TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIOCONSULTING
TRANSPORTA
WAREHOUSIINTERNATIO
DISTRIBUTIO
Annual Report 2008

For the year ended March 31, 2008

SENKO Co., Ltd.

Logistics of the Future Logistics of the Future Logisti

SENKO Co., Ltd.
Umeda Sky Bldg., Tower West, 1-30, Oyodonaka 1-chome, Kita-ku, Osaka 531-6115, Japan
Tel: 06-6440-5155 Fax: 06-6440-5175
URL http: //www.senko.co.jp/
Printed in Japan

Profile

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 theFirst Section of the Osaka Securities Exchange in 1975 and on the First Section of theTokyo Stock Exchange in 1990.
As of March 31, 2008, Senko boasted a national network in Japan of 297 offices, 2,791
vehicles, 18 owned and chartered ships, and 1,521,930 square meters of warehouse
space. The Company engages in wide-ranging business operations, centered ontrucking and extending to warehousing, marine transport, railway forwarding, infactory work, and multimodal international transportation.

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

Years ended March 31

These efficient integrated distribution services have an excellent reputation in themarket based on the provision of efficient transportation and distribution systems
centered on the Best Partner System that support the construction of customer
supply chain management systems. The Company’s Best Partner System is a newlogistics system that takes full advantage of information technology.

Contents

Consolidated Financial Highlights
A Message from the President
Review of Operations
Transport
Retail Distribution and Processing
Others
Review of Operations by Product Category
Corporate Social Responsibility
Board of Directors and Corporate Auditors, Executive Officers
Financial Review
Financial Section
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Changes in Net Assets
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
Consolidated Subsidiaries and Affiliated Companies
Corporate Data

2007

2008

¥204,294¥198,189$2,039,066

Operating income

6,057

5,491

60,455

Net income

3,061

2,536

30,552

Total assets

144,065

135,690

1,437,918

Net assets

49,84647,954

497,515¥27.70¥22.80

$0.28

8.00

8.00

0.08

454.03433.57

4.53

At year end:

Per share data: (Yen and U.S. dollars)
Net income

Senko plans to take another major step forward in its transformation from an
integrated distribution services company to a logistics information company
through the even greater utilization of information technology to provide customers
with high-quality, efficient logistics solutions.

2008

For the year:
Operating revenues

Senko’s forte lies in supplying integrated distribution services, from distribution
consulting to system design and operations, that closely match customer needs.

Thousands of
U.S. dollars

Millions of yen

Cash dividends
Net assets

Note : U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥100.19 to U.S.$1 on
March 31, 2008.

1
2
6
7
7
8
10
15
16

Operating revenues
250

19
20
22
23
24
25
33
33

Cautionary Statement with Respect to Forward-Looking Statements(Billions of yen)

Net income
3,600

200

Net income per share(Millions of yen)

30

3,000

25

2,400

20

1,800

15

1,200

10

600

5

(Yen)

150

100

50

0

04

05

06

07

08

0

04

05

06

07

08

0

04

05

06

07

08

Plans and strategies concerning future business performance included in this annual 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.

1

A Message from the President
Despite spiking prices for crude oil and otherintensifying competition and other factors,
new medium-term business plan, posting

Business Environment
In the fiscal year ended March 31, 2008, Senko posted growth inrevenues and profit. Consolidated operating revenues increased
3.1%, to ¥204,294 million, while consolidated operating income
climbed 10.3%, to ¥6,057 million and consolidated net income
jumped 20.7%, to ¥3,061 million.
During the fiscal year under review, Japan’s economy continued its
expansionary trend against the backdrop of solid corporate
performances in the first half. Entering the second half, however, asense of stagnation deepened in reaction to the turmoil in financial markets originatingwith the subprime loan problem in the United States, the jump in oil and other raw
material prices, and other factors.
In the transport and distribution industry, the business climate remained difficult
because of the higher fuel costs caused by surging crude oil prices, intensifying
competition, and other factors.
Under these conditions, the Senko Group kicked off its new three-year medium-termbusiness plan, which aims to make Senko a “Logistics Information Company.” The plantargets the expansion of business, particularly in the wholesale and retail chain store
market, by marketing retail supply chain management (SCM) systems. Among the newfacilities opened during the fiscal year were the Moriyama Warehouse, in Shiga
Prefecture; Nobeoka PD Center, in Miyazaki Prefecture; the Atsugi Logistics Center, in
Kanagawa Prefecture; and the Nishi-Kobe PD Center, in Nishi-ku, Kobe. In addition, theGroup completed building the container ship Senkoma Maru.
Consequently, operating revenues of the retail logistics business, which combines thewholesale and retail and medical treatment and pharmaceutical fields, advanced 8.5%
year on year, to ¥37.0 billion. The retail logistics business accounted for 18.1% of total
operating revenues, up 0.9 percentage points from a year earlier. Operating revenues of
the housing logistics business rose 5.0%, to ¥54.3 billion and contributed 26.6% of total
operating revenues, increasing 0.5 percentage points from the previous fiscal year. In

2

raw materials and a difficult business climate caused by
Senko achieved a satisfactory performance in the first year of its
growth in revenues and profits.

addition, revenues of the petroleum and plastics business grew 3.0% year on year, to¥38.0 billion.
Although expenses increased along with the higher fuel costs, the profit contributions
realized from the benefits of capital investments in large scale facilities in past years andthe impact of low-cost operations reforms, including price revisions, easily offset thesehigher costs. As a result, the Company posted increases in operating income and net
income.

Outline of Medium-Term Business Plan
The fiscal year under review was the first year of our new medium-term business plan,
the final year of which is the fiscal year ending March 2010. Continuing on with the goalof becoming a “Logistics Information Company,” we are fully committed to achieving
the final year goals of a 5% operating income to total assets ratio, a 3% net sales tooperating income ratio, consolidated operating revenues of ¥250 billion, operating
income of ¥7.5 billion, and net income of ¥3.5 billion. The Company is also aiming toincrease its equity ratio based on achieving these goals.
Among specific strategies to reach these objectives, the Company is concentrating on
expanding revenues in its three core businesses (Housing, Petroleum-related products
and plastics, and Retail logistics-related products businesses) while developing andreinforcing high-priority businesses (overseas distribution, trading, information, 3PL
solutions businesses) and new businesses (medical treatment and pharmaceuticalbusinesses, life related businesses, temporary staffing businesses, export related
businesses). In addition, the Company will endeavor to expand the foundations for
growth for the entire Group, including the use of business alliances and mergers andacquisitions.
During the three years of the plan, we intend to make capital investment on the samelevel as in the previous medium-term business plan—¥40 billion. This figure combines
expenditures for maintenance and renewal as well as strategic investments. In terms ofour distribution center network, new construction and expansion during the medium-3

A Message from the President

term business plan will increase the total warehouse capacity of our distribution centers
to 2.0 million square meters from 1.5 million square meters.

Outlook and Strategies for FY2009/3
The outlook for the fiscal year ahead is for a slowdown in capital expenditures by theprivate sector, which have been robust in recent years. The decline comes in the face ofthe rising raw material costs because of the hikes in crude oil and other factors and the
deepening turmoil in financial markets centered on the U.S. market.
Despite the continued uncertain business environment anticipated for the Company, we
will strive to meet the expectations of our customers by providing services enablingthem to achieve high-quality, low-cost operations. We plan to do this based on
proposing high quality, highly efficient logistics systems and comprehensive
distribution outsourcing services.
In the fiscal year ending March 2009, as the second year of our medium-term businessplan, we will take further steps toward our goal of becoming a “Logistics Information
Company” and aggressively work to increase revenues and profitability.
Specifically, we will endeavor to reform our customers’ distribution systems by
expanding use of system logistics (3PL) and to steadily improve the quality of theirservices through SCM structures. Through these efforts, we will target further growth indemand and seek to increase corporate value by continuing to concentrate on low cost
operations based on raising productivity and by implementing business managementthat emphasizes return on assets.
Entering the fashion logistics business is a new strategy we are initiating in the current
fiscal year. We estimate the size of the fashion logistics market to be ¥1.3 trillion. In
addition, the percentage of household logistics systems is relative high in the fashionindustry, and our sales division has indicated that there is a rising demand among
fashion companies for sources of comprehensive logistics services.

our distribution processing through business alliances with delivery agencies andproduct inspection, pressing, and repair specialists.
Aiming for sales of ¥10 billion in the fiscal year ending March 2011, we will endeavor todevelop this new business such that Senko is the first company that comes to people’s
mind when looking for fashion logistics services.

To Our Shareholders
The Company regards distribution of profits to shareholders as a management priority.
Our basic policy on profit distribution has been to continue to retain the internal
reserves necessary to provide for future business development and strengthen businessstructure. At the same time, to further increase the return of profits to shareholders, inaddition to maintaining stable dividends, we have linked dividends to performance.
For the fiscal year under review, in consideration of performance trends, we paid a
dividend of ¥8.0 per share (interim and year-end dividends of ¥4.00 per share). We areplanning to pay annual dividends of ¥8.0 per share in the current fiscal year as well.
In moving forward under our medium-term business plan, we look forward to thecontinued support of our shareholders.

August 2008
Yasuhisa Fukuda
President and Representative Director

Senko has abundant experience in this field, having started offering logistics services todomestic apparel companies in the 1970s. In addition, we are active in the international
market, currently operating a comprehensive logistics system linking Japan with Dalian,in China. In terms of business functions as well, we have strengthened our transport and45

Review of Operations
Beginning with the fiscal year under review, the Company’s operations have been
categorized into three business segments—transport, retail distribution and processing,and others—in consideration of business content and interrelated operations.

Transport
In addition to truck transport operations, this businesssegment includes railway forwarding on trunk routes;
marine transport by container ship, mixed cargo steamer,and specialty ship; and intermodal international freight
forwarding.
The core truck transport operations have developed an
extensive nationwide network, providing our customers
with transportation and delivery services that match theirproducts and distribution structure, including exclusive,combination, route, and joint transport services.

Retail Distribution and Processing
Transport Business Segment
120

This business segment comprises warehousing and infactory work operations.

Business segments

Operating revenues
Business segments(Billions of yen)(Billions of yen)70

122.2 125.0

61.9
60

100

61.2%
80

Our warehouses present a very different image from thewarehouses of the past. These multifunctional distribution
centers offer services that combine the delivery to and fromthe warehouse, storage (temperature controlled), setassembly, and labeling processes as well as warehousing,
printing expiration dates, logistics history management, IC
tag-based distribution and inventory management, andother distribution services provided by advanced
warehousing management systems.

30.3%

58.7

50

40
60

30

We transport industrial raw materials, machine products,
construction materials, housing materials, agricultural
products, and consumer items and provide moving services.
In short, we handle almost any freight related to food,shelter, and clothing. We operate a diversified fleet
comprised of medium-duty trucks, heavy-duty trucks, andtractor-trailers as well as specialty transport trucks, such as
tankers, specialty loose powder carrying, and refrigerated
trucks. Our diverse transportation capabilities have won the
Company high marks from manufacturers and othercustomers.

40

Transport sales composition

Retail distribution andprocessing sales composition

20

20
Others 1.4%

10

Others

7.1%
0

07

0

08

07

08

In-factory processing Warehousing

International freight forwarding 5.3%
Marine transport 5.1%
Railway forwarding 4.2%

26.9%
Truck transport

43.5%

Retail distribution

84.0 %

Our facilities provide a total storage space of approximately
1,520,000 square meters. With these warehousing bases as
the core of our operations, we develop and install logistics
information systems designed in anticipation of diverse
customer needs. These capabilities allow us to offer a fullrange of logistics services that assist our customers’
production and sales operations.
In-factory work comprises distribution and production
processes spanning everything from loading and unloading
raw materials at our customers’ factories and warehouses towrapping, packaging, and loading finished products. These
professional distribution services give high priority to safe,
quality operations that support the management of the flowof materials and products within factories.

22.5%

Operating revenues

Others(Billions of yen)

20
17.3

17.4

‘The others’ business segment includes petroleum sales;
merchandise sales; information processing and softwaredevelopment; and vehicle maintenance.

15

Business segments

Others sales composition

10

Others1.2%

Vehicle maintenance

8.5%

6.6%
Information processing andsoftware development

6.9%

5

Merchandise

25.4%

0

6

07

Petroleum

59.9%

08

7

Review of Operations by Product Category
In addition to business segments, we disclose sales on a

Sales composition

product category basis determined based on groupings ofthe special cargo and distribution characteristics ofcustomers. This information is provided as part of ourefforts to enable shareholders to gain a better
understanding of our business.

Others36.7%

Housing
26.6%

Petroleum-related
products and plastics
Retail18.6%
logistics-related
products

18.1%

Retail Logistics-Related ProductsThis product category is the main pillar of our growthstrategy. We are acquiring new customers among chain
stores, adapting to customers’ expansion to other locations
and regions, and pursuing outsourcing contracts with apparelcompanies. Furthermore, in the medical and pharmaceuticalfields, we also aim to be on of the top third-party logistics(3PL) companies in the domestic market. Some of our efforts
in this area include developing a nursing care productlogistics service and creating new logistics models for
hospitals.

Housing
For a core group of three major prefabricated housing
manufacturers, we provide just-in-time delivery services
covering raw material procurement to delivery at the
installment location. In addition, we develop SCM systems tocomply with zero emissions at the installment site and otherrequirements. Through this process, we are also responding
to the trend toward joint distribution system within the
prefabricated housing industry.

Change in sales volume of retail logistics-related products

40(Billions of yen)

th

35

es

.5
t3

ow
gr

Ab

37.0
34.1

tim

31.1

ou

30

rs

ea

0y

1
in

28.4
25.8

25

22.7
19.2
19.2

20

15.5
15

Petroleum-Related
Products and Plastics
Leveraging its nationwide business development capabilities
and its diversified transport system, we provide a full-rangeof services, from raw material procurement and accepting
orders to delivery to end customers. We can also
accommodate customers moving into overseas markets anddevelop SCM systems. These capabilities have earned Senko
the top share of the general-purpose plastics transport market
in Japan. We are also aiming to capture the top share of thedomestic lubricant oil market.

8

10

13.7
13.7
12.1

9.7
9.7

10.1

96

97

5

0

98

99

00

01

02

03

04

05

06

07

(Fiscal year)

9Corporate Social Responsibility
The transport industry to which Senko’s core business belongs has a highly public mission.
At Senko, we take that responsibility seriously and have established a business organizationthat complies with laws and regulations and is transparent.

Corporate Governance
Senko has made corporate governance its top priority management issue.
Meeting at least once a month, the board of directors is responsible for monitoring compliance with matters
stipulated in the law, deciding important matters related to the management of the Company, andWe are pursuing a structure that will ensure a high reputation for our corporate group
among our stakeholders. We are working toward that goal by bolstering the internalguidance and promotional organizations within the Group through thoroughmonitoring business execution.
The Company has adopted the auditor system by which four auditors, including two external auditors,
attend meetings of the board of directors and objectively monitor the directors’ execution of their duties. In
addition, the auditors liaise with the Audit Department, which is the Company’s internal audit section, andimplementation of corporate governance and compliance, improved customer satisfaction,

the independent certified public accounting firm, working to ensure thorough compliance by the Company

safe and quality services, and environmental preservation practices.

and its subsidiaries and to conduct strict audits.
On June 29, 2004, Senko reinforced the function of the board of directors by introducing a corporate officer
system. The purpose of the new system is to separate the business decision and monitoring roles of theboard from the business execution role of managers. In addition to strengthening these separate functions
and clarifying their responsibilities, the Company has sought to achieve greater transparency in business

Stakeholder Relationships in Senko’s Business

management through the establishment of an Executive Committee. Corporate officers also participate in
the committee, which verifies the status of business execution in the Company’s operations.

Customers
Transport andDelivery customers

Shareholders•High quality•Low cost•Efficient•Environmentallyconscious•Safe

Services•Partnerships•Proper information
disclosure•Proper distribution of
profits•Transparency inmanagement•Proper disclosure of
information

Regional
Communities•Environmental consciousness•Traffic safety•Regional exchange•Social contribution•Proper disclosure of
information

Government

Cooperative companies andprocurement sources•Environmental consciousness•Legal compliance•Partnership•Environmental consciousness

Board of corporate auditors

Board of directors

Executive committee

President

Audit department

General affairs
Department

Corporate strategy
department

CSR promotion committee

Public relations
department

Safety andenvironmental
management
department

CSR promotion
department

Other, head officeadministrative
departments

Departments andsections

Employees

10

General meeting of shareholders

Independent auditors

Senko<Business Activities>

Business partners
and vendors

Corporate Governance Structure•Maintaining safety andhealth in the workplace•Nurturing personnel•Fairness in employment

Subsidiaries and affiliates

11Corporate Social Responsibility
Compliance

Details

By complying with the laws and carrying out business activities on an ethical basis, companies

1. Through our environmental activities, we endeavor to reduce the impact of our business on thefulfill their social obligations and gain the trust of all stakeholders. As such, compliance represents aenvironment.

most basic corporate policy. Senko aims to carry out sincere and fair business activities and is• Install digital tachographs on vehicles: installed on 1,400 vehicles

pursuing stronger compliance systems.

• Thorough practice of eco-driving by vehicle operators• Use of low-pollution vehicles and transport equipment and introduce energy conservationequipment and facilities

Environmental Activities
Recognizing the major role the logistics industry has to play in protecting the environment, Senko

2. Aiming to spread environmental management activities (SEMS, ISO 14001 standards) throughout

offers modal shift and other logistics services that contribute to environmental preservation as partthe Company, we continue to improve our environmental preservation.

of its social mission as a logistics company. Moreover, the Company pursues environmental
preservation activities throughout its operations based on its ISO 14001 environmental

3. We make public environmental information on our business activities (environmental report).

management system.

4. We proactively propose services to customers that reduce environmental impact (see pictures).
• Actively propose modal shift and other more energy efficient “green” logistics systems
Senko’s Relationship with the Environment

Diesel oil,natural gas

INPUTElectricity, Water,
Heavy oil, gasoline,
natural gas, LP gas,
packaging material,
paper, secondary
materials

Diesel oil,natural gas,
heavy oilSenko Environmental Management System

Diesel oil,natural gas,
gasoline

Overall
Delivery

Departments and BranchesStore

Senko Environmental Management System (SEM)

Model Office
Data use

Shipping
Delivery

Customer’s plant

Cargo

Logistics Center
Sorting and shipment

Emission gases,
noise, vibration

Emission gases,
water pollution,
waste, waste oil,vibration, noise

Shipping

Emission gases,
noise, vibration

Emission gases,
noise, vibration• Diesel oil

14,131 kL

Delivery• Heavy oil

10,983 kL• Electricity

72,836,359 kWh

Offices and warehouses, etc. (Electricity)• Initiate and carry out environmental activities

CHECK• Regular inspections, improvements, etc.
• Environmental management audit

ACTION• Revision of environmental management system

Office• SEMS-based environmental activities• Acquiring ISO 14001 certification

Expanded todepartments
and branches

Support,collaboration

Other Offices• SEMS-based environmental activities

Plant

41,824 t-CO2
36.9 %
Total CO2 Emissions

113,276 t-CO
113,276 t-CO2

Note: The numbers for CO2 emissions are based on the laws and ordinances related to measures for
global warming that were revised on March 29, 2006.

Automobile (Diesel oil)

40,424 t-CO2
35.7 %OUTPUT

12

DO

Customer’sdelivery center

CO2 Emissions Composition by Causes

INPUT• CO2 emissions• Environmental policies and initiatives• Formulation of a plan

Logistics Center

DeliveryOUTPUT

PLAN

Shipping (C heavy oil)

10,528 t-CO2
9.3 %

2

Shipping (A heavy oil)

20,500 t-CO2
18.1 %

13

Corporate Social Responsibility

Integrated shipping of plastic products by sea and land using a bulk container
distribution system

Board of Directors and Corporate Auditors, Executive Officers (As of July 31, 2008)

Container ship Senkoma Maru (Completed December 2007)

Environmental Promotion System

President and Representative Director

Executive Vice President and Representative Director

Yasuhisa Fukuda

Kenichi Shibukawa

President and Representative Director
Energy Conservation Committee

President

Environment
Committee

Green Logistics Promotion Committee

Full-time Corporate Auditors

Yasuhisa Fukuda

Kunihiro Sanada
Masakazu Tsuji

Executive Vice President and Representative Director

Kazuo Saga

Kenichi Shibukawa
Social Contribution
Promotion Committee

Directors and Managing Senior Executive Officers

Corporate Auditor

Hiroshi Itawaki

Takeyo Teduka

Secretariat

Hisao Takahashi

Departments and Branches
Environmental Measures Committee

Senior Executive Officers

Katsuhiko Miyagawa

Directors and Managing Executive Officers

Mitsuru Muramoto

CRD Shiba Building Environmental
Measures Committee(East and West head offices)Group Companies Environmental
Measures Committee

Masuo Tanaka

Kengo Tanaka

Sky Building Environmental
Measures Committee

Sadayuki Wada

Executive Officers

Kazuhiro Yamanaka
Yoshihiro Kawase

Directors and Executive Officers

Yutaka Toyama

Takao Morita

Masahito Kanno

Kazuaki Oike

Yasushi Morimoto

Yoshio Shigeno
Hirofumi Teramachi
Koujirou Matsuda

Improving Safely, Health, and Quality

Takashi Yamamoto

Guided by the spirit of “respecting people” and “safety before everything else,” Senko pursues
activities to ensure safety and health on the job. Aiming to have “strong jobsites” that undertake
reforms on their own and that in turn become “excellent job sites” that create new value, we focus
on nurturing the personnel that will form the core of our workforce.
Activities as a Corporate Citizen
Encouraging each of its employees to act on its behalf as a “good corporate citizen,” Senko
contributes to local communities and society through its business and voluntary activities. Throughthese activities the Company seeks to make local communities that form the base for people’s lives
prosperous and comfortable places to live.

14

15

Financial Review

Performance
Consolidated operating revenues for the fiscal year ended March 2008
climbed 3.1%, to ¥204,294 million. These results can be attributed to theCompany’s core principal products category, retail logistics businesses,
housing, and petroleum-related products and plastics, contributing
increased revenues to overall operating revenues. The retail logistics
business combines the wholesale and retail and medical treatment andpharmaceutical fields.
Looking at profits, consolidated operating income rose 10.3%, to ¥6,057
million. Because of the hike in crude oil prices, fuel expenses, the major
cost of the transport segment, expanded. However, since the additional
profits from capital investments made in prior years and the reform of
low profitability business exceeded these higher costs, the Company
was able to post growth in profits. Consequently, the operating income
ratio improved 0.2 percentage points, to 3.0%.

growth because of additional revenues related to the opening of a new
distribution center in the previous fiscal year as well as from the modal shiftbusiness.
The operating revenues of the retail distribution and processing businesssegment amounted to ¥61,913 million, rising ¥3,233 million, or 5.5% andaccounting for 30.3% of total operating revenues. The sales benefits from theopening of large-scale facilities, such as the AEON Tohoku RDC and theSenboku No. 2 PD and Urawa PD centers opened in the previous fiscal year
and the Moriyama Warehouse in the fiscal year under review contributed to
the growth in operating revenues
Operating revenues from the others business segment edged forward ¥122
million, or 0.7%, to ¥17,427 million, contributing 8.5% of total operating
revenues. Although the revenues of oil sales operations increased due to therise in sales price, overall revenues declined because the slow growth intrading operations.

Income before income taxes and minority interests jumped 20.2% year
on year, to ¥5,791 million, reflecting a decline in other losses.
Moreover, despite an increase in current income taxes, consolidated net
income grew 20.7%, to ¥3,061 million. The ratio of net income tooperating revenues improved 0.2 percentage points, to 1.5%.

Performance by Principal Products Category
The Company has three core product categories: housing-related,
petroleum-related and plastics, and retail logistics-related. For the fiscal
year ended March 2008, these three core product categories accounted
for 63.3% of total operating revenues.

Performance by Business Segment
By business segment, transport operating revenues for the fiscal year underreview increased ¥2,750 million, or 2.3%, to ¥124,954 million, generating
61.2% of total operating revenues. Despite a decline in freight volume in the
housing-related logistics business, the business segment recorded sales

Accounting for 26.6% of operating revenue, housing-related products
can be separated into distribution services from the factories andhousing materials distribution services. During the fiscal year, factory
distribution services revenues declined from the second quarter andwere down overall for the year. However, the Company recorded

Operating revenues

Operating income

Net income

Ratio of SG&A
expenses to operating revenues

200(Billions of yen)

7,000(Millions of yen)

3,000

6,000

(Millions of yen)5(%)

The petroleum-related and plastics product category, which
generates 18.6% of total operating revenues, targeted
expansion of its bulk container comprehensive distribution
system business during the fiscal year. This system uses
containers that can hold 16 metric tons of plastic resin orother materials. After filling the container at the factory,
Senko delivers the container using its rail, trucking, andmarine distribution network, unloads the container, andreturns the empty container to the customer. Based on large
lots, this door-to-door system provides cost, contaminationprevention, and operating efficiency advantages. Besides
these measures, with the opening of the Moriyama
Warehouse, the freight volume business for Asahi Kasei
Corporation increased. As a result, petroleum-related andplastics product operating revenues advanced ¥1,110 million,
or 3.0%, to ¥37,990 million.
The retail logistics-related product category, which
contributed 18.1% of total operating revenues, experienced
continued business expansion in the retail logistics field,
which has been achieving high growth recently. Contributing
factors to the increase in business during the fiscal year werea higher volume of business from general merchandise store

Operating income / net
income to operating revenues
4

2,500

Net income per share

(%)

30

Year ended March 2008

Year ended March 2007

Revenues

Composition

Revenues

Composition

Change% Change

Housing

54.3

26.6

51.8

26.1

2.5

4.8

Petroleumrelated products,
and plastics

38.0

18.6

36.9

18.6

1.1

3.0

Retail logisticsrelated products

37.0

18.1

34.1

17.2

2.9

8.5

International
freight forwarding
and modal shifts

18.2

8.9

18.0

9.1

0.2

1.1

Chemicals andfertilizers

4.9

2.4

3.6

1.8

△1.3

36.1

Foods

3.8

1.9

3.8

1.9

0.0

0.0

Electronics
products andmachinery

3.6

1.8

4.2

2.1

△0.6

△14.3

Others

44.5

21.7

45.8

23.2

△1.3

△2.8

Total

204.3

100.0

198.2

100.0

6.1

3.1

Cash dividends per share

Composition of
products handled(Year ended March 2008)

(Yen)

(Yen)

25

Operating income tooperating revenues

8

26.6%

Housing

18.6%

Petroleum-related products
and plastics

18.1%

Retail logistics-related
products

36.7%

Others

5,000
2,000

20
4

4,000

2

1,500

100
3,000

2,000

06

07

08

0

3

500

1,000

05

7
10

1

50

04

15
Net income tooperating revenues

1,000

16

(Units: billions of yen, %)

3

150

0

Consolidated Operating Revenues by Products Handled

revenue growth in housing materials distribution services
due to the conversion of A Line Amano Co., Ltd., the main
customers of which are construction materials
manufacturers, to a subsidiary. As a result, operating
revenues from housing-related products increased ¥2,580
million, or 5.0%, year on year to ¥54,330 million.

04

05

06

07

08

0

04

05

06

07

08

0

5

04

05

06

07

08

0

04

05

06

07

08

0

04

05

06

07

08

0

04

05

05

07

08

17

Report of Independent Certified Public Accountants(GMS) field, including the revenue benefits from the operation of the
AEON Tohoku RDC center, which was opened in August 2006. Businessvolume from major discount store and specialty store chains also rose. In
addition, the business volume of medical equipment increased.
Consequently, operating revenues from retail logistics-related products
grew ¥2,890 million, or 8.5%, to ¥37,020 million.

Financial Position
Total assets at March 31, 2008 increased year on year, climbing ¥8,375
million, or 6.2%, to ¥144,065 million. The growth in total assets can be
attributed to active capital investment and mergers & acquisitions (M&A)
activities. The major capital investments during the fiscal year underreview were in the construction of the Moriyama Warehouse, theNobeoka PD Center, and the Nishi-Kobe PD Center as well as the
opening of the Atsugi Logistics Center and the building of the container
ship Senkoma Maru. The increase in M&A investments came from theinvestment made in Tokyo Nohin Daiko Co., Ltd., in line with a businessand capital alliance agreement and the investment involved in theacquisition of the business of A Line Amano Co., Ltd.
Net assets at fiscal year-end amounted to ¥49,846 million, resulting in an
equity ratio of 34.6%. Although the equity ratio declined 0.7% from a year
earlier because of the expansion in total assets due to active capital
investment, the amount of net assets is steadily improving.

Cash Flows
For the year ended March 31, 2008, net cash provided by operating activities
increased ¥297 million, or 4.9%, to ¥6,298 million. This increase can mainly be
attributed to income before income taxes and minority interests, depreciation
and amortization, and an increase in trade payables exceeding income tax
paid and the increases in sales receivables and inventories.
Net cash used in investing activities fell ¥3,720 million, or 32.1%, to ¥7,880
million from the previous fiscal year. Major expenses components were
payments for purchases of fixed assets of ¥6,291 million, payments forpurchases of businesses of ¥907 million, and payments for purchases of stocks
based on a business alliance of ¥900 million.
Consequently, free cash flow at fiscal year-end was a negative ¥1,582 million,up ¥4,015 million, from the previous fiscal year.
Net cash provided by financing activities decreased ¥806 million, or 20.2%, to¥3,183 million. To increase the consistency of the nature of the Company’s
assets and its capital financing methods, Senko converted a portion of its
short-term borrowings into long-term debt during the fiscal year. In addition,
to fund its capital expenditures, the Company raised ¥4,984 million throughthe issue of convertible bonds with new share subscription rights.
As a result, cash and cash equivalents at end of year totaled ¥12,318 million,
increasing ¥1,728 million, or 16.3% from the prior fiscal year.

Interest-bearing debt at fiscal year-end rose ¥4,541 million, or 10.0%, to¥49,908 million. As a result, the ratio of interest-bearing debt to total
assets increased 1.2 percentage points, to 34.6%.

Total assets

150

Net assets /net assets ratio(Billions of yen)(Billions of yen)

(%)

60

ROE / ROA

40

6

(%)

ROE
55

35
5

120
50

30

45

25

40

20

35

15

4
90

60

3

2
30

10

25

5

30

0

18

ROA

1

04

05

06

07

08

0

04

05

06

07

08

0

0

04

05

06

07

08

19

Consolidated Balance Sheets
SENKO Co., Ltd. and Consolidated Subsidiaries
March 31, 2008 and 2007

Thousands of
U.S.dollars

Millions of yen

ASSETS

2007

2008

LIABILITIES AND NET ASSETS

2008

Current assets:

Thousands of
U.S.dollars

Millions of yen

2008

2007

¥ 7,750¥ 11,950$ 77,353

4,948

4,260

49,386

54

34

539

19,942

18,362

199,0422008

Current liabilities:¥ 12,318

Cash and cash equivalents¥ 10,590$ 122,946

Trade accounts and notes receivable-

Short-term loans (Note 7)
Current portion of long-term debt (Note 7)

34

167

339

26,98026,107269,288

(19)

(20)

(190)

Inventories

1,222

585

12,197

Accrued expenses

5,140

5,118

51,303

Deferred tax asset (Note 14)

1,670

1,548

16,668

Accrued income taxes

1,566

1,192

15,630Prepaid expenses and other current assets

1,943

2,004

19,395

Other current liabilities

4,797

4,222

47,87944,14840,981

440,643

44,19745,138441,132

Long-term debt, less current portion (Note 7)

37,21029,158371,394

Non-consolidated subsidiaries and affiliates
OthersLess allowance for doubtful accounts

Total current assets

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

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

1,552

879

15,491

Accrued Retirement Benefits (Note 8)

9,335

9,670

93,173

Investment securities (Notes 5 and 9)

1,524

1,670

15,211Other long-term liabilities

3,477

3,770

34,704

129,109125,129

1,288,641

Contingent liabilities (Note 10)

Less accumulated depreciation(55,831)(54,175)(557,251)

Net property and equipment

73,27870,954

731,390

18,296

18,296

182,613

Capital surplus

16,554

16,559165,226

Retained earnings

15,554

13,201

155,245

2008 and 1,151,067 shares in 2007

(717)

(419)

(7,156)

Net unrealized holdings gain on securities

98

291

978

Loss on deferred hedges

—

(2)

—

Translation adjustments

32

25

319

Stock acquisition rights

26

—

260

Minority interests

3

3

30

Total net assets

49,84647,954

497,515¥ 144,065¥ 135,690$ 1,437,918

Property and equipment, at cost (Notes 6 and 9)

Net assets (Note 12):
Common stock:

Long-term deferred tax assets (Note 14)

5,147

5,480

51,372

Authorized––294,999,000 shares

Other assets

18,416

15,726

183,811

Issued––111,746,167 shares

Less treasury stock, at cost––2,024,789 shares in

Total assets¥ 144,065¥ 135,690$ 1,437,918

See the accompanying notes to the consolidated financial statements.

20

Total liabilities and net assets

See the accompanying notes to the consolidated financial statements.

21

Consolidated Statements of Income

Consolidated Statements of Changes in Net Assets

SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2008, 2007 and 2006

Operating revenues

Thousands of
U.S.dollars

Millions of yen

2008

2007

2006

¥ 204,294¥ 198,189¥ 190,330

SENKO Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2008, 2007 and 2006

2008

Thousands$ 2,039,066

Operating costs and expenses:
Operating costs of revenues

188,300

183,621

177,038

1,879,429

9,937

9,077

8,634

99,182

198,237

192,698

185,672

1,978,611

6,057

5,491

4,658

60,455Interest and dividend income

739

439

232

7,376

Interest expenses

(779)

(630)

(497)

(7,775)

Impairment loss

—

(177)

(2,122)—

Amortization of prior service costs

—

—

3,804

—

Loss on revaluation of property——(1,537)

—

(226)

(305)

(225)

(2,256)

(266)

(673)

(345)

(2,655)

5,791

4,818

4,313

57,800

Selling, general and administrative expenses
Operating income
Other income (expenses):

Others, net
Income before income taxes and minority interests
Income taxes (Note 14):
Current

2,364

1,805

1,324

23,595

Deferred

365

477

699

3,643

2,729

2,282

2,023

27,238

(1)

(0)

(0)

(10)

¥ 3,061¥ 2,536¥ 2,290$ 30,552

Minority interests in gain of a consolidated subsidiary
Net income

Balance at April 1, 2005
Net income
Cash dividends
Bonuses to directors and statutory auditors
Adjustment of retained earnings
for a newly consolidated subsidiary
Unrealized holding gain on securities
Treasury stock
Balance at March 31, 2006
Reclassified balance as of March31, 2006
Net income
Cash dividends
Bonuses to directors and statutory auditors
Purchases of treasury stock
Retirement of treasury stock
Adjustment of retained earnings
for a newly consolidated subsidiary
Adjustment of retained earnings
for a newly share subsidiary
Other changes
Balance at March 31, 2007
Net income
Cash dividends
Purchases of treasury stock
Retirement of treasury stock
Adjustment of retained earnings
for a newly consolidated subsidiaries
Other changes
Balance at March 31, 2008

Millions of Yen

Number of
Shares ofCommonstock issued

Commonstock

CapitalsurplusRetainedearnings

Net
unrealized
holding gain
on securities

Loss ondeferredhedges111,746———¥ 18,296———¥ 16,508———¥ 10,159
2,290
(825)
(29)

¥ (295)
—
—
—

¥ 158
—
—
—

¥—
—
—
—

¥—
—
—
—

¥—
—
—
—

¥—
—
—
—

¥ 44,826
2,290
(825)
(29)

—
—
—
111,746
—
—
—
—
—
—

—
—
—
¥ 18,296
—
—
—
—
—
—

—
—
51
¥ 16,559
—
—
—
—
—
(0)

14
—
—
¥ 11,609
—
2,536
(975)
(26)
—
—

—
—
262
¥ (33)
—
—
—
—
(387)
1

—
227
—
¥ 385
—
—
—
—
—
—

—
—
—
¥—
—
—
—
—
—
—

—
—
—
¥—
—
—
—
—
—
—

—
—
—
¥—
—
—
—
—
—
—

—
—
—
¥—
3
—
—
—
—
—

14
227
313
¥ 46,816
3
2,536
(975)
(26)
(387)
1

—

—

—

51

—

—

—

—

—

—

51

—
—
111,746
—
—
—
—

—
—
¥ 18,296
—
—
—
—

—
—
¥ 16,559
—
—
—
(5)

6
—
¥ 13,201
3,061
(885)
—
—

—
—
¥ (419)
—
—
(306)
8

—
(94)
¥ 291
—
—
—
—

—
(2)
¥ (2)
—
—
—
—

—
25
¥ 25
—
—
—
—

—
—
¥—
—
—
—
—

—
0
¥3
—
—
—
—

6
(71)
¥ 47,954
3,061
(885)
(306)
3

—
—
111,746——¥ 18,296——¥ 16,554

177—¥ 15,554——¥ (717)

—
(193)
¥ 98

—
2
¥—

—
7
¥ 32

—
26
¥ 26

—
0
¥3

177
(158)
¥ 49,846

Treasurystock(at cost)

Stock
Minority
Translation
adjustment acquisition interests
rightsTotal
netassetsThousands of U.S. dollars

Per share of common stock
Net income

Yen

U.S.dollars¥ 27.70¥ 22.80¥ 20.52$ 0.28

Diluted net income

25.82

—

—

0.26

Cash dividends applicable to the year

8.00

8.00

8.50

0.08

Balance at March 31, 2007

Commonstock

CapitalsurplusRetainedearnings

Treasurystock(at cost)

Net unrealized
holding gain
on securities

Loss ondeferredhedgesStockTranslation
Minority
adjustments acquisition interests
rightsTotal
netassets$ 182,613$ 165,276$ 131,760$ (4,182)$ 2,904$ (20)

$ 250

$—

$ 30

$ 478,631

Net income——

30,552

—

—

—

—

—

—

30,552

Cash dividends——(8,833)

—

—

—

—

—

—

(8,833)Purchases of treasury stock

—

—

—

(3,054)

—

—

—

—

—

(3,054)Retirement of treasury stock

—

(50)

—

80

—

—

—

—

—

30

—

—

1,766

—

—

—

—

—

—

1,766

—

—

—

—

(1,926)

20

69

260

0

(1,577)$ 182,613$ 165,226$ 155,245$ (7,156)

$ 978

$—

$ 319

$ 260

$ 30

$ 497,515

Adjustment of retained earnings
for a newly consolidated subsidiaries
Other changes
Balance at March 31, 2008

See the accompanying notes to the consolidated financial statements.

22

See the accompanying notes to the consolidated financial statements.

23

Notes to the Consolidated Financial Statements

Consolidated Statements of Cash FlowsSENKO Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2008, 2007 and 2006

Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation and amortization
Loss on disposals of property and equipment
Impairment losses
Loss on revaluation of property
Decrease in allowance for employee retirement
Increase (decrease) in accrued bonuses to employees
Interest and dividends income
Interest expense
Decrease (increase) in trade receivables
Decrease (increase) in inventories
Increase in trade payables
Other
Sub totalInterest and dividend 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
Other
Net cash used in investing activities
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 bondPurchases of treasury stock
Sales of treasury stock
Dividends paid
Other
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Net increase in cash and cash equivalents of newly consolidated subsidiaries
Cash and cash equivalents at end of year

SENKO Co., Ltd. and Consolidated Subsidiaries
Thousands of
U.S.dollars

Millions of yen

2008

2007

2006

¥ 5,791¥ 4,818¥ 4,313$ 57,800

3,340
96
—
—
(349)
31
(739)
779
(573)
(635)
1,847
(526)
9,062
208
(778)
(2,194)
6,298

2,693
296
177
—
(327)
(0)
(439)
630
264
186
921
(874)
8,345
155
(631)
(1,868)
6,001

2,860
320
2,122
1,537
(4,420)
158
(232)
497
(623)
(139)
1,219
(278)
7,334
168
(500)
(1,655)
5,347

33,337958——(3,483)309(7,376)
7,775(5,719)(6,338)18,435(5,250)90,4482,076(7,765)(21,898)
62,861(6,291)
291
(78)
6
(900)
(908)
(7,880)(7,874)
167
(39)
55
(44)
(3,865)(11,600)(4,793)
211
(239)
178
(45)
(1,140)(5,828)(62,791)
2,904
(779)
60
(8,983)(9,062)(78,651)(4,200)8,000(4,260)
4,984
(306)
3
(886)
(152)
3,183
(5)
1,596
10,590132¥ 12,318

2,000
9,400
(5,927)
—
(387)
1
(973)
(125)
3,989
9
(1,601)
12,11576¥ 10,590

200
8,450(6,978)
—
(675)
988
(825)
(89)
1,071
3
593
11,5211¥ 12,115(41,920)
79,848(42,519)
49,745(3,054)30(8,843)(1,517)
31,770(50)
15,930105,699
1,317$ 122,946

2008

1. Basis of Presenting Consolidated Financial Statements:
SENKO Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their accounts and records in accordance with the provisions set forthin the Corporation Law of Japan (the “Law”) and the Financial Instruments and Exchange Law of Japan and in conformity with accounting
principles generally accepted in Japan, which are different in several aspects 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 andpractices prevailing in their respective countries of domicile.
The accompanying consolidated financial statements are prepared based on 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, 2008, which was ¥100.19 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.
2. Summary of Significant Accounting Policies:(a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its significant subsidiaries. All significant intercompany
balances and transactions are eliminated.
Non-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 Company has adopted the equity method of accounting for investments in a significant affiliates. 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 fairvalue, 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 oran evaluation of potential losses in the receivables outstanding.
(e) Inventories
Purchased goods are stated at cost determined by the first-in first-out method. Supplies are stated at cost determined by the moving-averagemethod. Real estate for sale and work in process are stated at cost sdetermined by the specific method.
(f) Property and Equipment and Depreciation
Property and equipment are stated at cost. Depreciation is computed on the straight-line method for the buildings (including fixtures attachedto the 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 60 years
Machinery and equipment
3 to 17 years(g) Accrued Retirement Benefits
The company and certain domestic consolidated subsidiaries have retirement benefit plans for their employees. Such benefits are provided
through the unfunded lump-sum severance indemnity plan and the funded noncontributory pension plan.
The amount of retirement benefits are determined on the basis of length of service, basic salary and certain other factors at the time oftermination of employment.
Allowance for retirement benefits has 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 averageremaining years of service of the Companies’ employees. The amortization of such gains and losses is recognized effective the year subsequent
to the year in which 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.
At the Annual meeting of Shareholders of the Company held on June 28, 2007, the retirement benefit plan for directors, corporate auditorsof the Company was abolished. In connection with the abolishment of the retirement benefits plan, the company has reversed accrued
retirement benefits for these officers and recognized the outstanding balance of 128 million ($1,278 thousand) at March 31, 2008 as a liability,
which was included in other liabilities in the accompanying consolidated balance sheet as of March 31, 2008.

See the accompanying notes to the consolidated financial statements.

24

25

(h) 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 theenacted tax rate and laws that will be in effect when the differences are expected to reverse.
(i) Leases
In Japan finance leases other than those that are deemed to transfer the ownership of the leased assets to lessees are permitted to be accounted
for by a method similar to that applicable to ordinary operating leases.

The following is a summary of marketable securities included in investment securities, at March 31, 2008 and 2007.

2008
Equity security
Bonds and Others(j) 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
the amortization period.
(k) 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 eachyear after giving effect to the dilutive potential of the shares of common stock to be issued upon the conversion of convertible bonds andexercise of stock acquisition rights.
Cash dividends per share are dividends applicable to the respective years including dividends to be paid after the end of the year.
(l) 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
for prevailing 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 of exchange during the fiscal year of those subsidiaries.
The resulting translation adjustments are included in net assets as translation adjustments.

3. Change of Accounting Policies(a) Property and Equipment
With effect from the year ended March 31, 2008, the Company and its domestic consolidated subsidiaries changed its depreciation method oftangible fixed assets (except for vehicle and vessels) acquired on or after April 1, 2007 in accordance with the amendment of JapaneseCorporate Tax Law. As a result, operating income, Income before income taxes and minority interests decreased by ¥38 million ($379 thousand)respectively.
(b) Accounting Standards for Business Combinations and Divestitures
Effective the year ended March 31, 2008, the Company has adopted a new accounting standard for the presentation of business combinations(Business Accounting Council, October 31, 2003). The adoption will not have an effect on the company’s consolidated financial position andresult of operations.
(c) Accounting Standards for Stock Options
Effective from the year ended March 31, 2008, the company applied Accounting Standard for Share-Based payment (Accounting Standards
Board of Japan, statement No.8, December 27, 2005) and Implementation Guidance on Accounting Standard for Share-Based Payment(Accounting Standards Boards of Japan, Guidance No.11, final revision on May 31, 2006). As a result, for the year ended March 31, 2008,
operating income, income before income taxes and minority interests decreased by ¥26 million ($260 thousand) respectively.

4. Supplementary Information
Pursuant to an amendment to the Japanese Corporate Tax Law, effective from the year ended March 31,2008, the company and its domestic
consolidated subsidiaries depreciate the difference between the original residual value of 5% of acquisition cost of assets (except for vehicle andvessels) acquired before April 1,2007 and the new residual value of 1Yen (memorandum value) by the straight-line method over 5 years
commencing from the fiscal year following the year in which the asset becomes fully depreciated to the original residual value. Depreciatedamounts are included in depreciation expenses. As a result, operating income, i ncome before income taxes and minority interests decreased by¥82million ($818 thousand) respectively.

5. Investment Securities
The carrying amounts of investment securities at March 31, 2008and 2007, consisted of the following:—

Marketable securities
Non-marketable securities

26

Millions of yen
2008
2007
¥ 1,020¥ 1,203504
467¥ 1,524¥ 1,6702007
Equity security
Bonds and Others

2008
Equity security
Bonds and Others

Acquisition
cost
¥ 843
10
¥ 853

Millions of yen
Gross
Gross
unrealized
unrealized
gains
losses¥ 206¥ (39)0—¥ 206¥ (39)

Book
value(Market value)¥ 1,01010¥ 1,020

Acquisition
cost
¥ 708
10
¥ 718

Millions of yen
Gross
Gross
unrealized
unrealized
gains
losses
¥ 492
¥ (7)
0
—
¥ 492
¥ (7)

Book
value
(Market value)¥ 1,19310¥ 1,203

Acquisitioncost$ 8,414100$ 8,514

Thousands of U.S.dollars
Gross
Gross
unrealized
unrealized
gains
losses$ 2,056$ (389)0—$ 2,056$ (389)Book
value(Market value)$ 10,081100$ 10,181

The proceeds from sales of, and gross realized gain and loss on, other securities for the years at March 31, 2008 and 2007 are summarized as follows.

Proceed from sales
Gross realized gain
Gross realized loss

Millions of yen
2008
2007
¥—
¥ 35
—
2
—
44
¥—
¥ 81

Thousands of
U.S.dollars
2008
$—
—
—
$—

Millions of yen
2008
2007
¥ 33,214¥ 33,098
74,79472,282
17,035
15,864
3,801
3,577
265
308
¥ 129,109¥ 125,129

Thousands of
U.S.dollars
2008$ 331,509
746,522
170,027
37,9382,645$ 1,288,641

Millions of yen
2008
2007
¥ 7,750¥ 11,950

Thousands of
U.S.dollars
2008$ 77,353

6. Property and Equipment:
At March 31, 2008 and 2007, property and equipment at cost consisted of the following:—

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

7. Short-term Loans and Long-term Debt:
At March 31, 2008 and 2007, short-term loans consisted of the following:—

0.50% to 1.47% unsecured loans from banks
Thousands of
U.S.dollars
2008$ 10,181
5,030$ 15,221

27

At March 31, 2008 and 2007, long-term debt consisted of the following:—
Thousands of
U.S.dollars
2008$ 69,867
49,905

Millions of yen
2008
2007
¥ 7,000¥7,0005,000—

0.92% bonds due 2009
Convertible bond due 2012
0.74% to 2.51% loans from banks and insurance companies:
Unsecured

30,15842,158(4,948)¥ 37,210

Less current portion

26,41833,418(4,260)¥ 29,158

301,008
420,780(49,386)$ 371,394

9. Pledged Assets:
The following assets were pledged as collateral as at March 31, 2008 and 2007—

Land
Buildings
VehiclesInvestment securities

Millions of yen
2008
2007
¥ 2,393¥ 2,393
964
1,024
3
4
10
10
¥ 3,370¥ 3,431

Thousands of
U.S.dollars
2008$ 23,884
9,622
30
100
$ 33,636

Millions of yen
2008
2007
¥ 100
¥ 20

Thousands of
U.S.dollars
2008
$ 998

Millions of yen
2008
2007
¥0
¥5
—
15
302
373
¥ 302
¥ 393

Thousands of
U.S.dollars
2008
$0
—
3,014
$ 3,014

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

The annual maturities of long-term debt at March 31, 2008 for the next five years are as follows:—
Year ending
March 31
2009
2010
2011
2012
2013
There after

Millions of yen¥ 4,948
7,838
5,883
5,908
9,258
8,323

Long-term debt, including current portion
Thousands of
U.S.dollars$ 49,386
78,231
58,71858,96892,40583,072

10. Contingent Liabilities:
At March 31, 2008 and 2007, contingent liabilities were as follows:

At March 31, 2008, the Company has committed line and overdraft contracts with twelve banks aggregating ¥22,600 million ($225,571thousand).
Of the total credit limit, ¥6,950 million ($69,368thousand) was used as the above short-term and long-term borrowing, and the rest ¥15,650 million($156,203thousand) was unused.

8. Accrued Retirement Benefit:
The following table sets forth the changes in benefit obligation, plan assets and funded status of the Company and its certain subsidiaries at March
31, 2008 and 2007.
Thousands ofMillions of yen
U.S.dollars
2008
2007
2008
Benefit obligation at the end of year
¥ (24,208)¥ (24,733)$ (241,621)
Fair value of plan assets at the end of the year
13,80017,801
137,738
Unfunded retirement benefit obligation(10,408)(6,932)(103,883)
Unrecognized actuarial loss
2,730
(1,747)
27,248
Net retirement benefit obligation(7,678)(8,679)(76,635)
Prepaid pension cost
1,657
991
16,538
Accrued retirement benefit¥ (9,335)¥ (9,670)$ (93,173)

Guarantees of installment obligation and lease obligation for the third parties
Trade notes discounted
Buyback obligations associated with securitization of receivables

11. Lease:
At March 31, 2008 and 2007, financing lease transactions whose ownership are not to be transferred were as follows:

Machinery and equipment
Tools, furniture and fixtures

Purchasecost¥ 13,461
14,486¥ 27,947

Millions of yen
2008
Accumulated
Accumulated
depreciation
impairment loss
¥ 5,087
¥—
6,385
185
¥ 11,472¥ 185

Retirement benefit costs of the Company and its certain subsidiaries included the following components for the year ended March 31, 2008, 2007 and 2006.

Service cost
Interest cost
Expected return on plan assets
Amortization:
Recognized actuarial loss
Prior service costs
Net periodic benefit cost2008
¥ 1,141
600(523)

Millions of yen
2007
2006
¥ 1,355¥ 1,184
612
627
(543)
(361)

(21)
—
¥ 1,197¥ 1,197(136)—¥ 1,288¥ 1,288

Thousands of
U.S.dollars
2008$ 11,388
5,989(5,220)Machinery and equipment
Tools, furniture and fixtures

Discount rate
Expected rate of return on fund assets
Amortization period of prior service costs
Amortization period of actuarial losses

28

Book value¥ 8,374
7,916¥ 16,290

Book value$ 83,581
79,010$ 162,591

Millions of yen
2007
Accumulated
Accumulated
impairment loss
depreciation¥ 4,860
¥ 317
6,060
213
¥ 10,920¥ 530

Book value¥ 7,416
8,220¥ 15,636

Millions of yen
2008
2007
¥ 4,809¥ 4,740
12,95912,214¥ 17,768¥ 16,954

Thousands of
U.S.dollars
2008$ 47,999
129,344$ 177,343

At March 31, 2008 and 2007, obligations under finance leases were as follows:277(3,804)¥ (2,077)¥ (2,077)(210)—$ 11,947$ 11,947

Due within one year
Due after one year

Assumption used in the accounting for the defined benefit plans for the year ended March 31, 2008, 2007 and 2006 is as follows:

Method of attributing benefit to periods of service

Purchasecost¥ 12,593
14,493¥ 27,086

Thousands of
U.S.dollars
2008

2008
Straight-line
basis
2.5%
3.0%
1year
13years

2007
Straight-line
basis
2.5%
3.0%
1 year14 years

2006
Straight-line
basis
2.5%
3.0%
1 year14 years

At March 31, 2008 and 2007, obligations under non-cancelable operating leases were as follows:

Due within one year
Due after one year

Millions of yen
2008
2007
¥ 1,554¥ 1,554
12,935
14,489¥ 14,489¥ 16,043

Thousands of
U.S.dollars
2008$ 15,511
129,105$ 144,61629

12. Net Assets:
The Corporation Law of Japan(the “Law”) provides that an amount equal to at least 10% of the amounts to be disbursed as distributions ofearnings be appropriated to the legal reserve until such reserve and additional paid-in capital equals 25% of the common stock account. The Law
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, theamount 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, 2008, included the Company’s legal reserveof ¥ 1,506 million ($ 15,031thousand).

15. Business Combination Related:
Previous consolidated fiscal year (from April 1, 2005 to March 31, 2006)
Not available
Current consolidated fiscal year (from April 1, 2006 to March 31, 2007)(The application of purchase method)(1) Name of company subject to business combination and type of business acquired from the company, reasons, date, and legal form of thebusiness combination, and name of company resulting from the business combination

13. Stock Option Plans:
The stock option plans of the Company approved by the shareholders in accordance with the “Law” at March 31, 2008 were as follows:
Date of approval by shareholders
Grantees
Shares with warrants granted
Number of shareswith warrants granted
Option price per warrant
Exercise period

June 28, 2007
10 directors
3 auditors
Common stock

June 28, 2007
9 operating officers

61,000 shares

18,000 shares¥1
July 21, 2007 - June 30, 2027

¥1
July 21, 2007 - June 30, 2027

Common stocka. Name of company subject to business combination and type of business acquired from the company
Name of company subject to business combination
A Line Amano Co., Ltd.
Type of business acquired from the company
Transportation of building materials etc
b. Reasons for the business combination
A Line Amano Co., Ltd. has strong capabilities in housing logistics services and a principal customer base of major housing and building
material manufacturers. The Company is integrating the business to establish a housing logistics business as a new growth business of
the Senko Group by leveraging its customer base, human resources, and transportation capabilities to the maximum.
c. Date of the business combination
July 31, 2007

14. 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 of approximately 40.6% for the years ended March31, 2008 and 2007.
(1) Significant components of deferred tax assets and liabilities at March 31, 2008 and 2007 were as follows:

Millions of yen
2008
2007
Deferred tax assets:
Accrued severance indemnities to employees
Accrued bonuses to employees
Impairment losses
Loss on revaluation of landSocial insurance premium
Loss carry forward
Accrued enterprise tax
Other
Gross deferred tax assets
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Reserve for reduction in costs of fixed assets
Net unrealized holding gains on available-for-sale securities
Other
Gross deferred tax liabilities
Net deferred tax assets

Thousands of
U.S.dollars
2008¥ 4,721
1,105
698
351
175
189
144
807
8,190
(295)
7,895

¥ 5,127
1,085
853
351
169
128
123
596
8,432
(193)
8,239

$ 47,120
11,029
6,967
3,503
1,747
1,886
1,437
8,055
81,744(2,944)78,800

(985)
(69)
(185)
(1,239)¥ 6,656

(987)
(199)
(185)
(1,371)¥ 6,868(9,831)(689)(1,846)(12,366)$ 66,434

d. Legal form of the business combination and name of company resulting from the business combination
Legal form of the business combination
Acceptance of business transfer
Name of company resulting from the business combination
Senko A Line Amano Co., Ltd.
(consolidated subsidiary of the Company)(2) Period of performance of acquired business reported in the consolidated financial statements
From August 1, 2007 to March 31, 2008
(3) Cost of acquired business
Cost of acquired business¥1,365 million ($13,624 thousand)(4) The amount of goodwill recorded, reasons for recording goodwill, and depreciation method and period of goodwill
Amount of goodwill recorded¥ 900 million ($8,983 thousand)Reasons for recording goodwill
As the mark-to-market net asset value at the time of the business combination was lower
than the acquisition cost, the difference between the two values was recognized as goodwill.
Depreciation method and period
To be depreciated over a 20-year period using the straight-line method(5) The amount and breakdown of assets received on the date of the business combination

Structures
Vehicles and others

Millions of yen
¥ 11
196
¥ 207

Thousands of
U.S.dollars
$ 110
1,956
$ 2,066(2) Reconciliation of the statutory effective income tax rate and the income tax rate as a percentage of income before income taxes and minority
interests at March 31, 2008 and 2007 were as follows:

Statutory tax rate
Adjustment:
Non-deductible expenses
Inhabitants’ per capita taxes
Non-taxable dividend income
Other
Income tax rate as a percentage of income before income taxes and minority interests

30

2008
40.6%

2007
40.6%

1.8
2.9
(0.8)
2.6
47.1%

2.2
3.2
(1.2)
2.5
47.3%

31

16. Segment Information
Business segment information of the Company and its consolidated subsidiaries for the years ended March 31, 2008 and 2007 is summarized as follows:

Consolidated Subsidiaries and Affiliated Companies (As of July 31, 2008)

Millions of yen
2008
Transporta.

Operating revenues andoperating income:Customers
Intersegment
Total operating revenues
Operating costs and expenses
Operating incomeb. Assets, depreciation andcapital expenditures;
AssetsDepreciation
Capital expenditures

Retail Distribution
and Processing

OthersElimination or
Corporate

Total

Consolidated¥ 124,954
3,250
128,204
125,161¥ 3,043¥ 61,913
3,666
65,57963,077¥ 2,502¥ 17,427
14,256
31,68331,005¥ 678¥ 204,294
21,172
225,466
219,243¥ 6,223¥—(21,172)(21,172)(21,006)¥ (166)¥ 204,294—
204,294
198,237¥ 6,057¥ 49,263
1,210
2,409

¥ 77,309
1,958
3,338

¥7,945111
303¥ 134,517
3,279
6,050

¥ 9,54861
419¥ 144,065
3,340
6,469

Elimination or
Corporate

Consolidated

Millions of yen
2007
Transport

Retail Distribution
and Processing

Others

Total

Operating revenues andoperating income:Customers
Intersegment
Total operating revenues
Operating costs and expenses
Operating income¥ 122,204
3,062
125,266
122,016¥ 3,250¥ 58,680
3,665
62,34560,610¥ 1,735¥ 17,305
11,07628,381
27,845¥ 536¥ 198,189
17,803215,992
210,471¥ 5,521¥—(17,803)(17,803)(17,773)¥ (30)¥ 198,189—
198,189
192,698¥ 5,491b. Assets, depreciation, Impairment
losses and capital expenditures;
AssetsDepreciation
Impairment losses
Capital expenditures¥ 45,612
866
—
1,989

¥ 75,158
1,711
177
6,525

¥ 6,57674—
52¥ 127,346
2,651
177
8,566

¥ 8,34442—
260¥ 135,690
2,693
177
8,826

a.

a.

Operating revenues andoperating income:Customers
Intersegment
Total operating revenues
Operating costs and expenses
Operating incomeb. Assets, depreciation andcapital expenditures;
AssetsDepreciation
Capital expenditures

Retail Distribution
and Processing

OthersTotal$ 1,247,170
32,4381,279,608
1,249,236$ 30,372$ 617,956
36,590654,546629,574$ 24,972$ 173,940
142,290316,230
309,463$ 6,767$ 2,039,066
211,318
2,250,384
2,188,273$ 62,111$ 491,696
12,07724,044$ 771,624
19,54333,317$ 79,299
1,108
3,024

Elimination or
Corporate

Consolidated$—(211,318)(211,318)(209,662)$ (1,656)$ 2,039,066—
2,039,066
1,978,611$ 60,455$ 1,342,619
32,72860,385$ 95,299
609
4,182$ 1,437,918
33,33764,567

17. Subsequent Event
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 27, 2008

Cash dividends

32Paid-in Capital Equity Ownership

Location¥300 milion¥30 million

Tokyo
Tokyo

100.0%
100.0%

Senko Information System Co., Ltd.
¥60 million
100.0%
Senko Moving Plaza Co., Ltd.
¥60 million
100.0%
Senko A Line Amano Co., Ltd.
¥300 million
100.0%
Sapporo Senko Transport Co., Ltd.
¥30 million
100.0%
Tohoku Senko Transport Co., Ltd.
¥30 million
100.0%
Kanto Senko Transport Co., Ltd.
¥90 million
100.0%
Kashiwa Senko Transport Co., Ltd.
¥30 million
100.0%
Saitama Senko Transport Co., Ltd.
¥50 million
100.0%
Senko Fashion Logistics Co., Ltd.
¥30 million
100.0%
Kanagawa Senko Transport Co., Ltd.
¥10 million
100.0%
Chiba Senko Transport Co., Ltd.
¥30 million
100.0%
Fuji Senko Transport Co., Ltd.
¥30 million
100.0%
Tokai Senko Transport Co., Ltd.
¥30 million
100.0%
Toyohashi Senko Transport Co., Ltd.
¥40 million
100.0%
Hokuriku Senko Transport Co., Ltd.
¥20 million
95.0%
Shiga Senko Transport Co., Ltd.
¥30 million
100.0%
Osaka Senko Transport Co., Ltd.
¥90 million
100.0%Hanshin Senko Transport Co., Ltd.
¥90 million
100.0%
Chushikoku Logistics Co., Ltd.
¥80 million
100.0%
Shikoku Reefer Transport and Warehousing Co., Ltd. ¥50 million
100.0%Sankyo Freight Co., Ltd.
¥10 million
100.0%
Sanyo Senko Transport Co., Ltd.
¥20 million
100.0%
Fukuoka Senko Transport Co., Ltd.
¥50 million
100.0%
Minami Kyushu Senko Co., Ltd.
¥25 million
100.0%
Miyazaki Senko Transport Co., Ltd.
¥90 million
100.0%
Daito Senko Apollo Co., Ltd.
¥10 million
100.0%
Miyazaki Senko Apollo Co., Ltd.
¥15 million
100.0%
Senko Foods Co., Ltd.
¥90 million
100.0%
US$200 thousand 100.0%
Guangzhou Senko Logistics Co.,Ltd
Senko International Logistics Pte, Ltd.
S$860 thousand 100.0%
Asics Phisical Distribution Corporation¥300 million
20.0%Tokyo Nohin Daiko Co.,Ltd.
¥525 million
20.0%
DFTZ Best International Trade & Logistics Co., Ltd.
US$1,800 thousand 33.0%

Main Business

Sales of petroleum-related products, information equipment and foodNon-life insurance agent business, Insurance agent business based on
Automobile Security Act., Life insurance soliciting service
Osaka
Development and sales of software, Consulting, Information processing
Tokyo
Trucking, Moving services
Tokyo
Trucking, Warehousing, In-factory work
SapporoTrucking, In-factory work, Moving services
MiyagiTrucking, In-factory work
Trucking, Warehousing, In-factory work, Vehicle maintenance, Moving services
Ibaraki
Chiba
Trucking, In-factory work, Moving services
SaitamaTrucking, In-factory work, Vehicle maintenanceTokyo
Trucking, In-factory work
Kanagawa
Trucking, In-factory work, Moving services
Chiba
Trucking, In-factory work, Moving services, Vehicle maintenanceShizuoka
Trucking, In-factory work
Aichi
Trucking, In-factory work
Aichi
Trucking, In-factory work, Moving services
Fukui
Trucking, In-factory work
Shiga
Trucking, In-factory work
Osaka
Trucking, In-factory work, Moving services, Vehicle maintenance
Hyogo
Trucking, In-factory work, Moving services
OkayamaTrucking, Warehousing, In-factory work
KagawaTrucking, Warehousing
Hiroshima
Trucking
Yamaguchi
Trucking
FukuokaTrucking, Moving services
Kumamoto
Trucking, In-factory work
Miyazaki
Trucking, In-factory work, Vehicle maintenanceShizuokaIn-factory work, Moving services
Miyazaki
Trucking
Osaka
Restaurant operation, Food sales
Guangzhou(China) Freight forwarding, In-factory work, Warehousing
Singapore
Freight forwarding, Warehousing, Custom brokers
Hyogo
Trucking, Warehousing
Tokyo
Trucking, Delivery agent, Warehousing
Dalian(China)
Freight forwarding, Trucking, Warehousing

Corporate Data (As of July 31, 2008)

Thousands of U.S. dollars
2008
Transport

Company Name
Senko Trading Co., Ltd.
Senko Insurance Services Co., Ltd.

Millions of yen¥ 439

Thousands of
U.S.dollars$ 4,382

Date of Establishment:
July 1946
Paid-in Capital:¥18,295,643,751
Authorized Shares:
294,999,000
Outstanding Shares:
111,746,167
Number of Shareholders: 8,130
Stock Listing:Tokyo Stock Exchange
Osaka Securities Exchange
Transfer Agent:
Mitsubishi UFJ Trust andBanking Corporation 4-5,
Marunouchi, 1-chome Chiyoda-ku,
Tokyo 100-8212, Japan

Network:(As of July 31, 2008)

Head Office
Housing Distribution
Sales Department
East Japan Sales DivisionMarket Development
Division
Chubu Sales Department

Represents Branches
and Departments

Chemicals Distribution
Sales Department
Logistics Sales Department

Branches:

Sapporo, Sapporo Minami, Sendai, Sendai Kita, Ibaraki, Saitama, Omiya, Saitama Minami, Kashiwa, Tokyo,
Kanagawa, Kanto Jyutaku, Chiba, Shizuoka Higashi, Shizuoka Nishi, Nagoya, Komaki, Mie, Keiji, Osaka,Hanshin, Minami Osaka, Nara, Okayama, Kurashiki, Hiroshima, Yamaguchi, Kyushu, Kita Kyushu,
Minami Kyushu, Nobeoka

Departments:

Kansai Operation Center, Kyushu Operation Center, International Business, Railway Forwarding,
Air Cargo & KYN (Local Transport Network)33