sales Division
Kansai Business Division

Sapporo, Sendai, Ibaraki, Kita Kanto, Saitama, Kashiwa, Tokyo, Kanagawa, Chiba, Shizuoka East,
Shizuoka West, Nagoya, Mie, Hokuriku, Keiji, Nara, Osaka, Okayama, Yamaguchi, Fukuoka,
Kumamoto, Nobeoka

Departments:

International Distribution, Marine Transport, Moving Operations

25

SENKO Co., Ltd.
Umeda Sky Bldg., Tower West, 1-30, Oyodonaka 1-chome, Kita-ku, Osaka 531-6115, Japan
Tel: 06-6440-5155

Fax: 06-6440-5175

URL http: //www.senko.co.jp/
Printed in Japan