2012
Annual Report
For the year ended March 31, 2012

TONAMI HOLDINGS CO., LTD.

Capitalizing on expertise originally gained in the transportation business, the Tonami Group has long been a trailblazer in logistics.
We were among the first in the industry to introduce computer systems.
In recent years, we have taken systematized distribution services fully
utilizing IT to new heights. In particular, our third-party logistics (3PL),
offering companies the optimum solutions to their logistics needs, hasenabled us to cultivate a loyal and growing customer base.
Tonami Holdings Co., Ltd. is now strengthening the fundamentals of
the business as it embarks on a new round of development, bringing its
capabilities as a pure holding company into full play. Leveraging theaccumulated expertise and business know-how of the Tonami HoldingsGroup, we are sharpening our responsiveness to customer needs not onlyin the field of logistics but also in related businesses and new fields.
We strive to offer value-added services that transcend the traditional
conception of logistics. As a pioneer with strengths in information processing, we are committed to delivering value a stride ahead.
By deploying IT infrastructure attuned to the increasingly diverse andsophisticated needs of the era, we aim to maximize the corporate value of
the Tonami Holdings Group and be an enterprise needed
and respected by society.
We are taking a big stride toward realization of
our “More Than Transportation” vision.

We Want to Deliver Value a Stride Ahead

Contents
1 Consolidated Financial Highlights
2 To Our Shareholders and Investors
5 Corporate Governance
8 Corporate Social Responsibility Activities
9 Financial Section
37 Consolidated Subsidiaries
38 Board of Directors and Corporate Auditors
38 Corporate Data

Forward-Looking Statements
This annual report includes forward-looking statements that represent Tonami’s assumptions and expectations in light of currently available
information. These statements reflect industry trends, clients’ situations and other factors, and involve risks and uncertainties which may
cause actual performance results to differ from those discussed in the forward-looking statements in accordance with changes in thebusiness environment.

Consolidated Financial Highlights
TONAMI HOLDINGS CO., LTD.
AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2012 and 2011
Thousands of
U.S. dollars(Note 1)Millions of yen
2012
2011

2012

FOR THE YEAR:
Operating revenues:¥117,710¥118,979$1,432,165

107,500

109,0311,307,940

Information processing

2,718

2,689

33,072

Sales

6,697

6,459

81,478Others

795

800

9,675

1,404

1,199

17,073

633

315

7,698

1,470

102

17,881

¥6.97

¥3.47

$0.0848

—

—

—

4.00

4.00

0.0487¥116,085¥117,412$1,412,403

46,04644,945560,238

Logistics

Operating income
Net income
Comprehensive income

PER SHARE (Yen and U.S. dollars):
Net income, basic
Net income, diluted
Cash dividends

AT YEAR-END:
Total assets
Total net assets

Notes: 1. U.S. dollar amounts presented herein are included solely for convenience. The rate of ¥82.19 = U.S.$1, prevailing on March 31, 2012,
has been used for the translation into U.S. dollar amounts.
2. The computation of net income per share of common stock is based on the weighted average number of shares outstanding (which
represents the number of issued shares less treasury stock.) during each financial year.
3. Diluted net income per share is not presented for the years ended March 31, 2012 and 2011, since there were no residual securities.

Operating Revenues by
Business Segment
150(Billions of yen)

Operating Income

3

Net Income (Loss) and
Net Income (Loss) per Share, Basic(Billions of yen)

4.0

(Billions of yen)

(Yen)

30

100

2

2.0

15

50

1

0

0

0

’08

’09

’10

’11

’12

0

’08

’09

’10

’11

’12

-2.0

’08

’09

’10

’11

’12

-15

Net Income (Loss) (Left scale)
Net Income (Loss) per Share, Basic (Right scale)

Logistics
Information processing
Sales
Others01

To Our Shareholders and Investors

President, Katsusuke Watanuki

During the fiscal year ended March 31, 2012, the Japanese economy showed signs of recovery
owing to faster-than-expected restoration of supply chains disrupted by the Great East Japan
Earthquake. Nevertheless, slowing of overseas economies and the unprecedentedly strong yen led toa decrease in exports and the damage caused by flooding in Thailand slowed production. As aresult, the Japanese economy lost momentum. The outlook remained unclear in view of the slowing
tempo of growth of overseas economies, the impact of the strong yen on exporters, rising crude oil
prices, and electricity shortages in Japan.
Although the distribution industry experienced lower domestic freight volumes owing to a
decline in production in the aftermath of the Great East Japan Earthquake, transport demand
showed signs of recovery in line with the restoration of supply chains. However, subsequently,
owing to the negative impact of the appreciation of the yen and the flooding in Thailand on exports
and production, domestic distribution was lackluster.
In these circumstances, the Tonami Holdings Group strove to expand logistics-related businesses
centering on truck transport, freight forwarding, and third-party logistics (3PL) while at the sametime analyzing the profitability of transactions in order to improve margins. As a result, operating
revenues amounted to ¥117,710 million, a decrease of 1.1% or ¥1,269 million from the previous
year.
With regard to profits, despite revisions to freight charges and unit rates, increased fuel costs, andother negative factors, cost-reduction measures including improvement of operational efficiency
resulted in increased profits. Operating income increased 17.0% or ¥205 million from the previous
year to ¥1,404 million and net income increased 101.1% or ¥318 million to ¥633 million.
Total annual dividends for the year ended March 2012 amounted to ¥4 per share, including aninterim dividend of ¥2 per share.
Results by Segment

Although the Group strove to expand business with existing customers and cultivate new customers
for road haulage and 3PL services, export-related logistics demand remained sluggish. The Groupalso sought to minimize unprofitable transactions. As a result, operating revenues from the logisticsrelated business decreased 1.4% or ¥1,530 million from the previous year to ¥107,500 million.
Segment income increased 137.7% or ¥387 million to ¥670 million owing to the improvement ofoperational efficiency and reduction of expenses despite the increased burden of fuel costs.
Operating revenues from the information processing business amounted to ¥2,718 million, an
increase of 1.1% or ¥28 million from the previous year. Revisions to charges resulted in lower segment income. Segment income was ¥103 million, a decrease of 73.1% or ¥279 million.
Operating revenues from the sales business, which includes merchandising, consignment sales,
and a non-life insurance agency, amounted to ¥6,697 million, an increase of 3.7% or ¥237 million
from the previous year. Segment income increased 13.5% or ¥51 million to ¥430 million.
Operating revenues from other businesses, which include automobile repair, travel agency, and02

direct mail service, amounted to ¥795 million, a decrease of 0.6% or ¥4 million from the previous
year. Segment income increased 115.7% or ¥60 million to ¥114 million.
Outlook for the Year ending March 31, 2013

There are hopes that a broad recovery of the Japanese economy may take hold in the second half ofthe year to March 2013, underpinned by public investment related to reconstruction associated with
the Great East Japan Earthquake and rising exports. However, the outlook remains unclear becauseof concerns about downside risks, including the European sovereign debt crisis, trends in China andother emerging economies, increases in crude oil prices, electricity shortages in the summer inJapan, and persistence of the unprecedentedly strong yen.
In this challenging business environment, positioning the enhancement of profitability throughstructural reform of our business and the expansion of the scale of business and the strengthening ofmarket competitiveness through the creation of new logistics businesses as vital management issues,
the Group launched the 19th Three-year Medium-Term Business Plan in April 2012 under theslogan “The Road to Self-Innovation! Innovation Plan 19.”
In order to continue to expand business in the future in an environment marked by the market
contraction caused by the decreasing population in Japan and the continuing yen’s appreciation,
logistics companies need not only to fulfill domestic logistics demand but also to respond to globalization and seek opportunities in other countries, including emerging nations.
The Group will aim to further strengthen the complementary functions between the business divisions of the Group companies and promote M&A and business alliances with other companies. We
will also take steps to improve our performance by steadily increasing revenue from the logistics
business and strengthening our integrated logistics system that covers both Japan and overseas as we
expand business at our overseas subsidiaries (Dalian and Thailand).
In addition, the Group will strive to expand business by strengthening its 3PL (third-party logistics) service that combines logistics IT systems and logistics services, continually improving quality
and cutting costs of logistics services with customer cooperation by adopting cloud-based logistics
systems, proposing optimal logistics services, actively conducting promotional activities aimed at
gaining new orders, and streamlining operations through the reconstruction of operations of existing
distribution centers.
The Tonami Holdings Group will vigorously promote joint sales & marketing among Group companies. As the business environment becomes increasingly sophisticated and diversified, we will
promote restructuring by making full use of information and communication technology (ICT) as amanagement strategy and starting operation of a “business management system” that provides powerful support to the core business with the aim of maximizing corporate value.
Taking the above into consideration, our forecast for the Group’s business results for the year ending March 31, 2013, is as follows:
Forecast of consolidated business results
Operating revenues ¥120,200 million (an increase of 2.1% year on year)
Operating income ¥2,000 million (an increase of 42.6% year on year)
Net income¥1,020 million (an increase of 61.4% year on year)
Note: The forecast of consolidated business results presented above is based on certain assumptions that management
believes reasonable at the time of announcement and may be revised.

We will continue making a concerted effort to raise business performance so as to meet the expectations of our shareholders. In all our endeavors, we will be grateful for your continued support.
June 2012
Katsusuke Watanuki
President and Representative Director
03Operating Subsidiaries and Affiliates
Transportation business:

Group companies that support
business activities in Asia

Tonami Transportation
Tonami Transportation Shinetsu
Tonami Transportation Chugoku
and other companies

Group companies that support
domestic business operations

Warehousing business:

Tonami Transportation
Keishin Warehouse
Tonami Global Logistics and other companies

Tonami International Logistics(Dalian)

IT System:

Keishin System Research

Financial Services

Tonami Business Service

Temporary Staffing
Tonami Staff Support

Hokkaido Tonami Transportation
Tonami（Thailand）

Tonami Computer Center
Gosei Tonami Transportation
Fukui Tonami Transportation
Ishikawa Tonami Transportation
Niigata Tonami Transportation
Zento Transportation
Takaoka Transportation
Takefu Transportation

Mahaporn Transport

Anan Transportation
Nationwide Shirobo JSE Courier

Kanto Tonami Transportation
Ibaraki Tonami Transportation
Tonami Shutoken Logistics

Osaka Tonami Transportation
Kansai Tonami Transportation

Chukyo Tonami Transportation
Touto Transportation

Tonami Trading, Toyo Gomu Hokuriku Hanbai, Tonami Business Service,
Tonami Staff Support, Takaoka Cable Network, Shogawa Kanko, etc.

Tonami Logistics Solutions

Physical distribution
consulting functions

Physical distribution
network functions

Procurement logistics

Production logistics

Raw materials (Parts etc.)
manufacturers

Factories

Environmental
logistics

Consumers

Goods returned, repairs,
waste, etc.

In-house logistics

Warehouses, distribution
centers

Sales logistics
Destinations in Japan

Wholesalers, retailers
Overseas suppliers

ExportImportDestinations overseas

International logistics
Systematized distribution (3PL), information sharing
Supply chain management (SCM)

Information systemdevelopment functions

Operational functions04

Corporate Governance

At a meeting of the Board of Directors held on October 1, 2008, the Company passed a resolution concerning a basic policy for internal control systems. The Company, with the Internal
Control Committee in a central role, is implementing sound internal control systems in accordance with the policy, aiming to increase the corporate value of the Tonami Holdings Group.

(1) Overview of the Corporate Governance System and Reason for Adopting the System

1) Description of Management Organization and Internal Control Systems
The Board of Directors of the Company is the organization responsible for important matters concerning business policy and business strategy. In accordance with the Board of Directors Regulations,
meetings of the Board of Directors are held, in principle, once a month, and as necessary, enabling
the directors to attain mutual understanding and engage in mutual supervision of the execution ofbusiness. The Board of Directors utilizes the services of outside experts as necessary to prevent violations of the law or the Articles of Incorporation.
The Company employs a corporate auditor system as part of its internal control framework. The
Board of Corporate Auditors consists of five corporate auditors (two standing corporate auditors andthree outside corporate auditors). The corporate auditors audit the legality of the directors’ actions
by attending meetings of the Board of Directors and other important meetings, by offering theiropinions, and by other means.
The corporate auditors, including the outside corporate auditors, audit the execution of businessby the directors in accordance with the auditing policy and task assignments decided by the Board of
Corporate Auditors.
In the event that a director discovers a violation of the law or the Articles of Incorporation on thepart of another director, the director is required to promptly report the violation to the corporate
auditors and the Board of Directors and a remedy will be sought. The Company has an internal
auditing unit, the Internal Audit Office, which is an organization independent of the business units.
Moreover, the Company has established the Tonami Group Employee Code of Conduct as thefoundation of the Group’s compliance system and the Internal Control Committee, chaired by thepresident, as the decision-making body. The Company’s effort to enhance its internal control systems
is led by an officer responsible for internal control.
The Compliance Committee is a compliance control organization, and the Internal Control Team
within the Internal Audit Office performs control, operation and training in order to maintain andenhance internal control systems.
To ensure the propriety of business operations of the Group’s operating subsidiaries, the Company
applies the Tonami Group Employee Code of Conduct and the Group Operation Regulations to all
operating subsidiaries of the Group, and each of the Group’s operating subsidiaries has established
its own regulations based on them.
With regard to administration of operating subsidiaries, the Group Company Administration
Procedures specify matters requiring approval by the headquarters and those to be reported.

05

2) The Relationship between the Management Organization and Internal Control
General Meeting of Shareholders
Election

Election

Auditing

Attorney

Board of Directors(Representative directors)(Directors)

OpinionSupervision

Election

Board of Corporate Auditors(Corporate auditors)(Outside corporate auditors)
Reporting

Reporting

Independent auditors

Internal Audit Office
Auditing

ReportingBusiness Execution
Internal Control Committee(Internal Control Office)Internal auditing

Human Resource
Management Group

Business Planning OfficeCompliance Committee

Business Administration Group

Business Risk Management
Committee

Internal
controlInternal
controlPlanformulation,
reporting

Policypresentation,plan approvalGroup operating subsidiaries

3) Description of Management Organization and State of Development of Internal Control Systems
With regard to the design of its internal control systems, the Company has established a basic policy
concerning business risk management for the Tonami Holdings Group and is working to appropriately respond to various types of risk that might affect the operation of operating subsidiaries, inorder to stabilize the fundamentals of the Group and, should a business risk materialize, to minimize
the impact and as far as possible ensure that neither a business loss nor a social loss is incurred.
The Company recognizes the importance of legal compliance and has established the Compliance
Committee to ensure compliance. The Group’s operating subsidiaries have appointed compliancepromotion officers to inculcate corporate ethics and compliance among their officers and employees.
The compliance promotion officers conduct education and hold briefings concerning compliance.
Within the Company, activity plans etc. are required to be reported to the Compliance Committee
to enable potential violations in the course of business activities to be detected in advance and theiroccurrence prevented. This system enables swift correction of any violations that occur and implementation of measures to prevent recurrence.
The executive officers strive to promptly execute business in accordance with the basic policy
decided by the Board of Directors. The Board of Directors obtains and refers to advice from certified
public accountants, attorneys, and other specialists concerning compliance matters related to management, as necessary.

06

The Company has put in place a structure enabling a rapid response to changes in the businessenvironment and strives to ensure sound management. To this end, the Group’s operating subsidiaries have established their own regulations based on the Group Operation Regulations and theCompany conducts administration of the Group’s operating subsidiaries in accordance with theGroup Company Administration Procedures that specify matters requiring approval by the headquarters and those to be reported.
The Internal Audit Office conducts internal audits to verify whether business is executed appropriately and efficiently. It reports to the corporate auditors and the Board of Directors.

4) State of Internal Auditing and Auditing by Corporate Auditors
The Internal Audit Office (six personnel) of the Company is an internal auditing unit independent of
the business units and its staff assists with the work of the corporate auditors. The Internal Audit
Office’s independence from the Board of Directors is ensured since decisions of the Board of
Directors on Internal Audit Office staff changes require approval of the Board of Corporate Auditors.
The Internal Audit Office conducts periodic and unscheduled internal audits of the Company’s business, reports to the Board of Corporate Auditors and the Board of Directors, and requests
improvements.
The Company’s corporate auditors exchange information with the independent auditors, cooperate with the Internal Audit Office, conduct appropriate audits, and hold periodic meetings of theBoard of Corporate Auditors.
One standing corporate auditor and three outside corporate auditors possess significant expertise
concerning financial and accounting matters gained through their experience over many years.

5) Relationships between Outside Directors and Outside Corporate Auditors
No outside directors are appointed by the Company.
In accordance with the provisions of Paragraph 3, Article 335 of the Companies Act, five corporate
auditors, including standing and part-time corporate auditors, are appointed by the Company, threeof whom are outside corporate auditors, and therefore uninvolved in the execution of the business of
the Company, who conduct auditing from a third-party standpoint in order to strengthen the auditing function.
The Company considers that outside corporate auditors who do not execute business and are
independent are conducting appropriate auditing of the supervisory function of the Board of
Directors, which is the main function of the Board of Directors.
Three outside corporate auditors are appointed by the Company. Their function is to state appropriate opinions, as necessary, as experienced experts. The role of outside corporate auditors is tocontribute to enhancement of transparency and accountability of the Board of Directors throughauditing of the compliance of the directors by attending meetings of the Board of Directors and otherimportant meetings, by offering their opinions, and by other means.

07

The Company considers individuals who have no personal, capital, or business relationships with
the Company or other interests in the Company, possess expertise, and are capable of overseeing
management based on excellent insight to be suitable for election as outside corporate auditors.
None of the three outside corporate auditors have any of the above-mentioned relationships with
the Company. The Company appointed one of the three outside corporate auditors as an independent officer as required by the Tokyo Stock Exchange and has notified the Tokyo Stock Exchange
accordingly.
Although Outside Corporate Auditor Mr. Yohji Ishiguro, who is the independent officer appointed
by the Company, owns shares of the Company, the capital relationship between him and theCompany is negligible and he has no business relationships with the Company or other interests in
the Company.
Outside Corporate Auditor Mr. Toshio Kaido has no capital or business relationships with theCompany or other interests in the Company.
Outside Corporate Auditor Mr. Shinichiro Inushima used to work for The Hokuriku Bank, Ltd.,
which is a customer of the Company and is also a shareholder of the Company. These facts. however,
have no impact on objective decisions of shareholders and investors because Outside Corporate
Auditor Mr. Inushima himself has no interests in the Company. Outside Corporate Auditor Mr.
Inushima has no capital relationships with the Company or other interests in the Company.
The Company has concluded limited liability contracts with the outside corporate auditors. The
outside corporate auditor’s liability for damages is limited to the sum of compensation and other feesthat the outside corporate auditor received from the Company during his/her term of office or thesum of property benefits that he/she is to receive for each fiscal year, whichever the higher.
(Internal structure as an alternative to a structure under which outside directors are elected andreasons for adopting such a structure)
The Company has adopted a “company with auditors and with board of auditors” system as its
corporate governance structure based on the judgment that management by the Board of Directors
consisting of internal directors who are well versed in the Company’s operations is suitable for theCompany, which is a logistics company. Meanwhile, the Company is enhancing the effectiveness of
the audit function of corporate auditors.
Regarding management transparency, the Company believes that a structure is in place that canfully function in terms of management supervision because the Company has appointed three independent outside corporate auditors.

08

(2) State of Development of the Risk Management Structure

In accordance with the Tonami Group Business Risk Management Regulations, the president serves
as the Chief Risk Management Officer, risk management officers are appointed for each type of risk,
and a risk management structure is established. In the event of unforeseen circumstances, in accordance with the Tonami Group Large-scale Disaster Response Regulations and the Tonami Group
Emergency Response Regulations, the Company will establish an Emergency Response
Headquarters, which will be headed by the president. The Company will mount a rapid and appropriate response in accordance with the regulations and put in place a structure to prevent the spreadof damage and minimize damage.
To ensure the propriety of business operations of the Group’s operating subsidiaries, the Company
has established the Tonami Group Employee Code of Conduct, consisting of action guidelines, and
the Group’s operating subsidiaries have established regulations based on the code of conduct.
With regard to administration of the Group’s operating subsidiaries, matters requiring approval by
the headquarters and those to be reported are specified in the Group Company Administration
Procedures and management of operations is in accordance with the Group Operation Regulations.
In the event that a director discovers a violation of the law or any other important matter related
to compliance in an operating subsidiary of the Group, the director is required to report the matterto a corporate auditor. In the event that an operating subsidiary of the Group finds that the administration by the Company or management instructions issued by the Company violate the law or
becomes aware of any other compliance-related problem, the subsidiary is required to report thematter to the Internal Audit Office. In such a case, the Internal Audit Office promptly reports thematter to a corporate auditor and the corporate auditor receiving the report may express an opinion
and request improvement measures.
The Company has established the Tonami Group Internal Reporting Regulations and operates aninternal reporting system concerning violations of the law and other matters related to compliancecovering the entire Tonami Holdings Group.
The Company will have no relationships with antisocial forces. The Company will take resoluteaction against any undue claims or actions by antisocial forces on the basis of cross-organizational
cooperation in close collaboration with the police and other external specialist organizations and will
never provide any benefit to antisocial forces.

09Corporate Social Responsibility Activities

Basic Policy on Corporate Social Responsibility Activities
Adhering to the action principle “Ensure compliance throughout business activities,” by means of selection and focus
and reinforcement of the fundamentals, the Tonami Holdings Group endeavors to create value through the logistics
business and fulfill its corporate social responsibility (CSR).
It is essential to ensure transportation safety, accord consideration to the environment, ensure legal compliance andcompliance with other rules, respect human rights, and contribute to local communities. As a logistics expert, we areresolved to fulfill these responsibilities by adhering to corporate ethics, ensuring compliance with laws and regulations, and enhancing corporate governance.
In business activities, with the objective of achieving customer satisfaction, we are endeavoring to be an enterprisethat contributes to the development of society and strives to protect the environment and where employees canachieve job satisfaction, take pride in their work, and are motivated.
In view of the increasing concern about the impact of CO2 emissions on climate, the Group recognizes the urgent
need for more efficient use of energy. The Group is making a concerted effort involving all employees to minimize thewaste of energy throughout its business activities. This effort involves improved logistics efficiency, introduction of
low-pollution vehicles, modal shift, and our initiative to promote environmentally friendly driving through the introduction of digital tachographs.
The Environmental Division is spearheading the Group’s efforts centering on the “Society and the Environment”
theme, aiming to contribute to the establishment of a recycling-based society. Our Ecolock System supports locally
self-sufficient recycling of resources. Additionally, as we are a certified wide-area waste disposal agent under the
Ministry of the Environment’s certification system, we can implement highly efficient recycling activities covering awide geographical area.
We are currently working to realize practical application of the Ecozo System for proposing the optimum recycling
route for industrial waste, positioning it at the heart of our environmental logistics. We own a business model patent
for the Ecozo System (business model patent publication number 2009-110333).
We are reinforcing our commitment to CSR by executing socially responsible business activities in accordance with
our mission: to achieve corporate growth while protecting the environment for future generations. Through continuous and sustainable activities, we strive to enhance corporate value and fulfill our social responsibility to stakeholders.
Principal CSR Initiatives and State of Implementation
Environmental Protection Activities
Recognizing that environmental protection is a crucially important theme
that concerns the maintenance of the ecosystem, adhering to our principle— “Contribute to society through transportation and strive to protect theenvironment” — we will act in accordance with the following policies.
1. We will do the following to mitigate environmental pollution associatedwith transportation services:(A) We will introduce environmentally friendly vehicles.
This truck runs on natural gas(B) We will practice environmentally friendly driving.
(C) We will create eco-friendly distribution systems through more efficient distribution.
(D) We will establish a recycling system to contribute to establishment of a recycling-based society.
(E) We will promote development and provision of environmentally friendly products.
Annual social and(F) We will make continuous efforts to save resources and energy and to achieve improvements every
environmental reportday.
2. We will ensure compliance with environment-related laws and regulations at the national and municipal levels and other requirements that the Company undertakes to fulfill in its efforts to protect theenvironment.
3. We will set specific environmental objectives and environmental goals, conduct periodic reviews, andwork to achieve continuous improvement of environmental management systems.
4. We will communicate these policies to all employees through internal environmental education andawareness raising initiatives, and we will disclose these policies to the public. We will also vigorously
participate in environmental protection activities in local communities.

Encouraging local people to take up
badminton

Social Contributions
We are eager to contribute to local communities through various activities as a corporate citizen.
Our social contribution activities include participation involuntary clean-up campaigns, such as “neighborhood adoption” programs promoted by local government, and the donation of vehicles to social welfare facilities through theestablishment of the Tonami Shozyukai Foundation.
We transport relief supplies when natural disasters occur.
The Tonami Transportation Badminton Club offers badmintoncoaching as a local sports promotion activity.
10

A clean-up in progressFinancial Section

12

Consolidated Five-Year Summary

13

Consolidated Financial Review

16

Consolidated Balance Sheets

18

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income

19

Consolidated Statements of Changes in Net Assets

20

Consolidated Statements of Cash Flows21

Notes to the Consolidated Financial Statements

11Consolidated Five-Year Summary
TONAMI HOLDINGS CO., LTD
AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

2008

2009

2010

2011

2012

Thousands of
U.S. dollars
2012

Operating revenues¥130,188¥126,930¥113,601¥118,979¥117,710$1,432,165

Operating cost

121,875

119,596

106,522

111,355

110,069

1,339,203

Selling, general and administrative expenses

6,426

6,664

6,345

6,425

6,237

75,889Operating income

1,887

670

734

1,199

1,404

17,073

Net income (loss)

(911)

244

702

315

633

7,698

Depreciation expenses

2,594

2,848

3,157

3,504

3,882

47,236¥(10.03) ¥2.69¥7.73¥3.47¥6.97$0.0848

Millions of yen

RESULTS OF OPERATIONS:PER SHARE (yen and U.S. dollars):
Net income (loss)
Cash dividends

6.00

5.00

4.00

4.00

4.00

0.0487¥36,017¥34,702¥33,860¥35,723¥33,045$402,054

Net property and equipment

62,194

66,63369,44770,037

71,597871,122

Total assets

112,511113,141

115,502

117,412116,085

1,412,403

Total current liabilities

36,991

34,24832,61733,98934,222

416,381Long-term liabilities, excluding of current portion thereof

29,55834,011

37,65638,47835,817435,784

Total net assets

45,96244,88245,22944,94546,046560,238

7,310

7,361

7,235

7,025

6,762

YEAR-END FINANCIAL POSITION:
Total current assets

OTHER YEAR-END DATA:
Number of employees

12Consolidated Financial Review

Forward-looking statements in the discussion below represent the best judgment of the Tonami HoldingsGroup as of the end of the fiscal year under review.

Significant Accounting Policies and Estimates

The consolidated financial statements of the Tonami Holdings Group have been prepared in accordance withaccounting principles generally accepted in Japan. Estimates used in the preparation of the consolidated financial statements that may affect the reported amounts of assets and liabilities on the closing date and the reported revenues and expenses for the reporting period are principally deferred tax assets, the allowance for
doubtful accounts, the severance and retirement benefits, and income taxes. These estimates are subject tocontinuous, reasonable assessment.
Estimates, judgments, and assessments are made on the basis of factors that are deemed reasonable in lightof past performance and conditions. However, since estimates invariably involve uncertainties, actual results
may differ from the estimates.

Analysis of Consolidated Operating Results
Operating Revenues

During the fiscal year ended March 31, 2012, operating revenues decreased 1.1% year on year to ¥117,710
million, partly due to sluggish export-related logistics demand. This result also reflected the Group’s efforts tominimize unprofitable transactions in its mainstay business, namely the road haulage operations and freight
forwarding operations, as well as in the 3PL services.
Composition of Operating Revenues
Percentage pointchange from theprevious year

Composition

Logistics:
Road haulage operations and freight forwarding operations
Warehousing operations
Harbor transport operations
Information processing business
Sales businesses
Other businesses

−0.3
+0.7
−1.0
−0.0
+0.0
+0.3
−0.0

91.3%
69.5
16.7
5.1
2.3
5.7
0.7

Operating Cost

Operating cost decreased 1.2% year on year to ¥110,069 million. Although there were factors increasing costs,
such as soaring prices of diesel oil and raw materials, the Group’s efforts to improve operational efficiency andreduce facilities costs as well as the drive to minimize unprofitable transactions resulted in enhanced profitability.
As a result, the ratio of operating cost to operating revenues decreased 0.1 percentage points from the previous
year to 93.5%.
Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased 2.9% year on year to ¥6,237 million. The main reason is
management integration of subsidiaries included in the scope of consolidation. The ratio of selling, general andadministrative expenses to operating revenues decreased 0.1 percentage points to 5.3%.
As a result, operating income increased 17.0% year on year to ¥1,404 million. The ratio of operating income
to operating revenues was 1.2%, an increase of 0.2 percentage points from the previous year.

Sales of Logistics

Operating Revenues

150(Billions of yen)

150

Sales of Information
Processing Business(Billions of yen)

3

100

100

2

50

50

1

0

’08

’09

’10

’11

’12

0

’08

13

’09

’10

’11

’12

0

(Billions of yen)

’08

’09

’10

’11

’12

Net Income

Income before income taxes and minority interests was ¥1,871 million, up 59.2% year on year. Despite anincrease in income taxes, net income soared 101.1% year on year to ¥633 million.

Analysis of Cash Flows

Cash and cash equivalents on a consolidated basis for the year under review decreased ¥2,549 million from theprevious year to ¥8,591 million as a result of net cash provided by operating activities amounting to ¥4,364 million, net cash used in investing activities amounting to ¥3,452 million, and net cash used in financing activities
amounting to ¥3,461 million.
Cash Flows from Operating Activities

Net cash provided by operating activities totaled ¥4,364 million, an increase of ¥93 million from the previous
year.
Principal items were income before income taxes and minority interests amounting to ¥1,871 million anddepreciation and amortization amounting to ¥3,882 million.
Cash Flows from Investing Activities

Net cash used in investing activities totaled ¥3,452 million, an increase of ¥703 million from the previous year.
The principal item was payments of ¥3,609 million for the purchase of property and equipment.
Cash Flows from Financing Activities

Net cash used in financing activities totaled ¥3,461 million, an increase of ¥2,720 million from the previous
year.
Cash outflows included repayment of long-term debt amounting to ¥1,354 million and repayment of leaseobligations amounting to ¥1,638 million.

Analysis of the Financial Position
AssetsCurrent assets were ¥33,045 million, a decrease of 7.5% from the previous fiscal year-end. This decrease wasmainly attributable to a ¥2,647 million decrease in cash and time deposits.
Property and equipment amounted to ¥71,597 million, an increase of 2.2% from the previous fiscal year-end.
This increase was attributable to a ¥1,537 million increase in buildings and structures.
Investments and other assets were ¥11,443 million, a decrease of 1.8% from the previous fiscal year-end,
mainly owing to a ¥564 million decrease in deferred tax assets.
As a result, total assets amounted to ¥116,085 million, a decrease of 1.1% from the previous fiscal year-end.
Liabilities

Current liabilities were ¥34,222 million, an increase of 0.7% from the previous fiscal year-end, mainly due to a¥423 million increase in lease obligations.
Long-term liabilities were ¥35,817 million, a decrease of 6.9% from the previous fiscal year-end. Thisdecrease was mainly attributable to a ¥1,207 million decrease in long-term debt including corporate bonds anda ¥713 million decrease in deferred tax liabilities from revaluation reserve for land.
As a result, total liabilities amounted to ¥70,039 million, a decrease of 3.3% from the previous fiscal year-end.
Net assets

Net assets amounted to ¥46,046 million, an increase of 2.4% from the previous fiscal year-end. Main factors
were a ¥321 million increase in retained earnings as a result of booking of net income of ¥633 million and a¥626 million increase in revaluation reserve for land.

Sales of Other Business

1.5(Billions of yen)

Net Income (Loss)

Operating Cost andOperating Income
150(Billions of yen)3

2.0(Billions of yen)

1.0
100

1.0

2
0

50

0.5

1
-1.0

0

’08

’09

’10

’11

’12

0

’08

’09

’10

’11

Operating cost (Left scale)Operating income (Right scale)

14

’12

0

-2.0

’08

’09

’10

’11

’12

Risk Factors

The principal business of the Tonami Holdings Group is the logistics-related business centering on road haulage
operations and freight forwarding operations. The Group’s business is subject to impacts of fluctuation of theJapanese economy and the world economy, customers’ streamlining of logistics, restructuring, and deteriorationof business results, and suspension of business transactions with customers. The business environment in which
the Group operates entails the risk of difficulty in absorbing cost increases due to such factors as sharp increases
in the price of crude oil and interest rate increases that exceed expectations.
In the event of the occurrence of a major disaster, such as an earthquake, in the regions where the Group
operates, there is a risk that damage to facilities may greatly affect the Group’s business operations.
In the event that the retention, development and recruitment of human resources indispensable for businessexpansion do not progress as envisaged in the plan, strategic tie-ups including acquisitions and capital partnerships do not develop as planned, or that social risks materialize with respect to the Group’s overseas businessexpansion, there may be an adverse impact on the Group’s business activities and business results.
The Group handles a huge amount of customer information and strives to appropriately manage such information. However, in the event of leakage of information owing to trouble concerning safekeeping, the credibilityof the Group may be undermined and claims may be made for damages against the Group. In the event of trouble concerning IT systems caused by a natural disaster, computer virus infection, etc., there may be an adverse
impact on the Group’s business results and financial condition.
There is also a possibility of cost increases due to the strengthening of environmental regulations and for
ensuring compliance with stricter safety regulations, and the increased cost burden may have an adverse impact
on the Group’s business results and financial condition.
In the event of occurrence of a serious problem, such as a vehicle accident, there is a risk of loss of customer
confidence and public trust that could have an adverse impact on the Group’s business results and financial
position.
In the event that impairment becomes necessary in accordance with the impairment accounting applicable to
fixed assets for business use or there is a great change in the estimates of future taxable income and reversal ofdeferred tax assets is required, there may be an adverse impact on the Group’s business results and financial
position.

Strategic Position and Outlook

Positioning the enhancement of profitability through structural reform of our business and the expansion of thescale of business and the strengthening of market competitiveness through the creation of new logistics businesses as vital management issues, the Group launched the 19th Three-year Medium-Term Business Plan in
April 2012 under the slogan “The Road to Self-Innovation! Innovation Plan 19.”
In order to continue to expand business in the future in an environment marked by the market contraction
caused by the decreasing population in Japan and the continuing yen’s appreciation, logistics companies need
not only to fulfill domestic logistics demand but also to respond to globalization and seek opportunities in othercountries, including emerging nations.
The Group will aim to further strengthen the complementary functions between the business divisions of theGroup companies and promote M&A and business alliances with other companies. We will also take steps toimprove our performance by steadily increasing revenue from the logistics business and strengthening our integrated logistics system that covers both Japan and overseas as we expand business at our overseas subsidiaries(Dalian and Thailand).

Net Cash Used in Investing
Activities

Net Cash Provided byOperating Activities
6(Billions of yen)

0(Billions of yen)

Total Assets andTotal Net Assets
150(Billions of yen)

-1
100

4
-2

50

2
-3

0

’08

’09

’10

’11

’12

-4

’08

’09

’10

’11

’12

0

’08

’09

Total assets
Total net assets

15

’10

’11

’12

Consolidated Balance Sheets
TONAMI HOLDINGS CO., LTD.
AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2012 and 2011ASSETS

Thousands of
U.S. dollars(Note 1)
2012

Millions of yen
2012
2011

Current assets:
Cash and time deposits (Notes 10 and 12)¥8,636¥11,283$105,069

—

17

—

20,01920,437

243,575

(45)

(33)

(551)

Investments in lease assets

376

514

4,582

Inventories

606

675

7,369

Marketable securities (Note 12 and 13)
Trade receivables:
Notes and accounts (Notes 5, 8 and 12)
Less: allowance for doubtful accounts

Deferred tax assets (Note 17)

511

598

6,214

2,942

2,232

35,79633,04535,723402,054

Land

41,30440,919502,540

Buildings and structures

21,341

19,804

259,654

Machinery and vehicles

2,050

2,067

24,947

Leased assets (Note 11)

6,057

5,556

73,691

Construction in progress

92

990

1,119

Other

753

701

9,171

71,59770,037871,122

5,631

5,340

68,511

Deferred tax assets (Note 17)

298

862

3,628

Good will

95

198

1,157

5,419

5,252

65,931

11,443

11,652

139,227¥116,085¥117,412$1,412,403

Other current assets
Total current assets

Property and equipment (Notes 3, 4 and 6):

Total property and equipment

Investments and other assets:
Investments in securities (Notes 12 and 13)

Other
Total investments and other assets
Total assets
The accompanying Notes are an integral part of these statements.

16

LIABILITIES AND NET ASSETS

Thousands of
U.S. dollars(Note 1)
2012

Millions of yen
2012
2011

Current liabilities:
Short-term bank loans (Notes 4 and 12)¥13,490¥13,590$164,132

Current portion of long-term debt (Notes 4, 7, 12 and 14)

1,208

1,354

14,693

Trade notes and accounts payable (Notes 8 and 12)

10,928

10,960132,958

Lease obligations (Note 12)

1,930

1,507

23,487

Income taxes payable

416

527

5,064

Other current liabilities

6,250

6,051

76,04734,22233,989416,381

Total current liabilities
Long-term liabilities:
Long-term debt, less current portion thereof (Notes 4, 7, 12 and 14)

10,453

11,660127,177

Lease obligations (Note 12)

5,083

5,067

61,839Deferred tax liabilities from revaluation reserve for land (Note 6)

4,742

5,455

57,693

Employees’ severance and retirement benefits (Note 15)

14,07914,654

171,302

Retirement benefits for directors and corporate auditors

154

196

1,880

Negative goodwill

230

307

2,798

1,076

1,139

13,095

Other long-term liabilities
Total long-term liabilities

35,81738,478435,784

Total liabilities

70,03972,467852,165

14,183

14,183

172,559

Net assets
Shareholders’ equity (Note 16):
Common stock:
Authorized: 299,200,000 shares in 2012
299,200,000 shares in 2011
Issued: 97,610,118 shares in 2012
97,610,118 shares in 2011
Capital surplus

11,682

11,682

142,136

Retained earnings

15,007

14,686

182,591(2,016)(2,015)(24,530)

38,85638,536

472,756

427

257

5,194

6,413

5,787

78,031

6,840

6,044

83,225

350

365

4,257

Treasury stock, at cost: 6,828,800 shares in 2012
6,822,582 shares in 2011
Total shareholders’ equity
Other comprehensive income
Unrealized gain on other securities (Note 13)
Revaluation reserve for land (Note 6)
Accumulated other comprehensive income
Minority interests:
Minority interests
Total net assets
Total liabilities and net assets

17

46,04644,945560,238¥116,085¥117,412$1,412,403

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income
TONAMI HOLDINGS CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2012 and 2011
Thousands of
U.S. dollars(Note 1)
2012

Millions of yen
2012
2011

Operating revenues (Note 20):
¥117,710¥118,979 $1,432,165

117,710

118,979

1,432,165

110,069

111,355

1,339,203

6,237

6,425

75,889116,306

117,780

1,415,092

1,404

1,199

17,073

Interest and dividend income

292

268

3,549

Equity in earnings of unconsolidated subsidiaries and affiliates

53

50

651

Loss on sale of property and equipment, net

304

(40)

3,699

Interest expenses

(500)

(502)

(6,081)

Operating revenues

Operating costs and selling, general and administrative expenses:
Operating cost (Note 18)
Selling, general and administrative expenses (Note 18)
Operating income (Note 20)
Other income and expenses:

Impairment losses

—

(54)

—

Other, net

318

255

3,872

467

(23)

5,690

1,871

1,176

22,763Current

701

720

8,532

Deferred

548

130

6,667

1,249

850

15,199Net income before minority interests

622

326

7,564

Minority interests

(11)

11

(134)

¥633

¥315

$7,698

Minority income

(11)

11

(134)

Net income before minority interests

622

326

7,564

Valuation difference on other securities

175

(224)

2,129

Revaluation reserve for land

678

—

8,251

(5)

—

(63)

Total other comprehensive income

848

(224)

10,317

Total comprehensive income for the year

1,470

102

17,881

1,481

92

18,015

(11)

10

(134)

Income before income taxes and minority interests
Income taxes (Note 17):

Net income

Other comprehensive income (Note 9)

Share of other comprehensive loss of associates accounting for using the equity method

Total comprehensive income attributable to:
Owners of the parent
Minority interests
The accompanying Notes are an integral part of these statements.

18

Consolidated Statements of Changes in Net Assets
TONAMI HOLDINGS CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2012 and 2011

Millions of yen
Shares ofcommonstock(thousands)

Balance as at April 1, 2010

Cash dividends applicable tothe year (¥4.00 per share)
Net income
Treasury stock
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2011
Balance as at April 1, 2011

Balance as at March 31, 2012

CapitalsurplusRetainedearnings

Treasurystock

97,610 ¥14,183 ¥11,682 ¥14,734¥(2,012) ¥38,587

(363)
315

(363)
315
(3)

97,610 ¥14,183 ¥11,682 ¥14,686
97,610 ¥14,183 ¥11,682 ¥14,686
Shares ofcommonstock(thousands)

Cash dividends applicable tothe year (¥4.00 per share)
Net income
Reversal of Revaluation reserve for land
Treasury stock
Net changes in items other thanshareholders’ equity

Commonstock

Accumulated
Total
Unrealized Revaluation other comshareholders’ gain on other reserve
prehensive
equitysecurities
for landincomeCommonstock

CapitalsurplusRetainedearnings

(363)
633
52

(3)

—
¥(2,015) ¥38,536¥(2,015) ¥38,536
Treasury
stock

(1)

¥480

¥5,787¥6,267

Minority
interests¥375 ¥45,229
(363)
315
(3)

(223)
¥257
¥257

¥5,787¥5,787(223)¥6,044¥6,044

Accumulated
Total
Unrealized Revaluation other comshareholders’ gain on other reserve
prehensive
equitysecurities
for landincome(9)(232)¥365 ¥44,945¥365 ¥44,945
Minority
interests

(363)
633
52
(1)

—
97,610 ¥14,183 ¥11,682 ¥15,007 ¥(2,016) ¥38,856

Total
net assets

Total
net assets

(363)
633
52
(1)
170
¥427

626
¥6,413796¥6,840(16)780¥350 ¥46,046

Thousands of U.S. dollars (Note 1)
Commonstock

Balance as at April 1, 2011

Cash dividends applicable tothe year ($0.0486 per share)
Net income
Reversal of Revaluation reserve for land
Treasury stock
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2012

CapitalsurplusRetainedearnings

Treasurystock

Accumulated
Total
Unrealized Revaluation other comshareholders’ gain on other reserve
prehensive
equitysecurities
for landincome$172,559 $142,136 $178,679 $(24,513) $468,861(4,418)
7,699
631

(17)

(4,418)
7,699
631
(17)

—
$172,559 $142,136 $182,590 $(24,530)$472,756

The accompanying Notes are an integral part of these statements.

19$3,128 $70,411 $73,539

Minority
interests

Total
net assets$4,447 $546,847(4,418)
7,699
631
(17)

2,065
7,620
9,685
$5,194 $78,031 $83,224(189) 9,496$4,257 $560,238

Consolidated Statements of Cash FlowsTONAMI HOLDINGS CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2012 and 2011

Millions of yen
2012
2011

Cash flows from operating activities:
Net income before income taxes and minority interests
Depreciation and amortization
Impairment losses(Gain) loss on disposal of property and equipment
Loss on sales of investments in securities
Loss on devaluation of investments in securities
Loss on devaluation of golf club memberships
Amortization of goodwill
Equity in earnings of unconsolidated subsidiaries and affiliates
Decrease in allowance for doubtful accounts
Decrease in employees’ severance and retirement benefits(Decrease) increase in directors’ and corporate auditors’ retirement benefits
Increase (decrease) in accrued bonuses to employees
Interest and dividend income
Interest expenses
Decrease (increase) in trade receivables
Decrease (increase) in inventories(Decrease) increase in accounts payable(Decrease) increase in accrued consumption taxes
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Thousands of
U.S. dollars(Note 1)2012

¥1,871
3,882
—
(304)
0
13
2
26
(53)
(3)
(575)
(41)
0
(291)
500
417
69
(32)
(222)
153
5,412
292
(502)
(838)
4,364

¥1,176
3,504
54
40
25
29
—
33
(50)
(2)
(651)
6
(64)
(268)
502
(723)
(65)
1,149
39
487
5,221
268
(513)
(705)
4,271

$22,763
47,236—(3,699)
5
160
24
315
(651)
(36)
(6,993)(501)
1(3,549)
6,081
5,078
841
(386)
(2,702)
1,859
65,846
3,549(6,104)(10,195)
53,096

Cash flows from investing activities:
Purchase of time deposits
Proceeds from redemption of time deposits
Purchase of property and equipment
Proceeds from sales of property and equipment
Purchase of investments in securities
Proceeds from sales of investments in securities
Purchase of investments in subsidiaries
Investments in loans receivable
Proceeds from collection of loans receivable
Other, net
Net cash used in investing activities(34)
22(3,609)
439
(20)
3
(0)
(251)
42
(44)
(3,452)(44)
53(2,786)
119
(104)
77
(23)
(31)
4
(14)
(2,749)(408)
268(43,914)
5,344
(246)
37
(0)
(3,050)515(541)(41,995)

Cash flows from financing activities:
Net decrease in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Dividends paid
Dividends paid to minority interests
Repayment of lease obligations
Net cash used in financing activities(100)—(1,354)
(1)
(363)
(5)
(1,638)(3,461)

(433)
3,309
(1,738)
(3)
(363)
(5)
(1,508)(741)(1,217)—(16,477)(17)(4,418)(55)(19,926)(42,110)(2,549)
11,140¥8,591

781
10,359¥11,140(31,009)
135,542$104,533

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year (Note 10)
The accompanying Notes are an integral part of these statements.

20Notes to the Consolidated Financial Statements
TONAMI HOLDINGS CO., LTD.
AND CONSOLIDATED SUBSIDIARIES

1 Basis of presenting financial statements
The accompanying consolidated financial statements have been prepared based on the accounts maintained by
Tonami Holdings Co., Ltd. (the “Company”) and consolidated subsidiaries in accordance with accounting principles generally accepted in Japan, which differ in certain respects as to the application and disclosure requirements of International Financial Reporting Standards.
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been
made to the Company’s consolidated financial statements issued domestically in order to present them in a format which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the2011 financial statements to conform to the classifications used in 2012.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which theCompany is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts areincluded solely for the convenience of readers outside Japan and have been made at the rate of ¥82.19 to U.S.
$1, the approximate rate of exchange at March 31, 2012. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

2 Summary of significant accounting policies(a) Consolidation

The accompanying consolidated financial statements as of March 31, 2012 include the accounts of theCompany and its 27 (30 in 2011) consolidated subsidiaries and 6 (6 in 2011) affiliates accounted for by theequity method.
Under the control or influence concept, those companies in which the Company, directly or indirectly, isable to exercise control over operations are fully consolidated, and those companies over which the Company
has the ability to exercise significant influence are accounted for by the equity method. Three subsidiaries considered insignificant in view of total assets, operating revenues, net income and retained earnings are excluded
from the scope of consolidation and not accounted for by the equity method.
The difference between the cost of an acquisition and the fair value of the net assets of the acquired subsidiary at the date of acquisition is being equally amortized over a period of 5 years after incurred. However, if theamount is immaterial, it is fully charged to income at the date of acquisition.
All significant intercompany balances and transactions have been eliminated in consolidation.
(b) Marketable securities and investments in securities

Securities, except for investments in unconsolidated subsidiaries and affiliates, are classified as trading securities, held-to-maturity securities or other securities. Trading securities are carried at fair value. Held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fairvalue with any unrealized gain or loss reported as a separate component of net assets, net of taxes.
Non-marketable securities classified as other securities are carried at cost determined by the moving-averagemethod.
Cost of securities sold is determined principally by the moving average method.
(c) Inventories

Inventories are stated at the lower of cost, determined principally by the last purchase price method or partiallyby the specific identification method, or net selling value.
(d) Derivatives

Derivative financial instruments are stated at fair value.
Interest-rate swaps which meet specific matching criteria and qualify for hedge accounting treatment are not
re-measured at market value; however, the differentials paid or received under the respective swap agreements
are recognized and included as interest expense or income.
(e) Property and equipment and intangible assets

Property and equipment are stated at cost. However, under Japanese tax law, capital gains arisen from disposals
and other similar transactions are deducted from the cost of the property and equipment acquired in substitution.
Depreciation of property and equipment, except for leased assets, is computed by the declining balancemethod over the useful life of the assets as determined by law, except for buildings and structures, which are
depreciated by the straight-line method.
21

The ranges of useful lives of principal property and equipment are as follows:
Buildings and structures . . 2–67 years
Machinery and vehicles . . . 2–17 years
Leased assets under the finance lease arrangements which do not transfer ownership of the leased assets tothe lessee are depreciated by the straight-line method over the respective lease periods without residual values.
However, if the guaranteed salvage value is specified in the lease contracts, they are depreciated by thestraight-line method considering such salvage value.
Finance leases which commenced prior to April 1, 2008 and do not transfer ownership of the leased assets
are accounted for as operating lease transactions as before.
Amortization of intangible assets is principally computed using the straight-line method on the presumptionof having no salvage value.
(f) Allowance for doubtful accounts

Allowance for doubtful accounts is provided in an amount sufficient to cover possible losses on collection. Saidamount is computed by applying the rate of actual losses on collection experienced in the past with respect togeneral trade receivables and by individually reviewing their collectibility with respect to certain doubtfulreceivables.
(g) Employees’ severance and retirement benefits

Full-time employees of the Company and its consolidated subsidiaries are entitled to a lump-sum payment
upon retirement or severance of employment. In order to provide for the employees’ severance and retirement
benefits, the Company and its consolidated subsidiaries assume a liability for severance and retirement benefits,
which is included in the liability section of the consolidated balance sheet, based on the estimated amounts ofprojected benefit obligation and plan assets at the balance sheet dates.
Past service costs are recognized in expenses using the straight-line method over 9 years (a period notexceeding the employees average remaining service years) commencing with the year incurred.
Actuarial gains and losses are recognized in expenses using the straight-line method over 9 years (a period
not exceeding the employees’ average remaining service years) commencing with the year following theiroccurrence.
(h) Retirement benefits for directors and corporate auditors

Some consolidated subsidiaries provide necessary payments to directors and corporate auditors at the end of
the fiscal year determined according to internal company rules to a reserve for retirement benefits for directors
and corporate auditors.
(i) Foreign currency translation

All monetary assets and liabilities denominated in foreign currencies are translated into yen at the current
exchange rates at the balance sheet date, and any gain or loss on translation is credited or charged to income.
(j) Income taxes

Income taxes consist of corporate income tax, inhabitant taxes and enterprise tax.
The Company and its consolidated subsidiaries recognize tax effects of temporary differences between the
carrying amounts of assets and liabilities for tax and financial reporting.
(k) Cash equivalents

Cash equivalents include deposits placed with banks on demand and highly liquid investments with insignificant risk of changes in value which have maturities of three months or less when purchased.
(l) Net income per share

Basic income per share is computed using the weighted-average number of shares of common stock outstanding, which represents the number of issued shares less treasury stock, during each year.
(Additional information)
Effective from the fiscal year ended March 31, 2012, the Company adopted the “Accounting Standard for
Accounting Changes and Error Corrections” (ASBJ Statement No. 24) issued in December 2009.

22

3 Property and equipment
Depreciable property is stated at the net book value in the consolidated balance sheets. The amounts of accumulated depreciation were ¥52,541 ($639,266 thousand) million and ¥50,068 million on March 31, 2012 and2011, respectively.
Capital gains resulting from disposals and other similar transactions are deducted from the cost of property
and equipment acquired in substitution. The amounts deducted from the cost of property and equipment were¥180 million ($2,192 thousand) and ¥180 million on March 31, 2012 and 2011, respectively.

4 Short-term bank loans and long-term debt(a) Short-term bank loans

Short-term bank loans as at March 31, 2012 and 2011 were as follows:—
Millions of yen
2012
2011

SecuredUnsecured¥3,120
10,370¥3,220
10,370Thousands of
U.S. dollars
2012$37,961
126,171

Interest rates range from 0.610% to 1.600%.
(b) Long-term debt

Long-term debt as at March 31, 2012 and 2011 was as follows:—
Millions of yen
2012
2011

2.11% ¥3.0 billion unsecured straight bonds due 2013
0.625%-2.520% loans from financial institutions due 2012 to 2016
and thereafter
SecuredUnsecured
Total
Less: amount due within one year

Thousands of
U.S. dollars
2012¥3,000¥3,000$36,501

1,053
6,400
10,453
1,208¥9,245

1,958
8,056
13,014
1,354¥11,660

12,80877,868127,177
14,693$112,484

The maturity date of the ¥3.0 billion 2.11% unsecured straight bonds, issued in June 2008 is June 5, 2013.
The annual maturities of long-term debt outstanding as at March 31, 2012 are as follows:—
Year ending March 31,

Millions ofyen

Thousands of
U.S. dollars

2013
2014
2015
2016
2017 and thereafter¥ 1,208
3,057
3,461
589
99

$ 14,693
37,193
42,1077,166
1,204(c) Pledged assets

Property and equipment having a net value of ¥14,559 million ($155,775 thousand) was pledged as collateralfor short-term bank loans and long-term debt as at March 31, 2012.

5 Contingent liabilities
As at March 31, 2012, the Company was contingently liable as follows:—
Notes endorsed
Others23

Millions ofyen

Thousands of
U.S. dollars

¥11
348

$132
4,233

6 Revaluation reserve for land
In accordance with the Law concerning Revaluation of Land enacted on March 31, 1998, the Company has
revaluated its owned land used for business operations as at March 31, 2000 and reported a revaluation reserve
for land under “Net assets.”
The revaluated book value of land was determined based on the value of land registered on the cadastres ortheir supplementary records, which are provided by the Local Tax Law under the Law Concerning Revaluationof Land, after making reasonable adjustments.
Difference between the fair market value of revalued land at March 31, 2011
and the revalued book value

Millions ofyen

Thousands of
U.S. dollars¥11,179$136,015

7 Restrictive financial covenants(1) The Company has entered into overdraft facility and credit line commitment agreements with ten banks forthe purpose of efficient procurement of working capital.
Outstanding balance of unused credit concerning overdraft facility and credit line commitment agreements
at March 31, 2012, was as follows:
Maximum credit line of overdraft facility and commitment agreement
Used credit
Total

Millions ofyen

Thousands of
U.S. dollars¥3,000—¥3,000$36,501—$36,501

The agreements include restrictive financial covenants requiring net assets as of the fiscal year end to exceed
predetermined amount.
(2) Of borrowings of the Company and certain subsidiaries, syndicated loan agreements (outstanding balance
at March 31, 2012: ¥7,140 million ($86,872 thousand)) include restrictive financial covenants requiring assets
at a fiscal year-end to exceed the predetermined amount.

8 Notes due at the end of the fiscal year
Notes due at the end of the fiscal year are treated as if they were settled on the due date.
Since the last day of the fiscal year, March 31, 2012, was a holiday for financial institutions, the following
notes due at the end of the fiscal year were treated as if they were settled on the due date.
Notes receivable
Notes payable

Millions ofyen

Thousands of
U.S. dollars

¥424
175

$5,166
5,124

Millions ofyen

Thousands of
U.S. dollars

¥233
9
242
(67)
175

$2,838
109
2,947
(818)
2,129

678

8,251

(5)
848

(63)
10,3179 Consolidated statement of comprehensive income
Reclassification adjustments and tax effects relating to other comprehensive income
Valuation difference on other securities
Amount arising during the year
Reclassification adjustment
Before tax-effect adjustment
Tax effect
Valuation difference on other securities
Revaluation reserve for landTax effect
Share of other comprehensive income of affiliates accounted for using equity method

Amount arising during the year
Total other comprehensive income2410 Cash flow statements
Reconciliation of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents shown in the consolidated statements of cash flows as at March 31, 2012 and 2011 are as follows:—
Millions of yen
2012
2011

Cash and time deposits
Time deposits with maturities exceeding three months
Cash and cash equivalents¥8,636(45)¥8,591¥11,283(142)¥11,141

Thousands of
U.S. dollars
2012$105,069(536)$104,533

11 Leases(a) Finance leases other than those which are deemed to transfer the ownership of the leased assets to the lessee● Contents of leased assets: Tangible fixed assets (mainly, machinery, equipment and vehicles for distribution related business)● Depreciation method: Leased assets are depreciated by the straight-line method over the respective lease
periods without residual values. However, if the guaranteed salvage value is specified in the lease contracts, they are depreciated by the straight-line method considering such salvage value.
(b) Finance lease transactions which commenced prior to April 1, 2008 and do not transfer ownership of theleased assets to the lessee are accounted for as operating lease transactions as before.
The following are pro forma amounts of the acquisition costs, accumulated depreciation, accumulated
impairment losses and net book value of leased property if they were capitalized as of March 31, 2012 and2011 for finance leases accounted for as operating leases:—Millions of yen
2012
2011

Acquisition costs:
Machinery and tools
Other assets
Accumulated depreciation:
Machinery and tools
Other assets
Accumulated impairment losses:
Machinery and tools
Other assets
Net book value:
Machinery and tools
Other assets

Thousands of
U.S. dollars
2012¥5,3455,834¥11,179¥7,5815,834¥13,415$65,032
70,982$136,014¥4,6482,227¥6,876¥5,955
1,947¥7,902$56,552
27,096$83,660

¥—
756
¥756

¥

—
756
¥756

$—
9,198
$9,198

¥697
2,850
¥3,547¥1,626
3,131¥4,757$8,480
34,676$43,156

Amounts of depreciation expense equivalents and interest expense equivalents for the years ended March 31,
2012 and 2011 are as follows:—
Millions of yen
2012
2011

Depreciation expense
Interest expense

¥979
134

¥1,424
168

Thousands of
U.S. dollars
2012$11,9111,630

Lease payments relating to finance leases accounted for as operating leases amounted to ¥1,231 million($14,977 thousands) and ¥1,713 million, which were equal to the depreciation expense of the leased assets
computed by the straight-line method over the lease terms, for the years ended March 31, 2012 and 2011,
respectively.

25

In the year ended March 31, 2006, impairment losses on leased assets amounting to ¥756 million were recorded.
Since these leased assets are off-balance-sheet, the equivalent amount is included in “Other long-term liabilities”.
Impairment losses on leased assets is realized over the lease term. In the fiscal year ended March 31, 2012 and2011, reversal of impairment losses on leased assets amounting to ¥42 million ($511 thousand) was recorded.
Future minimum lease payments (including the interest portion thereon) and the balance of impairment losses
on leased assets as at March 31, 2012 and 2011 for finance leases accounted for as operating leases are summarized
as follows:—
Millions of yen
2012
2011

Due within one year
Due over one year
Total

¥796
3,337
¥4,133¥462

Impairment losses on leased assets¥1,2424,167¥5,409¥504

Thousands of
U.S. dollars
2012$9,685
40,601$50,286$5,621(c) Operating leases
Millions of yen
2012
2011

Due within one year
Due over one year
Total

¥274
3,027
¥3,300

¥274
3,300
¥3,574

Thousands of
U.S. dollars
2012$3,334
36,829$40,151

12 Financial instruments and related disclosures(a) Financial instruments
The Group invests cash surplus, if any, in low risk financial assets and raises funds for short-term working
fund by bank borrowings. For capital investment, the Group raises necessary funds in light of capital investment plan by bank borrowings or issuance of corporate bonds. Derivatives are employed to mitigate the riskof fluctuations in interest rates, and not used for speculative purposes.
Trade receivables such as notes and accounts are exposed to customer credit risk. For such credit risk, theGroup has established the risk management system to monitor and control payment term and balances ofcustomers.
Investments in securities such as equity securities are exposed to the market risk of fluctuation in market
prices, but major components are equity securities issued by the business partners and their fair values are
periodically reported to the in-charge directors.
Almost all the trade payables such as notes and accounts payable are due within one year.
Of borrowings, short-term bank loans are used mainly to procure funds for operating transactions andlong-term debt and corporate bonds are used to procure funds for capital investment. For floating-rate debt,
derivative transactions (interest rate swaps) are used as hedges to avoid the risk of interest rate fluctuations
and fix interest payments.
The Company executes and manages derivative transactions in accordance with internal rules that specify
transaction authority, and since large borrowings are subject to the decision of the board of directors, theboard of directors also decides whether to enter into a corresponding swap agreements. Moreover, theCompany enters into derivative transactions only with financial institutions with high credit ratings to mitigate counterparty default risk.
Trade payables and loans are exposed to the liquidity risk, but the Group controls such liquidity risk by
the monthly cash management plans prepared by each company.

26

(b) Fair value of financial instruments
The carrying amount, fair value and the related difference of the financial instruments as of March 31, 2012
and 2011 are as follows:
Financial instruments whose fair values are extremely difficult to determine are not included in the following tables.
Carrying
amountMillions of yen
Fair
value

¥8,636
3,636
16,3833,330¥31,985¥8,636
3,636
16,3833,330¥31,985

—
—
—
—
—

¥787
10,141
13,490
3,000
7,013
8,661
¥43,092—¥787
10,141
13,490
3,042
7,087
8,782
¥43,329
—

—
—
—
42
74
122
¥238
—

Carrying
amountMillions of yen
Fair
value

¥11,283
3,501
16,9363,089¥34,809¥11,283
3,501
16,9363,089¥34,809

—
—
—
—
—

¥938
10,022
13,5903,000
6,574
10,014¥44,138—¥938
10,022
13,5903,067
6,840
10,151¥44,608
—

—
—
—
67
266
137
¥470
—

For the year ended March 31, 2012

Assets:Cash and time deposits
Trade receivables – notes
Trade receivables – accounts
Investments in securities (other securities)
Total assets
Liabilities:
Trade notes payable
Trade accounts payable
Short-term bank loans
Bonds
Lease obligations
Long-term debt
Total liabilities
Derivatives:
For the year ended March 31, 2011

Assets:Cash and time deposits
Trade receivables – notes
Trade receivables – accounts
Investments in securities (other securities)
Total assets
Liabilities:
Trade notes payable
Trade accounts payable
Short-term bank loans
Bonds
Lease obligations
Long-term debt
Total liabilities
Derivatives:

Difference

Difference

Thousands of U.S. dollars
Carrying
Fair
Difference
amountvalue

For the year ended March 31, 2012

Assets:Cash and time deposits
Trade receivables – notes
Trade receivables – accounts
Investments in securities (other securities)
Total assets
Liabilities:
Trade notes payable
Trade accounts payable
Short-term bank loans
Bonds
Lease obligations
Long-term debt
Total liabilities
Derivatives:27$105,069
44,246
199,329
40,517$389,161$105,069
44,246
199,329
40,517$389,161

—
—
—
—
—

$9,579
123,379
164,132
36,501
85,326105,369$524,286—$9,579
123,379
164,132
37,01486,228106,853$527,185
—

—
—
—
513
902
1,484
$2,899—

For cash and time deposits, trade notes receivable and trade accounts receivable, the carrying amount is presented as the fair value since the fair value approximates the carrying amount because of the short maturity ofthese instruments.
For investments in securities, the fair value of equity securities is determined using the quoted price of thestock exchanges. Unlisted equity securities whose fair value is extremely difficult to identify in the carrying
amount of ¥2,300 million ($27,994 thousand) are not included in the above table.
For trade notes payable, trade accounts payable and short-term bank loans, the carrying amount is presented
as the fair value since the fair value approximates the carrying amount because of the short maturity of these
instruments.
For bonds, lease obligations and long-term debt, the fair value is determined using the present value of
aggregated principal and interest discounted at a rate assumed if the new loans or lease arrangements weremade.
For derivatives, please see Note 14 “Derivative transactions”.
(c) Information about maturities of financial instruments
Annual maturities of monetary receivables and other securities with contractual maturities as of March 31,
2012 and 2011 are as follows:
Millions of yen

For the year ended March 31, 2012

Time deposits
Trade notes receivable
Trade accounts receivable
Investments in securities (other securities with contractual maturities)
Total

Due in one
year

Due after one
year throughfive years

Due after five
years throughten years¥8,612
3,636
16,383—¥28,631

¥—
—
—
59
¥59

¥—
—
—
—
¥—

Due in one
year

Due after one
year throughfive years

Due after five
years throughten years¥11,253
3,501
16,93617¥31,707

¥—
—
—
60
¥60

¥—
—
—
—
¥—

Due after
ten years

¥—
—
—
—
¥—

Millions of yen

For the year ended March 31, 2011

Time deposits
Trade notes receivable
Trade accounts receivable
Investments in securities (other securities with contractual maturities)
Total
For the year ended March 31, 2012

Due in one
year

Time deposits
Trade notes receivable
Trade accounts receivable
Investments in securities (other securities with contractual maturities)
Total

28

$104,782
44,239199,331—$348,352

Thousands of U.S. dollars
Due after one Due after five
year through years throughfive years
ten years

$—
—
—
718
$718

$—
—
—
—
$—

Due after
ten years

¥—
—
—
—
¥—

Due after
ten years

$—
—
—
—
$—

Annual maturities of monetary payables as of March 31, 2012 are as follows:
Millions of yen

Bonds
Lease obligations
Long-term debt
Total

Due in one
year

Due after one
year throughtwo years

¥—
1,930
1,208
¥3,138¥3,000
1,743
3,057¥7,800

Due in one
year

Due after one
year throughtwo years$—
23,482
14,707$38,190$36,501
21,207
37,192$94,900

Due after two Due after three
years through years throughthree years
four years

¥—
1,102
3,461
¥4,563

¥—
731
589
¥1,320

Due after four
years throughfive years

¥—
414
99
¥513

Due after
five years

¥—
1,093
247
¥1,340

Thousands of U.S. dollars

Bonds
Lease obligations
Long-term debt
Total

Due after two Due after three
years through years throughthree years
four years$—
13,40842,107$55,515

$—
8,894
7,165
$16,059

Due after four
years throughfive years

$—
5,037
1,204
$6,241

Due after
five years$—
13,2983,004$16,304

13 Marketable securities and investments in securities
No trading securities or held-to-maturity securities were held at March 31, 2012 or 2011. Securities classified
as other securities are included in “marketable securities” and “investments in securities” in the accompanying
consolidated balance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities at March 31,
2012 and 2011 are summarized as follows:—
Carrying
value

Millions of yen
2012
Acquisitioncosts¥1,892¥1,018

¥874

—
—
50

—
—
50

—
—
0

1,378

1,663

(285)

—
—
10
¥3,330——10¥2,741

—
—
(0)
¥589

Carrying
value

Millions of yen
2011
Acquisitioncosts¥1,730¥1,019

¥712

—
—
50

—
—
50

—
—
0

1,281

1,647

(366)

—
17
10
¥3,089—100
10¥2,826

—
(83)
(0)
¥263

For the year ended March 31, 2012

Unrealized gain:
Stocks (Note)
Bonds:
Corporate bonds
Other
Other
Unrealized loss:
Stocks (Note)
Bonds:
Corporate bonds
Other
Other
Total
For the year ended March 31, 2011

Unrealized gain:
StocksBonds:
Corporate bonds
Other
Other
Unrealized loss:
StocksBonds:
Corporate bonds
Other
Other
Total

29

Unrealized
gain (loss)

Unrealized
gain (loss)

Thousands of U.S. dollars
2012
Carrying
Acquisition
Unrealized
value
costs
gain (loss)

For the year ended March 31, 2012

Unrealized gain:
Stocks (Note)
Bonds:
Corporate bonds
Other
Other
Unrealized loss:
Stocks (Note)
Bonds:
Corporate bonds
Other
Other
Total

$23,021$12,389$10,632

—
—
609

—
—
608

—
—
1

16,76920,232(3,463)——118$40,517——
122$33,351——(4)$7,166

Note:	Equity securities with fair value, classified as other securities, are restated at the fair value and related loss
on impairment in an amount of ¥13 million ($158 thousand) is charged to income for the year ended
March 31, 2012.
Equity securities whose fair value is 50% or less than the acquisition cost are necessarily restated at fairvalue and those whose fair value is between 50% and 30% of the acquisition cost are restated at fairvalue, if they are judged to be unrecoverable considering the trend of the market value for the past certain period and performances of the issuers.
Other securities sold during the year ended March 31, 2012, and the year ended March 31, 2011, amounted
to ¥3 million ($36 thousand) and ¥1 million, respectively, of which a gain on sales amounted to ¥0 million ($5thousand) and ¥0 million, respectively.

14 Derivative transactions(a) Derivative transactions to which hedge accounting is not applied
There is no applicable transaction.
(b) Derivative transactions to which hedge accounting is applied
Hedge accounting method: Special treatment for interest rate swaps
Type of transactions: Interest rate swaps:
Fixed rate payment/Floating rate receipt
Major hedged item: Long-term debt
Millions of yen
2012
2011

Contract amount Total
Due after one year
Fair value¥7,140
6,400*¥7,880
7,140*

Thousands of
U.S. dollars
2012$86,872
77,868**The fair value is regarded to be included in the fair value of the long-term debt as hedged instruments, since
the interest rate swaps which qualify for hedge accounting and meet specific criteria are not remeasured atmarket value, but the differentials paid or received under the swap agreements are recognized and included ininterest expenses or income (special treatment).

30

15 Employees’ severance and retirement benefits
Employees who terminate their service with the Company and consolidated subsidiaries are, in most cases,
entitled to pension annuity payments or to a lump-sum severance payment determined by reference to thebasic rate of pay, length of service and the conditions under which the termination occurs.
The Company and certain consolidated subsidiaries have defined benefit plans, including a lump-sum payment plan and a contributory welfare pension plan and an approved retirement annuity plan. The Company
revised its pension plans and shifted them to a cash balance plan (money market-interest-rate linked type) on
June 1, 2004.
The projected benefit obligation and the funded status of the plans summarized as follows:—
Millions of yen
2012
2011

Projected benefit obligation
Plan assets
Net unrecognized amount
Employees’ severance and retirement benefits¥(19,527)
4,005
1,443
¥(14,079)¥(20,013)
3,519
1,840
¥(14,654)

Thousands of
U.S. dollars
2012$(237,584)
48,72917,557$(171,298)

The net unrecognized amounts were as follows:—
Millions of yen
2012
2011

Unrecognized benefit obligation:
Adjustment for actuarial assumptions
Past service cost
Net unrecognized amounts¥2,230(787)¥1,443¥3,209(1,369)¥1,840

Thousands of
U.S. dollars
2012$27,132(9,575)$17,557

The components of net periodic pension and severance costs excluding the employees’ contributory portion
were as follows:—
Millions of yen
2012
2011

Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of adjustment for actuarial assumptions
Amortization of past service cost
Net periodic pension and severance costs

¥732
253
(50)
1,075
(582)
¥1,428

¥836
260
(74)
1,117
(582)
¥1,557

2012

2011

1.3%
2.5%

1.3%
2.5%

The assumptions used were as follows:—
Discount rates
Expected rates of return on plan assets

31

Thousands of
U.S. dollars
2012$8,906
3,078(608)
13,079(7,081)$17,374

16 Net assets
The Company Law provides that an amount equal to at least 10% of the aggregate amount to be distributed as
cash dividends or cash appropriations must be transferred to the legal reserve until the additional paid-in capital, which is part of the capital surplus account, and the legal reserve, which is part of retained earnings, equals
25% of the common stock account.
Transfers from the legal reserve to common stock, additional paid-in capital, and other reserves may be madeby resolution of the shareholders.
Under the Company Law, distributions of reserves to shareholders may be made at any time by resolution of
the shareholders.
The Company’s Articles of Incorporation also provide that the Board of Directors may make distributions toshareholders based on a resolution of the Board of Directors, provided that such distributions are limited toonce per fiscal year.
Information concerning changes in net assets

Treasury stock
Class of shares

Common stock (shares)

At March 31, 2011

Increase

Decrease

At March 31, 2012

6,837,767

8,103

—

6,845,870

Reason for the change:
The increase attributable to the purchase of shares less than one unit: 8,103 shares

17 Income taxes
As described in Note 2(j), the Company and its consolidated subsidiaries recognizes tax effects of temporary
differences between the carrying amounts of assets and liabilities for tax and financial reporting.
Significant components of deferred tax assets and liabilities were as follows:—
Millions of yen
2012
2011

Deferred tax assets:
Excess bonuses accrued
Excess employees’ severance and retirement benefits accrued
Excess loss on impairment of tangible fixed assets (except for leased assets)
Accumulated loss on impairment of leased assets
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gain on other securities
Reserve under Special Taxation Measures Law
Total deferred tax liabilities
Net deferred tax assets

32

Thousands of
U.S. dollars
2012

¥417
5,018
2,748
163
1,220
9,566
(4,226)
5,340

¥455
5,949
3,216
204
1,180
11,004(4,530)6,474$ 5,079
61,05033,4291,989
14,850116,396(51,428)
64,968(161)(4,370)(4,531)¥809(91)(4,922)(5,014)¥1,460(1,958)(53,165)(55,125)$9,843

Income taxes applicable to the Company consist of corporate income tax, inhabitant taxes and enterprise tax.
Significant differences between the statutory tax rate and the Company’s effective tax rate after applying thedeferred tax accounting for the years ended March 31, 2012 and 2011 were as follows:—

Statutory tax rate:
Increase (reduction) in tax resulting from:
Nondeductible expenses including entertainment, etc.
Nontaxable income including dividends received deduction, etc.
Per capita portion of inhabitant taxes
Equity in earnings of affiliates
Elimination of dividends received from consolidated subsidiaries, etc.
Change in valuation allowance related to deferred tax assets
Adjustment of deferred tax assets following a change in statutory tax rates
Other
Effective tax rate

2012

2011

40.43%

40.43%

3.29(7.14)
12.33(1.16)
6.30
6.12
4.75
1.26
66.18%

4.42(10.54)19.09(1.73)
9.52
6.24
—
5.80
73.23%

18 Supplementary income information
Supplementary income information for the years ended March 31, 2012 and 2011 is as follows:—
Millions of yen
2012
2011

Depreciation expenses
Lease and rental

Thousands of
U.S. dollars
2012¥3,504
5,368¥3,882
4,928$47,236
59,95819 Amounts per share
Amounts per share of common stock for the years ended March 31, 2012 and 2011 were as follows:—
Yen

Net income per share:
Basic
DilutedCash dividends
Net assets per share:

2012

2011

¥6.97—4.00¥503.46¥3.47—4.00¥491.12

U.S. dollars
2012$0.0848—
0.0487$6.1256

Basis for the calculation of net assets per share for the years ended March 31, 2012 and 2011 were as follows:—
Millions of yen
2012
2011

Total net assets as reported on the consolidated balance sheets
Deduction:
Adjusted net assets allocated in common stock:
Minority interests
Number of shares of common stock issued
Number of shares of common stock in treasury
Number of shares of common stock outstanding at the end ofyear on which net assets per share is calculated

33

Thousands of
U.S. dollars
2012¥44,945$560,238

45,69644,580350
365
Shares97,610,118 97,610,118
6,845,870
6,837,767

555,981
4,257¥46,046

90,764,248

90,772,351

Basis for the calculation of basic and diluted net income per share for the years ended March 31, 2012 and2011 was as follows:—
Thousands of
U.S. dollars
2012

Millions of yen
2012
2011

Net income available to shareholders of common stock:
Net income
Net income not available to shareholders of common stock
Net income available to shareholders of common stock
Weighted-average number of shares of common stock outstanding (shares)

¥633
—
633
90,768,846

¥315
—
315
90,781,100$7,698—
7,698

20 Segment information(1) Overview of reportable segments
The Company’s segments are the Group’s components for which discrete financial information is available andwhose operating results are regularly reviewed by the Company’s board of directors to make decisions on the
allocation of resources to the segments and to assess their performance.
The Group, in doing business, classifies business models of operating companies, which are under theCompany (pure holding company), according to the nature of services and formulates comprehensive strategies
for individual business models.
Therefore, the Group consists of segments according to services based on these business models and theGroup’s reportable segments are: Logistics, Information Processing, and Sales.
Principal services of the Logistics segment are road haulage, freight forwarding, warehousing, and harbortransport. The principal service of the Information Processing segment is information processing. Principal services of the Sales segment are merchandising, consignment sales, and a non-life insurance agency.
(2)	Methods of calculating operating revenues, income/loss, assets/liabilities, and other items by reportablesegment
Accounting procedures applied to the reported operating segments are the same as those described in the “Basisof Presenting Consolidated Financial Statements.” Income of reportable segments is on an operating income
basis. Intersegment revenues and transfers are based on market prices.
(3) Information on operating revenues, income/loss, assets/liabilities, and other items by reportable segment
For the year ended March 31, 2012
Logistics

Operating revenues:
Revenues from outside customers
Intersegment revenues or transfers
Total
Segment income
Segment assets
Other items
Depreciation
Amortization of
goodwill
Increases in property
and equipment andintangible fixed assets

Millions of yen
Reportable segment
Information
processing
Sales

Total

Others(Note 1)

Total

¥107,500¥2,718¥6,697¥116,915¥795¥117,710

27
107,527

256
2,974

5,527
12,224

5,810
122,725

831
1,626

6,641
124,351

Adjustment(Note 2)

Consolidated(Note 3)

¥—¥117,710(6,641)(6,641)—
117,710

¥670

¥103

¥430

¥1,203¥114¥1,317¥87¥1,404¥105,550¥2,095¥9,132¥116,777¥11,309¥128,086¥(12,001)¥116,085¥3,368

¥438

¥40

¥3,846¥26¥3,872¥10¥3,882

¥88

¥14

¥

—

¥102

¥

—

¥102

¥

—

¥102

¥5,548

¥246

¥52

¥5,846¥6¥5,852¥8¥5,86034

For the year ended March 31, 2011
Logistics

Operating revenues:
Revenues from outside customers
Intersegment revenues or transfers
Total
Segment income
Segment assets
Other items
Depreciation
Amortization of
goodwill
Impairment losses
Increases in property
and equipment andintangible fixed assets

Millions of yen
Reportable segment
Information
processing
Sales

Others(Note 1)

Total

Adjustment(Note 2)

Consolidated(Note 3)

¥109,031¥2,689¥6,459¥118,179¥800¥118,979¥—¥118,979

8
109,039

188
2,877

5,431
11,8905,627
123,806

822
1,622

6,449
125,428(6,449)(6,449)—118,979

¥281

¥382

¥379

¥1,042¥53¥1,095¥104¥1,199¥105,949¥1,583¥8,726¥116,258¥11,288¥127,546¥(10,134)¥117,412¥3,137

¥286

¥40

¥3,463¥29¥3,492¥12¥3,504

¥103
¥
54

¥14
¥—

¥—
¥—

¥118
¥
54

¥—
¥—

¥118
¥54

¥—
¥—

¥118
¥54

¥4,103

¥305

¥25

¥4,433¥8¥4,441¥(6)¥4,435

Adjustment(Note 2)

Consolidated(Note 3)For the year ended March 31, 2012

Logistics

Operating revenues:
Revenues from outside customers
Intersegment revenues or transfers
Total
Segment income
Segment assets

Total

Thousands of U.S. dollars
Reportable segment
Information
processing
Sales

Total

$1,307,940$33,072$81,478 $1,422,490

329
1,308,269

3,117
36,19067,245
148,723

70,692
1,493,182

Others(Note 1)

Total

$9,675 $1,432,165
10,115
19,78980,806
1,512,971$— $1,432,165(80,806)(80,806)—
1,432,165$8,147$1,248$5,232 $14,627$1,382 $16,008$1,064 $17,072$1,284,224$25,486$111,104 $1,420,814$137,596 $1,558,410$(146,007) $1,412,403$5,325$486 $46,792$315 $47,107$129 $47,236$175$— $1,248$— $1,248$— $1,248$3,000$627 $71,128$73 $71,201$100 $71,300

Other items$40,982
Depreciation
Amortization of$1,073
goodwill
Increases in property
and equipment andintangible fixed assets $67,501

Notes:
1. “Others” corresponds to operating segments that are not included in the reported operating segments
and includes automobile repair and direct mail service.
2. Adjustments are as follows:(1) Adjustments of segment income
For the fiscal year ended March 31, 2012 and 2011, adjustments of segment income amounted to¥87 million ($1,064 thousand) and ¥104 million, respectively. Adjustments include intersegment
eliminations and corporate expenses not allocated to any reportable segments.
For the fiscal year ended March 31, 2012 and 2011, the above-mentioned intersegment eliminations amounted to ¥733 million ($8,921 thousand) and ¥764 million, respectively, and corporate
expenses not allocated to any reportable segments amounted to –¥646 million ($7,857 thousand)and –¥660 million, respectively. Corporate expenses are mainly expenses of the Company’s operations that do not belong to any reportable segments.

35

(2) Adjustments of segment assets
For the fiscal year ended March 31, 2012 and 2011, adjustments of segment assets amounted to–¥12,000 million ($146,008 thousand) and –¥10,134 million, respectively. Adjustments include
intersegment eliminations and corporate assets not allocated to any reportable segments.
For the fiscal year ended March 31, 2012 and 2011, the above-mentioned intersegment eliminations amounted to –¥19,606 million ($238,545 thousand) and –¥19,411 million, respectively, andcorporate assets not allocated to any reportable segments amounted to ¥7,606 million ($92,537
thousand) and ¥9,277 million, respectively. Corporate assets are mainly cash and time deposits andinvestments in securities of the head office that does not belong to any reportable segments.
(3) Adjustments of increases in property and equipment and intangible fixed assets
For the fiscal year ended March 31, 2012 and 2011, adjustments of increases in property andequipment and intangible fixed assets amounted to –¥8 million ($101 thousand) and –¥6 million,
respectively. Adjustments include intersegment eliminations and corporate assets not allocated to
any reportable segments.
For the fiscal year ended March 31, 2012 and 2011, the above-mentioned intersegment eliminations amounted to –¥12 million ($144 thousand) and –¥7 million, respectively, and corporate
assets not allocated to any reportable segments amounted to ¥20 million ($245 thousand) and ¥1
million, respectively.
3. Segment income is adjusted to operating income in the consolidated financial statements.
(4) Related information
For the year ended March 31, 2012
1) Information by product and service
Information by product and service is omitted because similar information is presented in the segment
information.
2) Information by geographical area
Not applicable for operating revenues because there are no operating revenues from outside customers
other than those in Japan.
Not applicable for property and equipment because there is no property and equipment located inplaces other than Japan.
3) Information by major customer
Not applicable because, concerning operating revenues from outside customers, no outside customer
accounts for 10% or more of operating revenues in the consolidated financial statements.
For the year ended March 31, 2011
1) Information by product and service
Information by product and service is omitted because similar information is presented in the segment
information.
2) Information by geographical area
Not applicable for operating revenues because there are no operating revenues from outside customers
other than those in Japan.
Not applicable for property and equipment because there is no property and equipment located inplaces other than Japan.
3) Information by major customer
Not applicable because, concerning operating revenues from outside customers, no outside customer
accounts for 10% or more of operating revenues in the consolidated financial statements.

36

(5) Information on fixed asset impairment losses by reportable segment
For the year ended March 31, 2012
Not applicable
For the year ended March 31, 2011
Information on fixed asset impairment losses by reportable segment is omitted because similar information
is presented in the segment information.
(6) Information on amortization of goodwill and unamortized balance by reportable segment
For the year ended March 31, 2012

Millions of yen

Logistics

Goodwill:
Amortization
Balance at end of year
Negative goodwill:
Amortization
Balance at end of year

Reportable segment
Information
processing
Sales

Adjustment

Total

¥14

¥—

¥103

¥—

¥—

¥103

¥66

¥29

¥—

¥95

¥—

¥—

¥95

¥76

¥—

¥—

¥76

¥—

¥—

¥76

¥230

¥—

¥—

¥230

¥—

¥—

¥230

Total

OthersAdjustment

Total

Millions of yen

Logistics

Reportable segment
Information
processing
Sales

¥103

¥15

¥—

¥118

¥—

¥—

¥118

¥155

¥43

¥—

¥198

¥—

¥—

¥198

¥83

¥—

¥2

¥85

¥—

¥—

¥85

¥307

¥—

¥—

¥307

¥—

¥—

¥307

OthersAdjustment

Total

For the year ended March 31, 2012
Logistics

Goodwill:
Amortization
Balance at end of year
Negative goodwill:
Amortization
Balance at end of year

Others¥88

For the year ended March 31, 2011

Goodwill:
Amortization
Balance at end of year
Negative goodwill:
Amortization
Balance at end of year

Total

Thousands of U.S. dollars
Reportable segment
Information
processing
Sales
Total

$1,073

$175

$—

$1,248$—$—$1,248

$807

$350

$—

$1,157$—$—$1,157

$933

$—

$—

$933

$—

$—

$933

$2,798$—$—$2,798$—$—$2,79837

(7) Information on gain on negative goodwill by reportable segment
For the year ended March 31, 2012
Not applicable
For the year ended March 31, 2011
Not applicable

21 Subsequent events
Cash dividends

The annual shareholders’ meeting of the Company, which was held on June 28, 2012, duly approved the payment of dividends as follows:
Cash dividends (¥2.00 per share)

38

Millions ofyen

Thousands of
U.S. dollars¥181$2,202

Consolidated Subsidiaries

Logistics
Company NameBusiness Line

Tonami Transportation Co., Ltd.

Road haulage

Tonami Transportation Shinetsu Co., Ltd.

Road haulage

Tonami Transportation Chugoku Co., Ltd.

Road haulage

Kanto Tonami Transportation Co., Ltd.

Road haulage

Gosei Tonami Transportation Co., Ltd.

Road haulage

Tonami Shutoken Logistics Co., Ltd.

Road haulage

Osaka Tonami Transportation Co., Ltd.

Road haulage

Zento Transportation Co., Ltd.

Road haulage

Ishikawa Tonami Transportation Co., Ltd.

Road haulage

Ibaraki Tonami Transportation Co., Ltd.

Road haulage

Kansai Tonami Transportation Co., Ltd.

Road haulage

Chukyo Tonami Transportation Co., Ltd.

Road haulage

Fukui Tonami Transportation Co., Ltd.

Road haulage

Niigata Tonami Transportation Co., Ltd.

Road haulage

Takefu Transportation Co., Ltd.

Road haulage

Anan Transportation Co., Ltd.

Road haulage

Nationwide Shirobo JSE Courier Co., Ltd.

Road haulage

Tonami Global Logistics Co., Ltd.

Harbor transport service

Keishin Warehouse Co., Ltd.

Warehousing

Daiichi Warehouse Co., Ltd.

Warehousing

Information Processing and Others
Company NameBusiness Line

Tonami Trading Co., Ltd.

Trading Company

Toyo Gomu Hokuriku Hanbai Co., Ltd.

Sale of tires

Keishin System Research Co., Ltd.

Development and sale of software

Tonami Business Service Co., Ltd.

Financial service

Tonami Staff Support Co., Ltd.

Temporary Staffing

Toyo Tire Toyama shop Co., Ltd.

Sale of tires

Tonami Automobile Technology Research Institute Co., Ltd.

Automobile technology R&D

39

Board of Directors and Corporate Auditors

President and Representative Director
Katsusuke Watanuki
Managing Director
Yasuo Terabayashi

Standing Corporate Auditors
Mitsuo Matsuda
Masafumi Takebe
Corporate Auditors
Shinichiro Inushima
Yohji Ishiguro
Toshio Kaido

Director and Senior Adviser
Yoshihiro Minami
Directors
Shigeki Sakamoto
Shigeyuki Okada
Yoshimi Nagahara
Kazuo Takata
Mitsuharu Wadachi(As of June 28, 2012)

Corporate Data

Head Office2-12, Showa-machi 3-chome, Takaoka,
Toyama Prefecture 933-8788, Japan
Phone: (0766) 32-1073
Fax: (0766) 32-1077

Common Stock¥14,183 million

Tokyo Office8-4, Nihonbashihoridome-cho 2-chome, Chuo-ku,
Tokyo 103-0004, Japan
Phone: (03) 3664-5403
Fax: (03) 3664-5405

Shareholders
6,990

Issued and Outstanding Shares
97,610,118 shares

Date of Established
June 1943

Employees
55(As of March 31, 2012)40

TONAMI HOLDINGS CO., LTD.
URL:http://www.tonamiholdings.co.jp/

Printed in Japan on recycled paper