ANNUALREPORT2017

For the year ended March 31, 2017

Contents
01 Consolidated Financial Highlights
02 A Message from the President
05 New Medium-Term Business Plan
08 The New Structure of the Senko Group
10 Review of Operations by Business Segment
12 Topics
15 Corporate Governance and Compliance
16 Business Risks
17 Board of Directors, Corporate Auditors and Executive Officers
18 Corporate Social Responsibility
22 Financial Review
25 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 / Group Companies

Cautionary Statement with Respect
to Forward-Looking Statements
Plans and strategies concerning future businessperformance included in this annual report are
forward-looking statements based not on historicalfacts but on management’s assumptions and beliefs in
the light of the information currently available to it, andthus involve a certain element of risk and uncertainty.

Scope of Report
The scope of coverage includes the activities of Senko
Group Holdings Co., Ltd. and its Group companies.

Reporting Period
This report covers business activities for the period
between April 1, 2016 and March 31, 2017. However, some
activities that took place after April 2017 are also covered.

Other Publications of the Company• Notice of convocation of the annual meeting of shareholders• Securities reports (Japanese only) and quarterly reports• CSR reports (Japanese only)
A variety of information other than that mentioned above
is available on the Company’s website (in Japanese).
http://www.senkogrouphd.co.jp/en

Consolidated Financial Highlights
2017

Years ended March 31

2016

2015

2017

Millions of yen

Thousands of
U.S. dollars*1

For the year:
Operating revenues¥ 455,435¥ 434,000¥ 398,448$ 4,059,497

Operating income

17,082

17,497

13,650152,259

Net income attributable to owners of parent

8,951

8,542

7,074

79,783

Capital expenditures

17,662

17,50014,182

157,429

Depreciation and amortization

10,216

9,925

8,856

91,060Total assets

285,959

269,461

285,3102,548,881

Net assets

114,091

100,01092,745

1,016,944

Yen

U.S. dollars

At year end:

Per share data:
Net income

¥

61.67

¥

60.43

¥ 55.06$

0.55

Cash dividends applicable to the year

22.00

20.00

17.00

0.20

Diluted net income

58.74

56.32

50.41

0.52

Operating income margin (%)

3.8

4.0

3.4

Net income margin (%)

2.0

2.0

1.8

Equity ratio (%)

35.1

32.6

28.4

Return on equity (ROE) (%)

9.5

10.1

9.5

Interest coverage ratio*2 (times)

21.9

14.7

15.5

Financial Ratios:*1: U.S. dollar amounts are converted from yen, for convenience only, at the prevailing rate of ¥112.19 to U.S.$1 on March 31, 2017.
*2: Interest coverage ratio: Operating cash flows / Interest expenses

Operating revenues(Millions of yen)
500,000

398,448

434,000

455,435

Operating income

Net income attributable toowners of parent(Millions of yen)
20,000(Millions of yen)
10,00017,497

17,082

13,650375,000

15,000250,000

10,0005,000

125,000

50,000

2,500

0

15

16

17

0

15

7,500

16

17

0

8,542

8,951

7,074

15

16

17

SENKO ANNUAL REPORT 2017 01

A Message from the President

We intend to be a “Corporate Group
Creating Future Trends” fostering people
and supporting people’s lives.

Business Environment
in the Fiscal Year 2016
In the Japanese economy for the fiscal year under review, theoutlook for the future remained uncertain, due in part to weak
consumer spending as well as other factors, despite moving froma plateau toward recovery due to a moderate upturn in overseas
economies and improvements in wages and employment.
In the logistics industry, the business environment remained
challenging, partially due to shortages of drivers and workers,
amid the continued slowing of freight volume.
In this environment, the Senko Group worked to improve
competitiveness, expand business areas, and upgrade theoperation system.

Main Activities and Performance
In Japan, we welcomed ACROSS TRANSPORT CO., LTD., whichis involved in fashion logistics, including department store
delivery agency services, into the Senko Group in April, andhave been boosting cooperation with each of the Senko Group
companies in charge of fashion logistics. In addition, withinlarge-scale logistics facilities there were four developments: inMay, we opened the Narita Fashion Logistics Center II (Chiba
Prefecture) to provide logistics services for imported brands; inAugust, we opened the Nishikanto LC (Logistics Center)(Kanagawa Prefecture), which engages in operations for major
general merchandise store outlets located in the western Kanto
region; in November, we opened the Kazo PD Center (Saitama
Prefecture) for logistics operations in the Tokyo metropolitan
area; and in January 2017, we opened the Hino Logistics
Center (Tokyo), which operates for major drugstore chains.
Outside Japan, we expanded the Kentucky Logistics Center(state of Kentucky, the U.S.) in August to include a new freezer
warehouse. We also started operation of our first threetemperature zone logistics center in Myanmar in October.
In our Trading & Commerce, we developed new products andpromoted the expansion of sales channels for existing products,
in addition to cultivating integrated trading and logistics services,which included bringing logistics services to goods that arehandled in-house.
At the same time, for initiatives in new business areas, weestablished a subsidiary in August in the real estate sector. We
launched a nursing care business and lifestyle support services

Consolidated operating revenues (Net sales)

Consolidated operating income ( )/Consolidated ordinary income ( )(Billions of yen)
500

(Billions of yen)
20

375

15

250

10

125

5

0

12

02 SENKO ANNUAL REPORT 2017

13

14

15

16

FY

0

12

13

14

15

16

FY

Yasuhisa Fukuda
President and Representative Directorbusiness, welcoming KEIHANNA helper station Co., Ltd., which
operates a nursing care business, and Ienonaka Company, Ltd.,
which provides housekeeping services, into the Senko Groupin October 2016 and January 2017, respectively.
To upgrade our operation system, we have been promoting
a modal shift to reduce our environmental impact and to resolve
the shortage of drivers, while boosting the use of our own trucks.
In October, we opened an authorized driving school for large
vehicles at the Company’s traffic safety training facility Crefeel
Koto, strengthening our system for attracting and training drivers.
To ensure financial soundness, in September we transferred
seven logistics centers to a real estate investment trust (a private
REIT) managed by Senko Asset Management Co., Ltd. Funds
raised have been used for building new logistics centers andother purposes.
Furthermore, in October 2016, we established SENKO
UNIVERSITY, an in-house training center for improving thesophistication and specialization of training content for humanresources and for developing strategic human resources.
Consolidated operating revenues for the fiscal year underreview increased 4.9% year on year to ¥455,435 million. This
result mainly reflected the aggressive expansion of sales andthe contribution of ACROSS TRANSPORT CO., LTD., which wasmade into a consolidated subsidiary of the Company.
On the profit front, consolidated operating income fell to¥17,081 million, down 2.4% year on year, impacted by a fall in
profit due to the decline in freight volumes from existingcustomers despite increases from the sales expansion, pricerevisions, and productivity improvements.
Meanwhile, consolidated ordinary profit increased 0.7% year
on year to ¥17,301 million, partly due to an increase in non-operating
revenue, and income attributable to owners of parent
increased 4.8% year on year to ¥8,950 million.

Results of Four-Year
Medium-Term Business Plan
We will now report on the results of the Four-Year Medium-TermBusiness Plan (fiscal 2013 – fiscal 2016) that we have beenworking on to date.
We exceeded the goal of ¥400.0 billion in operating revenuesby ¥55.4 billion, due in part to our aggressive expansion of sales,
large-scale capital investment and M&A activities.
Looked at by business domain, revenues from the Logistics

Income attributable to owners of parent

Dividend per share ( ) /Consolidated payout ratio ((Billions of yen)
10.0(Billions of yen)
24

(%)
60

7.5

18

45

5.0

12

30

2.5

6

15

0

12

13

14

15

16

FY

0

12

13

14

)

15

16 F Y 0

SENKO ANNUAL REPORT 2017 03

A Message from the President

exceeded our goal by ¥20.0 billion to stand at ¥318.0 billion as aresult of our efforts for new sales promotion and expanding thescope of our logistics center business.
Meanwhile, revenues in our Trading & Commerce segment
exceeded our goal by ¥34.9 billion to stand at ¥132.9 billion.
This was the result of an increase in revenues from ASTCORPORATION, a major wholesaler of household paper
products, joining the Group as well as efforts to expand
integrated trading and logistics services.
Operating income exceeded the goal of ¥15.0 billion by ¥2.1
billion, mainly due to the expansion in sales and improvements
in productivity.
As a result of working to aggressively expand our logistics
centers inside and outside Japan, logistics center spaceexceeded our goal by 220,000 m2, reaching 3,220,000 m2.

Holding Company Structure andEstablishment of Group Corporate
Philosophy
In April 2017, the Company changed its name to Senko Group
Holdings Co., Ltd. and transitioned to a holding company structure.
Under the new structure, group companies have been divided
into five business groups: Logistics, Trading & Commerce,
Living Support, Agriculture, and Business Support. We willoversee management with the holding company and the fiveoperating companies at the core of our operations.
Going forward, we will strengthen our governance system,
clarify responsibility and authority at each operating company,
and speed up decision-making with the aim of reinforcing thestructure of the Group and further enhancing its corporate value.
We have also established a philosophy to be shared by theentire Group. Our vision is to be “Corporate Group Creating
Future Trends.” Our aims are to foster people and support theirlives. We also strive to create services and products that are
driving the future by contributing to the realization of a truly
enriched global community.
With our corporate slogan, Moving Global, we will go beyond

logistics, make the world of commerce go around, andrevolutionize business by promoting our operations. We havealso established five shared values for Group employees:
sincerity, passion, responsibility, respect and diversity. The
goal is to become a group of companies that contributes to andis trusted by all stakeholders.

Future Initiatives
The Japanese economy going forward is expected to continue
expanding while experiencing a moderate recovery backed by
an improvement in domestic demand that is focused on consumer
spending and an expansion of external demand due to an upturnin the U.S. and Chinese economies.
However, in the logistics industry, the challenging businessenvironment is expected to persist. There has been an increasein small-lot freight amid a slowdown in both overall freight
volume and in recruiting staff, particularly drivers, to handle
small-lot freight.
In this environment, the Senko Group has formulated theFive-Year Medium-Term Business Plan SIP21 (Senko Innovation
Plan 2021), with fiscal 2017 as its inaugural year.
SIP21 is a growth strategy that will take on the challenge ofcreating new services and products based on the businessareas of logistics as well as trading and commerce.
In the next 100 years, we will unite as a group of companies todrive economic and social innovation inside and outside Japans
with the aim of realizing our motto, Moving Global.

Increase in the Annual Dividend to ¥22
While securing internal reserves necessary for future businessdevelopment and management structure reinforcement, ourbasic policy is to return profits to shareholders through stabledividends that are linked to business results.
In accordance with this basic policy, the annual dividend forfiscal 2016, ended March 31, 2017, was ¥22.00 per share.
We ask for the continued support and encouragement of ourshareholders going forward.
(Billions of yen)

Target

FY2016
Results

Changecomparedwith target

Operating revenues (billions of yen)

400

455.4

55.4

Operating income (billions of yen)

15

17.1

2.1

Operating income margin (%)

3.8

3.8

ROE (%)

8.3

Equity ratio (%)
Logistics center space (10,000 m2)

Medium-Term Business Plan
Targets and Results

04 SENKO ANNUAL REPORT 2017

Target

FY2016 Results

Changecomparedwith target

Business
revenues% of total

Business
revenues% of total

Logistics

298

75

318

70

20.0

0.0

Trading &Commerce

98

24

132.9

29

34.9

9.5

1.2

Others

35.8

35.1

(0.7)

4.0

1

4.6

1

0.6

300

322

22

Total

400

100

455.4

100

55.4

New Medium-Term Business Plan

Launch of Senko Group Five-Year
Medium-Term Business Plan SIP21
The Senko Group has launched the Five-Year Medium-Term Business Plan SIP21 (Senko Innovation Plan 2021),
which runs from fiscal 2017 until fiscal 2021.
SIP21 is a growth strategy for the corporate group to support logistics for industry and people’s lives as wellas to take up the challenge of creating new services and products that will drive the future, based on Logistics
and Trading & Commerce, for the next 100 years.

Our Philosophy

Universal Mission
As a corporategroup fostering people
and supporting people’s
lives, we contribute to achieve agenuinely productive global society bycontinuously challenging efforts to create
new trends in terms of products and services
that shift the future; centering on our physical andcommercial distribution business.

VisionCorporate Group
Creating Future Trends
SloganOur thoughts into a Mission & Vision

Go beyond logistics, make the world go round, revolutionize businessCorporate Values
Values that should be shared with all our group employees (IP CReD)

Integrity, Passion, Commitment, Respect, Diversity
Group Corporate Motto
Fundamental spirit that underpins our business activities

Sure

Swift

Smile

We will fulfill our obligations from the standpoint of customers through a commitment to our mission as a logistics service provider
and a dedication to providing services backed by the best technologies, skills and behavior. This is the Senko “3S” spirit.

Direction ofstrategy

Achieve “Moving Global” Go beyond logistics, make the world go round, and revolutionize business.
Unite as a group to drive economic and social innovation inside and outside Japan.
SENKO ANNUAL REPORT 2017 05

New Medium-Term Business Plan
Senko Group Medium-Term Business Policy
1 Expand business areas

3 Improve employee satisfaction (ES)

Accelerate international business expansion, further
enhance existing domestic businesses, and enter new
business areas, such as Living Support and BusinessSupport. Also, actively promote business partnerships andM&As to support the above.

By both creating and using a diverse range of programs,
improve employee satisfaction to attract employees fromvaried backgrounds and then nurture their growth, as well as
increase the value of the environment they work in.

4 Emphasize corporate social responsibility (CSR)
2 Grow brand value

Grow alongside society, while preserving and fostering
industry, culture, and nature in each region.

Consolidate the Group’s overall strength, deliver “services
that surprise and delight,” and evolve from “customer
satisfaction” (CS) to “customer delight” (CD).

5 Gain trust from capital markets
Work to maximize the corporate value of the entire Group,
while strengthening financial soundness.

Group Medium-Term Management Goals
Size

Profitability(Billions of yen)

Strive for operating
revenues of

700.0

455.4

¥28.0 billion¥700.0 billion
FY 2016 results

FY 2021 plan

(Million m2)

3.22

17.1

28.0

3.8 %

4.0 %

FY 2016 results

FY 2021 plan

35.1%

40.2 %FY 2016 results

FY 2021 plan

9.5 %10.5 %FY 2016 results

FY 2021 plan

4.00

Logistics center
storage space

Equity ratio
FY 2016 results(Number)

FY 2021 plan

6,700

4,426

ROE
FY 2016 results

06 SENKO ANNUAL REPORT 2017

Strive for ratio of operating
income to sales of 4.0%

(Billions of yen)

Stability

Operational system

Fleet of own
trucks

Strive for operating
income of

FY 2021 plan

Key Measures of Group Medium-Term Business Policy
1 Expand business areas
Goals for operating revenues
in each business area

FY2016 results
Operatingrevenues

FY2021 plan

ChangePercentage

Operatingrevenues

Percentage

AmountRate ofincrease

Retail products

177.6

39%

285

41%

107.4

60%

Housing

60.9

13%

65

9%

4.1

7%
47%

Chemical

51.1

11%

75

11%

23.9

Other

28.4

6%

30

4%

1.6

6%

Logistics

318.0

70%

455

65%

137.0

43%

Trading & Commerce

132.9

29%

185

26%

52.1

39%

Others

4.6

1%

60

8%

55.4

1204%

Total

455.4

100%

700

100%

244.6

54%

International business*

26.6

6%

70

10%

43.4

163%

* Revenue from international business is included in the above figure.

2 Enhance brand value

4 Emphasize corporate social responsibility (CSR)

1) Extend and improve the Group brand2) D‌ evelop products and services incorporating next-generation technology3) B‌ uild a business platform that transcends industries and national borders

1) Strengthen internal controls and promote activities for safety and health2) Contribute to and collaborate with local communities
3) Pursue environmental consciousness

3 Improve employee satisfaction (ES)

5 Gain trust from capital markets

1) Strengthen hiring and training of global human resources2) ‌Provide opportunities so that all Group employees are challenged
and can grow3) ‌Promote diverse workstyles and a workplace that is easy to work in

1) Strengthen financial soundness
2) Boost capital efficiency
3) Strengthen business profitability

Key measures in each business area

Key measures

Retail products• Diversifying logistics center services and expanding bases• Enhancing logistics bases with three temperature zones, for food products, etc.
• Expanding business through logistics bases, integrating operations for manufacturers and wholesalers (using an industry platform)

Housing• Expanding logistics for both builders using traditional Japanese timber framing methods as well as pre-cut housing manufacturers• Entering into logistics for fields other than single-family houses, such as apartment and commercial buildings, and housing renovations• Enhancing housing logistics-related services

Chemical• Expanding business areas where we have a competitive advantage, such as bulk container transportation• Promoting renewable energy-related logistics• Enhancing logistics for foreign-owned businesses in Japan and trading companies

Other• Growing the moving business for hospitals, libraries, research centers, etc.
• Expanding logistics in the same industry as ours and for trading companies

Logistics

Trading & Commerce• Deeply cultivating markets with a unified model for Logistics and Trading & Commerce• Developing and selling new products

Others (Living Support, Agriculture,
Business Support)• Promoting business in the healthcare industry (nursing care facilities, etc.)• Promoting and strengthening lifestyle–related business (housekeeping services, etc.)• Promoting business related to hotels• Expanding business in the agriculture industry• Promoting Business Support

International business• Strengthening international logistics (expand bases, build a cold storage and freezer network, enter international air transportation)• Expanding into commercial logistics areas that we have not entered yet

SENKO ANNUAL REPORT 2017 07

Corporate Group Creating Future Trends

The New Structure of the Senko GroupIn April 2017, we divided our Group companies into five businessdomains, to coincide with the transition to using a holding company
system. We also established SENKO Co., Ltd. and Runtec Co., Ltd.
as the core companies for the Logistic Group and SENKO SHOJI
Co., LTD., SMILE CORP. and AST CORPORATION as the corecompanies for the Trading & Commerce Group in order to supervise
the management of the companies within each group.

Name

Senko Group Holdings Co., Ltd.

Representative

Yasuhisa Fukuda (President and Representative Director)

Date of Founding

September 1916

Date of Establishment

July 1946

Paid-in Capital¥26,528 million

Senko Group Holdings Co., Ltd.

Logistics

Trading & Commerce

Senko Co., Ltd.
Runtec Co., Ltd

SENKO SHOJI Co., Ltd.
SMILE CORP.
AST CORPORATION

83

15

Companies

Companies

Living Support

Agriculture

6

Companies

1

Company

Business
Support15

Companies(As of April 30, 2017)

Core companies
Name

SENKO Co., Ltd.

Name

SMILE CORP.

Representative

Yasuhisa Fukuda (President and Representative Director)

Representative

Atsushi Ono (President and Representative Director)

Date of Establishment

April 15, 2016

Date of Establishment

June 1, 1977

Paid-in Capital¥10,000 million

Paid-in Capital¥570.5 million

Main Business

Logistics

Main BusinessTrading & Commerce

Name

Runtec Co., Ltd.

NameAST CORPORATION

Representative

Kazuhiro Yamanaka (President and Representative Director)

Representative

Hiroyuki Hayashi (President and Representative Director)

Date of Establishment

July 14, 1953

Date of Establishment

July 1, 2006

Paid-in Capital¥519.8 million

Paid-in Capital¥100 million

Main Business

Logistics (refrigerated and frozen)

Main BusinessTrading & Commerce

Name

SENKO SHOJI Co., LTD.

Representative

Hiroshi Yoneji (President and Representative Director)

Date of Establishment

April 1, 1965

Paid-in Capital¥300 million

Main BusinessTrading & Commerce

08 SENKO ANNUAL REPORT 2017

Logistics
We have expanded our Logistics Group to support customers in industries related tohousing and construction materials and chemical products, in addition to retail industries
encompassing general supermarkets, drugstores, home improvement stores, and apparel.
Furthermore, for the food sector we have freezing and refrigeration warehouses as well
as a nationwide low-temperature (both refrigerated & frozen) logistics network, whichuses several methods including refrigerated trucks and railway containers.
We also have business centers outside Japan (local companies, etc.) to create amultimodal transportation system between Japan and the rest of the world, and for our
global logistics center business.

Trading & Commerce
We sell fuel with oil cards, logistics-related commercial materials (logistics equipment,etc.), everyday items, packaging materials, foodstuffs, liquor and more.
We also undertake international trade, such as the import and export of customers’
raw materials, and other international transactions.

Living Support
We have developed businesses to support the everyday life of consumers, such as nursing
care and housework services, as well as moving services and restaurants.

Agriculture
Senko School Farm Tottori, housed in a disused school, is a welfare-oriented agricultural
initiative which cultivates and sells leafy vegetables and mushrooms.
We also grow and sell tea (in Kumamoto), tomatoes (in Miyazaki), and grapara
leaves (in Chiba).

Business Support
We have a logistics consulting business and an information system business, responsiblefor developing and managing IT solution systems, to create an optimum logistics system
which meets the diverse needs of our customers.
We also have a call center business that serves the real estate development sector, thepersonnel service sector and online shopping businesses.

SENKO ANNUAL REPORT 2017 09

Review of Operations by Business Segment
Logistics
Operating revenue grew 5.8% year on year to ¥318 billion inthis segment. This was mainly attributable to a rise in operating
revenue resulting from the consolidation of ACROSS
TRANSPORT CO., LTD. and sales to new and existingcustomers, including a major drugstore chain.

318.0

300.4

Total
operatingrevenue¥ 455.4
7%

Up

5.8%

15

Retail Products
Logistics

16

FY

Operating revenue grew 10.5% year on
year to ¥177.6 billion in this segment.
This was mainly attributable to newservice contracts, particularly for major
drug stores, and the effect of making
ACROSS TRANSPORT CO., LTD. into a
consolidated subsidiary.

billion

11% 13%Retail product logistics
Housing logistics

Housing
Logistics

177.6

160.7

Chemicals logistics
Other logistics

Operating revenue decreased 1.9%
year on year to ¥60.9 billion in this to a
decline in existing cargo volumes,
despite active sales expansion.

Down
1.9%

10.5%

Chemicals
Logistics

16

FY

In this segment, operating revenue
grew 3.1% year on year to ¥51.1 billion.
This was mainly because of growth insales, which included logistics
contracts for resin and aluminumproducts and an expansion in bulk
container transportation.

51.1

49.5

15

Other Logistics

FY

28.4

28.1

Up

3.1%

10 SENKO ANNUAL REPORT 201716

Operating revenue in this segment
for the fiscal year ended March 31,2017 increased by 1.0% year on yearto ¥28.4 billion.

Up

15

60.9

62.1

Up

15

39%

1.0%

16

FY

15

16

FY

Trading & Commerce
Operating revenue grew 2.6% year on year to ¥132.9 billion in thissegment, the result of an increase in sales volume of existingproducts and sales expansion to new customers.

29%

Total
operatingrevenue¥ 455.4
billion

132.9

129.6

Up

2.6%

15

Others16

FY

1%

Operating revenue rose 11.5% year on year to ¥4.6 billion in thissegment. This was mainly attributable to the growth of sales indata processing services and sales of electricity produced by solar
power generation.

Total
operatingrevenue¥ 455.4
billion

4.6

4.1

Up

11.5%
15

16

FY

SENKO ANNUAL REPORT 2017 11

Topics
Logistics

Building a Logistics Infrastructure in Vietnam;
Logistics Center to Begin Operations in December
We established SENKO Logistics Vietnam Co., Ltd. to work in
freight forwarding and customs services in Vietnam, a nation
attracting wide attention as a manufacturing center and as aconsumer market. We began a full-scale land-sea intermodaltransportation service between Japan and Vietnam in May 2017.
We also established SENKO DISTRIBUTION SERVICE(VIETNAM) Co., Ltd. in March 2017 and started building alogistics center near Hanoi, with plans to start operating in
December 2017.

Logistics

Subsidiaries to Develop Marine Transportation
In April 2017, Senko purchased 60% of the shares in each of
NIPPON MARINE CO., LTD. and EIKICHI KAIUN CO., LTD., both
members of the JX Nippon Mining & Metals Group, a marinetransporter of metals, from JX Nippon Mining & Metals Groupand made them into subsidiaries.
With the entry of these two companies into the Senko
Group, we can strengthen our marine transportation
services, including increasing tonnage shipped and reducing
costs through centralized purchasing of equipment. In
addition, we intend to further grow the marine transportation
segment, including the creation of new services and thedevelopment of new customers, by combining Senko’s
expertise in land-sea intermodal operations with the marinetransportation expertise of these two companies.

12 SENKO ANNUAL REPORT 2017

01
02

Living Support

Expanding the Living Support Segment
Group Nationwide
In January 2017, the Senko Group made Ienonaka Company, Ltd.
into a subsidiary, which operates lifestyle support services,
mainly in Tokyo and Yokohama.
Over the past few years, there has been a growing need forthese types of services, which includes housekeeping and housecleaning, due to an increase in the number of women working
outside the home and the graying of society in Japan.
The Senko Group entered the living support domain and will
first provide services in the Kanto region, with plans to graduallyroll out services nationwide with a focus on urban areas,such as the Kansai region. We will roll out these services incooperation with Senko Group business sites, which arelocated nationwide.

Logistics / Trading & Commerce / Living Support

03
04

Alliance with Chinese Nursing Care Company;
Developing Integrated Trading, Commerce and Logistics
In March 2017, Senko formed an operational alliance with
China Minsheng Investment Group (CMIG) Elderly Care, Ltd.,a subsidiary established by the major Chinese property manager
CMIG to run nursing care facilities and to sell nursing careproducts in China.
This alliance creates an opportunity for us to support thenursing care businesses that CMIG Elderly Care, Ltd.
operates in China through trading and by sales of the nursing
care equipment and goods that the Senko Group handles,
supplying the nursing care expertise of Group company
KEIHANNA helper station Co., Ltd., as well as training,
guidance and integrated Japan-China logistics.

SENKO ANNUAL REPORT 2017 13

Topics
Personnel Development

Initiatives for Human Resource Development

In October 2016, the Senko Group established SENKO
University, an in-house training center for developing strategic
personnel. With courses such as Creating new businesses,
Developing the next-generation of leaders, Training globallyminded managers, and Training advanced businessprofessionals, we give a series of lectures from internal andexternal experts for periods of study that last from one tothree years.

Personnel Development

Driving School for Large Vehicles
to Attract New Drivers
In November 2016, the Crefeel Koto Driving School Grounds(Higashiomi City, Shiga Prefecture) at the Company’s traffic
safety training facility Crefeel Koto was certified by the
Shiga Prefectural Public Safety Commission and began
operating as a training school for large vehicle driving.
In addition to driver education at Crefeel Koto, going forward
the Senko Group will continue working to attract drivers bypromoting large vehicle drivers’ licenses.

14 SENKO ANNUAL REPORT 201705
06

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 a businessand is regarded as a high-priority issue for management.

General Meeting of Shareholders
Appointment / Dismissal

Accounting Auditors

ReportAppointment / Dismissal

Board ofCorporate Auditors

Appointment / Dismissal

ReportAudit

Appointment /Supervision

Dialogue
ReportAccounting
Audit

ReportAssist /ReportPresident andRepresentative Director

Audit

Auditing Dept.

Legal Counsel

Audit

CSR Promotion Committee(Directors, Corporate Auditors, Committee Chairmen, etc.)
Supervise

ReportReportOperating companies
Subsidiaries directlysupervised byholding company
Companies in Living
Support, Agriculture,
and Business Support

Internal Controls Committee
Group Safety and Environment Committee

ReportInstruct

AdviceExecutive Officers

Board of Directors

ReportCore companies
Runtec Co., Ltd.
SENKO SHOJI Co., LTD.
AST CORPORATIONSMILE CORP.

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

SENKO Co., Ltd.
ReportCorporate Management Committee

Senko has included some of the principle elements of Japan’s Corporate Governance Code on the Company’s website to clarify its
position on working to enhance corporate governance based on this code.
http://www.senkogrouphd.co.jp/ir/governance/ (Japanese only)

Compliance-Based Management
The Senko Group has established the Senko Standards of Business Conduct, which prescribe all items that executives and employees
must observe regarding every aspect of their job activities based on a thorough understanding of the Group’s social obligations.
Committees have been established to ensure that everyone fully understands these standards and to implement and upgrade thesestandards. In addition, there is a Business Ethics Hotline.
The Senko Group established the Senko Group Corporate Code of Conduct, which prescribes all items that executives and employees
must observe in every aspect of their job activities based on a thorough understanding of the Group’s social obligations.

SENKO ANNUAL REPORT 2017 15

Business Risks
Reinforcing Risk Management System
We have built a risk management system for various risks that may arise in the course of our business operations. In the event of an
emergency, this system prioritizes human life, limits property damage (corporate losses), enables a swift resumption of business,maintains social trust, and implements measures from a 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 anddisseminating our Risk Manual and by implementing periodic training programs for truck drivers on the safe transport of hazardous
materials. We also operate a logistics information back-up center to prepare for major disasters.
Of the items related to the status of business and accounting contained in the Securities Report, the following may have a material impact
on the judgment of investors.

(1) Laws and Regulations
The Group is engaged in transportation, distribution processing, and other businesses, and provides a wide range of logistics
services. These businesses are subject to regulation under the Motor Truck Transportation Business Act, the Consigned Freight
Forwarding Business Act, the Warehousing Business Act and other legislation. It is necessary to receive registration or approval
from the Minister of Land, Infrastructure and Transport to engage in these businesses, and there is a mandatory post-notification
system for setting and revising fees. Moreover, environmental legislation, including regulations on truck exhaust, has also beenstrengthened. The performance of the Group could be affected by legal revisions in the future and by trends for tightening or
loosening regulations.

(2) Sharp Increase in the Price of Crude Oil
A rise in the price of light oil due to a sharp increase in the price of crude oil will push up transportation costs. The performance of
the Group, where truck transportation is the mainstay business, could be affected in the future by price trends.

(3) Occurrence of a Serious Accident
In case a serious vehicle or freight accident occurs, the performance of the Group could be affected by a loss in customer andpublic confidence, suspension of vehicle use, administrative penalties such as business suspension, etc.

(4) Occurrence of a Disaster, etc.
The performance of the Group could be affected by a system shutdown due to transportation routes being blocked or electricity
being suspended during a disaster, such as a storm or an earthquake, or by a blackout.

(5) IT System Failure
The Group leverages IT technology to manage customer freight information and for control systems for warehouses. The performanceof the Group could be affected if these systems are shut down due to a natural disaster, computer virus, or computer hacking.

(6) Management of Customer Information
The Group handles customer information when providing logistics services and has worked hard on information management throughin-house education. However, the Group’s performance could be affected by claims for compensation for damages if there is anexternal leak of information or loss of data.

16 SENKO ANNUAL REPORT 2017

Board of Directors, Corporate Auditorsand Executive Officers

President andRepresentative Director

Yasuhisa Fukuda
President andRepresentative Director

Director andManaging Executive Officers

Directors

Outside Directors

Yasuhisa Fukuda

Responsible for Logistics
Head of promotion Division, Business Support
Senko Co., Ltd. President and Representative Director

Yoshihiro Kawase

Responsible for IT & HR Training
President and Representative Director, SENKO INFORMATION SYSTEM Co., Ltd.
Chairman, Senko Health Insurance Association

Noburo Sasaki

Responsible for PR & IR
President and Representative Director, Senko Facilities Co., Ltd.

Kenichi Shiraki

Head of Business Promotion Division, Living Support

Masanobu Uenaka

Responsible for Management Strategy General Manager of Management Strategy OfficeDirector and Managing Executive Officer, Senko Co., Ltd.

Takeyo Tezuka

Responsible for Trading & CommarceDirector and Chairman, SENKO SHOJI Co., Ltd.
President and Representative Director, Marufuji Co., Ltd.
President and Representative Director, Obata Co., Ltd.

Kengo Tanaka

Responsible for International Business

Kazuhiro Yamanaka

Represent for Refrigerated & Frozen Logistics
President and Representative Director, Runtec Co., Ltd.
President and Representative Director, KOUKI Co., Ltd.

Hiroko Ameno

Director (part-time), Senko Co., Ltd.

Yasuyuki Sugiura
Keiji Matsubara

Full-time Corporate Auditors

Masami Washida
Keiichiro Yoshimoto

AuditorExecutive Officers

Auditor, Senko Co., Ltd.

Kanji Yasumitsu
Masami Tada

Depuly Head of promotion Division, Living Support
Responsible for Hotel BusinessPresident and Representative Director, Senko Creative Management Co., Ltd.

Kiyoshi Rurigaki

Assistant to Responsible for IT & HR Training
Responsible for Senko University
President and Representative Director, Crefeel Koto Co., Ltd.

Shigeru Ono

Head of ASEAN Area Office
Executive Officer, Senko Co., Ltd.
President and Representative Director, SENKO (THAILAND) CO., LTD.

SENKO ANNUAL REPORT 2017 17

CSR

Corporate Social Responsibility
The Senko Group has made to “emphasize corporate social responsibility (CSR)” part of its policy in SIP21.
The Group will unite to promote CSR management with the aim of enhancing corporate value and achieving
an enriched society in the future.

Medium-Term CSR Policy

We will raise awareness about compliance and CSR beginning with the
Senko Group and will include our vendors and business partners.

● Key Measures

Environmental Initiatives(1) As a specified business operator, we will work to achieve energy conservation targets.
(2) W‌ e will make reductions by conserving energy and improving the recycling and the green product purchasing rates, while contributing to a recycling society.
(3) We will develop environmental data at Group companies and will roll out environmental targets to Group companies.
(4) We will introduce equipment that reduces environmental impact, such as LED lighting and low-emission vehicles.
(5) We will promote alternative energy sources, including installing solar panels at new sites and by introducing large CNG vehicles.
(6) We will actively propose modal shifts in transportation to customers to promote green logistics.

Safety Initiatives(1) We will establish a safety and health management system that matches the characteristics of Group companies.
(2) We will analyze and use big data to centralize safety-related systems.
(3) We will actively introduce technology that prevents accidents (active safety).
(4) We will create opportunities for receiving and learning about safety technology.

Health Initiatives(1) We will manage health information on all Group employees and translate this into extending a healthy life expectancy.
(2) We will strengthen health management and eliminate all accidents caused by health conditions.
(3) We will build a prevention management framework based on the implementation of stress checks.
(4) We will strengthen activities to promote health in collaboration with the employee health insurance association.

Social Activities(1) We will actively conduct road safety classes and area cleanups to contribute to the local community.
(2) We will actively engage in volunteer programs that include educational assistance overseas.

CSR Promotion System
To fulfill our diverse social responsibilities, theCompliance Committee, the Corporate Ethics
Committee, the Risk Management Committee,
the Environmental Promotion Committee, and theSocial Contribution Promotion Committee will
each promote individual activities related to CSR.
In addition, the CSR Promotion Committee,
chaired by the president of Senko Group
Holdings, oversees these committees.
18 SENKO ANNUAL REPORT 2017

Compliance Committee
Corporate Ethics Committee
CSR Promotion
Committee
chaired by president

Risk Management Committee
Environmental Promotion Committee
Social Contribution Promotion
Committee

Operatingcompanies

Corporate Social Responsibility

CSR

Environmental Initiatives
To fulfill our social responsibility as a logistics company, we are taking action to reduce
CO2 emissions and are working with customers to promote green logistics.

Updated the Modal Shift Promotion Catalog to Strengthen
Green Logistics Proposals
The Senko Group’s performance on modal shifts to railway and marine transportation has been highly evaluated. As a result of contracts
concluded with major customers, we have reduced CO2 emissions per contract by 54% year on year.
For example, we switched to railway transportation for clothing and apparel in fiscal 2016. We updated our modal shift promotion
catalog to allow more customers to know about these kinds of green logistics. We are strengthening our proposal activities to provide
support for customers to reduce their environmental impact.

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 first determined the quantity of resources and energy used (the input) and the quantity of CO2 and waste materials
we produce (the output).

Diesel oil

INPUT
11,191 kℓ

Heavy oil

10,047 kℓElectricity

64,380,000 kWh

OUTPUT
CO2 emissions
94,276 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 WarmingCountermeasures” and the “Ministerial Order
Concerning the Calculation of the Greenhouse
Gas Emissions in Conjunction with the Business
Activities of Specified Emitters.”● CO2 Emissions by Cause
Others (city gas,
CNG, kerosene)0%

Boilers0%

171 t-CO2
306 t-CO2
Gasoline

1%752 t-CO2

Automobile(diesel oil)

26,628 t-CO2

36%

Total CO2
emissions

94,276 t-CO2

14%

Offices and warehouses,
etc. (electricity)

28%
2%

16%

33,447 t-CO2

Lift (diesel oil)

2,301 t-CO2
Shipping(heavy oil A)

14,877 t-CO2

Shipping(heavy oil C)

13,302 t-CO2● Change in annual CO2 emissions(t-CO2)120,000

97,81786,88990,05214

15

94,27690,00060,00030,000013

16 (FY)SENKO ANNUAL REPORT 2017 19

Safety Programs
We are striving to improve the skills of drivers in addition to strengthening safety management systems.
We are promoting initiatives linked to our health management system.

Held the 1st Grand Championship to Mark our 100th Anniversary
We extended the scale of the Skill Contest, held every year as part of our way to boost practical skills, and we determined championsfrom among 108 competitors. The champions were selected in each area by past champions and included ten competitors from overseas
in a logistics contest. In addition, 31 competitors selected from each area also competed in the telephone communication contest. A
fascinating contest was held on Senko-style safety knowledge and skills.

Driver competition,
Operator competition
We changed from a conventional scoring system
to a tournament style, where competitors now
go head to head.

Telephone communication
contestIn fiscal 2016, we also incorporated a paper test
for this competition of knowledge and skill.

20 SENKO ANNUAL REPORT 2017

Corporate Social Responsibility

CSR

Social Initiatives
We promoted reforms to benefit the health and job satisfaction of employees. We also
focused on initiatives for being more in harmony with local communities.

HealthSupporting Health with 19 Nurses
Around the Country
We have stationed occupational health and general nurses in nine
areas around the country to provide specialized health advice forall employees. In 2016, we hired three new nurses, creating a systemwith 19 in total.
We are also identifying issues from health data and are implementing
measures to promote better health. Specifically, the rate of abnormal
findings increased by 1.7% over the previous fiscal year. The rateof re-examination, follow-up examination, and treatment required
improved by 0.2% year on year.

Diversity

Promoting a "Working at Home"
System under Work Style Reforms
We have formulated the Work Style Reform Plan, to create a workplacethat is easy to work in and to keep working in.
As part of this program, we introduced a “working at home” systemfor employees who have difficulty coming into work for reasons
such as child or nursing care. In fiscal 2016, five employees used
this system, launching a new work style. We will further develop
an environment that enables the same work to be done at home as
is done at the office and to provide support that enables employees
to keep working over the long term.

Seeing the same materials andworking outside the office

Making maximum use of theteleconferencing system

Communities

School Visit Workshops on Road Safety
In addition to Road Safety Classes for Kids, which we hold in every
area, we have been holding school visit workshops at elementaryand junior high schools since fiscal 2014. In fiscal 2016, we held
these workshops in six schools in Hokkaido, Miyagi, Saitama,
Kanagawa, Fukuoka, and Miyazaki prefectures. The school visit
workshops include a ride in a truck and other experiences, and area good opportunity for students to see trucks up close.

Main components of the school
visit workshop program

School visit workshop for 5th grade
elementary school students

Hands on demonstration on the coolness ofa refrigerated vehicle, etc.

• Children learn the safe way to cross a road and use crosswalk• Children see the blind spots in a truck driver’s line of sight• Children learn about the hazards of left-turn collisions, etc.

SENKO ANNUAL REPORT 2017 21

Financial Review
Performance
decline in freight volumes from existing customers, and despite
factors buoying profits such as sales expansion, revision of
freight charges, and improvements in productivity. On the other
hand, consolidated ordinary profit rose to ¥17,301 million, up
0.7% year on year, due primarily to the increase in nonoperating income, while income attributable to owners ofparent also rose, to ¥8,951 million, up 4.8% year on year.

Consolidated operating revenue for the fiscal year ended
March 31, 2017 increased 4.9% year on year to ¥455,435 million.
This result mainly reflected the aggressive expansion of sales
and the contribution of ACROSS TRANSPORT CO., LTD., which
was made a consolidated subsidiary of the Company.
On the profit front, consolidated operating income
decreased to ¥17,082 million, down 2.4% year on year due to a

Billions of yen

2017

2016

Operatingrevenues

Component
ratio (%)

Operatingrevenues

Component
ratio (%)

Difference

Growth rate(%)

Logistics¥ 318.0

69.8¥ 300.4

69.2¥ 17.6

5.8

Retail product

177.7

55.9

160.7

53.5

17.0

10.6

Housing

60.9

19.1

62.1

20.7

(1.2)

(2)

Chemicals

51.1

16.1

49.5

16.5

1.6

3.2

Other

28.3

8.9

28.1

9.4

0.2

0.9

Trading & commerce

132.9

29.2

129.6

29.8

3.4

2.6

Others

4.6

1.0

4.1

1.0

0.4

11.5

Total

¥ 455.4100¥ 434.0

100.0¥ 21.49

For the fiscal years ended March 31

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

Net income attributable toowners of parent

0

0

13

14

22 SENKO ANNUAL REPORT 2017

15

16

17

13

14

15

16

17

13

14

15

16

17

Consolidated Operating Revenues
by Segment

Financial Condition
Assets

Logistics

Total assets as of March 31, 2017 were ¥285,959 million, whichwas ¥16,497 million more, or 6.1% higher, than at the end of theprevious fiscal year.
Current assets amounted to ¥108,699 million, up ¥15,318 million,
or 16.4%, from the end of the previous fiscal year. This mainlyreflected increases of ¥8,685 million in cash and deposits andincreases of ¥3,868 million in notes and operating accounts
receivable.
Non-current assets totaled ¥177,175 million, up ¥1,204 million,
or 0.7%, from the end of the previous fiscal year. This was due
to a decrease in property, plant and equipment of ¥6,609 million,
or 4.8%, as a result of transfers of seven logistics centers to
the private REIT, despite increases in intangible assets of¥1,759 million, and an increase in investments and other assetsof ¥6,054 million.

Operating revenue grew 5.8% year on year to ¥317,984 million
in this segment. This was mainly attributable to a rise inoperating revenue resulting from the consolidation of ACROSS
TRANSPORT CO., LTD. and expansion of sales to new andexisting customers, including a major drugstore chain.

Trading & Commerce
Operating revenue grew 2.6% year on year to ¥132,868 million
in this segment, the result of an increase in sales volume ofexisting products and sales expansion to new customers.

OthersLiabilities

Operating revenue rose 11.5% year on year to ¥4,6 million in thissegment. This was attributable to the growth of sales in dataprocessing services and increased sales of electricity produced
by solar power generation.

Operating income ( )/net income to operating
revenues ( )Liabilities as of March 31, 2017 increased ¥2,416 million, or 1.4%,
from the end of the previous fiscal year to ¥171,868 million.
Current liabilities totaled ¥93,915 million, up ¥8,267 million, or
9.7%, from the end of the previous fiscal year. This was mainly due
to increases in electronically recorded obligations−operatingof ¥5,171 million, short-term loans payable of ¥7,243 million, andlease obligations of ¥857 million, despite decreases in notes
and operating accounts payable−trade of ¥3,394 million andcurrent portion of bonds of ¥5,000 million.

Net income per share

Cash dividends applicable tothe year per share

(%)
5.0

(Yen)

(Yen)

75

25

4.0

60

20

3.0

45

15

2.0

30

10

1.0

15

5

0

0

0

13

14

15

16

17

13

14

15

16

17

13

14

15

16

17

SENKO ANNUAL REPORT 2017 23

increase ¥18,984 million, or 107.5%, to ¥36,646 million, due tothe planned opening of large logistics centers both in Japanand overseas.
Depreciation increased ¥291 million, or 2.9%, to ¥10,216 million,
compared with the previous fiscal year, and is expected to rise
¥1,336 million, or 13.1%, to ¥11,552 million in the fiscal year ending
March 31, 2018.

Non-current liabilities totaled ¥77,953 million, down ¥5,850 million,
or 0.7%, from the end of the previous fiscal year. This was due
to increases in convertible bonds with subscription rights toshares of ¥5,012 million and lease obligations of ¥2,774 million,
even though long-term loans payable decreased by ¥13,459 million.

Net Assets

Cash Flows
Cash and cash equivalents at the end of year increased by¥8,431 million, or 47.5%, year on year to ¥26,197 million.
Net cash provided by operating activities amounted to¥20,848 million, an increase of ¥4,698 million, or 29.1%, from theprevious fiscal year. This was mainly due to income before
income taxes of ¥16,573 million and depreciation andamortization of ¥10,216 million, despite interest expenses paidof ¥954 million and income taxes paid of ¥5,360 million.
Net cash used in investing activities totaled ¥3,679 million,
an increase of ¥1,390 million, or 60.7%, from the previous fiscal
year. This was mainly due to the purchase of fixed assets of¥16,253 million and the purchase of non-consolidated
subsidiaries ¥5,282 million, despite proceeds from the sale of
fixed assets of ¥17,883 million.
Net cash used in financing activities totaled ¥8,627 million, adecrease of ¥12,865 million, or 59.9%, from the previous fiscal
year. This was mainly due to a repayment of long-term debt of¥10,871 million, repayments of finance lease obligations of¥2,802 million, redemption of bond of ¥5,000 million, and cash
dividends paid of ¥3,173 million, despite proceeds from long-termloans debt of ¥3,150 million and proceeds from issuance of
convertible bord of ¥10,050 million.

Net assets as of March 31, 2017 rose ¥14,080 million, or 14.1%,
from the end of the previous fiscal year to ¥114,091 million. Thiswas due to factors such as increases of ¥2,516 million in capitalstock as a result of the conversion of convertible bonds with
subscription rights to shares, ¥2,573 million in capital surplus,¥5,809 million in retained earnings, ¥1,527 million in remeasurementsof defined benefit plans, and ¥1,472 million in non-controllinginterests. The equity ratio increased by 2.5 percentage points
to 35.1% from the end of the previous fiscal year.

Capital Expenditures andDepreciation
Capital expenditures in the fiscal year under review increased¥162 million, or 0.9%, to ¥17,662 million, compared with the previous
fiscal year. The Company opened logistics centers in the Kanto
region in Japan as well as in the U.S. and Myanmar in thefiscal year under review. As a result, the total warehouse
space as of March 31, 2017 expanded by 280,000 m2 from theend of the previous fiscal year to 3,220,000 m2. In the fiscal year
ending March 31, 2018, capital expenditures are expected toTotal assets

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

ROE ((Millions of yen)

(%)

(%)

120,000

40

12

90,00030

960,00020

630,000

10

3

0

0

240,000) / ROA ()

180,000

120,000

60,000

0

0

13

14

24 SENKO ANNUAL REPORT 2017

15

16

17

13

14

15

16

17

13

14

15

16

17

Report of Independent Auditors

SENKO ANNUAL REPORT 2017 25

Consolidated Balance Sheets
SENKO Group Holdings Co., Ltd. and Consolidated Subsidiaries
March 31, 2017 and 2016

Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

¥ 26,197¥ 17,765$ 233,506

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

6

4

53

61,97058,104552,366

(22)

(29)

(196)

Inventories

7,604

7,507

67,778Deferred tax asset (Note 16)

2,827

2,583

25,198Prepaid expenses and other current assets

10,117

7,446

90,177

108,699

93,380968,882

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

13,267

9,031

118,255

Investment securities (Notes 7 and 12)

6,033

6,033

53,775

Total current assets

241,236

245,205

2,150,245

Less : accumulated depreciation(111,122)(108,481)(990,480)

Net property and equipment

130,114

136,724

1,159,765

Long-term deferred tax assets (Note 16)

2,051

2,553

18,281

Net defined benefit assets

2,359

–

21,027

Other assets

23,353

21,631

208,156

83

109

740

83

109

740

¥ 285,959¥ 269,461$ 2,548,881

Property and equipment, at cost (Notes 9 and 12)

Deferred assets:
Business commencement expenses
Total deferred assets

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

26 SENKO ANNUAL REPORT 2017

Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

LIABILITIES AND NET ASSETS
Current liabilities:
Short-term loans (Note 10)

¥

9,035

¥

7,530

$

80,533Current portion of long-term debt (Note 10)

16,597

15,858147,937

Lease obligations

2,794

1,936

24,904

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

25

44

223

40,48038,683360,817

8,630

8,301

76,923

Accrued income taxes

3,916

3,220

34,905

Other current liabilities

12,438

10,075

110,865

93,91585,647

837,107

Long-term debt, less current portion (Note 10)59,534

67,981

530,653

Lease obligations

6,366

3,591

56,743Net defined benefit liabilities (Note 11)

7,088

7,621

63,179Other long-term liabilities

4,965

4,611

44,255

26,52924,012

236,465

Capital surplus

25,411

22,838226,499

Retained earnings

48,65542,845433,684

(658)

(943)

(5,864)

99,93788,752890,784

1,392

1,449

12,408

2

(92)

18

251

428

2,237

(1,293)(2,821)(11,525)352(1,036)

3,138

Total current liabilities

Contingent liabilities (Note 13)
Net assets (Note 14):
Shareholders' equity
Common stock:
Authorized–294,999,000 shares
Issued–152,861,921 shares in 2017 and 144,834,771 shares in 2016

Less : Treasury stock, at cost–1,279,937 shares in 2017 and 1,907,546 shares in 2016
Total Shareholders' equity
Accumulated other comprehensive income :Net unrealized holdings gain on securities
Gain (loss) on deferred hedges
Translation adjustments
Remeasurements of defined benefit plans
Total accumulated other comprehensive income :Stock acquisition rights (Note 15)

396

360

3,530

13,406

11,934

119,492

Total net assets

114,091

100,0101,016,944

Total liabilities and net assets¥ 285,959¥ 269,461$ 2,548,881

Non-controlling interests

See the accompanying notes to the consolidated financial statements.

SENKO ANNUAL REPORT 2017 27

Consolidated Statements of Income
SENKO Group Holdings Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

2017

2016

2015

2017

¥ 455,435¥ 434,000¥ 398,448$ 4,059,497

405,758
32,595386,32130,182357,431
27,3673,616,704
290,534

438,353

416,503384,798

3,907,238

17,082

17,497

13,650152,259

232
(927)
186

293
(1,102)(272)

303(1,213)314

2,068(8,263)
1,658

(509)

(1,081)(596)(4,537)

Income before income taxes

16,573

16,416

13,054

147,722

Income taxes (Note 16):
Current
Deferred

5,930
(148)

5,528
638

4,466
958

52,857(1,319)

5,782

6,166

5,424

51,538Net income

10,791

10,2507,630

96,184

Net income attributable to non-controlling interests(1,840)(1,708)(556)(16,401)

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

¥

8,951

¥

8,542

¥

7,074

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

$

Yen

¥

61.67
58.74
22.00

¥

60.43
56.32
20.00

¥

55.06
50.41
17.00

79,783
U.S. dollars

$

0.55
0.52
0.20

See the accompanying notes to the consolidated financial statements.

Consolidated Statements of Comprehensive Income
SENKO Group Holdings Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017, 2016 and 2015
Thousands of
U.S. dollars

Millions of yen

2017

2016

2015

2017

¥ 10,791¥ 10,250¥ 7,630$ 96,184

Other comprehensive income (Note 5):
Net unrealized holdings gain on securities
Gain (loss) on deferred hedges
Translation adjustments
Remeasurements of defined benefit plans

52
98
(236)
1,544

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

1,258
8
257
652

463
875
(2,104)
13,762

Total other comprehensive income

1,458(1,620)2,175

12,996Comprehensive income¥ 12,249¥ 8,630¥ 9,805$ 109,180

Total comprehensive income attributable to:
Owners of parent
Non-controlling interests¥ 10,337¥ 1,912¥ 7,088¥ 1,542¥ 9,060¥ 745$ 92,137$ 17,043

Net income

See the accompanying notes to the consolidated financial statements.

28 SENKO ANNUAL REPORT 2017

Consolidated Statements of Changes in Net Assets
SENKO Group Holdings Co., Ltd. and Consolidated Subsidiaries
Years ended March 31, 2017, 2016 and 2015
Thousands

Millions of yen

Number ofshares ofcommonstock issued

Commonstock

CapitalsurplusRetainedearnings

Treasurystock(at cost)

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

¥ 739

¥ (9)

¥ 230

¥ (2,530)

¥ 236

–

–

–

530

–

–

–

–

–

–

Restated balance

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

¥ 739

¥ (9)

¥ 230

¥ (2,530)¥ 236

Net income attributable to owners of parent
Conversion of convertible bonds
Cash dividends
Purchases of treasury stock
Retirement of treasury stock
Adjustment of retained earnings for
newly consolidated subsidiaries–
12,938
–
–
–

–
2,578
–
–
–

–
2,578
–
–
–

7,074
–
(2,064)
–
–

–
–
–
(10)
360

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

7,074
5,156
(2,064)
(10)
360

–
–

–
–

–
–

72
–

–
–

–
1,081

–
5

–
314

–
690

–
53

–
7,181

72
9,324

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

¥ (4)

¥ 544

¥ (1,840)

¥ 289

–
2,907
–
–
–

–
913
–
–
–

–
913
–
–
–

8,542
–
(2,571)
–
–

–
–
–
(10)
250

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

8,542
1,826
(2,571)
(10)
250

–

–

–

197

–

–

–

–

–

–

–

197

–

–

10

–

–

–

–

–

–

–

–

10

–

–

–

–

–

(371)

(88)

(116)

(981)

71

506

(979)

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

¥ 360

–

–

–

19

–

–

–

–

–

–

144,834¥ 24,012¥ 22,838¥ 42,864¥ (943)¥ 1,449¥ (92)¥ 428¥ (2,821)

¥ 360

–
8,027
–
–
–

–
2,517
–
–
–

–
2,517
–
–
–

8,951
–
(3,177)
–
–

–
–
–
(1)
286

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

8,951
5,034
(3,177)
(1)
286

–

–

–

17

–

–

–

–

–

–

–

17

–

–

56

–

–

–

–

–

–

–

–

56

–

–

–

–

–

(57)

94

(177)

1,528

36

1,452

2,876

152,861¥ 26,529¥ 25,411¥ 48,655¥ (658)¥ 1,392

¥ 2

¥ 251

¥ (1,293)¥ 396

Balance at March 31, 2014
Cumulative effects of changes inaccounting policies

Other changes

Balance at March 31, 2015
Net income attributable to owners of parent
Conversion of convertible bonds
Cash dividends
Purchases of treasury stock
Retirement of treasury stock
Adjustment of retained earnings for
newly consolidated subsidiaries
Change in treasury shares ofparent arising from transactions
with non-controlling shareholders
Other changes

Balance at March 31, 2016
Cumulative effects of changes inaccounting policies

Restated balance
Net income attributable to owners of parent
Conversion of convertible bonds
Cash dividends
Purchases of treasury stock
Retirement of treasury stock
Adjustment of retained earnings for
newly consolidated subsidiaries
Change in treasury shares ofparent arising from transactions
with non-controlling shareholders
Other changes

Balance at March 31, 2017

Net
Remeasurements
Stock
Gain (loss)
unrealized
Translationof definedacquisition
on deferredholdings gain
adjustments
benefit plansrightshedgeson securities

Noncontrollinginterests

Total net
assets¥ 4,247 ¥ 72,303–

530¥ 4,247 ¥ 72,833¥ 11,428 ¥ 92,745¥ 11,934 ¥ 100,010
20

39¥ 11,954 ¥ 100,049¥ 13,406 ¥ 114,091
Thousand of U.S. dollars

Balance at March 31, 2016
Cumulative effects of changes inaccounting policies

Restated balance
Net income attributable to owners of parent
Conversion of convertible bonds
Cash dividends
Purchases of treasury stock
Retirement of treasury stock
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, 2017

Net
Gain (loss)
Remeasurements
Stockunrealized
Translation
on deferredof definedacquisition
holdings gain
adjustments
hedgesbenefit plansrightson securities

Commonstock

CapitalsurplusRetainedearnings

Treasurystock(at cost)$ 214,030$ 203,565$ 381,897$ (8,405)$ 12,916$ (820)$ 3,815$ (25,145)$ 3,209

–

–

170

–

–

–

–

–

–

$ 214,030$ 203,565$ 382,067$ (8,405)$ 12,916$ (820)$ 3,815$ (25,145)$ 3,209–22,435––––22,435–––79,783–(28,318)
–
–

–
–
–
(9)
2,550

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–
–
–
–
–

–

–

152

–

–

–

–

–

–
–

499
–

–
–

–
–

–
(508)

–
838

–
(1,578)–
13,620$ 236,465$ 226,499$ 433,684$ (5,864)$ 12,408

18$ 2,237$ (11,525)$ 3,530$

Noncontrollinginterests

Total net
assets$ 106,372 $ 891,434
178

348

$ 106,550 $ 891,782
–
–
–
–
–

79,78344,870(28,318)
(9)
2,550

–

–

152

–
321

–
12,942499
25,635$ 119,492 $ 1,016,944

See the accompanying notes to the consolidated financial statements.

SENKO ANNUAL REPORT 2017 29

Consolidated Statements of Cash FlowsSENKO Group Holdings Co., Ltd. and Consolidated Subsidiaries
Year ended March 31, 2017, 2016 and 2015

Thousands of
U.S. dollars

Millions of yen

2017

2016

2015

2017

¥ 16,573¥ 16,416¥ 13,054$ 147,722

10,216
130
(251)
1,225
(1,253)
(537)
575
–
(419)
(243)
144
(232)
927
(1,695)
(67)
1,071
608

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

91,0601,159(2,237)
10,919(11,168)(4,787)
5,125–(3,735)(2,166)
1,284(2,068)
8,263(15,108)
(597)
9,546
5,419

26,772390(954)(5,360)22,782226(1,096)(5,763)24,483214(1,238)(4,231)

238,6313,476(8,503)(47,776)

20,84816,14919,228

185,828(16,253)
17,883(60)
637(5,282)
–
(325)
–
(279)

(17,995)
21,728(120)
524(4,579)––(96)(1,751)(13,031)
431
(77)
126
(510)
9
(3,609)–(1,318)(144,870)
159,399(535)
5,678(47,081)–(2,897)–(2,487)

Net cash used in investing activities(3,679)(2,289)(17,979)(32,793)

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

252
3,150
(10,871)
10,050(5,000)(2,802)(1)
406(3,173)(638)(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)

2,246
28,077(96,898)
89,580(44,567)(24,975)(9)
3,619(28,282)(5,687)(8,627)(21,492)

6,210(76,896)

Effect of exchange rate changes on cash and cash equivalents

(116)

(79)

124

(1,034)

Net increase (decrease) in cash and cash equivalents

8,426(7,711)

7,583

75,105

Cash and cash equivalents at beginning of year

17,76525,476

17,667

158,347

6

–

226

54

¥ 26,197¥ 17,765¥ 25,476$ 233,506

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
Loss on reduction of property and equipment
State subsidy
Gain on sales of investment securities
Loss on valuation of shares of subsidiaries and associates
Loss on sales of shares of subsidiaries and associates
Increase in accured retirement benefits
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

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 2017

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

01

Basis of Presenting Consolidated Financial Statements

02

Summary of Significant Accounting Policies

SENKO Group Holdings Co., Ltd. (the “Company”) and its domestic subsidiaries maintain their accounts and records in accordance with the provisions
set forth in the Japan Companies Act and the Financial Instruments and Exchange Law of Japan and in conformity with accounting principles generally
accepted in Japan, 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, 2017, which was ¥112.19 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.

(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 2017 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 10 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 eachyear after giving effect to the dilutive potential of the shares of common stock to be issued upon the conversion of convertible bonds and exerciseof 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.

(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 programfor employees.

32 SENKO ANNUAL REPORT 2017

(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 1,449,000 shares valued at ¥718 million($6,400thousand) for the previous consolidated fiscal year and 873,000 shares valued at ¥433 million ($3,860thousand) for the current
consolidated fiscal year.
(3) Book value of borrowings posted due to application of the gross method
Previous consolidated fiscal year: ¥750 million ($6,685thousand)Current consolidated fiscal year: ¥374 million ($3,334thousand)03

Changes in Accounting Policies(Application of the Revised Implementation Guidance on Recoverability of Deferred Tax Assets)
Effective from the consolidated fiscal year ended March 31, 2017, the “Revised Implementation Guidance on Recoverability of Deferred Tax Assets”(ASBJ Guidance No. 26, issued on March 28, 2016; hereinafter referred to as “Implementation Guidance on Recoverability”) has been applied.
Accordingly, certain accounting methods related to the recoverability of deferred tax assets have been changed.
The Implementation Guidance on Recoverability has been applied in accordance with the transitional treatment set forth in paragraph 49 (4) of the
Implementation Guidance on Recoverability. The differences between (a) the amounts of deferred tax assets and deferred tax liabilities calculated
when application of paragraph 49 (3) (i) to (iii) of the Implementation Guidance on Recoverability as of April 1, 2016, the beginning of the fiscal year
ended March 31, 2017, and (b) the amounts of deferred tax assets and deferred tax liabilities as of March 31, 2016, the end of the previous consolidated
fiscal year, were added to retained earnings and non-controlling interests as of April 1, 2016.
As a result, long-term deferred tax assets, retained earnings and non-controlling interests increased by ¥39 million ($348 thousand), ¥19 million($170thousand) and ¥20 million ($178thousand) as of April 1, 2016, respectively.
As the amount of the impact was reflected in net assets at the beginning of the current consolidated fiscal year, on the consolidated statements ofchanges in net assets, the beginning balance of retained earnings increased by ¥19 million ($170thousand) and non-controlling interests increased by¥20 million ($178thousand).
(Application of Practical Solution on a Change in Depreciation Method Due to Tax Reform 2016)
Effective from the consolidated fiscal year ended March 31, 2017, certain consolidated subsidiaries of the Company began applying the Practical
Solution on a Change in Depreciation Method Due to Tax Reform 2016 (Accounting Standards Board of Japan [ASBJ] Practical Issues Task Force[PITF] No. 32 of June 17, 2016) as a result of revisions to Japan’s Corporate Tax Act. The solution was adopted to change from the declining-balancemethod to the straight-line method for the depreciation of fixtures attached to the buildings or structures acquired on or after April 1, 2016.
The effect of this change on the consolidated operating results for the ended March 31, 2017 was also immaterial.

04

Changes in Accounting Estimates(Change in the amortization period for actuarial gains and losses from accounting treatments of defined benefit plans)With regard to actuarial gains and losses from accounting treatments of defined benefit plans that were previously amortized over a certain period(mainly 13 years), which is within the estimated average remaining years of service of the Companies’ employees, the Company has shortened theperiod to mainly 10 years effective from the consolidated fiscal year ended March 31, 2017, as the current estimated average remaining years ofservice fell short of the previous amortization period of 13 years.
Compared with the figures calculated for the previous amortization period, this change had the effect of reducing operating income, and income
before income taxes for the consolidated fiscal year ended March 31, 2017, each by ¥289 million ($2,576thousand).

SENKO ANNUAL REPORT 2017 33

05

Comprehensive Income

The amount of recycling and amount of income tax effect associated with other comprehensive income at March 31,2017, 2016 and 2015 consisted of
the following:Thousands ofMillions of yen

2017
Net unrealized holdings gain on securities:
Amount recognized in the period under review
Amount of recycling

2016

U.S. dollars

2015

2017

¥ 563
(513)

¥ (658)6¥ 2,090(306)$ 5,018(4,573)

Before income tax effect adjustments
Amount of income tax effect

50
2

(652)
299

1,784
(526)

445
18

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

52

(353)

1,258

463

143

(138)

13

1,275

Before income tax effect adjustments
Amount of income tax effect

143
(45)

(138)
43

13
(5)

1,275
(400)

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

98

(95)

8

875

(236)

(153)

257

(2,104)Remeasurements of defined benefit plans:
Amount recognized in the period under review
Amount of recycling

1,791
460

(1,127)
(276)

1,666
(555)

15,964
4,100

Before income tax effect adjustments
Amount of income tax effect

2,251
(707)

(1,403)
384

1,111
(459)

20,064(6,302)Remeasurements of defined benefit plans

1,544(1,019)652

13,762¥ 1,458¥ (1,620)¥ 2,175$ 12,996

Total other comprehensive income

06

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 2017

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

2017Book 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¥ 27,163
61,976
5,597
3,791
(646)

¥ 27,163
61,976
5,597

3,145

3,872

727

Total assets¥ 97,881¥ 98,608¥ 727(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)¥ 40,505
9,035
7,000
10,05059,081
9,160¥ 40,505
9,035
6,953
9,702
59,702
8,602¥

Total liabilities¥ 134,831¥ 134,499¥ (332)Derivatives (* )

¥

¥

¥

2

2

2

¥

–
–
–

–
–
(47)
(348)
621
(558)

–

Millions of yen

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¥ 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)

–

SENKO ANNUAL REPORT 2017 35

Thousands of U.S. dollars

2017(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$ 242,116
552,41949,88933,791(5,758)$ 242,116
552,41949,88928,03334,513

6,480

Total assets$ 872,457$ 878,937$ 6,480(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)$ 361,040
80,53362,39489,580526,616
81,647$ 361,040
80,533
61,97586,478532,151
76,673$

Total liabilities$ 1,201,810$ 1,198,850$ (2,960)

Derivatives (*2)

$

$

$

18

18

$

–
–
–

–
–
(419)
(3,102)
5,535(4,974)–*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 7"(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 and interestby 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 2017

● Derivatives

See “Note 8”
Financial instruments for which it is extremely difficulty to determine market value

Thousands of
U.S. dollars

Millions of yen

2017
Unlisted shares2016¥ 10,8562015¥ 6,118$ 96,764

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

2017

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¥ 27,163
61,976
–

¥

–
–
–

–
–
–
844

–
16
–
1,357

–
–
–
1,481

–
–
–
109

Total

¥ 89,983¥ 1,373¥ 1,481¥ 109
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
Thousands of U.S.dollars

2017

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$ 242,116
552,419
–

$

–
–
–

–
–
–
7,523

–
143
–
12,096–––
13,201

–
–
–
971

Total

$ 802,058$ 12,239$ 13,201$ 971

SENKO ANNUAL REPORT 2017 37

07

Investment Securities

The carrying amounts of investment securities at March 31, 2017 and 2016, consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017Marketable securities
Non-marketable securities

2016

2017

¥ 5,597436¥ 5,579454$ 49,888
3,887¥ 6,033¥ 6,033$ 53,775

The following is a summary of marketable securities included in investment securities, at March 31, 2017 and 2016.
Millions of yen

2017
Equity security
Bond and Others

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)¥ 2,891133¥ 2,6090¥ 34
2¥ 5,466131¥ 3,024¥ 2,609¥ 36¥ 5,597

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

Acquisition cost

Gross unrealized
gains

Gross unrealized
lossesBook value(Market value)$ 25,769
1,185$ 23,255
0

$ 303
18

$ 48,721
1,167$ 26,954$ 23,255$ 321$ 49,888

Millions of yen

2016
Equity security
Bond and Others

Thousands of U.S.dollars

2017
Equity security
Bond and Others

08

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

2017
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

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

38 SENKO ANNUAL REPORT 2017

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable
Trade accounts receivable

¥

58
2

¥–
–

¥ 0
0

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable¥ 1,954
572
147
5
3

¥–
–
–
–

¥ 6
1
5
0
0

¥ 2,741¥–¥ 12

Millions of yen

2016
Hedge accounting method

Designated transactions forforward exchange contracts

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

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
203
12
0

¥–
–
–
–
–

¥ (105)
(20)
(5)
(0)
(0)

¥ 2,898¥–¥ (130)

Total

(0)
0

Thousands of U.S.dollars

2017
Hedge accounting method

Type of contracts

Designated transactions forforward exchange contracts

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

Item hedged

Contract
amounts

Over 1 year out ofcontract amounts

Market value

Trade accounts receivable
Trade accounts receivable

$

517
18

$–
–

$ (0)
0

Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable
Trade accounts payable$ 17,417
5,098
1,310
45
27

$–
–
–
–
–

$ 53
9
45
0
0

$ 24,432

$–

$ 107

Total

Market value is measured based on prices and other criteria presented by our correspondent financial institutions.
(2) Interest rate swaps
Millions of yen

2017
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¥ 30,600

Over 1 year out ofcontract amounts¥ 18,950

Market value¥ – (*)

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¥ 37,450

Over 1 year out ofcontract amounts¥ 30,600

Market value¥ – (*)

Thousands of U.S.dollars

2017
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$ 272,752

Over 1 year out ofcontract amounts$ 168,910

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.

SENKO ANNUAL REPORT 2017 39

09

Property and Equipment

At March31,2017 and 2016,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

10

2017

2016

2017

¥ 56,700
124,740
37,669
6,955
3,637
11,535¥ 60,487
134,201
35,671
6,494
1,504
6,848

$ 505,392
1,111,864
335,761
61,99332,418102,817¥ 241,236¥ 245,205$ 2,150,245

Short-term Loans and Long-term Debt

At March 31, 2017 and 2016, short-term loans consisted of the following:Thousands of
U.S. dollars

Millions of yen

2017
0.21% to 0.55% unsecured loans from banks

2016¥ 9,035

At March 31, 2017 and 2016, long-term debt consisted of the following:-

Less current portion¥ 7,530¥$ 80,533

Thousands of
U.S. dollars

Millions of yen

2017
0.80% bond due 2016
0.50% bond due 2021
Convertible bond due 2018
Convertible bond due 2022
0.50% to 4.50% loans from banks and insurance companies:
Unsecured

2017

2016

2017

–
7,000
–
10,050¥ 5,000
7,000
5,037
–

$

–
62,394–89,58059,08166,802526,616

76,131(16,597)

83,839(15,858)

678,590(147,937)¥ 59,534¥ 67,981$ 530,653

On October 15, 2013, the Company issued ¥7,000 million ($62,394 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 ($5.58) per share.
On March 9, 2017, the Company issued ¥10,050 million ($89,580 thousand) of zero coupon convertible bond with stock acquisition rights due in 2022.
The stock acquisition rights are exercisable during the period from March 14, 2022 at a conversion price of ¥930 ($8.29) per share.
The annual maturities of long-term debt at March 31, 2017 are as follows:Year ending March 31

2018
2019
2020
2021
2022
There after

Millions of yen¥ 16,597
8,349
5,640
12,8991,873
30,773Thousands of
U.S. dollars$ 147,937
74,41850,272
114,975
16,694274,294

At March 31, 2017, the Company has committed line and overdraft contracts with twenty three banks aggregating ¥37,065 million ($330,377 thousand).
Of the total credit limit, ¥7,535 million ($67,163 thousand) was used as the above short-term and long-term borrowing, and the rest ¥29,530 million($263,214 thousand) was unused.

40 SENKO ANNUAL REPORT 2017

11

Retirement 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

2017
Benefits obligation at the beginning of the year
Service cost
Interest costAccrued actuarial differences
Retirement benefits paid
OthersBenefits obligation at the end of the year

2016

2017

¥ 26,264¥ 27,581$ 234,103

1,137
78
(442)
(1,673)
274

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

10,135695(3,940)(14,912)2,442¥ 25,638¥ 26,264$ 228,523

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

2017

2016

2017

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

¥ 18,643
559
1,397
1,011
(701)

¥ 20,209606(2,481)
1,020
(711)

$ 166,173
4,983
12,452
9,011(6,248)Fair value of plan assets at the end of the year

¥ 20,909¥ 18,643$ 186,371c. ‌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						Millions of yen

2017

2016

Thousands of
U.S. dollars

2017

Benefits obligation under the funded benefit plan
Fair value of plan assets¥ 20,095(20,909)¥ 21,124(18,643)$ 179,116(186,371)

Benefits obligation under the unfunded benefit plan

(814)
5,542

2,481
5,140

(7,255)49,398

Net amounts of assets and liabilities on the consolidated balance sheets

4,728

7,621

42,143Net defined benefit assets
Net defined benefit liabilities

2,360
7,088

–
7,621

21,036
63,179¥ 4,728¥ 7,621$ 42,143

Net amounts of assets and liabilities on the consolidated balance sheets

d. Breakdown of retirement benefit costs

Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial differences¥ 1,137
78
(559)
480

¥ 1,039
227
(606)
297

$ 10,135
695(4,983)
4,278

Retirement benefit costs for the defined benefit plan

¥ 1,136¥ 957$ 10,125

SENKO ANNUAL REPORT 2017 41

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:
Millions of yen

2017

2016

Thousands of
U.S. dollars

2017

Recognized actuarial differences¥ 2,252¥ 1,402$ 20,073

Total

2,252

1,402

20,073f. 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:
Millions of yen

2017

2016

Thousands of
U.S. dollars

2017

Unrecognized actuarial differences¥ (1,967)¥ (4,219)$ (17,533)

Total(1,967)(4,219)(17,533)

g. Items concerning plan assets(i) Main items of plan assets
2017

2016

Bonds
StocksOthers

25%
58%
17%

27%
58%
15%

Total

100%

100%

(Note) 44% and 41% of total pension assets are in a "Retirements Benefit Trust" for the defined benefit pension plans as of March 31, 2017 and 2016, 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
2017
Discount rate
Defined benefit pension plans
Retirements lump-sum plans
Expected rate of return on plan assets

2016

0.61%
0.26%
3.00%

0.42%
0.17%
3.00%

(2) Defined contribution plan

Thousands of
U.S. dollars

Millions of yen

2017
Contributions to defind contribution plan by the Company and its consolidated subsidiaries

42 SENKO ANNUAL REPORT 2017

2016
¥ 621

2017
¥ 530

$ 5,535

12

Pledged Assets

The following assets were pledged as collateral as at March 31, 2017 and 2016.

Thousands of
U.S. dollars

Millions of yen

2017
Land
Buildings
Structures
VehiclesInvestment securities2016¥ 5,834
2,744
31
–
22

¥ 8,323
3,273
36
0
30

$ 52,001
24,459276–
196¥ 8,631¥ 11,662$ 76,932

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

Thousands of
U.S. dollars

Millions of yen

2017Long-term debt, including current portion

13

2016

¥ 4,581¥ 5,2062017$ 40,832

Contingent Liabilities

At March 31, 2017 and 2016, contingent liabilities were as follows:

Thousands of
U.S. dollars

Millions of yen

2017
Guarantees of some obligations
Buyback obligations associated with securitization of receivables
Recourse obligation associated with securitization of guarantee deposits
Trade notes endorsed

14

2017

2016

2017

¥ 2,052
605
83
84

¥ 405
468
140
82

$ 18,290
5,393
740
749

¥ 2,824¥ 1,095$ 25,172

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, 2017, included the Company’s legal reserve of¥1,506 million ($13,424 thousand).

SENKO ANNUAL REPORT 2017 43

15Stock Option Plans

The stock option plans of the Company approved by the shareholders in accordance with the Japan Companies Act at March 31, 2017 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

2016 Stock options (22th)

10 directors
4 auditors

35,000 shares

July 1, 2016

¥1

Common stock

July 2, 2016June 30, 2036

2016 Stock options (23th)

23 operating officers
15 assistant directors

43,000 shares

July 1, 2016

¥1

Common stock

July 2, 2016June 30, 2046

44 SENKO ANNUAL REPORT 2017

(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, 2017. The number of stock options istranslated into the number of shares.
Share subscription rights which are not yet vested (shares):
Stock option

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

At March 31,
2016

GrantedForfeited

VestedAt March 31,
2017

At March 31 ,2016

Vested2007 Stock options (1st)

–

–

–

–

–

24,000–2007 Stock options (2nd)

–

–

–

–

–

6,000

2008 Stock options (4th)

–

–

–

–

–

2008 Stock options (5th)

–

–

–

–

2009 Stock options (6th)

–

–

–

2009 Stock options (7th)––2010 Stock options (8th)–2010 Stock options (9th)Forfeited

At March 31,
2017

–

–

24,000

–

2,000

–

4,000

27,000–––27,000

–

9,000

–

3,000

–

6,000

–

–

36,000

–

6,000

–

30,000–––20,000–––20,000––––42,000

–

7,000

–

35,000

–

–

–

–

–

36,000

–

2,000

–

34,0002011 Stock options (10th)

–

–

–

–

–

70,000

–

8,000

–

62,0002011 Stock options (11th)

–

–

–

–

–

87,000

–

6,000

–

81,0002012 Stock options (12th)

–

–

–

–

–

74,000

–

8,000

–

66,0002012 Stock options (13th)

–

–

–

–

–

89,000

–

4,000

–

85,0002013 Stock options (15th)

–

–

–

–

–

63,000–––63,0002013 Stock options (16th)

–

–

–

–

–

80,000

–

4,000

–

76,0002014 Stock options (18th)

–

–

–

–

–

49,000–––49,0002014 Stock options (19th)

–

–

–

–

–

72,000

–

2,000

–

70,0002015 Stock options (20th)

–

–

–

–

–

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

–

–

–

–

–

60,000–––60,0002016 Stock options (22th)–

35,000–35,000––35,000––35,0002016 Stock options (23th)–

43,000–43,000––43,000––43,000Exercised

SENKO ANNUAL REPORT 2017 45

16Income 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 30.8 % for the years ended March 31, 2017 and 33.0 % for the years ended March 31, 2016.
(1) Significant components of deferred tax assets and liabilities at March 31, 2017 and 2016 were as follows:
Thousands of
U.S. dollars

Millions of yen

2017
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

2016

2017

¥ 2,966
1,591
409
258
265
318
216
258
102
1,744

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

$ 26,437
14,181
3,646
2,300
2,362
2,835
1,925
2,300
909
15,545

8,127(1,244)

8,885(1,603)72,440(11,088)

6,883

7,282

61,352

(689)
(32)
(697)
(971)

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

(6,141)(285)(6,213)(8,655)Gross deferred tax liabilities(2,389)(2,514)(21,294)

Net deferred tax assets¥ 4,494¥ 4,768$ 40,058

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(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, 2017 and 2016 were as follows:

2017

2016

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

30.8%

33.0%

1.3
1.5
(0.4)
–
(0.6)
1.4
0.9

1.1
1.5
(0.3)
1.2
(0.7)
1.2
0.6

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

34.9%

37.6%

46 SENKO ANNUAL REPORT 2017

17

Bussiness Combination Related(1) Outline of the business combinationa. Name of the acquired company and its business
Name of the acquired company
ACROSS TRANSPORT CO., LTD (hereinafter, “Across”)
Businesses
Fasion logistics
b. Main reasons for the business combination
Through a Group company, Tokyo Nohin Daiko Co., Ltd., the Company operates a consistent business for fashion products, ranging fromoverseas procurement to logistics center operation including storage, needle detection and repair, and delivery to a wide variety of outlets suchas department stores, and is working to strengthen and expand its fashion logistics business.
Concurrently, Across provides a consistent service ranging from logistics management to transportation of fashion products, as a subsidiaryof Onward Holdings Co., Ltd. (hereinafter referred to as “Onward”), and recently it has aggressively provided logistics services to companies
other than those in the Onward Group.
The Company made a decision to acquire Across’s shares to strengthen the delivery network to a range of stores including department stores,
shopping malls and outlet shopping centers throughout Japan. This will improve the fashion logistics services and boost earning capacity and pricecompetitiveness by integrating Across’s logistics expertise, production system and customer base with the Company’s fashion logistics business.
c. Date of business combination
April 15, 2016d. Legal form of the business combination
Stock acquisitione. Name of the controlling entity after the business combination
The name remains unchanged.
f. Percentage share of voting rights acquired by the Company
100.0%
g. Main reason for the decision to acquire the company
As the payment of the consideration was designated in cash, it was decided that the Company would be the acquirer, paying the relevant
consideration in cash.
(2) Period of the acquired company’s financial results included in the consolidated statements of income
From April 15, 2016 to March 31, 2017(3) Acquisition cost of the acquired company and breakdown
Millions of yen

Consideration for the acquisition
Expenses directly required for acquisition

Cash
Advisory fees, otherAcquisition costThousands of
U.S. dollars¥ 6,05812$ 53,998
107¥ 6,070$ 54,105(4) Goodwill, reason for recognizing goodwill, amortization method and amortization perioda. Amount of goodwill¥1,944 million ($17,328 thousand)b. Reason for recognizing goodwill
Goodwill is attributable mainly to the excess earnings power expected from Across’s fasion logistics.
c. Method and period of amortization of goodwill
Straight-line method over 20 years.

SENKO ANNUAL REPORT 2017 47

(5) Amounts of assets and liabilities acquired on the day of the business combination, and breakdown
Millions of yen

Thousands of
U.S. dollars

Current assets
Non-current assets¥ 7,888
1,436$ 70,309
12,800Total assets¥ 9,324$ 83,109

Current liabilities
Long-term liabilities¥ 4,029
1,180$ 35,912
10,518

Total liabilities¥ 5,209$ 46,430(6) ‌Estimated amount and the calculation method of the impact on the consolidated statements of income for the year ended March 31, 2017, assumingthat the business combination has been completed on the first day of the fiscal year under review.
Millions of yen

Operating revenues
Operating loss
Ordinary loss
Loss before income taxes
Net loss

Thousands of
U.S. dollars¥ 10,977
(87)
(43)
(44)
(36)
yen

Net loss per share$ 97,843
(775)
(383)
(392)
(321)
U.S. dollars

¥ (0)

$ (0)

(Calculation method for estimated amount of impact)
Operating revenues and information on profit and loss computed on the assumption that the business combination was completed on April 1, 2016
are defined as the estimated amount.
The relevant estimated amount is unaudited.

18

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 required in
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 0.1% to 2.5% were assumed.
c. Increase in the total amount of asset retirement obligations

Thousands of
U.S. dollars

Millions of yen

2017

2016

2017

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

¥ 519
232
52
14
–

¥ 575
–
–
9
(65)

$ 4,626
2,068
463
125
–

Balance at the end of the term

¥ 817

¥ 519

$ 7,282

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.

48 SENKO ANNUAL REPORT 2017

19

Segment 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, income (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

2017
Distribution

Trading &Commerce¥ 317,985
1,999¥ 132,868
12,000¥ 4,582
4,409¥ 455,435
18,408

Total operating revenues

319,984

144,868

8,991

Segment income (loss)

13,4193,209

Segment assets

221,505

Other items
Depreciation
Increase in tangible and intangible fixed assets

8,634
15,165

Operating revenues:
Customers
Intersegment

Others

Total

Adjustments andeliminations¥

Consolidated–(18,408)¥ 455,435–

473,843(18,408)

455,435

870

17,498(416)

17,08242,88012,260276,6459,314

285,959

277
457

311
822

9,222
16,444994
6,619

10,21623,063
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

813

Segment assets

211,11340,276

Other items
Depreciation
Increase in tangible and intangible fixed assets

8,452
17,194269
201

Others

Total

Adjustments andeliminations¥

Consolidated–(16,635)¥ 434,000–

450,635(16,635)

434,000

17,833(336)

17,497

10,298261,687

7,774

269,461

285
202

9,006
17,597

919
4,581

9,925
22,178

Thousands of U.S. dollars

2017
Distribution

Trading &Commerce

Others

Total

Operating revenues:
Customers
Intersegment$ 2,834,344
17,818$ 1,184,312
106,961$ 40,841
39,299$ 4,059,497
164,078

Total operating revenues

2,852,162

1,291,273

80,140

Segment income (loss)

119,610

28,603

Segment assets

1,974,374

Other items
Depreciation
Increase in tangible and intangible fixed assets

76,959135,172

Adjustments andeliminations$

Consolidated–(164,078)$ 4,059,497–

4,223,575(164,078)

4,059,497

7,755

155,968(3,709)152,259

382,208

109,279

2,465,861

83,0202,548,881

2,469
4,073

2,772
7,327

82,200146,572

8,860
58,99891,060205,570

SENKO ANNUAL REPORT 2017 49

(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

2017

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce

¥ 227
3,472

¥ 144
2,060

OthersAdjustments andeliminations

Consolidated

¥–
–

¥ 376
5,618

¥ 5
86

Millions of yen

2016

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce

¥ 123
1,743

¥ 144
2,205

OthersAdjustments andeliminations

Consolidated

¥–
–

¥ 272
4,038

¥ 5
90

Thousands of U.S. dollars

2017

Amortization of goodwill
Balance at the end of period

Distribution

Trading &Commerce$ 2,023
30,947$ 1,284
18,362OthersAdjustments andeliminations

Consolidated$––$ 3,352
50,076$ 45
767(Information on negative goodwill by business segment)
No significant items to be reported.

20

Subsequent Event(1) Payment of Dividends
Shareholders approved the following appropriation of retained earning at the annual meeting held on June 28, 2017
Millions of yen

Cash dividends¥ 1,677

Thousands of
U.S. dollars$ 14,948(2) Transition to a Holding Company Structure through Company Split
Based on the resolution at the Annual Meeting of Shareholders held on June 28, 2016, the Company moved to a holding company structure througha company split as of April 1, 2017. Accordingly, the Company and SENKO Split Preparation Co., Ltd. changed their trade name to SENKO Group
Holdings Co., Ltd. and SENKO Co., Ltd., respectively.

50 SENKO ANNUAL REPORT 2017

Corporate/Stock Information
Corporate Data (As of March 31, 2017)
Trade Name
Established
Incorporated
Head Office
Representative
CapitalIssued SharesGroup Employees
Group Companies
VehiclesVessels
Total Warehouse SpaceSENKO Group Holdings Co., Ltd.
September 1916
July 1946
Shiomi SIF Bldg., 2-8-10 Shiomi, Koto-ku, Tokyo 135-0052
Yasuhisa Fukuda, President and Representative Director
26.528 million yen
152,861 Thousand of Shares
13,915111 (102 subsidiaries, 9 affiliated companies)
5,180
18
3,220,000 m2

Stock Information (As of March 31, 2017)
Stock Listing
Stock Code
Authorized Shares
Outstanding Shares
Number of Shareholders

First Section of the Tokyo Stock Exchange

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

9069
294,999,000
152,861,921
7,572

Largest Shareholders

Type of Shareholder
Number of
Shares(thousands)

Percentage
Held

Japan Trustee Services Bank, Ltd.

19,890

13.0%

Asahi Kasei Corporation

11,676

7.7%

The Master Trust Bank of Japan, Ltd.

8,403

5.5%

Sekisui Chemical Co., Ltd.

6,785

4.5%

Senko Group Employee’s Stockholding

6,316

4.1%

STATE STREET BANK AND TRUST COMPANY(Standing proxy: Settlement & Clearing
Services Department, Mizuho Bank, Ltd.)

5,445

3.6%

Domestic financial
institutions

Individuals
and others

52,836,629

24,191,249

15.83%
Total

34.56%

22.63% 152,861,921
sharesMitsubishi UFJ Trust and Banking Corporation(Standing proxy: The Master Trust Bank ofJapan, Ltd.)

4,252

2.8%

J.P. Morgan Bank Luxembourg S.A.
(Standing proxy: Settlement & Clearing
Services Department, Mizuho Bank, Ltd)

4,102

2.7%

Isuzu Motors Ltd.

4,039

2.6%

NORTHERN TRUST CO. (AVFC)(Standing proxy: The Hongkong and Shanghai
Banking Corporation, Tokyo Branch)

3,626

2.4%

1.73%
Foreign financial
institutions andindividuals

34,590,489

25.25%
Securities firms
Other domestic
corporations

2,650,784

38,592,770

SENKO ANNUAL REPORT 2017 51

Domestic and Global Network
Hokkaido

Japan

12

Kinki

112

Chugoku
Shikoku

45

Tohoku

21
Kanto

125

Kyushu79

Chubu area

55

Total: 449

Headquarters (Tokyo)

Group Companies
Logistics● Hokuriku Senko Transport Co., Ltd.

● Tokyo Nohin Daiko West Japan Co., Ltd.

SENKO Co., Ltd.

● Shiga Senko Transport Co., Ltd.

● ACROSS TRANSPORT CO., LTD.

● Hokkaido Senko Co., Ltd.

● Osaka SenkoTransport Co., Ltd.

● Senko Fashion Logistics Co., Ltd.

● Tohoku Senko Transport Co., Ltd.

● Kyoto Senko Transport Co., Ltd.

● Esaka Logistics Service Co., Ltd.

● Noda Senko Logi Service Co., Ltd.

● Nara Senko Logistics Co., Ltd.

● Hanshin Transportation Co., Ltd.

● Kashiwa Senko Tranport Co., Ltd.

● Moriyama Hoso Co., Ltd.

● NIPPON MARINE CO., LTD.

● Prettyporters Co., Ltd.

● Hososhimako Niyaku Shinko Co., Ltd.

● EIKO SHIPPING CO., LTD.

● Kanto Senko Transport Co., Ltd.

● Minami Osaka Senko Transport Co., Ltd.

● NICHIEI KOUN CO., LTD.

● Saitama Senko logiservice Co., Ltd.

● Hanshin Senko Transport Co., Ltd.

● EIKICHI KAIUN CO., LTD● Saitama Minami Senko Logi Co., Ltd.

● Okayama Senko Transport Co., Ltd.

● Senko (U.S.A.) Inc.

● Kan-etsu Senko Logistics Co., Ltd.

● Harcob Co., Ltd.

● Mexicana de Paqueteria Urgente, S.A.de C.V.

● Senko Housing Logistics Co., Ltd.

● Sankyo Freight Co., Ltd.

● SHENYANG SENKO LOGISTICS CO., LTD.

● Kanagawa Senko Transport Co., Ltd.

● Sanyo Senko Transport Co., Ltd● DALIAN TRI-ENTERPRISE LOGISTICS CO., LTD.

● Atsugi Senko Transport Co., Ltd.

● Fukuoka Senko Transport Co., Ltd.

● QINGDAO SENKO LOGISTICS CO., LTD.

● NISHIKANTO SENKO LOGI CO., LTD.

● Minami Kyushu Senko Co., Ltd.

● SINOTRANS SENKO INTERNATIONAL● Chiba Senko Transport Co., Ltd.

● Kyushu Senko Logistics Co., Ltd.

● Tokai Senko Transport Co., Ltd.

● Miyazaki Senko Transport Co., Ltd.

● Toyohashi Senko Transport Co., Ltd.

● Miyazaki Senko Apollo Co., Ltd.

● Fuji Senko Transport Co., Ltd.

● Senko Plantec Co., Ltd.

● Daito Senko Apollo Co., Ltd.

● Tokyo Nohin Daiko Co., Ltd.

● Mie Senko Logistics Co., Ltd.

● Senko A Line Amano Co., Ltd.

52 SENKO ANNUAL REPORT 2017

COLD LOGISTICS Co., Ltd.

● SENKO LOGISTICS (SHANGHAI) CO., LTD.
● SHANGHAI SENKO INTERNATIONALFREIGHT FORWARDING INC.

● GUANGZHOU SENKO LOGISTICS CO., LTD.
● SENKO INTERNATIONAL LOGISTICS(HONG KONG) CO., LTD.

North America

EuropeAsia

SouthAmerica
Overseas OfficeTotal: 54● SENKO (THAILAND) CO., LTD.

Trading & Commerce

Living Support● Senko Logistics Distribution (Thailand) Co., Ltd.

SENKO SHOJI CO.,LTD.

● Senko Living Plaza Co., Ltd.

● SENKO INTERNATIONAL LOGISTICS PTE., LTD.

● Marufuji Co., Ltd.

● Senko Foods Co., Ltd.

● Skylift Consolidator (Pte) Ltd.

● Obata Co., Ltd.

● KEIHANNA helper station Co., Ltd.

● Skylift Districentre (Pte) Ltd.

● Sankyo Butsuryu Niyaku Co., Ltd.

● Ienonaka Company, Ltd.

● SENKO SMI Myanmar Co., Ltd.

● Sankyo Logistics Co., Ltd.

● Senko Medical Logistics Co., Ltd.
● Senko Creative Management Co., Ltd.

● SENKO Logistics Vietnam Co., Ltd.
● SENKO DISTRIBUTION SERVICE (VIETNAM) Co., Ltd.

SMILE CORP.

● Senko Logistics Australia Pty Ltd.

● Fuji Label Co., Ltd.

● Senko-Lancaster Silk Road Logistics LLP● Takano Machinery Works Co., Ltd.

● Senko Facilities Co., Ltd.

● Japan Select LLP● SHANGHAI SMILE CORP.

● Senko Asset Management Co., Ltd.

● NH-SENKO LOGISTICS CO., LTD.

● SHANGHAI SMILE PRINTING CORP

● Senko Private REIT Inc.

● KO-SENKO LOGISTICS CO., LTD.

● HONG KONG SMILE CORP LIMITED● Senko Real Estate Co., Ltd.

● Senko Logistics (Thailand) Co., Ltd.

● KOREA SMILE CORP.

● Logi Factoring Co., Ltd.

● SMILECORP VIETNAM CO., LTD.

● Senko Business Support Co., Ltd.

Business Support● S-TAFF Co., Ltd.

Runtec Co., Ltd.
● KOUKI Co., Ltd.

AST CORPORATION● Senko Insurance Services Co., Ltd.

● Chushikoku Logistics Co., Ltd.

● Delivery Ace Co., Ltd.

● Logi Solution Co., Ltd.
● SENKO INFORMATION SYSTEM Co., Ltd.

Agriculture● Crefeel Koto Co., Ltd.

● Senko School Farm Tottori Co., Ltd.

SENKO ANNUAL REPORT 2017 53

SENKO Group Holdings Co., Ltd.
Shiomi SIF Bldg., 2-8-10 Shiomi, Koto-ku, Tokyo Japan
http://www.senkogrouphd.co.jp/en/