ANNUALREPORT2016

For the year ended March 31, 2016

Profile

Our aim is to be a

“Logistics Information
Company.”
Established in Osaka in July 1946, Senko Co., Ltd. is an integrated distribution services company. The Company
has grown steadily over the years, listing on the First Section of the Osaka Securities Exchange in 1975 and on
the First Section of the Tokyo Stock Exchange in 1990.
As of March 31, 2016, the Senko Group had a nationwide network with 458 locations in Japan, an overseas
network with facilities in 43 locations, approximately 2,940,000 square meters of distribution center space, anda fleet of 18 owned and chartered ships. The Company engages in wide-ranging business activities centeredon trucking. Including partner companies, Senko operates more than 10,000 trucks each day. Activities also
encompass warehousing, marine transport, in-factory services, and multimodal international cargo transport.
Senko’s strength lies in supplying integrated distribution services, from distribution consulting to systemdesign and operations that closely match customer needs.
These efficient integrated distribution services have won an excellent reputation from our customers for theprovision of efficient transportation and distribution systems that support the construction of customer supply
chain management systems. These systems operate taking full advantage of information technology.
Senko will continue to leverage information technology to provide high-quality, efficient logistics solutions on a
global scale. The goal is to become a logistics information company with capabilities that go well beyond theconventional activities of logistics companies.

Contents

Consolidated Financial Highlights
A Message from the President
Outline of the Medium-Term Business Plan (April 2013 to March 2017)
Review of Operations
TopicsCorporate Governance and Compliance
Board of Directors, Corporate Auditors, and Executive Officers
Corporate Social Responsibility
Financial Review
Financial Section
25 Report of Independent Auditors
26 Consolidated Balance Sheets
28 Consolidated Statements of Income
28 Consolidated Statements of Comprehensive Income
29 Consolidated Statements of Changes in Net Assets
30 Consolidated Statements of Cash Flows
31 Notes to the Consolidated Financial Statements
51 Corporate/Stock Information
52 Domestic and Global Network / Subsidiaries
02
04
06
08
12
16
17
18
22

Cautionary Statement with
Respect to Forward-Looking
Statements
Plans and strategies concerning futurebusiness performance included in thisannual report are forward-looking
statements based not on historical facts but
on management’s assumptions and beliefs
in the light of the information currently
available to it, and thus involve a certain
element of risk and uncertainty.

Main Businesses
The retail product logistics segmentprovides logistics services forvolume retailers, department stores,
specialty stores, and other retailingbusinesses as well as for food,electric appliance, and machineryindustries.

Retail
Product
Logistics

Chemicals
Logistics

The chemicals logistics segmentprovides logistics services forresins used to make plastics andother products, and molded/
processed plastic products, as well
as for lubricants for machinery andother applications.

Number of Vehicles

Housing
Logistics

Trading &Commerce

Major activities of the housing
logistics segment include thetransport of products from thefactories of housing makers toconstruction sites and the transportof products for housing material
manufacturers.

The business of the trading &commerce segment comprises
petroleum marketing, commercial
sales, and international trading.
Operations include the sales of fuelusing petroleum cards and the salesof logistics equipment and materials,
as well as the wholesale sales ofcommodities, wrapping materials,
alcoholic beverages, and paper
products used for households.

Total Warehouse Space

4,745 2,940m

thousand2

18

Number of Vessels

Number of Employees

12,934
SENKO ANNUAL REPORT 2016 01

Consolidated Financial Highlights
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31

2016

2015

2014

2016

Millions of yen

Thousands of
U.S. dollars*1

For the year:
Operating revenues¥ 434,000¥ 398,448¥ 333,884$ 3,851,615

Operating income

17,497

13,65012,122

155,280

Net income attributable to owners of parent

8,542

7,074

6,504

75,807

Capital expenditures

17,50014,182

24,000155,307

Depreciation and amortization

9,925

8,856

7,606

88,081

Total assets

269,461

285,310

243,570

2,391,383

Net assets

100,01092,74572,303

887,558

Yen

U.S. dollars

At year end:

Per share data:
Net income

¥

60.43

¥

55.06

¥

51.89

$

0.54

Cash dividends applicable to the year

20.00

17.00

16.00

0.18

Net assets

613.71581.46539.52

5.45

Operating profit margin (%)

4.0

3.4

3.6

Net profit margin (%)

2.0

1.8

2.0

Equity ratio (%)

32.6

28.4

27.8

Return on equity (ROE) (%)

10.1

9.5

9.8

Interest coverage ratio*2 (times)

14.7

15.5

8.6

Number of employees*3 (persons)

12,934

12,455

9,341

Number of vehicles

4,745

4,530

3,352

Distribution center space (thousand m2)

2,938

2,809

2,523

Financial Ratios:*1: U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥112.68 to U.S.$1 on March 31, 2016.
*2: Interest coverage ratio = Net cash provided by operating activities / interest cost.
*3: Excluding part-timers.

02 SENKO ANNUAL REPORT 2016

Operating revenues

Operating income ( ) /Operating profit margin ()

Net income attributable toowners of parent ( ) /Net profit margin ( )(Millions of yen)
480,000(Millions of yen)
20,000(%)
4.8(Millions of yen)
10,000360,000

434,000
398,448

333,884
293,534
270,361

4.0
15,000

3.1

3.4

3.6

10,000120,000

17,497

12

13

14

3.6

7,500

12,122 13,650
2.4

8,274

15

16

0

12

13

14

Net assets ( ) /Equity ratio ( )(Millions of yen)
320,000(Millions of yen)
120,000

269,46130.3

243,594

63,274160,000

15

16

1.2

2,500

0

0

31.3
27.8
67,328

0.6

12

13

92,745

13

14

15

16

0

32.6

30

21,00072,303 28.4

13

14

15

16

10

7,000

0

0

7,606

8,856

9,925

4,404

12

13

14

15

16

Number of vehides

Distribution center space(persons)
16,000

6,000(thousand m2)
3,600

12,000

4,530

4,745

4,500

8,640 8,889

9,341

2,809
2,700

3,218 3,240 3,352

8,000

3,000

1,800

4,000

1,500

900

0

12

13

14

15

16

0

12

13

14

15

16

)

14,182

14,000

Number of employees

12,455 12,934

0

17,50014,96720

12

16

24,000100,009

30,000

12

15(Millions of yen)
28,0006,160 6,738

0

14Capital Expenditures ( ) /Depreciation and amortization(

60,00080,000

1.8

5,203

5,000

1.2

(%)
40

90,000202,847 208,095

8,542

3,479

Total assets

285,3101.8
6,504 7,074

1.3

5,000

0

240,000

3.4

2.0

2.0
1.8

9,909

240,000

(%)
2.4

0

2,938

2,523
2,247 2,211

12

13

14

15

16

SENKO ANNUAL REPORT 2016 03

A Message from the President

This year, we celebrate the Senko Group’s
100th anniversary of operations.
We will continue to aim to be a company
that earns the trust of society.

Business Environment
During Fiscal 2015
In the fiscal year under review, the Japanese economy
continued to recover gradually, with improvements incorporate performance and the employment environment.
However, the outlook for the future remained uncertain as
overseas economies slowed from the autumn and a slump
was seen in consumption, in addition to such factors as
the increased risk of a downturn in corporate earnings
due to the yen’s appreciation since early 2016.
In the logistics industry, difficult economic conditions
continued with slowing freight volume, a shortage ofdrivers and intensifying competition.
In this environment, the Senko Group sought to enhance its
competitiveness, boost profitability, and upgrade its operating
system as the priority policies for the fiscal year under review,
and worked on a number of measures in this regard.

Main Activities and Performance
During the fiscal year under review, we strengthened
our business competitiveness by opening large-scale
distribution centers in the Tohoku, Kanto, and Kansai

04 SENKO ANNUAL REPORT 2016

regions. We also worked to develop, propose and sell
new products and services.
To boost profitability, in addition to working to boost
productivity---including by increasing truck operation
efficiency and storage efficiency in distribution centers---weproceeded to revise freight charges to attain appropriate rates.
To enhance our operation system, we aimed to expand
our fleet and, in addition to actively recruiting drivers,
opened an in-house training facility to obtain drivers’
licenses for large vehicles.
As for overseas operations, in September we began
full-scale operations at the Laem Chabang Distribution
Center (Chonburi Province) near Thailand’s largest trade
port. And in June we opened a representative office in
Hanoi, Vietnam, expanding our business base in the
ASEAN region. In December, we concluded a basic
agreement with Sinotrans Air Transportation
Development Co., Ltd. (Sinotrans Air), a major Chinese
air cargo operator, to set up a joint venture.
In the fiscal year under review, in addition to actively
expanding sales, we enlarged sales volume in our trading& commerce business and made Runtec Corporation a
subsidiary in October 2014. Our consolidated operating
revenue grew to ¥434 billion (up 8.9% year on year).

Yasuhisa Fukuda
President and Representative Director

On the profit front, we saw increases in costs such as
the outsourcing costs in the distribution business andpurchase prices in the trading & commerce business, butalso a jump in revenue and a drop in fuel prices and therevision of freight charges. Accordingly, consolidated
operating income reached ¥17.5 billion, up 28.2% year on
year, consolidated ordinary income rose to ¥17.2 billion,
up 29.8% year on year, and profit attributable to owners ofparent was ¥8.5 billion, up 20.8%.

The Future Business Environment
and Our Main Activities
The economic outlook of Japan is expected to remain
unpredictable due to the postponement of capital
expenditure due to deterioration in earnings at exporters
reflecting the yen’s appreciation and concerns about aslowdown in overseas economies.
In the distribution industry, the challenging environmentis expected to continue, including intensifying competition
within the industry amid a forecast decline in freight
volume and labor shortages in human resources.
In this environment, the Senko Group will tackle thefollowing tasks during the final year of its four-year
medium-term business plan: enhancing its
competitiveness, expanding its business areas andupgrading its operating system.

Distribution of the Commemorative
Dividend for the 100th Anniversaryof Operations
While securing internal reserves necessary for futurebusiness development and management structure
reinforcement, our basic policy is to return profits toshareholders by implementing stable dividends anddividends that are linked to business results.
In accordance with this policy, the annual dividend forfiscal 2015, ended March 31, 2016 will be ¥20.00 per
share (including ¥2.00 per share of commemorative
dividend for the 70th anniversary of our foundation andthe 100th anniversary of operations).
We ask for the continued support of our stockholders as weface new challenges in the fiscal year ending March 31, 2017.
August 2016

SENKO ANNUAL REPORT 2016 05

Outline of the Medium-Term Business Plan
April 2013 to March 2017

We established a Four-Year Medium-TermBusiness Plan to March 2017 that iscurrently under implementation.
Senko celebrated the 100th anniversary of its foundation in September 2016.
The Four-Year Medium-Term Business Plan to March 2017 creates a growth strategy for the next 100 years andputs forth a corporate ideal for Senko to aim for as a logistics information company trusted both in Japan and overseas.
In all its corporate activities, Senko is implementing the practical measures it must adopt to become a company thatis trusted by all its stakeholders.

Corporate Image Targeted
A logistics information company that can be trusted upon bothin Japan and overseas

Customers and partners in Japan and overseas (collaborative companies, business partners)
Shareholders and investors in Japan and overseas
Society
Employees (full-time, part-time and casual workers) and their families
Note: A‌ logistics information company refers to a company with a good command of information, including logistics and trade
distribution, that provides the appropriate distribution and logistical services on a global scale.

Corporate Slogan
Our corporate slogan is “Moving Global” because it clearly and simply expresses the direction in which Senko should be heading
through the concepts of “go beyond logistics,” “make the world go round,” and “revolutionize business.” The slogan is shared byeach and every one of the Group’s employees as they work to meet the challenges that lie ahead.

Go beyond logistics, make the world go round, and revolutionize business.

06 SENKO ANNUAL REPORT 2016

Medium-Term Management Policies
As part of the Group’s Medium-Term Management Policy, the Company is promoting its business based on the following five principles.
1 Aiming at the provision of comprehensive and integrated services, challenging the creation of products together with expanding
the range of our businesses in distribution and in trade logistics operations.
2 Fostering a greater degree of trust among our customers, forming a high-quality and high-service structure.
3 Reinforcing our staff training and employment activities to foster and retain group human resources (including global humanresources, and in-house entrepreneurs within the Group).
4 Placing emphasis on compliance, and aiming to become a company that is in the vanguard of environmental, safety, and health issues.
5 Promoting financial policies that are based upon prioritizing the maintenance of financial soundness.

Medium-Term Business Plan Targets(FY2013-FY2016)

We set the following quantitative targets for our Medium-TermBusiness Plan and achieved the targets already in FY2015.
Aiming at operating revenues of ¥ 400 billion
Senko aims to increase sales by expanding the scope of its logistics center& trading and commerce businesses, boosting its international logistics
operations, taking on the challenge of creating products, and promoting
business partnerships and M&A activities.

(Billions of yen)

293.5

13

Aiming at operating income of ¥15 billion
Senko seeks to achieve operating income of ¥15 billion and an operating
profit margin of 3.8%.

400.0

434.0

17

16

15.0

17.5

17

16

(Initial target)(Billions of yen)

Capital investment
The core aim of our capital investment program lies in establishing new facilities
to expand our operations, and in business partnerships and M&A activities.

9.9
13(Initial target)

Medium-Term Business Policies
The present development of the Group’s business operations is predominantly focused on achieving the following five policies.
1 Expanding the operational scope of our physical distribution business.
2 Expanding the operational scope of our commerce and trading business.
3 Developing an international distribution business that prioritizes earnings.
4 Taking on the challenge of making things.
5 Promoting business partnerships and M&A.
Please see our website for more details: http://www.senko.co.jp/en/ir/vision/plan/

SENKO ANNUAL REPORT 2016 07

Review of Operations
Reporting Results of the Fiscal Year under
Review (FY2015) by Business Segment
Senko has three business segments: Distribution,
Trading & Commerce, and Others. The Distribution
segment is further divided into the following four
categories based on the types of cargo andcharacteristics of logistics services provided: Retail
Product Logistics, Housing Logistics, Chemicals
Logistics and Other Logistics.

Operatingrevenues
composition

Trading &commerce

Others 1.0%

29.8%

37.0%

Operatingrevenues

Retail productlogistics¥ 434.0
billion

Other logistics

6.5%
11.4%

14.3%

Chemicals
logistics

Housinglogistics
Distribution

08 SENKO ANNUAL REPORT 2016

Retail Product Logistics
We sought to strengthen our businesscompetitiveness by opening large-scale
distribution centers. In April 2015, we
opened the Sayama PD Center (Sayama
City, Saitama Prefecture), which connects
the Tokyo metropolitan area with the
Tohoku, Chubu, and Kansai regions. In
May, we opened the Narita Fashion
Logistics Center I (Tomisato City, Chiba
Prefecture) near Narita Airport to handle
imported brands, and in October we began
operating the Sendaiko PD Center (Sendai
City, Miyagi Prefecture) as a central hub
for the Tohoku region.
Operating revenues for the fiscal year
ended March 31, 2016 increased by 18.5%
year on year to ¥160.7 billion, mainly due toactive sales expansion and the effect of
having made Runtec Corporation a
subsidiary in the previous fiscal year.

Operatingrevenues

160.7

135.5

Up

(Billions of yen)

18.5%
15

16

62.5

62.1

Housing Logistics
We worked to expand our business areas,
identifying new needs including precutting
housing components, metal fittings andassembly, in addition to storage anddelivery functions. We also pursued
acquisition of logistics operations forcomponents related to solar power
generation and household storage
batteries, whose usage has increased inrecent years.
Operating revenues for the fiscal year
ended March 31, 2016 decreased by 0.7%
year on year to ¥62.1 billion, due to a
decline in existing cargo volumes, despite
active sales expansion such as our effort
to acquire logistics operations.

Operatingrevenues

Down(Billions of yen)

0.7%

15

16
SENKO ANNUAL REPORT 2016 09

Chemicals Logistics
In September 2015 we opened theDangerous Goods No. 2 Warehouse,
Daimon Distribution Center (Moriyama City,
Shiga Prefecture) to respond to the needfor dangerous goods storage, and in
November we opened the Mihara Asphalt
Center (Mihara City, Hiroshima Prefecture),
which conducts cargo handling, shippingand inventory management for asphalt. In
January 2016, we started operating the
Sodegaura Bulk Container Center(Sodegaura City, Chiba Prefecture), to
expand bulk container logistics, which is
our strength.
Operating revenues for the fiscal year
ended March 31, 2016 increased by 0.5%
year on year to ¥49.5 billion, largely
supported by active sales expansion andthe effect of our investment in facilities,
despite a decline in existing cargo volumes.

Other Logistics
This segment consists of logistics services
other than the retail product logistics,
housing logistics and chemicals logistics.
Operating revenues for the fiscal year
ended March 31, 2016 increased by 7.0%
year on year to ¥28.1 billion.

Operatingrevenues

Up(Billions of yen)

0.5%

Operatingrevenues(Billions of yen)

15

16

26.3

28.1

Up

7.0%

15

10 SENKO ANNUAL REPORT 2016

49.5

49.3

16

Trading & Commerce
Trade company subsidiaries sought todevelop their own private brands andexpand businesses that provide integrated
trading and logistics services leveraging
the Senko Group’s logistics functions. In
addition, the Group worked to bringlogistics operations for goods handled
in-house to streamline business.
Operating revenues for the fiscal year
ended March 31, 2016 increased by 7.3%
year on year to ¥129.5 billion. This was
mainly the result of a recovery in sales
following the slump caused by the
consumption tax hike in the previous fiscal
year, the acquisition of new customers, andthe development and sale of new products.

Operatingrevenues

129.5

120.7

Up

(Billions of yen)

7.3%

OthersThis segment consists of activities other thanthe operations of logistics and trading &commerce business segments, which include
outsourced data processing services, vehicle
maintenance and repair, and insurance
agency services. Operating revenues for the
fiscal year ended March 31, 2016 increased by
0.3% year on year to ¥4.1 billion.

15

16

4.1

4.1

Operatingrevenues(Billions of yen)

Up

0.3%

15

16

SENKO ANNUAL REPORT 2016 11

01
Supporting SCM Overall
T O P I C S

with Advanced
Distribution Centers

We are opening advanced distribution centers (PD centers) that
support supply chain management (SCM) overall, withcombined functions such as storage, delivery, inspection, orderprocessing, and information processing.

Main Distribution Centers Opened since April 2015

Sayama PD Center

Sendaiko PD Center
Location

Location

Sayama City,
Saitama Prefecture

Sendai City,
Miyagi Prefecture

Floor area

Floor area

21,500 m2

34,200 m2

Start of operations

Start of operations

April 2105

October 2015

This center offers very easy access to the interchange of theMetropolitan Inter-City Expressway, an excellent location for alogistics hub that connects the Kansai, Chubu and Tohoku
regions and bypasses the Tokyo metropolitan area. It is an
all-weather PD center with a broad, 13-m canopy.

This center is located in the Port of Sendai (Sendaiko), aninternational trade port with very convenient access near the
port’s interchange. This location makes it the central base of
the broad network covering the Tohoku region. The second
floor can hold approximately 1,300 people as an emergency
evacuation facility in the event of a tsunami.

Narita Fashion Logistics Center I & II

Laem Chabang Distribution Center

Center I

Center II

Location

Location

Tomisato City,
Chiba Prefecture

Chonburi Province,
Thailand

Floor area

Floor area

36,000 m2

21,000 m2

Start of operations

Start of operations

May 2015

September 2015

Location

Tomisato City,
Chiba Prefecture
Floor area

40,900 m2
Start of operations

May 2016

This is a large-scale fashion distribution center operated by
Tokyo Nohin Daiko Co., Ltd. It conducts inspection, needle
checks, and attachment of washing tags and so on for apparelproducts, primarily brands imported through Narita Airport.

12 SENKO ANNUAL REPORT 2016

This center opened near Laem Chabang Port, Thailand’s
largest trade port, to strengthen logistics in the ASEAN region.
It provides logistics services, primarily storage, for import andexport cargo.

We Are Proceeding to Open New Distribution Centers
and Expand the Warehouse Area
We are working tostrengthen the distribution
center business. At theend of fiscal 2005, ourtotal warehouse area was
1,270,000 m2 and over the
next decade this rose by
230%, bringing the total to2,940,000 m2 at the end of
fiscal 2015.

● Warehouse Area
2,940

(Thousand m2)
3,000

2,000

230% in

1,270
1,000

0

10 years

05

06

07

08

09

10

11

12

13

14

15 (FY)We Are Strengthening the Functions of Distribution
Centers for a Range of Industries● For the fashion industry
We handle a number of
products such as clothing,shoes, and accessories.
Moreover, we do not just store
them but also check for needles
and carry out pressing, repair
defective products, attachwashing tags, and even attach
price tags. Recently, we havealso been undertaking logistics
for Internet retailers.

● For the medical and pharmaceutical industries
At distribution centers for the
medical and pharmaceuticalindustries, we respond to
customers' needs for high-quality
logistics with insect- and dustproofed facilities as well as seismic
isolation, in response to the need fora Business Continuity Plan (BCP) andapproval and authorization under the
Pharmaceutical and Medical Device
Act (the revised Pharmaceutical
Affairs Law) and others.

● For the food industry
We handle refrigerated andfrozen food goods. Our facilities
are compatible with the highlevels of safety that are requiredin food logistics, maintaining
product quality in strictly
managed refrigerators andfreezers. In addition, we use ourown freezer vehicles, raising
the quality of transport.

● For the housing industry
The housing materials made by
a number of manufacturers arecollected at our housingmaterial center, divided byresidence and delivered to eachconstruction site. Not only do
we raise logistics efficiency bycollecting materials together,
we also process and assemble
materials.

SENKO ANNUAL REPORT 2016 13

02

T O P I C S

Transfer of our distribution
centers to a private REIT

In September 2015, we transferred distribution centers to Senko
Private REIT Inc., a private REIT managed by our wholly owned
subsidiary Senko Asset Management Co., Ltd. At the same time,
we started renting the centers from the REIT.
A real estate investment trust (REIT) purchases real estatewith funds raised from investors and distributes profit fromthe rent to the investors.
By transferring our distribution centers, we have taken theassets off the balance sheet and secured financial soundness.
In addition, the funds from the sale of property will be forfurther investment in facilities, leading to the expansion andgrowth of the distribution center business.

Senko Co., Ltd.

Senko AssetManagement Co., Ltd.
Rent
distribution
centers● Equity ratio (reference)
March 31, 2015

March 31, 2016

Increase (decrease)

28.4%

32.6%

+4.2 pt

Wholly owned

Transfer
distribution
centers

Managementof REIT

Private REIT

Senko Private REIT Inc.

● Distribution Centers Transferred to the Private REIT

Sapporo PD Center No. 2 Warehouse

03

T O P I C S

Noda No. 1 PD Center

Nishikobe PD Center

Welcoming the Logistics Subsidiary of
Onward Holdings Co., Ltd. into the GroupOn April 15, 2016, we acquired 100% of the shares of
ACROSS TRANSPORT Corp., a logistics subsidiary of
Onward Holdings Co., Ltd. that handles fashion logistics,
and welcomed it into the Group as a subsidiary. Together
with our Group’s fashion logistics companies, such as
Tokyo Nohin Daiko Co., Ltd., we will cooperate on delivery
and effectively use each other’s bases, working to raise
the quality of logistics and business efficiency.

14 SENKO ANNUAL REPORT 2016

Urawa PD Center

04

T O P I C S

Building a Cold and Freezer
Logistics Network in China

In December 2015, our company and Runtec Corporation
concluded a basic agreement with Sinotrans Air
Transportation Development Co., Ltd. (Sinotrans Air), a
Chinese government-run company that handles the airtransport of freight, to set up a joint venture in China tocarry out the cold and freezer logistics business in China.
In China, the demand for cold and freezer logistics is
expanding rapidly, and the joint company will use ouron-site capabilities, Runtec’s cold and freezer logistics
technology and expertise, and Sinotrans Air’s land andbases to build a cold and freezer logistics network in
China. As a first step, we plan to establish a cold andfreezer distribution center in Shanghai in the fall of fiscal
2017. Thereafter, we aim to establish a total of eight coldand freezer distribution centers in major Chinese cities by
fiscal 2024.

BeijingNanjingShanghaiChengduChongqing

Wuhan

Hangzhou

Guangzhou

05

T O P I C S

Transition to a Holding Company
System from Fiscal 2017

The Senko Group will move to a holding company system on
April 1, 2017.
The purpose of the transition is to strengthen corporate
governance, clarify the responsibilities and authorities of Group
companies, speed up decision-making, and thereby further
strengthen the Group structure and enhance corporate value.
In concrete terms, the pure holding company, Senko Group
Holdings Co., Ltd., will devise strategy, allocate management
resources, develop new businesses, and handle M&A activity
from a medium-to long-term perspective. The operatingcompanies will respond swiftly to changes in the businessenvironment and seek growth in their own business areas.
With regard to the transition to a holding company
system, it is necessary to hold discussions with the labor
union, and permits and approvals from the government andcompetent public agencies must be obtained.

● New Structure(plan)

Senko Group
Holdings

Senko,
Tokyo Nohin Daiko,
Runtec, etc.
Senko Trading,
AST, Smile, etc.

Senko Information
Systems,
Senko BusinessSupport, etc.

SENKO ANNUAL REPORT 2016 15

Corporate Governance and ComplianceCorporate Governance Philosophy and Systems
The Senko Group, as a business involved in logistics work of a highly public nature, makes every effort to ensure that its corporate
activities comply thoroughly with laws, based on awareness that proper corporate governance is the foundation of our existence as abusiness and is regarded as a high-priority managerial issue.

General Meeting of Shareholders
Appointment / Dismissal

Board ofCorporate Auditors

ReportAccounting Auditors

Appointment / Dismissal

Appointment / Dismissal

Audit

DialogueAccounting
Audit

Audit

ReportReportBoard of Directors
Appointment /Supervision

Assist /ReportPresident andRepresentative Director
Auditing Dept.

ReportInstruct

ReportLegal Counsel

Report

Audit

ReportAdviceCorporate Management Committee
Members of the Board of Directors /Executive Officers / Corporate Auditors

CSR Promotion Committee
Members of the Board of Directors /Corporate Auditors /Chairmen of Other Committees, etc.
Supervise

Compliance Committee
Corporate Ethics Committee
Risk Management Committee
Environmental Promotion Committee
Social Contribution Promotion Committee
Health and Safety Committee

Executive Officers / Departments /Branches / Group Companies

Internal Controls Committee

Compliance-Based Management

Reinforcing Risk Management System

The Senko Group has established the Senko Standards ofBusiness Conduct, which prescribe all items that executives andemployees must observe regarding every aspect of their job
activities based on a thorough understanding of the Group’ssocial obligations. Committees have been established to ensurethat everyone fully understands these standards and to
implement and upgrade these standards. In addition, there is a
Business Ethics Hotline.

We have built a risk management system for various risks that
may arise in the course of our business operations. In the eventof an emergency, this system prioritizes human life, limits
property damage (corporate losses), enables swift resumption ofbusiness, maintains social trust, and implements measures froma viewpoint that will support and contribute to local society.
To execute proper compliance (legal adherence) and social
responsibility, we worked to further minimize risks by creating
and disseminating our Risk Manual and by implementing
periodic training programs to truck drivers on the safe
transport of hazardous materials. We also operate a logistics
information back-up center to prepare for major disasters.

16 SENKO ANNUAL REPORT 2016

Board of Directors, Corporate Auditors, andExecutive Officers

President andRepresentative Director

Executive Vice President
and Representative Director

Yasuhisa Fukuda

Masami Fujimori

President andRepresentative Director

Yasuhisa Fukuda

Executive Vice President andRepresentative Director

Masami Fujimori

Executive Vice President andDirector

Takeyo Teduka

Directors andSenior Managing Executive Officers

Kengo Tanaka
Hiroshi Yoneji

Directors andManaging Executive Officers

Yoshihiro Kawase
Yoshiki Kanaga
Akira Taniguchi
Noburoh Sasaki

Director

Kazuhiro Yamanaka

Outside Directors

Hiroko Ameno
Fumitaka Ojima

Full-Time Corporate Auditors

Takashi Sawada
Keiji Matsubara
Takanobu Ishioka
Keiichiro Yoshimoto

Senior Managing
Executive Officers

Kazumasa Murakami
Tomoyuki Osako

Managing Executive Officer

Kenichi Shiraki

Executive Officers

Masami Tada
Yoshihito Koresawa
Yukio Murozaki
Kiyoshi Rurigaki
Kanji Kawasaki
Tatsuhiro Maeda
Takeo Ikebe
Seiji Kono
Noboru Ogoshi
Shinichi Murao
Takeshi Matsui
Masanobu Uenaka
Toshihiro Kawai
Kouji Fujita
Nobuharu Shinohara
Hiroyuki Takamizawa
Yoshihiro Furuyashiki
Tomohiko Ito
Hiroyuki Ito
Shigeru Ono(As of June 28, 2016)

SENKO ANNUAL REPORT 2016 17

CSR

Corporate Social Responsibility
The transport industry, to which Senko’s core business belongs, has a highly public mission. It is essential
to its continued viability as a company that Senko contribute to society through the practice of its corebusiness and fulfill its public responsibilities.
In the Medium-Term Business Plan that began in the fiscal year ended March 31, 2014, one of the goals is
placing emphasis on compliance, and aiming to become a company that is in the vanguard ofenvironmental, safety, and health issues, in order to be recognized as a logistics information company thatcan be trusted both in Japan and overseas. We conduct CSR activities as one way to achieve this goal.
● Stakeholder Relationships in Senko´s BusinessBusiness
partners andvendors• Proper distribution of profits
Shareholders• Transparency in management• Proper disclosure of information• Services– High quality– Low cost
– Efficiency– Environmental awareness– Safety• Partnerships• Proper information disclosure

Transport anddelivery customers

Cooperative companies
and procurement sources

Senko

Customers• Partnership• Environmental awareness

Employees

Business Activities• Traffic safety• Environmental awarenessRegional• Regional exchange
communities• Social contribution• Proper disclosure of information

Government• Maintaining safety andhealth in the workplace• Nurturing personnel• Fairness in employment• Legal compliance• Traffic safety• Environmental awareness

Reinforcing Our CSR Initiatives
The Senko Group views regulatory compliance, environmental responsibility, and safety consciousness as the core elements ofmanaging our business in a socially responsible way in order to create a corporate culture that allows us to gain the trust of all of our
stakeholders. A high level of awareness among all of our employees will allow us to contribute to society through our business activities.

The Environment

SafetyHealthWe are aware of the critical importance ofconducting environmentally responsible
logistics operations with respect to protecting
the environment. Dedicated to green logistics,
we are taking actions to cut CO2 emissions
and conserve energy and have establishednumerical targets. To become a highly
advanced environmental organization, we are
implementing our Phase V Environmental
Master Plan.

To promote safety and achieve accident-freeworkplaces, we have established targets for
reducing vehicle accidents and workplace
accidents. We use a PDCA cycle for safety
management to assess every source of risk in
our operations.

We are committed to maintaining amanagement framework that reduces risks
involving health. We improve workplaces toprevent health problems, encourage
individuals to use self-care and othermeasures to lead a healthy life, maintain astaff of nurses and industrial doctors, andtake other actions to provide health-related
support for employees.

18 SENKO ANNUAL REPORT 2016

CSR

Corporate Social Responsibility

We Are Strengthening
Eco-Drive (Energy-Conserving Driving Techniques)
and Green Logistics Proposals
As a company deeply involved in logistics, the Senko Group is working to
cut its CO2 emissions by using eco-drive systems. Through proposals forgreen logistics, we are helping to reduce our customers’ environment load.

Measures to Reduce Our Environmental Impact
The Senko Group’s goal is to cut the environmental impact associated with business activities to the absolute minimum. To achieve
this goal, we determine the quantity of resources and energy used (the input) and the quantity of CO2 and waste materials we
produce (the output).

INPUT
Diesel oil
10,619 kℓ
Heavy oil

9,010 kℓElectricity

64,650,000 kWh● CO2 Emissions Composition by Causes
Others (city gas,
CNG, Kerosene)

286 t-CO2 1%

2,531 t-CO2 3%

25,379 t-CO2

LP gasOUTPUT
CO2 emissions
90,052 t-CO2
Note: The CO2 emission coefficients are the revised
and publicly announced values as of December 27,
2013, based on the “Order for Enforcement of the Act
on Promotion of Global Warming Countermeasures”
and the “Ministerial Order Concerning the Calculationof the Greenhouse Gas Emissions in Conjunction with
the Business Activities of Specified Emitters.”

Automobile(diesel oil)

676 t-CO2 1%
Gasoline

37%

Total CO2
emissions

28%

12%

33,668 t-CO2

2

Shipping(A heavy oil)

90,052 t-CO2

Offices andwarehouses,
etc. (electricity)

Lift (diesel oil)
2% 2,071
t-CO

16%

14,689 t-CO2
Shipping(C heavy oil)

10,752 t-CO2

We Continue to Make Transport More Environmentally
Friendly and Aim to Achieve 100 Green Logistics Contracts
With its expertise in green logistics, theSenko Group actively proposes modal shifts
in transport, such as to railway forwarding
or marine transport, and improvements inthe efficiency of logistics. This resulted in a
reduction of 4,313t of CO2 for fiscal 2015,
ended March 31, 2016. Green logistics does
not just support the customer’s environment
load reduction efforts, it also helps toresolve the issue of shortage of longdistance drivers, and it has won highevaluations from numerous quarters.

● Number of green logistics contracts and reduction of CO2(t-CO2)5,000(contracts)

4,313

Volume of CO2 reduction
Number of contracts

4,000

150
120

2,829

3,000

90

1,711
1,285

2,000
1,000

34

27

0

12

13

87

104

60
30

14

15 (FY)

0

SENKO ANNUAL REPORT 2016 19

W

ith Practical Training,
We Inculcate Senko Standard Practices
throughout the Overall Senko GroupTo inculcate a safety-centric conscience among on-site workers, we are working
on even higher-level safety measures. In particular, in fiscal 2015 we strengthened
training to foresee danger using images and training for a number of frequent
accident situations. We are working to raise the skills and consciousness of safetyof each and every driver with realistic practice and training.

We Undertook Skills Training
Sessions for a Range ofFrequent Accident Situations

We select situations where accidents occur frequently and holdregional training in methods to prevent them. In fiscal 2015, we
carried out training on methods to prevent accidents inintersections and accidents when backing up a forklift trucks.

For Drivers

For Forklift Trucks Operators

Aiming for zero collisions and rear-end collisions inintersections, we madeAiming for zero collisions when backing up a forklift
truck and zero accidents from falling cargo,

we undertook training to“defensive driving”
mandatory.

prevent accidents
when backing up
a forklift truck.

Instruction in “defensive driving,” to prepare for people who
suddenly enter an intersection

Instruction in points of caution when backing up a reach-type
forklift truck

20 SENKO ANNUAL REPORT 2016

Corporate Social Responsibility

CSR

Taking Coexistence with Society Seriously,
Senko Aims to Be a “Healthy Company”
Employees are the foundation of a company. We put a great deal of effort intocreating a workplace where each and every employee can be healthy and carryout their work with a feeling of satisfaction. In addition, as a way to contribute toregional society, we are continuing activities to convey the knowledge andexpertise on safety that we have developed in the logistics business. Each Group
company is implementing a number of initiatives in this regard.

HealthWe Are Working to Improve
Employees' Health and Have
Stationed Sixteen Nurses
around the Country

Diversity

We Are Promoting the
Employment of Persons
with Disabilities andEmploy More People with
Disabilities Each Year
Fiscal 2015 employment rateof persons with disabilities

Traffic Safety Classes
for Kids Held at 12
Places Nationwide

The Senko Group seeks toemploy people withdisabilities, such as at Senko
School Farm Tottori Co., Ltd.
We will continue to create anenvironment and system
where every person canwork easily.

3.14%(a 0.11% increase year on year)

Regional Social Contribution

To support our employees'
health, we have stationed 16
nurses (occupational healthnurses and nurses) in nine
areas around the country.
These nurses give solid
health advice founded on
specialized knowledge.

CSR Ranking:

17th

Note: ‌From Toyo Keizai Inc., “2016 Directory of CSR Corporations”
Ranking by employment rate of people with disabilities

We have been holding Traffic
Safety Classes for Kids since fiscal
2006 so that children can learn
traffic safety and protect
themselves from traffic accidents.
In fiscal 2015, a total of 1,083
children and their guardians took
part in 12 places throughout Japanand enjoyed learning with games
and storytelling with pictures.

SENKO ANNUAL REPORT 2016 21

Financial Review
Performancerise in costs, including rising outsourcing costs in the distribution
business and purchase prices in the trading & commercebusiness. Net income attributable to owners of parent increased
to ¥8,542 million, up 20.8% year on year.

Consolidated operating revenues for the fiscal year ended
March 31, 2016 increased 8.9% year on year to ¥434,000 million
due to aggressive expansion of sales in addition to rising sales
volume in the trading & commerce business, and the effect ofRuntec Corporation becoming a consolidated subsidiary of theCompany in October 2014 on increasing revenues.
On the profit front, consolidated operating income grew to¥17,497 million, up 28.2% year on year, while consolidated ordinary
income rose to ¥17,178 million, up 29.8% year on year. Profits
increased due to a jump in revenues in addition to the effect froma drop in fuel prices and the revision of freight charges despite a

Consolidated Operating Revenues
by Segment
Business segment performance for the fiscal year ended
March 31, 2016 was as follows:
Billions of yen

For the fiscal years ended March 31

2016

2015

Operatingrevenues

Component
ratio (%)

Operatingrevenues

Component
ratio (%)

Difference

Growth rate(%)

Distribution¥ 300.4

69.2¥ 273.6

68.7¥ 26.89.8Retail product logistics

160.7

37.0

135.5

34.0

25.1

18.5

Housing logistics

62.1

14.3

62.5

15.7

(0.4)

(0.7)

Chemicals logistics

49.5

11.4

49.3

12.4

0.3

0.5

Other logistics

28.1

6.5

26.3

6.6

1.8

7.0

Trading & commerce

129.5

29.8

120.7

30.3

8.8

7.3

Others

4.1

1.0

4.1

1.0

0

0.3

Total

¥ 434.0

100.0¥ 398.4

100.0¥ 35.68.9

Net income attributable toowners of parent

Operating revenues

Operating income(Millions of yen)
500,000(Millions of yen)

(Millions of yen)

20,00010,000400,000

16,0008,000

300,000

12,0006,000

200,000

8,000

4,000

100,000

4,000

2,000

0

0

0

12

13

22 SENKO ANNUAL REPORT 2016

14

15

16

12

13

14

15

16

12

13

14

15

16

Financial Position

Distribution
Operating revenues for the fiscal year under review grew 9.8%
year on year to ¥300,421 million in this segment. This was theresult of higher revenues in the retail product logistics
business, due to the effect from making Runtec Corporation a
subsidiary, and the receipt of new orders for distribution
operations, including those from a major drug store. In the
housing logistics business and the chemicals logistics
business, revenues were flat due to a decline in existing
volumes despite aggressive sales expansion.

AssetsTotal assets as of March 31, 2016 were ¥269,461 million, ¥15,849
million lower than at the end of the previous fiscal year.
Current assets amounted to ¥93,380 million, down ¥4,868
million from the end of the previous fiscal year. This mainlyreflected a decrease of ¥7,207 million in cash and deposits
despite increases of ¥1,506 million in notes and operating
accounts receivable and ¥487 million in merchandise andfinished goods.
Non-current assets totaled ¥175,971 million, down ¥11,089
million from the end of the previous fiscal year. This was due toa decrease in property, plant and equipment of ¥13,087 million
as a result of transfers of four distribution centers to theprivate REIT, despite an increase in investments and otherassets of ¥1,759 million.

Trading & Commerce
Operating revenues increased 7.3% year on year to ¥129,469
million. This was mainly the result of a recovery in sales
following the slump caused by the consumption tax hike in theprevious fiscal year, the acquisition of new customers, and thedevelopment and sale of new products.

OthersLiabilities

In this segment, operating revenues increased 0.3% year on yearto ¥4,110 million.

Liabilities as of March 31, 2016 decreased ¥23,114 million fromthe end of the previous fiscal year to ¥169,451 million.
Current liabilities totaled ¥85,647 million, down ¥6,906 million
from the end of the previous fiscal year. This was mainly due toa decrease of ¥10,847 million in short-term loans payable, eventhough current portion of bonds increased by ¥4,980 million.
Non-current liabilities totaled ¥83,804 million, down ¥16,207
million from the end of the previous fiscal year. This was due toOperating income ( )/net income to operating
revenues ( )Net income per share

Cash dividends applicable tothe year per share

(%)
5.0

(Yen)

(Yen)

75

24

4.0

60

3.0

45

18

12
2.0

30

1.0

15

0

0

6

12

13

14

15

16

0

12

13

14

15

16

12

13

14

15

16

SENKO ANNUAL REPORT 2016 23

expenditures are expected to increase ¥260 million (1.5%), to¥17,240 million, due to planned opening of large-scale
distribution centers mainly in the Kanto region.
Depreciation increased ¥1,069 million (12.1%), to ¥9,925
million, compared with the previous fiscal year, and is
expected to rise ¥169 million (1.7%), to ¥10,094 million, in thefiscal year ending March 31, 2017.

decreases in bonds payable of ¥5,000 million, convertible bondtype bonds with subscription rights to shares of ¥1,831 million,
long-term loans payable of ¥6,027 million, and net defined
benefit liability of ¥1,760 million.

Net Assets
Net assets as of March 31, 2016 rose ¥7,265 million from theend of the previous year to ¥100,010 million. This mainlyreflected increases of ¥913 million in capital stock as a resultof the conversion to shares of convertible bond-type bonds
with subscription rights to shares, ¥923 million in capitalsurplus, ¥6,168 million in retained earnings, and ¥506 million in
non-controlling interests, despite a decrease of ¥980 million inremeasurements of defined benefit plans. The equity ratio
increased by 4.2 percentage points to 32.6% from the end of
the previous fiscal year.

Cash Flows
Cash and cash equivalents at end of year decreased by ¥7,711
million year on year to ¥17,765 million.
Net cash provided by operating activities amounted to¥16,149 million. This was mainly due to income before income
taxes of ¥16,416 million and depreciation and amortization of¥9,925 million, despite decreases of ¥1,761 million in the net
defined benefit liability and ¥1,779 million in accrued
consumption taxes, and interest expenses paid of ¥1,096
million and income taxes paid of ¥5,763 million.
Net cash used in investing activities totaled ¥2,288 million.
This was mainly due to the purchases of fixed assets of ¥17,995
million and purchases of non-consolidated subsidiaries of¥4,579 million, despite proceeds from sales of fixed assets of¥21,728 million.
Net cash used in financing activities totaled ¥21,492 million.
This was mainly due to a decrease in net short-term loans of¥12,800 million, repayment of long-term debt of ¥9,645 million,
repayments of finance lease obligations of ¥2,116 million, anddividends paid of ¥2,571 million, despite proceeds from longterm debt of ¥5,780 million.

Capital Expenditures andDepreciation
Capital expenditures in the fiscal year under review increased¥3,318 million (23.4%), to ¥17,500 million, compared with theprevious fiscal year. The Company opened large-scale
distribution centers in the Tohoku, Kanto and Kansai regions in
the fiscal year under review. As a result, the total warehouse
space as of March 31, 2016 expanded by 129,000 m2 from theend of the previous year to 2,938,000 m2.
In the fiscal year ending March 31, 2017, capital

Total assets

Net assets ( ) /Equity ratio ( )(Millions of yen)
300,000(Millions of yen)

(%)

(%)

120,000

40

12

90,00030

960,00020

630,000

10

3

0

0

ROE (

240,000) / ROA ()

180,000

120,000

60,000

0

0

12

13

24 SENKO ANNUAL REPORT 2016

14

15

16

12

13

14

15

16

12

13

14

15

16

Report of Independent Auditors

SENKO ANNUAL REPORT 2016 25

Consolidated Balance Sheets
SENKO Co., Ltd. and Consolidated Subsidiaries
March 31, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

¥ 17,765¥ 25,476$ 157,659

ASSETS
Current assets:
Cash and cash equivalents
Trade accounts and notes receivable–
Non-consolidated subsidiaries
OthersLess: allowance for doubtful accounts

4

11

36

58,10456,591

515,655

(29)

(43)

(257)

Inventories

7,507

7,113

66,622

Deferred tax asset (Note 15)

2,583

2,516

22,923

Prepaid expenses and other current assets

7,446

6,584

66,081

93,38098,248

828,719

Investments in and long-term loans receivable to non-consolidated subsidiaries

9,031

4,188

80,147

Investment securities (Notes 6 and 11)

6,033

6,987

53,541

Total current assets

245,205

257,853

2,176,118

Less: accumulated depreciation(108,481)(108,042)(962,735)

Net property and equipment

136,724

149,811

1,213,383

Long-term deferred tax assets (Note 15)

2,553

2,735

22,657

Other assets

21,631

23,341

191,968

109

–

968

109

–

968

¥ 269,461¥ 285,310$ 2,391,383

Property and equipment, at cost (Notes 8 and 11)

Deferred assets:
Business commencement expenses
Total deferred assets

Total assets
See the accompanying notes to the consolidated financial statements.

26 SENKO ANNUAL REPORT 2016

Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans (Note 9)

7,530¥ 20,540$ 66,826

Current portion of long-term debt (Note 9)¥15,858

8,716

140,735

Lease obligations

1,936

1,837

17,181

Trade accounts and notes payable–
Non-consolidated subsidiaries
Others
Accrued expenses

44

68

390

38,68337,922

343,300

8,301

8,007

73,669Accrued income taxes

3,220

3,415

28,577

Other current liabilities

10,075

12,04889,41385,64792,553760,091

Long-term debt, less current portion (Note 9)

67,98180,840603,310

Lease obligations

3,591

3,419

31,869Net defined benefit liabilities (Note 10)

7,621

9,382

67,634

Other long-term liabilities

4,611

6,371

40,921

24,01223,099213,099

Capital surplus

22,83821,915

202,680

Retained earnings

42,84536,677

380,236(943)(1,183)(8,369)88,75280,508787,646
12,859Total current liabilities

Contingent liabilities (Note 12)
Net assets (Note 13):
Shareholders’ equity
Common stock:
Authorized–294,999,000 shares
Issued–144,834,771 shares in 2016 and 141,927,426 shares in 2015

Less: Treasury stock, at cost–1,907,546 shares in 2016 and 2,577,118 shares in 2015
Total Shareholders’ equity
Accumulated other comprehensive income:Net unrealized holdings gain on securities

1,449

1,820

Loss on deferred hedges

(92)

(4)

(816)

Translation adjustments

428

544

3,798

(2,821)(1,840)(25,035)(1,036)520(9,194)Remeasurements of defined benefit plans
Total accumulated other comprehensive income:Stock acquisition rights (Note 14)

360

289

3,195

11,934

11,428105,911

Total net assets

100,01092,745887,558

Total liabilities and net assets¥ 269,461¥ 285,310$ 2,391,383

Non-controlling interests

See the accompanying notes to the consolidated financial statements.

SENKO ANNUAL REPORT 2016 27

Consolidated Statements of Income
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

2016

2015

2014

2016

¥ 434,000¥ 398,448¥ 333,884$ 3,851,615

386,32130,182357,431
27,367

299,040
22,722

3,428,479
267,856

416,503384,798

321,7623,696,335

17,497

13,65012,122

155,280

293(1,102)(272)

303(1,213)314

262(1,243)202

2,600(9,780)(2,414)(1,081)

(596)

(779)

(9,594)

Income before income taxes

16,416

13,054

11,343

145,686

Income taxes (Note 15):
Current
Deferred

5,528
638

4,466
958

4,315
335

49,059
5,662

6,166

5,424

4,650

54,721

Net income

10,250

7,630

6,693

90,965

Net income attributable to non-controlling interests(1,708)

(556)

(189)

(15,158)

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

Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Others, net

Net income attributable to owners of parent

¥

8,542

¥

7,074

¥

6,504

¥

60.43
56.32
20.00

¥

55.06
50.41
17.00

¥

51.89
45.17
16.00

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

Yen

75,807
U.S. dollars

$

0.54
0.50
0.18

See the accompanying notes to the consolidated financial statements.

Consolidated Statements of Comprehensive Income
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

2016

2015

2014

2016

¥ 10,250¥ 7,630¥ 6,693$ 90,965

Other comprehensive income (Note 4):
Net unrealized holdings gain on securities
Gain (loss) on deferred hedges
Translation adjustments
Remeasurements of defined benefit plans

(353)
(95)
(153)
(1,019)

1,258
8
257
652

70
(4)
286
–

(3,132)(843)(1,358)(9,043)

Total other comprehensive income(1,620)

2,175

352

(14,376)

Comprehensive income¥ 8,630¥ 9,805¥ 7,045$ 76,589

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥ 7,088¥ 1,542¥ 9,060¥ 745¥ 6,743¥ 302$ 62,904$ 13,685

Net income

See the accompanying notes to the consolidated financial statements.

28 SENKO ANNUAL REPORT 2016

Consolidated Statements of Changes in Net Assets
SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2016, 2015 and 2014
Thousands

Balance at March 31, 2013

Millions of yen

Number ofshares ofcommonstock issued

Commonstock

CapitalsurplusRetainedearnings

Treasurystock(at cost)

128,989¥ 20,521¥ 18,782¥ 26,469¥ (1,353)

Net
Remeasurements
Stock
Loss
unrealized
Translationof definedacquisition
on deferredholdings gain
adjustments
benefit plansrightshedgeson securities

¥ 674

¥ (5)

¥ 52

¥

–

¥ 196

Noncontrollinginterests

Total net
assets¥ 1,992 ¥ 67,328

Net income attributable to owners of parent

–

–

–

6,504

–

–

–

–

–

–

–

6,504

Cash dividends

–

–

–

(1,902)

–

–

–

–

–

–

–

(1,902)

Purchases of treasury stock

–

–

560

–

(567)

–

–

–

–

–

–

(7)

Retirement of treasury stock

–

–

(5)

–

387

–

–

–

–

–

–

382

Adjustment of retained earnings for
newly consolidated subsidiaries

–

–

–

(6)

–

–

–

–

–

–

–

(6)

Other changes

–

–

–

–

–

65

(4)

178

(2,530)

40

2,255

4

128,989¥ 20,521¥ 19,337¥ 31,065¥ (1,533)

¥ 739

¥ (9)

¥ 230

¥ (2,530)

¥ 236

–

–

–

530

–

–

–

–

–

–

128,989¥ 20,521¥ 19,337¥ 31,595¥ (1,533)

¥ 739

¥ (9)

¥ 230

¥ (2,530)¥ 236

Balance at March 31, 2014
Cumulative effects of changes inaccounting policies
Restated balance
Net income attributable to owners of parent
Conversion of convertible bonds¥ 4,247 ¥ 72,303–

530¥ 4,247 ¥ 72,833

–

–

–

7,074

–

–

–

–

–

–

–

7,074

12,938

2,578

2,578

–

–

–

–

–

–

–

–

5,156
(2,064)

Cash dividends

–

–

–

(2,064)

–

–

–

–

–

–

–

Purchases of treasury stock

–

–

–

–

(10)

–

–

–

–

–

–

(10)

Retirement of treasury stock

–

–

–

–

360

–

–

–

–

–

–

360

Adjustment of retained earnings for
newly consolidated subsidiaries

–

–

–

72

–

–

–

–

–

–

–

72

Other changes

–

–

–

–

–

1,081

5

314

690

53

7,181

9,324

141,927¥ 23,099¥ 21,915¥ 36,677¥ (1,183)¥ 1,820

¥ (4)

¥ 544

¥ (1,840)¥ 289

Balance at March 31, 2015
Net income attributable to owners of parent
Conversion of convertible bonds¥ 11,428 ¥ 92,745

–

–

–

8,542

–

–

–

–

–

–

–

8,542

2,907

913

913

–

–

–

–

–

–

–

–

1,826
(2,571)

Cash dividends

–

–

–

(2,571)

–

–

–

–

–

–

–

Purchases of treasury stock

–

–

–

–

(10)

–

–

–

–

–

–

(10)

Retirement of treasury stock

–

–

–

–

250

–

–

–

–

–

–

250

Adjustment of retained earnings for
newly consolidated subsidiaries

–

–

–

197

–

–

–

–

–

–

–

197

Change in treasury shares ofparent arising from transactions
with non-controlling shareholders

–

–

10

–

–

–

–

–

–

–

–

10

Other changes

–

–

–

–

–

(371)

(88)

(116)

(981)

71

506

(979)

144,834¥ 24,012¥ 22,838¥ 42,845¥ (943)¥ 1,449¥ (92)¥ 428¥ (2,821)¥ 360

Balance at March 31, 2016

¥ 11,934 ¥ 100,010
Thousand of U.S. dollars

Retainedearnings

Treasurystock(at cost)Net
unrealized
holdings gain
on securities

Loss ondeferredhedgesTranslation
adjustments$ 204,995 $ 194,488 $ 325,496$ (10,500)$ 16,151$ (36)$ 4,827

Commonstock

Balance at March 31, 2015
Net income attributable to owners of parent
Conversion of convertible bonds

CapitalsurplusRemeasurements
Stockof definedacquisition
benefit plansrights$ (16,330)

Noncontrollinginterests

Total net
assets$ 2,564 $ 101,428 $ 823,083––

75,807

–

–

–

–

–

–

–

75,807

8,104

8,104

–

–

–

–

–

–

–

–

16,208(22,816)

Cash dividends––(22,816)

–

–

–

–

–

–

–

Purchases of treasury stock

–

–

–

(88)

–

–

–

–

–

–

(88)

Retirement of treasury stock

–

–

–

2,219

–

–

–

–

–

–

2,219

–

–

1,749

–

–

–

–

–

–

–

1,749

–

88

–

–

–

–

–

–

–

–

88

–

–

–

–

(3,292)(780)(1,029)(8,705)

631

4,483

(8,692)$ 213,099 $ 202,680 $ 380,236$ (8,369)$ 12,859$ (816)$ 3,798$ (25,035)

Adjustment of retained earnings for newly
consolidated subsidiaries
Change in treasury shares of parent arising fromtransactions with non-controlling shareholders
Other changes
Balance at March 31, 2016

$ 3,195 $ 105,911 $ 887,558

See the accompanying notes to the consolidated financial statements.

SENKO ANNUAL REPORT 2016 29

Consolidated Statements of Cash FlowsSENKO Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2016, 2015 and 2014
Thousands of
U.S. dollars

Millions of yen

2016

2015

2014

2016

¥ 16,416¥ 13,054¥ 11,343$ 145,686

9,925
182
(248)
–
104
32
–
(1,761)
58
(293)
1,102
(1,748)(405)
1,694(2,276)

8,856
192
(26)
(301)
–
–
–
(639)
(14)
(303)
1,213
773
(534)
(1,365)
3,577

7,606
212
(187)
(550)
–
–
(9,301)
6,804
84
(262)
1,243
(2,662)
(295)
1,924
(185)

88,081
1,615(2,201)–923
284–(15,628)515(2,600)9,780(15,513)(3,594)15,034(20,199)

22,782226(1,096)(5,763)24,483214(1,238)(4,231)

15,774174(1,245)(4,014)202,183
2,006(9,727)(51,145)

16,14919,228

10,689143,317(17,995)
21,728(120)
524(4,579)––(96)(1,751)(13,031)
431
(77)
126
(510)
9
(3,609)–(1,318)(23,608)
564
(43)
1,026
(160)
12
(2,365)–(382)(159,700)
192,829(1,065)
4,650(40,637)––(852)(15,540)

Net cash used in investing activities(2,289)(17,979)(24,956)(20,315)

Cash flows from financing activities:
Increase (decrease) in short-term loans, net
Proceeds from long-term debt
Repayment of long-term debt
Proceeds from issuance of convertible bondPayments for redemption of bond
Repayments of finance lease obligations
Purchases of treasury stock
Sales of treasury stock
Dividends paid
Other

(12,800)
5,780(9,645)(20)(2,116)(9)250(2,571)(361)

13,0336,800(9,404)7,000(7,040)(2,135)(10)
360(2,075)(319)

850
20,520(9,549)7,035(20)(2,439)(7)360(1,898)(301)(113,596)
51,296(85,596)–(177)(18,779)(80)
2,219(22,817)(3,204)(21,492)

6,210

14,551(190,734)

(79)

124

100

(701)

Net increase (decrease) in cash and cash equivalents(7,711)

7,583

384

(68,433)

Cash and cash equivalents at beginning of year

25,476

17,667

15,691226,092

–

226

1,592

–

¥ 17,765¥ 25,476¥ 17,667$ 157,659

Cash flows from operating activities:
Income before income taxes
Adjustments for:
Depreciation and amortization
Loss on disposals of property and equipment
Gain on sales of property and equipment
Gain on sales of investment securities
Loss on valuation of shares of subsidiaries and associates
Loss on sales of shares of subsidiaries and associates
Decrease in accured retirement benefits
Increase (decrease) in net defined benefit liabilities
Increase (decrease) in accrued bonuses to employees
Interest and dividends income
Interest expenses
Decrease (increase) in trade receivables
Increase in inventories
Increase (decrease) in trade payables
Other
SubtotalInterest and dividends income received
Interest expenses paid
Income tax paid
Net cash provided by operating activities
Cash flows from investing activities:
Payments for purchases of fixed assets
Proceeds from sales of fixed assets
Payments for purchases of investment securities
Proceeds from sales of investment securities
Payments for purchases of non-consolidated subsidiaries
Proceeds from sales of subsidiaries
Payments for purchase of shares of newly consolidated subsidiaries
Payments for sales of shares of consolidated subsidiaries
Other

Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash equivalents

Net increase in cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year
See the accompanying notes to the consolidated financial statements.

30 SENKO ANNUAL REPORT 2016

Notes to the Consolidated Financial Statements
SENKO Co., Ltd. and Consolidated Subsidiaries

01

Basis of Presenting Consolidated Financial Statements

02

Summary of Significant Accounting Policies

SENKO Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their accounts and records in accordance with the provisions set forth in theJapan Companies Act and the Financial Instruments and Exchange Law of Japan and in conformity with accounting principles generally accepted inJapan, which are different in several respects as to the accounting and disclosure requirements of International Accounting Standards.
The Company’s foreign subsidiaries maintain their accounts and records in conformity with generally accepted accounting principles and practices
prevailing in their respective countries of 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 Director of Kanto Local Finance Bureau as required by the Financial Instruments andExchange Law of Japan.
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 Japanese yen amounts into U.S. dollars is included solely for the convenience of the reader, using the exchange rate prevailing at
March 31, 2016, which was ¥112.68 to US$1.00. These convenience translations should not be construed as representations that the Japanese yenamounts have been, could have been, or could in the future be, converted into U.S. dollars at this or any other rate of exchange.

(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant intercompany balances
and transactions are eliminated.
Non-consolidated subsidiaries, whose combined assets, net sales, net income and retained earnings in the aggregate are not significant inrelation to those of the consolidation with the Companies.
The investments in other insignificant unconsolidated subsidiaries and affiliates are stated at cost.

(b) Cash and Cash Equivalents
Cash and cash equivalents comprise cash in hand, deposits held at call with banks, net of overdrafts and all highly liquid investments withmaturities of three months or less.

(c) Investment Securities
Investment securities are classified and accounted for, depending on management’s intent.
Marketable other securities, which are not classified as either trading securities or held-to-maturity debt securities, are reported at fair value,with unrealized gains and losses, net of applicable taxes, reported in a separate component of net assets.
Non-marketable other securities are stated at cost.
The cost of other securities sold is determined by the moving-average method.
The Companies classified all securities as other securities.

(d) Allowance for Doubtful Accounts
The allowance for doubtful accounts is stated in amounts considered to be appropriate based on the Companies’ past credit loss experience or an
evaluation of potential losses in the receivables outstanding.

(e) Inventories
Purchased goods are stated principally at cost determined by the moving-average method (with book values written down on the balance sheets based on
decreased profitability of assets). Finished goods, real estate for sale and work in process are stated principally at cost determined by the specific method(with book values written down on the balance sheets based on decreased profitability of assets). Raw materials are stated at cost determined by the lastpurchase cost method (with book values written down on the balance sheets based on decreased profitability of assets). Supplies are principally stated atcost determined by the moving-average method (with book values written down on the balance sheets based on decreased profitability of assets).

(f) Property and Equipment and Depreciation (Except for Leased Assets)
Property and equipment are stated at cost. Depreciation is computed on the straight-line method for the buildings (including fixtures attached tothe buildings), structures and vehicles, and on the declining-balance method for the others, on the estimated useful lives of assets.
The principal estimated useful lives are as follows:
Buildings and structures

3 to 51 years

Machinery and equipment

3 to 17 years

SENKO ANNUAL REPORT 2016 31

(g) Leased Assets
Financial leases other than those that are deemed to transfer the ownership of leased assets to the lessees are accounted for in a similar way topurchases and depreciation for lease assets is computed under the straight-line method with zero residual value over the lease term.
Financial leases other than those that are deemed to transfer the ownership of leased assets to the lessees, which commenced in fiscal years
beginning prior to April 1, 2008, are accounted for in a similar way to operating leases.

(h) Accounting for significant deferred assets
Method and period for amortization of business commencement expenses
Business commencement expenses are amortized by the straight-line method over five years.

(i) Retirement Benefits
The Company and certain consolidated subsidiaries have retirement benefit plans for their employees that consist of funded and unfunded defined
benefit pension plans and a defined contribution pension plan. The Company terminated a part of the retirement lump-sum plan and transferred toa defined contribution pension plan on July 1, 2013.
Under the defined benefit pension plans (all of which are funded benefit plans), lump-sum benefits or pensions are paid based on salary and thelength of service. The Company has set up a retirement benefit trust scheme for certain defined benefit pension plans.
Under the retirement lump-sum plans (though the plans are basically unfunded, some were turned into funded plans after the setting up of aretirement benefit trust scheme), lump-sum benefits are paid based on salary and length of service.
Net defined benefit liabilities have been provided for employees’ retirement benefits, based on the amount of projected benefit obligation
reduced by pension plan assets at fair value at the balance sheet date.
Actuarial gains and losses are amortized by the straight-line method over a period of 13 years, which is within the estimated average remaining
years of service of the Companies’ employees. The amortization of such gains and losses is recognized effective the year subsequent to the year inwhich they are incurred. Prior service costs are amortized in the fiscal year in which they are incurred.
Certain consolidated subsidiaries also have a severance indemnity plan for directors and corporate auditors, whose accrued severance
indemnities are stated at 100% of the amount which is computed according to internal rules.

(j) Income Taxes
Deferred income taxes are recognized by the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are
determined based on difference of between financial reporting and the tax basis of the assets and liabilities, and are measured using the enacted
tax rate and laws that will be in effect when the differences are expected to reverse.

(k) Goodwill
Goodwill amortized over a period of 5 years by the straight-line method. If the economic useful life can be estimated, the useful life is used as theamortization period.

(l) Derivatives and hedge accounting
The Company and consolidated subsidiaries state derivative financial instruments at market value and recognize changes in the market value as
gain or loss unless the derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges andmeet certain hedging criteria, the Company and consolidated subsidiaries defer recognition of gain or loss resulting from changes in the market
value of the derivative financial instrument until the related loss or gain on the hedged item is recognized. However, when forward foreignexchange contracts are used as hedges and meet certain hedging criteria, the foreign currency receivables or payables are translated at thecontracted rate. Also, if interest rate swap contracts are used as hedges and meet certain hedging criteria, the net amount to be paid or received
under the interest rate swap contract is added to or deducted from the interest on the asset or liability for which the swap contract was executed.

(m) Per Share Information
Basic net income per share is computed on the basis of the weighted-average number of shares of common stock outstanding for the period.
Diluted net income per share is computed on the basis of the weighted-average number of shares of common stock outstanding during each year
after giving effect to the dilutive potential of the shares of common stock to be issued upon the conversion of convertible bonds and exercise ofstock acquisition rights.
Cash dividends per share are dividends applicable to the respective years including dividends to be paid after the end of the year.

(n) Translation of Foreign Currencies
All monetary assets and liabilities denominated in foreign currencies are translated into Japanese yen at the exchange rate at the balance sheet
date. Revenue and expenses are translated at the rate of exchange prevailing when transactions are made.
Foreign currency financial statements amounts of overseas consolidated subsidiaries are translated into Japanese yen at the exchange rate forprevailing at the respective balance sheet dates of those subsidiaries for assets and liabilities, and at the historical exchange rate for net assets.
All income and expense amounts are translated at the average rate of exchange during the fiscal year of those subsidiaries.
The resulting translation adjustments are included in net assets as translation adjustments.

(Additional Information)(Transaction of Delivering the Company’s Own Stock to Employees, etc., through Trusts)
The Company engages in transactions to deliver its own stock to the Senko Group Employees’ Stockholding (hereinafter, the “Employees’ Stock Holding”)
through the Employee Stock Ownership Plan (ESOP) Trusts (hereinafter, “ESOP Trusts”) with the aim of enhancing the welfare program for employees.

32 SENKO ANNUAL REPORT 2016

(1) Outline of the transaction
Under the ESOP Trusts plan, the ESOP Trusts, which are set up to deliver the Company’s own stock to the Employees’ Stock Holding, will makea lump purchase of the Company’s own stock, which the Employees’ Stockholding is expected to acquire over a period of four years and six
months, and transfer a certain quantity to the Employees’ Stockholding on a fixed day each month.
The Company accounts for the purchase and disposal of the Company’s stock by the ESOP Trusts as its own, since the Company guarantees
the liabilities of the ESOP Trusts.
(2) The Company’s own stock remaining in the trusts
The Company’s own stock remaining in the ESOP Trusts is posted as treasury stock under net assets at a book value recorded in the ESOP Trusts(excluding ancillary expenses). The amount and book value of the applicable treasury stock is 1,954,000 shares valued at ¥969 million ($8,600 thousand)for the previous consolidated fiscal year and 1,449,000 shares valued at ¥718 million ($6,372 thousand) for the current consolidated fiscal year.
(3) Book value of borrowings posted due to application of the gross method
Previous consolidated fiscal year: ¥1,126 million ($9,993 thousand)Current consolidated fiscal year: ¥750 million ($6,656 thousand)03

Changes in Accounting Policies(Application of Accounting Standard for Business Combinations, etc.)
Effective from the current consolidated fiscal year, the “Revised Accounting Standard for Business Combinations” (Accounting Standards Boardof Japan [ASBJ] Statement No. 21, September 13, 2013; hereinafter referred to as “Business Combinations Accounting Standards”), the “Revised
Accounting Standard for Consolidated Financial Statements” (ASBJ Statement No. 22, September 13, 2013; hereinafter referred to as“Consolidation Accounting Standard”) and the “Revised Accounting Standard for Business Divestitures” (ASBJ Statement No. 7, September 13,
2013; hereinafter referred to as “Business Divestitures Accounting Standard”) have been applied. Accordingly, the accounting method waschanged to record the difference arising from changes in the equity in subsidiaries under ongoing control of the Company as capital surplus, andrecord acquisition-related costs as expenses for the consolidated fiscal year in which they occur. In addition, with respect to any businesscombination entered into on or after the first day of the current consolidated fiscal year, the accounting method was changed to reflect
adjustments to the allocation of acquisition cost under provisional accounting treatment on the consolidated financial statements of theconsolidated fiscal year in which the relevant business combinations became effective. Furthermore, the presentation of net income, etc., waschanged and the presentation of minority interests was altered to non-controlling interests. To reflect the changes in the presentation, certain
reclassifications have been made to the consolidated financial statements with respect to the previous consolidated fiscal year.
The Company has applied the Business Combinations Accounting Standards, etc., in accordance with transitional accounting as provided inparagraph 58-2(4) of the Business Combinations Accounting Standards, paragraph 44-5(4) of the Consolidation Accounting Standard andparagraph 57-4(4) of the Business Divestitures Accounting Standard, prospectively from the beginning of the current consolidated fiscal year.
The above change had only a negligible effect on income before income taxes for the current consolidated fiscal year and capital surplus at theend of the current consolidated fiscal year.
In the consolidated statement of cash flows for the current consolidated fiscal year, cash flows from purchase or sales of shares of subsidiaries
that do not result in change in scope of consolidation are stated in the class of “cash flows from financing activities,” and cash flows fromexpenses related to purchase of shares of subsidiaries resulting in change in scope of consolidation or expenses related to purchase or sales ofshares of subsidiaries that do not result in change in scope of consolidation are stated in the class of “cash flows from operating activities.”
The above changes had only a negligible effect on capital surplus at the end of the term in the Consolidated Statements of Changes in Net
Assets for the current consolidated fiscal year.
The effect of the above changes on per share information for the consolidated fiscal year ended March 31, 2016 is also immaterial.
(Accounting Standard, etc., Issued but Not Yet Adopted)“Revised Implementation Guidance on the Recoverability of Deferred Tax Assets” (ASBJ Guidance No. 26, March 28, 2016)(1) Outline“Revised Implementation Guidance on the Recoverability of Deferred Tax Assets” sets out guidelines for the application of the AccountingStandard for Tax Effect Accounting (Business Accounting Council, Financial Services Agency) in relation to the recoverability of deferred tax
assets. As part of the transfer of practical and auditing guidelines on tax effect accounting from the Japanese Institute of Certified Public
Accountants (JICPA) to the ASBJ, in relation to guidelines on the recoverability of deferred tax assets, particularly those set out in JICPA Audit
Committee Report No. 66, (Auditing Treatment Regarding Judgment of the Recoverability of Deferred Tax Assets), the ASBJ has made essential
revisions to guidance in selected areas, including classification requirements and handling posted figures for deferred tax assets, while still
essentially following the framework for estimating deferred tax assets by classifying companies into five categories and calculating the amountbased on each of the relevant categories.
(2) Planned application date
The Guidance will be applicable from the first day of the consolidated fiscal year beginning on or after April 1, 2016.
(3) Impact of application of the above accounting standard, etc.
The impact that the application of “Revised Implementation Guidance on the Recoverability of Deferred Tax Assets” will have on consolidated
financial statements is currently under evaluation.

SENKO ANNUAL REPORT 2016 33

04

Comprehensive Income

The amount of recycling and amount of income tax effect associated with other comprehensive income at March 31, 2016, 2015 and 2014 consisted of
the following:Thousands ofMillions of yen

2016

U.S. dollars

2015

2014

2016

Net unrealized holdings gain on securities:
Amount recognized in the period under review
Amount of recycling¥ (658)6¥ 2,090
(306)

¥ 646
(541)

$ (5,839)53

Before income tax effect adjustments
Amount of income tax effect

(652)
299

1,784
(526)

105
(35)

(5,786)2,654

Net unrealized holdings gain on securities
Gain (loss) on deferred hedges:
Amount recognized in the period under review

(353)

1,258

70

(3,132)

(138)

13

(6)

(1,225)

Before income tax effect adjustments
Amount of income tax effect

(138)
43

13
(5)

(6)
2

(1,225)382

Gain (loss) on deferred hedges
Translation adjustments:
Amount recognized in the period under review

(95)

8

(4)

(843)

(153)

257

286

(1,358)Remeasurements of defined benefit plans:
Amount recognized in the period under review
Amount of recycling(1,127)
(276)

1,666
(555)

–
–

(10,002)(2,449)Before income tax effect adjustments
Amount of income tax effect(1,403)
384

1,111
(459)

–
–

(12,451)
3,408

Remeasurements of defined benefit plans(1,019)652–(9,043)¥ (1,620)¥ 2,175¥ 352$ (14,376)

Total other comprehensive income

05

Financial Instruments(a) Status of financial instruments(1) Policy on financial instruments
The Company and certain of its subsidiaries raise the funds required for capital investment plans for further growth from bank loans and theissuancee of bond. The Companies manage any temporary surplus funds using highly stable financial assets. The Companies use derivatives inorder to hedge against currency risks associated with merchandise imports as well as interest rate fluctuations risks in loans payable, and do
not engage in speculative transactions.
(2) Details of financial instruments, their risks and management systems
Trade accounts and notes receivable, which are operating receivables, are exposed to the credit risk of the customer and the Companies
operate systems to manage both payment deadlines and balances for each customer and grasp the credit status of each customer.
Investment securities are mainly the shares of companies with which the Companies have a business relationship and the shares related tocapital alliances, and these are exposed to the risk of fluctuations in market prices.
Trade accounts and notes payable, which are operating liabilities, have payment dates of within 1 year.
Trade accounts payable in foreign currencies are exposed to risks of foreign exchange fluctuations. To hedge such fluctuation risks, aconsolidated subsidiary has entered into foreign exchange forward contracts.
Short-term loans are fund procurement related mainly to operating transactions. Long-term debt are fund procurement related mainly tocapital investment.
Loans with variable interest rate are exposed to the risk of fluctuations in payable interest rates, but the Company conduct interest rate swap
transactions in order to hedge the risk of fluctuations in payable interest rates for some long-term debt among variable interest rate loans.
In addition, operating liabilities and loans payable are exposed to liquidity risk, but the Companies implement integrated fund management
through the concentration of funds in the Company, which carries out fund settlement, fund procurement, monitoring of balances and fundmanagement for the Companies.
Regarding derivatives, the Companies use foreign exchange forward contracts to hedge against foreign exchange rates fluctuation risks,
and interest rate swap transactions aimed at hedging against the risk of future interest rate fluctuations, and also reduce the cost of fund

34 SENKO ANNUAL REPORT 2016

procurement by converting variable interest rate liabilities into fixed interest rate liabilities.
Primary risks pertaining to derivative transactions include market risk and credit risk. Market risk is the risk that the value of an investment
position will decrease due to changes in market factors, and a derivative transaction is exposed to foreign exchange and interest rate
fluctuation risks. The Companies' derivatives effectively offset the risks of assets and liabilities on the balance sheets, and there were noimportant transaction risks. Credit risk is the risk that, in the case of default of the other party, the relevant party would become incapable ofbenefiting from the effect that would have obtained in the future if the transaction had continued. The Companies' derivative transaction
partners are limited to financial institutions with high credit ratings and the Companies do not foresee the occurrence of losses due to debt
default on the part of transaction partners.
The Company manages derivatives based on authority-related regulations in the Business Management Division . The execution oftransactions requires the permission of the director responsible for the management of derivatives and the details of transactions are reported
to the general manager of the Business Management Division and the director after their execution.
Consolidated subsidiaries also manage derivatives based on authority-related regulations, as does the Company.
(3) Supplementary explanation of the estimated market values of financial instruments
The market value of financial instruments includes prices based on market prices and reasonably estimated prices if there are no market prices.
Because estimations of the prices incorporate fluctuating factors, application of different assumptions can in some cases change the prices.

(b) Market value of financial instruments
The values on the consolidated balance sheets, market values and the differences between them are as follows. Financial instruments for which
apprehension of the market value is recognized to be extremely difficult are not included.
Millions of yen

2016Book value(1) Cash and cash equivalents(2) Trade accounts and notes receivable(3) Investment securities(4) Long-term loans receivable (including current portion)Less allowance for doubtful accounts (*1)

Market value

Difference¥ 18,478
58,108
5,579
3,857
(595)

¥ 18,478
58,108
5,579

3,262

3,917

655

Total assets¥ 85,427¥ 86,082¥ 655(1) Trade accounts and notes payable(2) Short-term loans(3) Bond(4) Convertible bond(5) Long-term debt (including current portion)(6) Lease obligations (including current portion)¥ 38,727
7,530
12,0005,038
66,802
5,527¥ 38,727
7,530
12,004
4,982
68,0595,281¥

Total liabilities¥ 135,624¥ 136,583¥ 959

Derivatives (*2)

¥

¥

¥

(92)

(92)

¥

–
–
–

–
–
4
(56)
1,257
(246)

–

Millions of yen

2015Book value(1) Cash and cash equivalents(2) Trade accounts and notes receivable(3) Investment securities(4) Long-term loans receivable (including current portion)Less allowance for doubtful accounts (*1)

Market value

Difference¥ 25,684
56,602
6,543
5,106
(270)

¥ 25,684
56,602
6,543

4,836

5,373

537

Total assets¥ 93,665¥ 94,202¥ 537(1) Trade accounts and notes payable(2) Short-term loans(3) Bond(4) Convertible bond(5) Long-term debt (including current portion)(6) Lease obligations (including current portion)¥ 37,990
20,54012,0206,868
70,6675,255¥ 37,990
20,54011,816
6,658
71,238
5,026¥

Total liabilities¥ 153,340¥ 153,268¥ (72)

Derivatives (* )

¥

¥

¥

2

(4)

(4)

¥

–
–
–

–
–
(204)
(210)
571
(229)

–

SENKO ANNUAL REPORT 2016 35

Thousands of U.S. dollars

2016(1) Cash and cash equivalents(2) Trade accounts and notes receivable(3) Investment securities(4) Long-term loans receivable (including current portion)Less allowance for doubtful accounts (*1)

Book valueMarket value

Difference$ 163,987
515,690
49,512
34,230(5,280)$ 163,987
515,690
49,512

28,95034,762

5,812

Total assets$ 758,139$ 763,951$ 5,812(1) Trade accounts and notes payable(2) Short-term loans(3) Bond(4) Convertible bond(5) Long-term debt (including current portion)(6) Lease obligations (including current portion)$ 343,690
66,826
106,496
44,711
592,847
49,050$ 343,690
66,826
106,532
44,214604,00346,867$

Total liabilities$ 1,203,620$ 1,212,132$ 8,512

Derivatives (*2)

$

$

$

(816)

(816)

$

–
–
–

–
–
36
(497)
11,156(2,183)–*1 Allowance for doubtful accounts recognized in long-term loans receivable is offset.
*2 “Derivatives” shows net receivables and liabilities generated by derivative transactions, with net liabilities shown in parentheses.

Calculation of the market value of financial instruments and items relating to investment securities and derivatives● Assets(1) Cash and cash equivalents, (2) Trade accounts and notes receivable					Because these are settled in a short period of time and market values are roughly equivalent to book values, market value are calculated basedon book values.
(3) Investment securities
The market values of shares are based on stock exchange prices and the market values of bond are based on stock exchange prices and theprices offered by correspondent financial institutions. With regard to details of the investment securities by purpose, please see "Note 6"(4) Long-term loans receivable
The market values of long-term loans receivable are calculated based on the current value discounting future cash flow by a rate adding credit
risk to appropriate indices such as the yield on government bond.
● Liabilities(1) Trade accounts and notes payable, (2) Short-term loans
Because these are settled in a short period of time and market values are roughly equivalent to book values, market values are calculated
based on the book values.
(3) Bond, (4) Convertible bond
The market values of bond issued by the Company are calculated based on the current value discounting the total value of principal andinterest by a rate adding the remaining period of the bond in question and credit risk.
(5) Long-term debt
The market values of long-term debt are calculated based on the current value discounting the total value of principal and interest by a rateenvisioned if a new loan of the same value was taken out. Long-term debt based on variable interest rates are subject to special processing
using interest rate swaps, and are calculated based on the current value discounting the total value of principal and interest processed as aunit with the relevant interest rate swaps by a rate estimated rationally and applied if a loan of the same value was taken out.
(6) Lease obligations
The market values of lease obligations are calculated based on the current value discounting the total value of principal and interest by a rateenvisioned if a new loan of the same value was taken out.

36 SENKO ANNUAL REPORT 2016

● Derivatives

See “Note 7”
Financial instruments for which it is extremely difficulty to determine market value

Thousands of
U.S. dollars

Millions of yen

2016
Unlisted shares2015¥ 6,1182016¥ 1,824$ 54,295

The financial instruments listed above are not included in “(3) Investment securities,” as there is no market price and determination of their market
value is extremely difficult.							(c) ‌Planned redemption amounts after the balance sheets date for monetary assets and investment securities withmaturity dates
Millions of yen

2016

Within 1 year

Over 1 year
Within 5 years

Over 5 years
Within 10 years

¥

¥

–
–
–

–
–
–

Over 10 years

Cash and cash equivalents
Trade accounts and notes receivable
Investment securities
Other securities with maturity period(1) Government bond, local government bond(2) Bond(3) Other
Long-term loans receivable¥ 18,478
58,108
–

¥

–
–
–

10
–
–
284

–
16
–
2,383

–
–
–
1,080

–
–
–
110

Total

¥ 76,880¥ 2,399¥ 1,080¥ 110
Millions of yen

2015

Within 1 year

Over 1 year
Within 5 years

Over 5 years
Within 10 years

¥

¥

–
–
–

–
–
–

Over 10 years

Cash and cash equivalents
Trade accounts and notes receivable
Investment securities
Other securities with maturity period(1) Government bond, local government bond(2) Bond(3) Other
Long-term loans receivable¥ 25,684
56,602
–

¥

–
–
–

–
–
–
333

10
–
–
2,427

–
–
–
1,744

–
–
–
602

Total

¥ 82,619¥ 2,437¥ 1,744¥ 602
Thousands of U.S.dollars

2016

Within 1 year

Over 1 year
Within 5 years

Over 5 years
Within 10 years

$

$

–
–
–

–
–
–

Over 10 years

Cash and cash equivalents
Trade accounts and notes receivable
Investment securities
Other securities with maturity period(1) Government bond, local government bond(2) Bond(3) Other
Long-term loans receivable$ 163,987
515,690
–

$

–
–
–

89
–
–
2,520

–
142
–
21,148

–
–
–
9,585

–
–
–
977

Total

$ 682,286$ 21,290$ 9,585$ 977

SENKO ANNUAL REPORT 2016 37

06

Investment Securities

The carrying amounts of investment securities at March 31, 2016 and 2015, consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016
Marketable securities
Non-marketable securities

2015

2016

¥ 5,579454¥ 6,543444$ 49,511
4,030¥ 6,033¥ 6,987$ 53,541

The following is a summary of marketable securities included in investment securities, at March 31, 2016 and 2015.
Millions of yen

2016
Equity security
Bond and Others

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)¥ 2,933133¥ 2,572
2¥ 59
2¥ 5,446133¥ 3,066¥ 2,574¥ 61¥ 5,579
Millions of yen

2015
Equity security
Bond and Others

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)¥ 3,238187¥ 3,12310¥ (14)(1)¥ 6,347196¥ 3,425¥ 3,133¥ (15)¥ 6,543
Thousands of U.S.dollars

2016
Equity security
Bond and Others

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)$ 26,029
1,180$ 22,826
18

$ 524
18

$ 48,331
1,180$ 27,209$ 22,844$ 542$ 49,511

The proceeds from sales of, and gross realized gain and loss on, other securities for the years at March 31,2016 and 2015 are summarized as follows.
Thousands of
U.S. dollars

Millions of yen

2016
Proceeds from sales
Gross realized gain
Gross realized loss

38 SENKO ANNUAL REPORT 2016

2015
¥–
–
–

2016
¥ 485
306
–

$ –
–
–

07

Derivatives

1. Derivative transactions to which hedge accounting is not applied
Not applicable.
2. Derivative transactions to which hedge accounting is applied(1) Currency transactions
Millions of yen

2016
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

Forward exchange contracts
Sell
U.S. dollars
Euros
Buy
U.S. dollars
Euros
Danish kroner
Pounds sterling
Chinese yen

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable
Trade accounts receivable

¥

0
2

¥–
–

¥

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable¥ 1,946
735
12
0
203

–
–
–
–

¥ (105)
(20)
(0)
(0)
(5)

¥ 2,898¥–¥ (130)

Total

(0)
0

Millions of yen

2015
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

Forward exchange contracts
Sell
U.S. dollars
Buy
U.S. dollars
Euros
Danish kroner
Chinese yen
Singapore dollar

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable

¥

7

¥–

¥ (1)

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable¥ 1,945
1,102
11
29
0

¥–
–
–
–
–

¥ 60
(51)
(1)
(0)
0

¥ 3,094

¥–

¥ 7

Total

Thousands of U.S.dollars

2016
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

Forward exchange contracts
Sell
U.S. dollars
Euros
Buy
U.S. dollars
Euros
Danish kroner
Pounds sterling
Chinese yen
Total

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable
Trade accounts receivable

$

0
18

$–
–

$

(0)
0

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable$ 17,270
6,523
106
0
1,802

$–
–
–

$

–

(932)
(178)
0
0
(44)

$ 25,719$–$ (1,154)

Market value is measured based on prices and other criteria presented by our correspondent financial institutions.
SENKO ANNUAL REPORT 2016 39

(2) Interest rate swap
Millions of yen

2016
Hedge accounting method
Exceptional accounting
method for interest-rate
swap transactions

Type of contracts

Item hedged

Interest rate swap contracts
Floating rate receivable/
Fixed rate payable

Long-term debt

Contract
amounts

Over 1 year out ofcontract amounts¥ 37,450¥ 30,600

Market value¥ – (*)

Millions of yen

2015
Hedge accounting method
Exceptional accounting
method for interest-rate
swap transactions

Type of contracts

Item hedged

Interest rate swap contracts
Floating rate receivable/
Fixed rate payable

Long-term debt

Contract
amounts

Over 1 year out ofcontract amounts¥ 38,257¥ 34,050

Market value¥ – (*)

Thousands of U.S.dollars

2016
Hedge accounting method
Exceptional accounting
method for interest-rate
swap transactions

Type of contracts

Item hedged

Interest rate swap contracts
Floating rate receivable/
Fixed rate payable

Long-term debt

Contract
amounts

Over 1 year out ofcontract amounts$ 332,357$ 271,565

Market value¥ – (*)* ‌Items treated under exceptional accounting method for interest-rate swap transactions are recorded together with long-term debt included in items hedged. Therefore, the market value of such items
is included in the market value of the relevant long-term debt.

08

Property and Equipment

At March 31, 2016 and 2015, property and equipment at cost consisted of the following:Thousands of
U.S. dollars

Millions of yen

Land
Buildings and structures
Machinery and equipment, vehicle and vessels
Tools, furniture and fixtures
Construction in Progress
Lease assets

40 SENKO ANNUAL REPORT 2016

2016

2015

2016

¥ 60,487
134,201
35,671
6,494
1,504
6,848

¥ 66,230
141,085
34,049
6,055
3,028
7,406

$ 536,803
1,190,992
316,569
57,632
13,34860,774¥ 245,205¥ 257,853$ 2,176,118

09

Short-term Loans and Long-term Debt

At March 31, 2016 and 2015, short-term loans consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016
0.49% to 0.60% unsecured loans from banks

2015¥ 7,5302016¥ 20,540$ 66,826

At March 31, 2016 and 2015, long-term debt consisted of the following:Thousands of
U.S. dollars

Millions of yen

2016
0.60% bond due 2016
0.80% bond due 2016
0.50% bond due 2021
Convertible bond due 2018
0.35% to 4.50% loans from banks and insurance companies:
UnsecuredLess current portion

¥

2015
–
5,000
7,000
5,037

¥

2016
20
5,000
7,000
6,869

$

–
44,37362,12344,702

66,80270,667592,847

83,839(15,858)

89,556(8,716)744,045(140,735)¥ 67,981¥ 80,840$ 603,310

On October 15, 2013, the Company issued ¥7,000 million ($62,123 thousand) of zero coupon convertible bond with stock acquisition rights due in 2018.
The stock acquisition rights are exercisable during the period from October 1, 2018 at a conversion price of ¥626 ($5.56) per share.
The annual maturities of long-term debt at March 31, 2016 are as follows:Year ending March 31

2017
2018
2019
2020
2021
There after

Millions of yen¥ 15,858
16,57913,367
5,120
12,87920,036

Thousands of
U.S. dollars$ 140,735
147,134
118,628
45,438114,297
177,813At March 31, 2016, the Company has committed line and overdraft contracts with twenty one banks aggregating ¥32,500 million ($288,427 thousand).
Of the total credit limit, ¥6,030 million ($53,514 thousand) was used as the above short-term and long-term borrowing, and the rest ¥26,470 million($234,913 thousand) was unused.				

SENKO ANNUAL REPORT 2016 41

10Retirement Benefits(1) Defined benefit plana. Table for adjusting benefits obligation at the beginning and end of the year
Thousands of
U.S. dollars

Millions of yen

2016
Benefits obligation at the beginning of the year
Cumulative effects of changes in accounting policies

2015

2016

¥ 27,581–¥ 22,889(823)$ 244,773–

Restated balance

27,58122,066

244,773

Service cost
Interest costAccrued actuarial differences
Retirement benefits paid
Others

1,039
227
(788)
(1,755)
(40)

929
311
874
(918)
4,319

9,221
2,014
(6,993)(15,575)(355)¥ 26,264¥ 27,581$ 233,085

Benefits obligation at the end of the year

b. Table for adjusting fair value of plan assets at the beginning and end of the year
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Fair value of plan assets at the beginning of the year
Expected return on plan assets
Accrued actuarial differences
Contribution by employers
Retirement benefits paid

¥ 20,209606(2,481)
1,020
(711)

¥ 16,084
483
2,609
1,033
–

$ 179,349
5,378(22,018)
9,052(6,310)Fair value of plan assets at the end of the year

¥ 18,643¥ 20,209$ 165,451c. ‌Table for adjusting benefits obligation, fair value of plan assets at the end of the year, and net defined benefit liabilities and net defined benefit
assets on the consolidated balance sheets							Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Benefits obligation under the funded benefit plan
Fair value of plan assets¥ 21,124(18,643)¥ 22,653(20,209)$ 187,469(165,451)

Benefits obligation under the unfunded benefit plan

2,481
5,140

2,444
4,928

22,01845,616

Net amounts of assets and liabilities on the consolidated balance sheets

7,621

7,372

67,634

Net defined benefit assets
Net defined benefit liabilities

–
7,621

2,010
9,382

–
67,634¥ 7,621¥ 7,372$ 67,634

Net amounts of assets and liabilities on the consolidated balance sheets

42 SENKO ANNUAL REPORT 2016

d. Breakdown of retirement benefit costs

Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial differences¥ 1,039
227
(606)
297

¥ 929
311
(483)
556

$ 9,2212,014(5,378)2,636

Retirement benefit costs for the defined benefit plan

¥ 957

¥ 1,313$ 8,493

e. Remeasurements of defined benefit plans (Other Comprehensive Income)The breakdown of items posted as re-measurement of defined benefit plans (before tax effect deduction) is as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Recognized actuarial differences¥ 1,402¥ (1,112)$ 12,442

Total

1,402

(1,112)

12,442

f. Remeasurements of defined benefit plans (Accumluated Other Comprehensive Income)The breakdown of items posted as re-measurement of defined benefit plans (before tax effect deduction) is as follows:
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Unrecognized actuarial differences¥ (4,219)¥ (2,817)$ (37,442)

Total(4,219)(2,817)(37,442)g. Items concerning plan assets(i) Main items of plan assets

2016

2015

Bonds
StocksOthers

27%
58%
15%

23%
62%
15%

Total

100%

100%

(Note) 18% and 23% of total pension assets are in a "Retirements Benefit Trust" for the defined benefit pension plans as of March 31, 2016 and 2015, respectively.

(ii) Method of setting the expected rate of long-term return on plan assets
The Company has taken into account a forecasted allocation of plan assets and the present and expected long-term return on various assetsthat consist of the plan assets to determine the expected rate of long-term return on plan assets.				
h. Items concerning the essential basis for actuarial calculation

2016
Discount rate
Defined benefit pension plans
Retirements lump-sum plans
Expected rate of return on plan assets

0.42%
0.17%
3.00%

2015
1.09%
0.67%
3.00%

SENKO ANNUAL REPORT 2016 43

(2) Defined contribution plan

Thousands of
U.S. dollars

Millions of yen

2016
Contributions to defind contribution plan by the Company and its consolidated subsidiaries

11

2015
¥ 530

2016
¥ 503

Pledged Assets

The following assets were pledged as collateral as at March 31, 2016 and 2015.

Thousands of
U.S. dollars

Millions of yen

2016
Land
Buildings
VehiclesInvestment securities

2015

2016

¥ 8,3233,273
0
36¥ 8,058
3,500
0
22$ 73,864
29,0470319¥ 11,632¥ 11,580$ 103,230

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

Thousands of
U.S. dollars

Millions of yen

2016Long-term debt, including current portion

12

2015

¥ 5,2062016¥ 5,845$ 46,202

Contingent Liabilities

At March 31, 2016 and 2015, contingent liabilities were as follows:

Thousands of
U.S. dollars

Millions of yen

2016
Guarantees of some obligations
Buyback obligations associated with securitization of receivables
Recourse obligation associated with securitization of guarantee deposits
Trade notes endorsed

13$ 4,704

2015

2016

¥ 405
468
140
82

¥ 300
363
140
69

$ 3,594
4,153
1,242
728

¥ 1,095¥ 872$ 9,717

Net Assets

The Japan Companies Act provides that an amount equal to at least 10% of the amounts to be disbursed as distributions of earnings be appropriated to
the legal reserve until such reserve and additional paid-in capital equals 25% of the common stock account. The Japan Companies Act also stipulates
that, on condition that the sum of the additional paid-in capital and the legal reserve exceeds 25% of the common stock account, the amount of any
such excess is available for appropriation by resolution of the shareholders.
The retained earnings account in the accompanying consolidated financial statements at March 31, 2016, included the Company’s legal reserve of¥1,506 million ($13,365 thousand).

44 SENKO ANNUAL REPORT 2016

14

Stock Option Plans

The stock option plans of the Company approved by the shareholders in accordance with the Japan Companies Act at March 31, 2016 were as follows:(1) Description of stock options
Stock option

Grantees

Number of shares withwarrants granted

Date of
grant

Option priceper warrant

Shares withwarrants granted

Exerciseperiod2007 Stock options (1st)

10 directors
3 auditors

61,000 shares

July 20, 2007

¥1

Common stock

July 21, 2007June 30, 2027

2007 Stock options (2nd)

9 operating officers

18,000 shares

July 20, 2007

¥1

Common stock

July 21, 2007June 30, 2027

2008 Stock options (4th)

10 directors
3 auditors

71,000 shares

July 1, 2008

¥1

Common stock

July 2, 2008June 30, 2028

2008 Stock options (5th)

10 operating officers

22,000 shares

July 1, 2008

¥1

Common stock

July 2, 2008June 30, 2028

2009 Stock options (6th)

11 directors
4 auditors

74,000 shares

July 1, 2009¥1

Common stock

July 2, 2009June 30, 2029

2009 Stock options (7th)

12 operating officers

27,000 shares

July 1, 2009¥1

Common stock

July 2, 2009June 30, 2029

2010 Stock options (8th)

11 directors
4 auditors

90,000 shares

July 1, 2010

¥1

Common stock

July 2, 2010June 30, 2030

2010 Stock options (9th)

13 operating officers
13 assistant directors

42,000 shares

July 1, 2010

¥1

Common stock

July 2, 2010June 30, 2040

2011 Stock options (10th)

12 directors
4 auditors

102,000 shares

July 1, 2011

¥1

Common stock

July 2, 2011June 30, 2031

2011 Stock options (11th)

15 operating officers
20 assistant directors

96,000 shares

July 1, 2011

¥1

Common stock

July 2, 2011June 30, 2041

2012 Stock options (12th)

12 directors
4 auditors

107,000 shares

July 2, 2012¥1

Common stock

July 3, 2012June 30, 2032

2012 Stock options (13th)

16 operating officers
22 assistant directors

92,000 shares

July 2, 2012¥1

Common stock

July 3, 2012June 30, 2042

2013 Stock options (15th)

12 directors
4 auditors

71,000 shares

July 1, 2013

¥1

Common stock

July 2, 2013June 30, 2033

2013 Stock options (16th)

18 operating officers
26 assistant directors

82,000 shares

July 1, 2013

¥1

Common stock

July 2, 2013June 30, 2043

2014 Stock options (18th)

12 directors
4 auditors

56,000 shares

July 1, 2014

¥1

Common stock

July 2, 2014June 30, 2034

2014 Stock options (19th)

18 operating officers
32 assistant directors

74,000 shares

July 1, 2014

¥1

Common stock

July 2, 2014June 30, 2044

2015 Stock options (20th)

12 directors
4 auditors

52,000 shares

July 1, 2015

¥1

Common stock

July 2, 2015June 30, 2035

2015 Stock options (21th)

20 operating officers
30 assistant directors

60,000 shares

July 1, 2015

¥1

Common stock

July 2, 2015June 30, 2045

(2) Changes in the number of stock options
The following describes changes in the number of stock options that existed during the year ended March 31, 2016. The number of stock options istranslated into the number of shares.

SENKO ANNUAL REPORT 2016 45

Share subscription rights which are not yet vested (shares):
Stock option

Share subscription rights which have already been vested (shares):

At March 31,
2015

GrantedForfeited

VestedAt March 31,
2016

At March 31 ,2015

Vested2007 Stock options (1st)

–

–

–

–

–

42,000–2007 Stock options (2nd)

–

–

–

–

–

10,000–2008 Stock options (4th)

–

–

–

–

–

49,000–2008 Stock options (5th)

–

–

–

–

–

15,000–2009 Stock options (6th)

–

–

–

–

–

60,000–2009 Stock options (7th)

–

–

–

–

–

25,0002010 Stock options (8th)

–

–

–

–

–

71,0002010 Stock options (9th)

–

–

–

–

–

2011 Stock options (10th)

–

–

–

–

2011 Stock options (11th)

–

–

–

–

2012 Stock options (12th)

–

–

–

2012 Stock options (13th)––

2013 Stock options (15th)–

2013 Stock options (16th)
2014 Stock options (18th)

Forfeited

At March 31,
2016

18,000–24,000

4,000

–

6,000

22,000–27,000

6,000

–

9,000

24,000–36,000

–

5,000

–

20,000–29,000–42,00041,000

–

5,000

–

36,000–88,000–18,000–70,000–93,000

–

6,000

–

87,000––92,000–18,000–74,000–––92,000

–

3,000

–

89,000––––71,000

–

8,000

–

63,000

–

–

–

–

–

82,000

–

2,000

–

80,000

–

–

–

–

–

56,000

–

7,000

–

49,0002014 Stock options (19th)

–

–

–

–

–

74,000

–

2,000

–

72,0002015 Stock options (20th)–

52,000–52,000––52,000––52,0002015 Stock options (21th)–

60,000–60,000––60,000––60,00015

Exercised

Income Taxes

The Company and its subsidiaries are subject to several taxes based on income, which in the aggregate resulted in a normal effective statutory tax rates ofapproximately 33.0 % for the years ended March 31, 2016 and 35.6 % for the years ended March 31, 2015.
(1) Significant components of deferred tax assets and liabilities at March 31, 2016 and 2015 were as follows:
Thousands of
U.S. dollars

Millions of yen

2016
Deferred tax assets:
Net defined benefit liabilities
Accrued bonuses to employees
Loss carry forward
Impairment losses
Loss on revaluation of land
Accrued enterprise tax
Social insurance premium
Asset retirement obligations
Loss on revaluation of golf club membership
Other

2015

2016

¥ 4,062
1,475
581
263
265
299
200
153
120
1,467

¥ 4,338
1,515
659
281
277
270
195
158
121
1,290

$ 36,049
13,090
5,156
2,334
2,352
2,654
1,775
1,358
1,065
13,0198,885(1,603)

9,104(1,425)78,852(14,226)

7,282

7,679

64,626

(911)
(31)
(768)
(804)

(983)
(38)
(1,066)(865)(8,085)(275)(6,816)(7,135)Gross deferred tax liabilities(2,514)(2,952)(22,311)Net deferred tax assets¥ 4,768¥ 4,727$ 42,315

Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for reduction in costs of fixed assets
Asset retirement obligations
Net unrealized holdings gain on other securities
Other

46 SENKO ANNUAL REPORT 2016

(2) ‌Reconciliation of the statutory effective income tax rate and the income tax rate as a percentage of income before income taxes and non-controllinginterests at March 31, 2016 and 2015 were as follows:

2016

2015

Statutory tax rate
Adjustment:
Non-deductible expenses
Inhabitants’ per capita taxes
Non-taxable dividends income
Adjustments of deferred tax assets due to the change in statutory effective tax rates
Special deduction of income taxes
Changes in valuation allowance
Other

33.0%

35.6%

1.1
1.5
(0.3)
1.2
(0.7)
1.2
0.6

1.4
1.8
(0.1)
3.5
(0.2)

Income tax rate as a percentage of income before income taxes and non-controlling interests

37.6%

41.9%

–
0.0

(3) Adjusutments of deferred tax assets and liabilities due to the change in statutory effective tax rates
Following promulgation of the Act for Partial Amendment of the Income Tax Act (Act No. 15 of 2016) and the Act for Partial Amendment of the Local Tax Act(Act No. 13 of 2016) on March 29, 2016, the corporate tax rate, etc., will be reduced effective from the consolidated fiscal period starting on April 1, 2016.
Consequently, the statutory effective tax rate used to calculate deferred tax assets and liabilities for this consolidated fiscal period was changed from 32.2%
in the previous consolidated fiscal period to 30.8%, for the temporary difference that is expected to be settled in the consolidated fiscal period starting on
April 1, 2016 and 2017; and to 30.5%, for the temporary difference that is expected to be settled in the consolidated fiscal period starting on April 1, 2018.
Accordingly, deferred tax assets (after deducting deferred tax liabilities) decreased by ¥225 million ($1,997 thousand), while deferred income taxes
and net unrealized holdings gain on securities increased by ¥191 million ($1,695 thousand) and ¥37 million ($328 thousand) and loss on defferred hedges
and remeasurements of defined benefit plans decreased by ¥2 million ($328 thousand) and ¥68 million ($603 thousand), respectively.

16

Asset Retirement Obligations(1) Asset retirement obligations recorded in the consolidated balance sheetsa. Outline of the relevant asset retirement obligations
Of property lease contracts for the Company’s distribution centers, asset retirement obligations are recognized where restoration is requiredin the fixed-term leasehold contracts and in the property lease contracts of some consolidated subsidiaries as well as expenses for removing
asbestos in buildings the Company owns.
b. Calculation method for the relevant asset retirement obligations
In calculating the amount of asset retirement obligations recorded under liabilities, an estimated period of use of 10 to 31 years and a discountrate of 0.7% to 2.5% were assumed.
c. Increase in the total amount of asset retirement obligations
Thousands of
U.S. dollars

Millions of yen

2016

2015

2016

Balance at the beginning of the term
Increase due to acquisition of a consolidated subsidiary
Reconciliation associated with the passage of time
Decrease due to settlement

¥ 575
–
9
(65)

¥ 440
126
9
–

$ 5,103–80(577)

Balance at the end of the term

¥ 519

¥ 575

$ 4,606(2) Asset retirement obligations not recorded in the consolidated balance sheets
The Group has restoration obligations to the original state at the withdrawal for some offices used on lease agreements. Since the use period of theleased asset pertaining to the obligations is unclear and transfer is not scheduled at present, asset retirement obligations cannot be measured
reasonably. Therefore, asset retirement obligations corresponding to the obligations have not been recorded.

SENKO ANNUAL REPORT 2016 47

17Segment Information

1. Summary of reportable segment
The reportable segments of the Companies are components for which separate financial information is available and whose operating results are
regularly reviewed by the board of directors to make decisions about resource allocation and to assess performance.
The Companies divide business operations into three segments: Distribution, Trading & Commerce, and Others
Distribution mainly includes truck transport, railway forwarding, marine transport, global logistics service, integrated retail logistics (distribution
centers) etc.
Trading & Commerce mainly includes the sale of petroleum products and the trading business.					Others mainly includes data processing outsousing services, automobile maintenance and insurance agency services
2. Calculation of sales, profit (loss), and assets, etc. of each reportable segment
The accounting policies of the segments are substantially the same as those described in the “Summary of Significant Accounting Policies.”
Income (loss) of reportable segments is based on operating income or loss.						3. Sales, income (loss), and assets, etc. of each reportable segment
Millions of yen

2016
Distribution

Trading &Commerce

Operating revenues:
Customers
Intersegment¥ 300,421
1,599¥ 129,469
11,011¥ 4,1104,025¥ 434,000
16,635

Total operating revenues

302,020

140,480

8,135

Segment income (loss)

14,2142,806

Segment assets

211,113

Other items
Depreciation
Increase in tangible and intangible fixed assets

8,452
17,194

Others

Total

Adjustments andeliminations¥

Consolidated–(16,635)¥ 434,000–

450,635(16,635)

434,000

813

17,833(336)

17,49740,276

10,298261,687

7,774

269,461

269
201

285
202

9,006
17,597

919
4,581

9,925
22,178Millions of yen

2015
Distribution

Trading &Commerce

Operating revenues:
Customers
Intersegment¥ 273,663
1,463¥ 120,686
11,309¥ 4,099
3,411¥ 398,448
16,183

Total operating revenues

275,126

131,995

7,510

Segment income (loss)

11,215

2,030

Segment assets

229,204

Other items
Depreciation
Increase in tangible and intangible fixed assets

7,620
11,39448 SENKO ANNUAL REPORT 2016

Others

Total

Adjustments andeliminations¥

Consolidated–(16,183)¥ 398,448–

414,631(16,183)

398,448664

13,909(259)

13,65038,11010,428

277,7427,568

285,310

267
343

274
262

8,161
11,999

695
4,395

8,856
16,394

Thousands of U.S. dollars

2016
Distribution

Trading &Commerce

Others

Total

Operating revenues:
Customers
Intersegment$ 2,666,143
14,191$ 1,148,997
97,719$ 36,475
35,721$ 3,851,615
147,631

Total operating revenues

2,680,334

1,246,716

72,196

Segment income (loss)

126,145

24,902

Segment assets

1,873,562

Other items
Depreciation
Increase in tangible and intangible fixed assets

75,009152,591

Adjustments andeliminations$

Consolidated–(147,631)$ 3,851,615–

3,999,246(147,631)

3,851,615

7,215

158,262(2,982)

155,280

357,437

91,392

2,322,391

68,992

2,391,383

2,387
1,784

2,529
1,793

79,925
156,168

8,156
40,65588,081
196,823(1) Products and Services Information
Information for specific products and services is not shown because the same information is in the segment information.
(2) Geographic Segment Informationa. SalesSales information by geographic segment is not shown because sales in Japan accounted for over 90% of operating revenue on the consolidated
statements of income.
b. Property, plant and equipment
Property, plant and equipment information by geographic segment is not shown because property, plant and equipment in Japan accounted forover 90% of property, plant and equipment on the consolidated balance sheets.
(3) Information by Major Clients
Information by major clients is not shown because sales to major clients accounted for less than 10% of operating revenue on the consolidated
statements of income.
(Information on impairment losses in fixed assets by business segment)
No significant items to be reported.
(Information on amortization of goodwill and amortization balance by business segment)
Millions of yen

2016

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce

¥ 123
1,743

¥ 144
2,205

Others¥ 5
90

Adjustments andeliminations

Consolidated

¥–
–

¥ 272
4,038

Millions of yen

2015

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce

¥ 117
1,867

¥ 154
2,349

Others¥ 2
95

Adjustments andeliminations

Consolidated

¥–
–

¥ 273
4,311

SENKO ANNUAL REPORT 2016 49

Thousands of U.S. dollars

2016

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce$ 1,092
15,469$ 1,278
19,569OthersAdjustments andeliminations

Consolidated$-$ 2,41435,837$ 44
799(Information on negative goodwill by business segment)
No significant items to be reported.

18

Subsequent Event(1) Payment of Dividends
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 28, 2016
Millions of yen

Cash dividends¥ 1,588

Thousands of
U.S. dollars$ 14,093(2) Transition to a Holding Company Structure through Company Split
The Company, at the meeting of its Board of Directors held on May 13, 2016, has resolved that, effective April 1, 2017, all of the businesses in which
the Company engages (except businesses related to the management of the business activities of companies of which the Company holds shares,
or businesses related to the group management) will be succeeded to by SENKO Split Preparation Co., Ltd. (with its trade name to be changed to
SENKO Co., Ltd. as of April 1, 2017), a wholly owned subsidiary of the Company that was incorporated on April 15, 2016, by absorption-type company
split, and that it will become a pure holding company. Accordingly, the Company concluded an absorption-type company split contract with SENKO
Split Preparation Co., Ltd. on the same date. The implementation of absorption-type company split was approved at the 99th Annual General
Meeting of Shareholders was held on June 28, 2016.

50 SENKO ANNUAL REPORT 2016

Corporate/Stock Information
Corporate Data (As of March 31, 2016)
Date of Establishment

July 1946

Paid-in Capital¥24,011,687,826

Head Office

Umeda Sky Bldg, Tower West, 1-30, Oyodonaka 1-chome, Kita-ku, Osaka 531-6115, Japan

Fiscal Year End

March 31

Number of Domestic Offices458

Number of Overseas Offices

43

Number of Vehicles

4,745

Number of Vessels

18

Total Warehouse Space

2,938,000 m2

Number of Employees

12,934

Stock Information (As of March 31, 2016)
Stock ListingTokyo

Stock Code9069

Authorized Shares

294,999,000

Outstanding Shares

144,834,771

Number of Shareholders

6,027

Administrator of
Shareholders’ Register

Mitsubishi UFJ Trust and Banking Corporation, Osaka Corporate Agency Division
3-6-3, Fushimi Machi, Chuo-ku, Osaka 541-8502, Japan

Independent Auditors

Ohtemae Audit Corporation

Largest Shareholders

Classification by Type of Shareholder
Number of
SharesPercentage
Held

Japan Trustee Services Bank, Ltd.
(Trust Account)

20,507,000

14.16%

Asahi Kasei Corporation

11,676,726

8.06%

The Master Trust Bank of Japan, Ltd.

8,305,000

5.73%

NORTHERNTRUSTCO. (AVFC)

6,875,553

4.75%

Sekisui Chemical Co., Ltd.

6,785,900

4.69%

Senko Group Employee’s Stockholding

6,502,743

4.49%

J. P. MORGANBANKLUXEMBOURGS. A. 5,638,000

3.89%

Mitsubishi UFJ Trust and Banking
Corporation

4,252,000

2.94%

Isuzu Motors Limited

4,039,689

2.79%

Tokio Marine & Nichido Fire
Insurance Co., Ltd.

3,439,170

2.37%

Domestic financial
institutions

Individuals
and others

53,175,329

23,581,488

16.28%
Total

36.71%

19.12% 144,834,771

Foreign financial
institutions andindividuals

27,691,606

27.35%

0.54%
Securities firms

Other domestic
corporations

777,792

39,608,556
SENKO ANNUAL REPORT 2016 51

Domestic and Global NetworkJapan(As of March 31, 2016)

Hokkaido area

7

Kinki area

119

Tohoku area

26

Chugoku
shikoku area

44

Kanto area

121

Kyushu area

73
Subsidiaries

Chubu area

68

Headquarters (Osaka and Tokyo)(As of March 31, 2016)

Company Name

Main BusinessCompany Name

Main Business● Senko Trading Co., Ltd.

Trading & Commerce, Others● Fuji Senko Transport Co., Ltd.

Distribution, Others● AST CORPORATION

Trading & Commerce● Daito Senko Apollo Co., Ltd.

Distribution● Smile Corp.

Trading & Commerce● Tokai Senko Transport Co., Ltd.

Distribution● Marufuji Co., Ltd.

Trading & Commerce● Toyohashi Senko Transport Co., Ltd.

Distribution● Logi Solution Co., Ltd.

Distribution, Others● Mie Senko Logistics Co., Ltd.

Distribution● Senko Information System Co., Ltd.

Others● Shiga Senko Transport Co., Ltd.

Distribution, Others● Senko Moving Plaza Co., Ltd.

Distribution● Osaka Senko Transport Co., Ltd.

Distribution● Senko A Line Amano Co., Ltd.

Distribution● Tokyo Nohin Daiko West Japan Co., Ltd.

Distribution● Tokyo Nohin Daiko Co., Ltd.

Distribution● Minami Osaka Senko Transport Co., Ltd.

Distribution, Others● Sapporo Senko Transport Co., Ltd.

Distribution● Hanshin Senko Transport Co., Ltd.

Distribution● Tohoku Senko Transport Co., Ltd.

Distribution● Esaka Logistics Service Co., Ltd.

Distribution● Kanto Senko Transport Co., Ltd.

Distribution● Hanshin Transport Co., Ltd.

Distribution● Kanetsu Senko Logistics Co., Ltd.

Distribution● Nara Senko Logistics Co., Ltd.

Distribution● Saitama Senko Transport Co., Ltd.

Distribution, Others● Okayama Senko Transport Co., Ltd.

Distribution● Senko Housing Logistics Co., Ltd.

Distribution● Chugoku Piano Transport Co., Ltd.

Distribution● Chiba Senko Transport Co., Ltd.

Distribution, Others● Sankyo Freight Co., Ltd.

Distribution● Senko Fashion Logistics Co., Ltd.

Distribution● Sanyo Senko Transport Co., Ltd.

Distribution● Kashiwa Senko Transport Co., Ltd.

Distribution● Chushikoku Logistics Co., Ltd.

Distribution

Noda Senko Logi Service Co., Ltd.

Distribution● Shikoku Reefer Transport and Warehousing Co., Ltd. Others● Kanagawa Senko Transport Co., Ltd.

Distribution● Fukuoka Senko Transport Co., Ltd.

Distribution● Atsugi Senko Transport Co., Ltd.

Distribution● Runtec Corporation

Distribution● Hokuriku Senko Transport Co., Ltd.

Distribution● Kyushu Senko Logistics Co., Ltd.

Distribution

52 SENKO ANNUAL REPORT 2016

North America

EuropeAsia

SouthAmerica
Overseas Office

Company Name

Main Business● Minami Kyushu Senko Co., Ltd.

Distribution● Miyazaki Senko Transport Co., Ltd.
● Miyazaki Senko Apollo Co., Ltd.

Company Name

Main Business

Senko Logistics (U.S.A.) Inc.

OthersDistribution, Others

Senko (U.S.A.) Inc.

Distribution

Distribution

SENKO LOGISTICS MEXICO S.A.DE C.V.

Distribution● Senko Plantec Co., Ltd.

Distribution

SK MARINE S.A.

Distribution● Senko Insurance Services Co., Ltd.

OthersShenyang Senko Logistics Co., Ltd.

Distribution● Senko Foods Co., Ltd.

Others● Dalian Tri-Enterprise Logistics Co., Ltd.

Distribution

Crefeel Koto Co., Ltd.

Others● S-TAFF Co., Ltd.

OthersQingdao Senko Logistics Co., Ltd.

Distribution

Senko Logistics (Shanghai) Co., Ltd.

Distribution

Senko Business Support Co., Ltd.

Others● Shanghai Senko International Freight Co., Ltd.

Distribution

Logi Factoring Co., Ltd.

Others● Shanghai Smile Corp.

Trading & Commerce

Senko Medical Logistics Co., Ltd.

Distribution● SHANGHAI SMILE PRINTING CORP.

Trading & Commerce

Senko School Farm Tottori Co., Ltd.

Others● Guangzhou Senko Logistics Co., Ltd.

Distribution● Fuji Label Co., Ltd.

Trading & Commerce● Takano Machinery Works Co., Ltd.

Trading & Commerce

Senko International Logistics (Hong Kong) Ltd. Distribution● Obata Co., Ltd.

Trading & Commerce

Senko (Thailand) Co., Ltd.

● Delivery Ace Co., Ltd.

Distribution

SENKO GLOBAL LOGISTICS (Thailand) CO., LTD. Distribution

PrettyPorters Co., Ltd.

Distribution● HONG KONG SMILE CORP LIMITED

Trading & Commerce
Distribution● Senko International Logistics Pte. Ltd.

Distribution

OthersSenko Logistics Australia Pty Ltd.

Distribution

Distribution

Senko-Lancaster Silk Road Logistics LLP

Distribution● Sankyo Logistics Co., Ltd.

Distribution

Japan Select LLP

Trading & Commerce● Kouki Corporation

Others● KOREA SMILE CORP.

Trading & Commerce● Senko Asset Management Co., Ltd.
● Sankyo Butsuryu Niyaku Co., Ltd.

Senko Facilities Co., Ltd.

Others

NH-SENKO Logistics Co., Ltd.

Distribution●: Consolidated subsidiaries

SENKO ANNUAL REPORT 2016 53

SENKO Co., Ltd.
Umeda Sky Bldg., Tower West, 1-30, Oyodonaka 1-chome,
Kita-ku, Osaka 531-6115, Japan
URL http://www.senko.co.jp/en/