ANNUAL REPORT 2019 - Mitsubishi Logistics · Meiji Yasuda Life Insurance Company 5,153 5.9 MITSUBISHI ESTATE CO., LTD. 3,665 4.2 Kirin Holdings Company, Limited 2,966 3.4 Tokio Marine

ANNUAL REPORT 2019Year ended March 31, 2019

Nihonbashi Dia Building 19-1 Nihonbashi, 1-chome Chuo-ku, Tokyo 103-8630, Japanhttp://www.mitsubishi-logistics.co.jp

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Company Profile (As of March 31, 2019)

Headquarters and Branches

Headquarters Chuo-ku, Tokyo

Branches Tokyo, Yokohama, Nagoya, Osaka, Kobe and Fukuoka

Date of Establishment April 15, 1887

Capital ¥22,393,986,570

Number of Shares Issued 87,960,739

Authorized Shares 220,000,000

Number of Employees 926 people (parent only; not including 125 people on leave and seconded outside of the Company. There are also 132 temporary employees and 627 seconded and contracted employees from outside the Company.)

4,466 people (on a consolidated basis; not including 49 people on leave and seconded outside of the Group. There are also 1,419 temporary employees and 1,207 seconded and contracted employees from outside the Group.)

Stock Exchange Listing First Section of the Tokyo Stock Exchange

Securities Code 9301

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To Our Shareholders

Summary of the Mitsubishi Logistics Group New Medium-term Management Plan FY2019-2021

Topics

Overview of the Mitsubishi Logistics Group

Independent Auditor’s Report

Consolidated Balance Sheets

Consolidated Statements Of Income

Consolidated Statements Of Comprehensive Income

Consolidated Statements Of Changes In Net Assets

Consolidated Statements Of Cash Flows

Notes To Consolidated Financial Statements

Company Pro�le

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Major ShareholdersShareholder name Number of shares (Thousands) Shareholding ratio (%)The Master Trust Bank of Japan, Ltd. (trust account) 12,707 14.5Japan Trustee Services Bank, Ltd. (trust account) 6,710 7.7Meiji Yasuda Life Insurance Company 5,153 5.9MITSUBISHI ESTATE CO., LTD. 3,665 4.2Kirin Holdings Company, Limited 2,966 3.4Tokio Marine & Nichido Fire Insurance Co., Ltd. 2,915 3.3MUFG Bank, Ltd. 1,864 2.1Japan Trustee Services Bank, Ltd. (trust account 9) 1,791 2.0State Street Bank and Trust Company 505001 1,671 1.9AGC Inc. 1,657 1.9Notes:1. MUFG Bank, Ltd. has set 750 thousand shares of the Company as trust funds for retirement benefits for which voting rights are reserved, in addition to the

shares stated in the table above.2. The Company’s treasury shares (334,099 shares) were excluded in the calculation of the percentage of shares held.

Directors and Corporate Auditors (As of June 27, 2019)Position Name Responsibilities and/or Primary Occupation

Chairman of the Board Akio MatsuiPresident* Masao FujikuraManaging Director Yoshiji Ohara Responsible for Harbor Transportation BusinessManaging Director Hitoshi Wakabayashi Responsible for Warehousing & Distribution Business, General Manager, Warehousing & Distribution Business DivisionManaging Director Yasushi Saito Responsible for Accounting & Financing and Information SystemManaging Director Shinji Kimura Responsible for Planning, Technical and Real Estate BusinessManaging Director* Saburo Naraba Responsible for General Affairs, Corporate Communications, Personnel, and Internal AuditManaging Director Hiroshi Nishikawa Responsible for International Transportation Business, General Manager, International Business Coordination ChamberDirector Minoru MakiharaDirector Koji Miyahara Senior Advisor, Nippon Yusen Kabushiki KaishaDirector Tatsuo Wakabayashi Chairman, Mitsubishi UFJ Trust and Banking CorporationDirector Toshifumi Kitazawa Vice Chairman of the Board, Tokio Marine & Nichido Fire Insurance Co., Ltd.Director Tatsushi Nakashima General Manager, Nagoya BranchDirector Akira Yamao General Manager, Planning & Business Coordination DivisionDirector Akio Miura General Manager, International Transportation Business DivisionStanding Corporate Auditor (full time) Tohru WatanabeCorporate Auditor (full time) Mikine HasegawaCorporate Auditor Yohnosuke Yamada LawyerCorporate Auditor Kenji Sakurai Certified Public AccountantCorporate Auditor Hiroshi Imai

Notes:1. Directors with an asterisk (*) are Representative Directors.2. Of Directors, Mr. Minoru Makihara, Mr. Koji Miyahara, Mr. Tatsuo Wakabayashi and Mr. Toshifumi Kitazawa are Outside Directors as stipulated by Article 2, item 15 of the

Companies Act. The Company designated them as independent officers as stipulated by Tokyo Stock Exchange, Inc. and registered them with the said Exchange.3. Of Corporate Auditors, Mr. Mikine Hasegawa, Mr. Yohnosuke Yamada and Mr. Kenji Sakurai are Outside Corporate Auditors as stipulated by Article 2, item 16 of the

Companies Act. The Company designated them as independent officers as stipulated by Tokyo Stock Exchange, Inc. and registered them with the said Exchange.4. Mr. Akio Matsui, Chairman of the Board, concurrently serves as President of Japan Warehousing Association Inc.

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We would like to express our sincere gratitude for your continued support and patronage.

I hereby report the business overview of the Mitsubishi Logistics Group for the 216th fiscal term (from April 1, 2018, to March 31, 2019).

During the fiscal year under review, in the global economy, while the economy in China slowed moderately, steady economic recovery continued in the United States, and the economy in Europe also gradually recovered despite some signs of weakness. Japan, despite some weakness, recovered moderately with consistently improved employment environment, a recovery in consumer spending and an increase in capital expenditure.

In these economic situations, the business environment surrounding the Group remained difficult in the warehousing and harbor transportation business in the Logistics Segment due to intensifying competition with other companies and increased costs owing to labor shortages and other factors, despite an increase in freight volume. The Real Estate Segment, meanwhile, remained relatively strong with partial rising trend in rent due to improvement in demand for rental office buildings and others.

Under these circumstances, Mitsubishi Logistics Corporation and its subsidiaries and affiliates (collectively, the “Group”) promoted aggressive marketing activities. In the Logistics Segment, we made efforts including the expansion of distribution operations especially for pharmaceuticals, and expansion reinforcement of operational bases overseas. In the Real Estate Segment, we focused our efforts on securing tenants, and maintaining and improving rent levels. Meanwhile, we endeavored to improve business performance thorough cost management and further improvement of efficiency in business operations.

As a result, revenue for the fiscal year under review amounted to 227,185 million yen, an increase of 11,778 million yen, or 5.5% from the previous fiscal year. In the Logistics Segment, revenue increased due to an increase in freight handled in the warehousing & distribution, land transportation, harbor transportation and international transportation businesses, and also in the Real Estate Segment, revenue increased due to the rising occupancy rate of the real estate leasing business and an increase in condominiums sold. On the other hand, cost of services overall increased 11,232 million yen, or 5.8% from the previous fiscal year to 203,825 million yen. In the Logistics Segment, operational and transportation consignment costs and such increased as freight handled increased, and the initial cost until stable operation associated with the start of operations at a new distribution center was borne. In the Real Estate Segment, real estate sales costs increased in line with an increase in condominiums sold. Selling, general and administrative expenses increased 306 million yen, or 2.9% from the previous fiscal year to 10,699 million yen primarily due to increases in personnel expenses and depreciation and amortization.

As a result, operating income increased 239 million yen, or 1.9% year on year to 12,660 million yen, reflecting the rise in income in the Real Estate Segment, despite a slight decline in income in the Logistics Segment. Ordinary income increased 1,172 million yen, or 7.3% to 17,333 million yen due partially to increases in dividend income and equity in earnings of unconsolidated subsidiaries and affiliates. Profit attributable to owners of parent increased 1,047 million yen, or 10.0% from the previous fiscal year to 11,564 million yen despite posting loss on disaster, primarily due to an increase in gain on sale of marketable securities and investments in securities.

With respect to the prospects of the world economy, despite concern for the trend of trade issue and the future of the Chinese economy, the steady recovery in the United States will likely continue, while moderate recovery trend in Europe are expected.

Japanese economy, despite some weakness for the time being, is also expected to continue gradual recovery supported by continuous improvement of employment and income environment and implementation of various government policies.

In this economic climate, under the business environment surrounding the Group, harsh situations continue in the warehousing & distribution business and harbor transportation business due to the intensified competition and an increase in cost resulting from labor shortage and such despite a moderate increase in freight volume. Meanwhile, due to concern over decline in demand for rental office buildings, the improvement in business condition is expected to remain moderate in the real estate business.

Under these circumstances, the Group has formulated a new vision “MLC2030 Vision” to be accomplished in 2030, and by giving first priority to “contributing to the improvement of customer’s value,” we aim to be a corporate group that continues to be selected by customers both in Japan and overseas as a logistics company that consistently handles the supply chain from procurement to distribution and sales as a partner of customers.

As for the year-end dividend for the fiscal year ended March 31, 2019, which is the first year of the New Medium-term Management Plan FY2019-2021, we intend to distribute a year-end dividend of ¥30 per share to further enhance shareholder returns and maintain stable dividend while taking into consideration the level of retained earnings as well as profit for the period under review. As a result, when considering the reverse stock split with an effective date of October 1, 2017, the annual dividend per share including the interim dividend of ¥15 per share totals ¥45, which is an increase of ¥17 from the previous fiscal year.

As for dividends for the fiscal year ending March 31, 2020, which are based on the above basic policy to respond to shareholders’ consistent support barring any extraordinary circumstances, both the interim dividend and the year-end dividend will be ¥30 per share. The annual dividend per share will be ¥60, up ¥15 compared with the previous fiscal year.

We look forward to your continued support and encouragement.

June 2019

Masao Fujikura, President

To Our Shareholders

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With a view to further enhancing its corporate value, the Group has formulated a new medium-term management plan covering the three-

year period that ends in the fiscal year ending March 31, 2022.

I. A Review of the Management Plan FY2016-2018

The Management Plan FY2016-2018, which concluded in the fiscal year ended March 31, 2019, aimed to enhance corporate value

and strengthen growth potential in line with the basic strategies of “expanding the domestic and overseas integrated logistics

business and strengthening the business foundations,” “expanding the Real Estate Business centered on building leases,” and

“strengthening the Group management foundations.”

During the period of the management plan, the Logistics Segment implemented measures that included the establishment of

domestic distribution centers in Osaka and Kobe, etc. and an overseas distribution center in Indonesia. In the Real Estate Segment,

we started up several business projects as planned. However, revenue and operating income fell short of our targets for the final year

of the management plan of 240,000 million yen and 15,500 million yen, respectively, partly due to delays in domestic and overseas

expansion of business domains and structural improvements including organizational restructuring, and an insufficient response to

changes in the external environment such as intensified competition in Japan and overseas, as well as increased costs against a

backdrop of the labor shortage.

Under these circumstances, as part of the Group’s future growth plans through proactive and bold innovation(*1), we formulated

the MLC2030 Vision(*2) and the New Medium-term Management Plan FY2019-2021. (*1) Innovation = the “creation of value” that brings changes to customers’ business and society.(*2) MLC2030 Vision = goals that the Group aims to accomplish by 2030 (MLC is the abbreviation of Mitsubishi Logistics

Corporation).

II. The MLC2030 Vision

1. Goal

For more than 130 years since our establishment, the Group has been contributing to the creation of a prosperous and sustainable

society through logistics businesses with a focus on warehousing. Going forward, the Group has conceived the following

MLC2030 Vision to ensure that we continue to conduct customer-oriented operations and become an innovator in future society

while simultaneously striving to become a corporate group that remains the partner of choice for customers in Japan and abroad.

Contributing to the improvement of customer’s

value is a matter of priority, and we offer

comprehensive logistics solutions to the

management of customer’s supply chains as their

partner, from procurement to distribution/sales.

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2. Growth strategy

The Group will take the following steps under its growth strategy to achieve the MLC2030 Vision.

(1) Establish a customer-oriented support system

The Group will establish a customer-oriented support system with a focus on the medical/health care, food/beverage, and

machinery/electrical machine industries as priority areas, and will take on comprehensive supply chain challenges as the

customer’s partner. Through these efforts, the Group will seek to expand its business domain and boost its market share.

(2) Expand overseas businesses

The Group will move forward with system enhancements to support customer supply chains in the medical/health care and

food/beverage industries and strengthen its forwarding business with demand for high quality cold chains expected to grow in a

number of regions such as Southeast Asia (ASEAN).

(3) Secure stable profits in the port and harbor transportation and real estate businesses

The Group will further enhance the competitiveness of its port and harbor transportation business by leveraging its cargo

handling services, the efficiency of which is ranked among the highest globally, while at the same time developing complexes

and facilities and boosting its operational capability in the real estate business. By doing so, it will seek to secure stable profits.

(4) Improve operational processes and further utilization of new technologies

The Group will review the operational processes of all businesses and facilitate efficient operations by utilizing new

technologies such as IoT, AI and robotics. Through these efforts, it aims to improve service quality and production efficiency.

(5) Strengthen the Group management base

The Group aims for growth by strengthening cost competitiveness through organizational management across the Company and

its Group companies and securing/developing human resources, particularly in the priority areas.

III. Mitsubishi Logistics Group New Medium-term Management Plan for FY2019-FY2021

1. Positioning of the New Medium-term Management Plan for FY2019-FY2021

The Group positions the relevant three-year period as the first stage to make a step toward achieving the MLC2030 Vision and will

focus on the following measures.

(1) Strengthening the business foundations of the priority areas

(2) Establishing a system that leverages new technologies

(3) Maintaining competitiveness in the port and harbor transportation business

(4) Developing complexes and other facilities for the real estate business and improving the organizational structure thereof to

strengthen operational capabilities

(5) Bolstering production efficiency through more efficient operational processes and other means

(6) Improving operational conditions to reform workstyles and creating innovation

(7) Increasing shareholder returns

(8) Promoting CSR-oriented management

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2. Financial objectives and financial strategy

(1) For financial targets in the fiscal year ending March 31, 2022, the Group aims to achieve the operating revenue of 240.0 billion

yen and operating income of 14.5 billion yen.

(2) With respect to the raising of funds for new investments, the Group seeks to boost its financial leverage through a range of

measures such as borrowings and the issuance of corporate bonds, while following a principle of maintaining financial

soundness.

3. Investment plan

The Group plans to make investments totalling approximately 100.0 billion yen (50.0 billion yen for logistics and 50.0 billion yen

for real estate) during the term of this plan.

4. Shareholder return

The Group will further enhance shareholder return programs through dividend increases and share buybacks.

(1) The Group will seek to achieve a dividend on equity of 2% in the fiscal year ending March 31, 2022, the final year of the Plan,

while following the principle of maintaining stable dividend payments, namely, a dividend per share of at least 60 yen per year

during the term of this plan.

(2) The acquisition of treasury shares totalling approximately 15.0 billion yen will be carried out in a flexible manner during the

term of the Plan.

5. Corporate governance

The Group continues to improve programs to institute effective corporate governance.

[Reference] Comparison between FY2021 Targets and FY2018 Results

Consolidated figures (Unit: billion yen)

FY2018 FY2021FY18/FY21 ratio

Amount of change Rate of change

Operating Revenue

Total 227.1 240 +12.9 +5.7%

Logistics 190.4 198.7 +8.3 +4.4%

Real estate 38.6 43.6 +5.0 +13.0%

Elimination of inter-segment transactions

(1.9) (2.3) (0.4) –

Operating Income Total 12.6 14.5 +1.9 +15.1%

Logistics 7.6 9.2 +1.6 +21.1%

Real estate 10.7 10.7 0 0%

Total group costs (5.7) (5.4) +0.3 –

Ordinary Income 17.3 17.1 (0.2) (1.2%)

EBITDA (operating income + depreciation)

25.6 30.1 +4.5 +17.6%

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Topics

The Company started construction on the Seishin Distribution

Center (Phase 2) within the site of the Kobe Logistics Center

(Suma-ku, Kobe). The decision was made to expand the Center

in response to an increase in freight handled at the Seishin

Distribution Center (Phase 1), which was completed in March

2018. The construction is scheduled to be completed in

November 2019.

The Seishin Distribution Center is located adjacent to the

Fusehata JCT on Kobe-Awaji-Naruto Expressway, an ideal spot

as a distribution base in western Japan.

The Center has been designed to share the spiral rampway

with the Phase I building which allow vehicles to access every

floor to address the high-frequency shipping of cargo.

In addition, as with the Phase 1 building, under the concept of a “Disaster-Resistant and Eco-Friendly Warehouse,” solar

power generation equipment has been installed and LED lighting adopted throughout the building to reduce the environmental

burden. By adopting a seismic-isolated structure and installing emergency power generators, the Seishin Distribution Center is

designed to have a high capability to respond to a natural disaster in order to support customers’ business continuity from the

aspect of logistics in the event of a disaster such as an earthquake.

The Company will capture logistics needs accurately and strive to expand its business in western Japan.

Construction at the Seishin Distribution Center (Phase 2) in Kobe

(1) Location: within the Kobe Logistics Center, in Suma-ku, Kobe

(2) Total floor area: approx. 57,400 m2 (four-story building)

(3) Purpose of the use: Distribution center for food products, chemical products and daily necessities, etc.

(4) Construction period: October 2018 to November 2019 (planned)

Outline of the Seishin Distribution Center (Phase 2)

Conceptual image upon completion

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The Company had been undertaking construction on S-GATE NIHONBASHI-

HONCHO, an office building located in Nihonbashi-Honcho, Chuo-ku, Tokyo and

its first real estate development joint project with THE SANKEI BUILDING CO.,

LTD. Construction was completed on October 31, 2018, and leasing of the

building began on November 1 of the same year.

The building is located in an office area with a concentration of companies

from wide-ranging industries, including financial institutions, pharmaceutical

companies and medical facilities, with excellent access to Mitsukoshimae Station

on the Tokyo Metro, Nihombashi Station on the Tokyo Metro and Toei Subway,

Ningyocho Station on the Tokyo Metro and Toei Subway, and Shin-Nihombashi

Station on JR.

Although the building is medium-scale with each floor area of approximately

620 m2, it features the same level of facilities and services as a high-grade, large-

scale office building, including an emergency power generator capable of

transmitting electric power to tenants’ rooms, and a private rooftop terrace for the

exclusive use of tenants.

Completion of S-GATE NIHONBASHI-HONCHO, a Disaster-Resistant, Environmentally-Friendly Office Building

(1) Location: Nihonbashi-Honcho, Chuo-ku, Tokyo

(2) Total floor area: approx. 8,500 m2 (eleven-story building)

Outline of S-GATE NIHONBASHI-HONCHO

(1) Name of company: MY Terminals Holdings, Limited

(2) Location of headquarters: Chiyoda-ku, Tokyo

(3) Principal business: Management of companies (affiliate companies)

(4) Date of establishment: December 13, 2018

(5) Capital: 10 million yen (49% equity participation by the Company; equity-method affiliate)

Outline of the new company

The Company jointly established MY Terminals Holdings, Limited (“the new company”) with Nippon Yusen Kabushiki Kaisha

(“Nippon Yusen”) in order to strengthen its harbor transportation business, and carried out a management integration to make

the domestic port shipping business subsidiaries in the Nippon Yusen Group wholly-owned subsidiaries under the new

company.

The Company will work together with Nippon Yusen to improve the quality of the harbor transportation business conducted

by the subsidiaries under the new company and to provide stable services in the future.

Joint Establishment of a Holding Company with Nippon Yusen Kabushiki Kaisha

S-GATE NIHONBASHI-HONCHO

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P.T. Mitsubishi Logistics Indonesia and P.T. Dia-Jaya Forwarding Indonesia (both consolidated subsidiaries of the Company)

have acquired halal certification from a certification body in Indonesia.

Both companies are providing services addressing temperature-controlled logistics for foods and other items originating

from the MM2100 Distribution Center, which was built in 2017 on the outskirts of Jakarta.

This acquisition of certification for storage and other warehouse-related operations at the distribution center and for land

transportation within Indonesia has enabled the supply of halal-compliant cold-chain services in the country where Muslims

account for the majority of the population.

The Group provides halal-compliant logistics services to Japanese manufacturers in Indonesia, including customers who

lease the factory buildings on the premises of the distribution center, and will strive to expand logistics operations in Indonesia

relating to food products, cosmetics, and pharmaceuticals.

Acquisition of Halal Certification for Warehousing and Domestic Transportation in Indonesia

(1) Name of company

(Business outline)

P.T. Mitsubishi Logistics

Indonesia(Warehousing)

P.T. Dia-Jaya Forwarding Indonesia

(Forwarding, NVOCC, land transportation)

(2) Applicable business Warehousing & delivery, storage and

distribution processing at MM2100

Distribution Center

Land transportation within Indonesia

(3) Date of acquisition June 7, 2018 October 24, 2018

Overview of the Halal Certification

Halal-compliant distribution center (MM2100 Distribution Center) Halal-compliant refrigerated transport vehicles

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Overview of the Mitsubishi Logistics Group (As of March 31, 2019)

Mitsubishi Logistics Corporation

Logistics

Consolidated Subsidiaries (51 companies)

Real Estate

Tohoku Ryoso Transportation Co., Ltd.Sairyo Service Co., Ltd.Dia Pharmaceutical Network Co., Ltd.Tokyo Dia Service Co., Ltd.Dia Systems CorporationRyoso Transportation Co., Ltd.Unitrans Ltd.Keihin Naigai Forwarding Co., Ltd.Touryo Kigyo Co., Ltd.Fuji Logistics Co., Ltd.Tokyo Juki Transport Co., Ltd.SII Logistics Inc.Fuji Logistics Support Co., Ltd.Kinko Service Co., Ltd.Chubu Trade Warehousing Co., Ltd.Meiryo Kigyo Co., Ltd.Ryoyo Transportation Co., Ltd.Kyokuryo Warehouse Co., Ltd.Hanryo Kigyo Co., Ltd.Shinryo Koun Co., Ltd.Naigai Forwarding Co., Ltd.Kyushu Ryoso Transportation Co., Ltd.Monryo Transport CorporationHakuryo Koun Co., Ltd.Seiho Kaiun Kaisha., Ltd.Saryo Service Co., Ltd.Mitsubishi Logistics America CorporationMitsubishi Warehouse California CorporationMitsubishi Logistics Europe B.V.Fuji Logistics Europe B.V.Mitsubishi Logistics China Co., Ltd.Shanghai Linghua Logistics Co., Ltd.* Shanghai Linghua Qingsheng Logistics Co., Ltd.Shanghai Qingke Warehouse Management Co., Ltd.Shanghai Lingyun Global Forwarding Co., Ltd.Fuji Logistics (China) Co., Ltd.Fuji Logistics (Dalian F.T.Z.) Co., Ltd.Fuji Logistics (Shanghai) Co., Ltd.Mitsubishi Logistics Hong Kong Ltd.Fuji Logistics (H.K.) Co., Ltd.Mitsubishi Logistics Thailand Co., Ltd.P.T. Mitsubishi Logistics IndonesiaP.T. Dia-Jaya Forwarding IndonesiaFuji Logistics Malaysia SDN. BHD.

(Note) * Company marked with an asterisk was included as a consolidated subsidiary from the current fiscal year

Subsidiaries and Af�liates Accounted for by the Equity Method (3 companies)(Note) * Company marked with an asterisk was included as an equity-method affiliate from the current fiscal year (Nippon Container Terminals Co., Ltd, which became a wholly owned subsidiary of MY Terminals Holdings, Limited was excluded.)

* MY Terminals Holdings, Limited Kusatsu Soko Co., Ltd.Jupiter Global Limited

Dia Buil-Tech Co., Ltd.Yokohama Dia Building Management CorporationChubo Kaihatsu Co., Ltd.Nagoya Dia Buil-Tech Co., Ltd.Osaka Dia Buil-Tech Co., Ltd.Kobe Dia Maintenance Co., Ltd.T’ACT Co., Ltd.

Principal BusinessLogistics SegmentWarehousing & Distribution Business Business conducting storage and handling of incoming and outgoing

cargo, etc. at warehouses containing consigned itemsLand Transportation Business Business conducting transport and usage transport, etc. by freight

automobilesHarbor Transportation Business Business conducting coastal cargo handling and onboard cargo

handling, etc. at portsInternational Transportation Business Business conducting handling of international product transport, etc.

(including handling domestic marine cargo transport)

Real Estate Segment Business conducting consignment, design and oversight of purchase, leasing, management and construction of real estate

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The accompanying notes are an integral part of these statements.

March 31, March 31,

ASSETS 2019 2018 2019(Millions of yen) (Thousands of U.S. dollars)

(Note 1)

CURRENT ASSETS:

Cash and deposits (Notes 2 and 4) ¥ 41,337 ¥ 38,330 $ 372,439

Marketable securities (Notes 2, 4 and 5) 2,000 2,000 18,020

Notes and accounts receivable (Notes 3, 4 and 6) 44,745 41,499 403,144

Allowance for doubtful accounts (41) (45) (369)

44,704 41,454 402,775

Real estate held for sale 14,332 11,712 129,129

Other 2,185 2,106 19,686

TOTAL CURRENT ASSETS 104,558 95,602 942,049

PROPERTY AND EQUIPMENT (Notes 9, 10, 14 and 16):

Land 89,571 86,750 807,019

Buildings and structures 387,661 378,607 3,492,756

Machinery and equipment 39,236 38,466 353,509

Transportation equipment 9,116 8,825 82,134

Construction in progress 2,068 3,539 18,632

527,652 516,187 4,754,050

Accumulated depreciation (308,152) (300,779) (2,776,395)

NET PROPERTY AND EQUIPMENT 219,500 215,408 1,977,655

INVESTMENTS AND OTHER ASSETS:

Investments in non-consolidated subsidiaries and affiliates 20,628 7,405 185,855

Investments in securities (Notes 4 and 5) 114,342 119,693 1,030,201

Long-term loans receivable 517 514 4,658

Intangible assets (Note 14) 14,058 14,601 126,660

Goodwill 630 950 5,676

Deferred income taxes (Note 7) 2,915 2,866 26,264

Other 5,448 5,013 49,085

Allowance for doubtful accounts (21) (21) (189)

TOTAL INVESTMENTS AND OTHER ASSETS 158,517 151,021 1,428,210

¥ 482,575 ¥ 462,031 $ 4,347,914

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LIABILITIES AND NET ASSETS March 31, March 31,

2019 2018 2019(Millions of yen) (Thousands of U.S. dollars)

(Note 1)

CURRENT LIABILITIES:

Short-term bank loans and current maturities of long-term

debt (Notes 4, 10 and 11) ¥ 31,467 ¥ 19,130 $ 283,512

Notes and accounts payable (Notes 3, 4 and 6) 37,480 33,153 337,687

Income taxes payable 2,717 2,265 24,480

Other (Notes 10 and 11) 3,526 3,312 31,769

TOTAL CURRENT LIABILITIES 75,190 57,860 677,448

LONG-TERM LIABILITIES:

Long-term debt, less current maturities (Notes 4, 10 and 11) 55,236 52,782 497,666

Deposits on long-term leases (Notes 4, 6 and 10) 20,680 21,947 186,323

Retirement benefits (Note 12) 10,237 11,159 92,234

Deferred income taxes (Note 7) 21,871 23,468 197,054

Other (Note 11) 256 265 2,307

TOTAL LONG-TERM LIABILITIES 108,280 109,621 975,584

TOTAL LIABILITIES 183,470 167,481 1,653,032

CONTINGENT LIABILITIES (Note 15)

NET ASSETS

SHAREHOLDERS’ EQUITY:

Common stock

authorized – 220,000,000 shares,

issued – 87,960,739 shares, 22,394 22,394 201,766

Capital surplus 19,565 19,567 176,277

Retained earnings 197,675 188,651 1,781,016

Treasury shares (845) (842) (7,613)

TOTAL SHAREHOLDERS’ EQUITY 238,789 229,770 2,151,446

ACCUMULATED OTHER COMPREHENSIVE INCOME

Net unrealized holding gains on securities 57,098 60,874 514,443

Foreign currency translation adjustments 234 960 2,108

Remeasurements of defined benefit plans 46 143 414

TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 57,378 61,977 516,965

NON-CONTROLLING INTERESTS 2,938 2,803 26,471

TOTAL NET ASSETS 299,105 294,550 2,694,882

¥ 482,575 ¥ 462,031 $ 4,347,914


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Year ended March 31, Year ended March 31,

2019 2018 2017 2019(Millions of yen) (Thousands of U.S. dollars)

(Note 1)

REVENUE ¥ 227,186 ¥ 215,408 ¥ 208,719 $ 2,046,905

COST OF SERVICES 203,826 192,594 185,574 1,836,436

Gross profit 23,360 22,814 23,145 210,469

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 10,699 10,393 10,397 96,396

Operating income 12,661 12,421 12,748 114,073

OTHER INCOME (EXPENSES):

Interest and dividend income 3,742 2,874 2,272 33,715

Interest expense (491) (602) (635) (4,424)

Gain on sale of marketable securities and investments

in securities (Note 5)990 369 37 8,920

Gain (loss) on revaluation of marketable securities and

investments in securities(519) 9 (28) (4,676)

Gain (loss) on disposal of property and equipment (716) (876) (639) (6,451)

Impairment loss (Note 14) (69) (147) (194) (622)

Compensation income 261 – 353 2,352

Equity in earnings of non-consolidated subsidiaries and

affiliates1,535 1,403 526 13,830

Indemntity income of exiting facilities for lease

(Note 13)– – 210 –

Foreign exchange gains (losses) (528) (267) 825 (4,757)

Other, net (74) 186 321 (667)

4,131 2,949 3,048 37,220

Profit before income taxes 16,792 15,370 15,796 151,293

INCOME TAXES (Note 7)

Current 4,890 4,843 4,544 44,058

Deferred 106 (145) 489 955

4,996 4,698 5,033 45,013

Profit 11,796 10,672 10,763 106,280

PROFIT ATTRIBUTABLE TO NON-CONTROLLING

INTERESTS (231) (154) (98) (2,081)

PROFIT ATTRIBUTABLE TO OWNERS OF PARENT ¥ 11,565 ¥ 10,518 ¥ 10,665 $ 104,199

AMOUNTS PER SHARE: Yen U.S.dollars(Note 1)

Profit attributable to owners of parent ¥ 132.03 ¥ 120.07 ¥ 121.75 $ 1.19

Cash dividends applicable to the year ¥ 45.00 ¥ 21.00 ¥ 14.00 $ 0.41

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(Note 1)

PROFIT ¥ 11,796 ¥ 10,672 ¥ 10,763 $ 106,280

OTHER COMPREHENSIVE INCOME:

Net unrealized holding gains (losses) on securities (3,844) 9,470 11,170 (34,634)

Foreign currency translation adjustments (713) 101 (702) (6,424)

Remeasurements of defined benefit plans (96) 221 387 (865)

Share of other comprehensive income of affiliates

accounted for using the equity method(21) (119) (64) (189)

Total other comprehensive income (Note 8) (4,674) 9,673 10,791 (42,112)

COMPREHENSIVE INCOME (Note 8) ¥ 7,122 ¥ 20,345 ¥ 21,554 $ 64,168

Comprehensive income attributable to:

Comprehensive income attributable to owners of parent ¥ 6,965 ¥ 20,162 ¥ 21,463 $ 62,753

Comprehensive income attributable to non-controlling interests 157 183 91 1,415



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Common Stock

Shares AmountCapitalsurplus

Retainedearnings

Treasuryshares

Net unrealizedholding gainson securities

Foreign currency

translationadjustments

Remeasurementsof defined

benefit plansNon-controlling

interests(Thousands of shares)

(Millions of yen)

Balance at March 31, 2016 175,921 ¥22,394 ¥19,618 ¥172,200 ¥(807) ¥40,282 ¥1,703 ¥(450) ¥2,584

Cash dividends – – – (2,103) – – – – –

Profit attributable to owners of parent – – – 10,665 – – – – –

Purchase of treasury shares – – – – (26) – – – –

Disposal of treasury shares – – 0 – 1 – – – –

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

– – (51) – – – – – –

Changes other than to stockholders’ equity, net – – – – – 11,141 (728) 385 63

Share consolidation – – – – – – – – –

Balance at March 31, 2017 175,921 ¥22,394 ¥19,567 ¥180,762 ¥(832) ¥51,423 ¥ 975 ¥ (65) ¥2,647

Cash dividends – – – (2,629) – – – – –





– – – – – – – – –

Changes other than to stockholders’ equity, net – – – – – 9,451 (15) 208 156

Share consolidation (87,961) – – – – – – – –

Balance at March 31, 2018 87,961 ¥22,394 ¥19,567 ¥188,651 ¥(842) ¥60,874 ¥ 960 ¥ 143 ¥2,803

Cash dividends – – – (2,541) – – – – –





– – (2) – – – – – –

Changes other than to stockholders’ equity, net – – – – – (3,776) (726) (97) 135

Balance at March 31, 2019 87,961 ¥22,394 ¥19,565 ¥197,675 ¥(845) ¥57,098 ¥ 234 ¥ 46 ¥2,938

CommonStock

Capitalsurplus

Retainedearnings

Treasuryshares

Net unrealizedholding gainson securities

Foreign currency

translationadjustments

Remeasurements of defined

benefit plansNon-controlling

interests

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

Balance at March 31, 2018 $201,766 $176,295 $1,699,712 $(7,586) $548,464 $8,649 $1,288 $25,255

Cash dividends – – (22,895) – – – – –

Profit attributable to owners of parent – – 104,199 – – – – –

Purchase of treasury shares – – – (27) – – – –

Disposal of treasury shares – 0 – 0 – – – –

Change in treasury shares of parent arising from transactions with non-controlling shareholders – (18) – – – – – –

Changes other than to stockholders’ equity, net – – – – (34,021) (6,541) (874) 1,216

Balance at March 31, 2019 $201,766 $176,277 $1,781,016 $(7,613) $514,443 $2,108 $ 414 $26,471

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(Note 1)

CASH FLOWS FROM OPERATING ACTIVITIES:

Profit before income taxes ¥16,792 ¥15,370 ¥15,796 $151,293

Depreciation and amortization 12,996 12,747 12,925 117,092

Impairment loss 69 147 194 622

Decrease in retirement benefits (922) (1,228) (1,343) (8,307)

Gain (loss) on revaluation of marketable securities and

investments in securities501 (44) 21 4,514

Gain on sales of marketable securities and

investments in securities(990) (369) (37) (8,920)

Loss on disposal of property and equipment 434 404 261 3,910

Equity in earnings of non-consolidated subsidiaries

and affiliates(1,535) (1,403) (526) (13,830)

Interest and dividend income (3,742) (2,874) (2,272) (33,715)

Interest expense 491 602 635 4,424

Decrease (increase) in notes and accounts receivable (3,415) (4,476) (2,797) (30,769)

Decrease (increase) in real estate held for sale (2,620) (1,866) 1,122 (23,606)

Increase (decrease) in notes and accounts payable 4,214 1,914 1,871 37,967

Increase (decrease) in deposits payable 866 752 (1,038) 7,803

Other, net 136 2,078 (808) 1,226

Subtotal 23,275 21,754 24,004 209,704

Interest and dividend income received in cash 5,028 5,575 2,542 45,301

Interest expense paid in cash (516) (567) (611) (4,649)

Income taxes paid in cash (4,435) (5,281) (4,468) (39,959)

NET CASH PROVIDED BY OPERATING ACTIVITIES 23,352 21,481 21,467 210,397

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash investment to time deposits (311) (729) (599) (2,802)

Cash return from time deposits 881 912 1,410 7,938

Acquisition of property and equipment (19,886) (22,814) (23,472) (179,169)

Proceeds from sales of property and equipment 251 54 342 2,261

Acquisition of marketable securities and investments

in securities(13,981) (41) (39) (125,966)

Proceeds from sales of marketable securities and

investments in securities1,256 372 53 11,316

Other, net 4 27 35 36

NET CASH USED IN INVESTING ACTIVITIES (31,786) (22,219) (22,270) (286,386)


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(Note 1)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loans ¥19,148 ¥13,311 ¥ 2,022 $172,520

Repayments of short-term bank loans (8,902) (13,224) (1,965) (80,205)

Proceeds from long-term debt 12,900 100 5 116,227

Repayments of long-term debt (1,349) (9,858) (5,387) (12,154)

Redemption of bonds (7,000) – – (63,069)

Issue of bonds – 15,900 – –

Dividends paid (2,541) (2,629) (2,104) (22,894)

Other, net (189) (181) (391) (1,703)

NET CASH PROVIDED BY (USED IN)

FINANCING ACTIVITIES12,067 3,419 (7,820) 108,722

EFFECT OF EXCHANGE RATE CHANGES ON CASH

AND CASH EQUIVALENTS(242) (22) (114) (2,181)

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS3,391 2,659 (8,737) 30,552

CASH AND CASH EQUIVALENTS AT

BEGINNING OF YEAR 39,581 36,922 45,659 356,618

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 2) ¥42,972 ¥39,581 ¥36,922 $387,170


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BASIS OF PRESENTING CONSOLIDATED FINANCIAL

STATEMENTS

The accompanying consolidated financial statements of Mitsubishi Logistics Corporation (the “Company”) have been prepared in accordance with the provisions set forth in the Japanese Financial Instruments and Exchange Law and its related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting Standards.

The accompanying consolidated financial statements have been restructured and translated into English from the consolidated financial statements of the Company prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments and Exchange Law. Some supplementary information included in the statutory Japanese language consolidated financial statements, but not required for fair presentation, is not presented in the accompanying consolidated financial statements.

The translations of Japanese yen amounts into U.S. dollars are included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2019, which was ¥110.99 to U.S. $1. The convenience translations should not be construed as representations that the Japanese yen amounts have been, could have been, or could in the future be converted into U.S. dollars at this or any other rate of exchange.

CONSOLIDATION

In consolidation, all significant inter-company transactions, account balances and unrealized profits are eliminated. Differences between the acquisition costs and underlying net equities of investments in consolidated subsidiaries are recorded as goodwill in the consolidated balance sheets and amortized over 5 to 10 years on a straight-line basis. Any immaterial amounts are fully recognized as expenses as incurred. The effect on retained earnings and net income of non-consolidated subsidiaries and affiliates not accounted for by the equity method is immaterial to the consolidated financial statements, and investments therein are carried at cost after adjusting for any substantial and non-recoverable decline in value.

The Company holds 51% of voting rights in MLC ITL Logistics Company Limited, however, the other shareholders’ agreement is necessary to decide important policies on finance and trade. Therefore, the Company does not treat MLC ITL Logistics Company Limited as its subsidiary.

The numbers of consolidated subsidiaries and non-consolidated subsidiaries and affiliates accounted for by the equity method at March 31, 2019, 2018 and 2017 were as follows:

March 31,

2019 2018 2017

Consolidated subsidiaries 51 51 52

Non-consolidated subsidiaries

and affiliates accounted for by

the equity method 3 3 3

CONSOLIDATED STATEMENTS OF CASH FLOWS

In preparing the consolidated statements of cash flows, cash on hand, readily-available deposits and short-term highly liquid investments with negligible risk of changes in value and maturities not exceeding six months at the time of purchase are considered to be cash and cash equivalents.

CONVERSION OF ASSETS AND LIABILITIES

DENOMINATED IN FOREIGN CURRENCIES

Receivables and payables denominated in foreign currencies are translated into Japanese yen at the year-end rates.

Gains or losses resulting from conversion are credited or charged to income as incurred.

DERIVATIVES AND HEDGE ACCOUNTING

The accounting standard for financial instruments requires companies to state derivative financial instruments at fair value and to recognize changes in fair value as gains and losses unless derivative financial instruments are used for hedging purposes.

If derivative financial instruments are used as hedges and meet certain hedging criteria, the Company and its consolidated subsidiaries defer recognition of gains and losses resulting from changes in fair value of derivative financial instruments until related gains and losses on the hedged items are recognized.

However, in cases where forward foreign exchange contracts are used as hedges and meet certain hedging criteria, forward foreign exchange contracts and hedged items are accounted for in the following manner.

(1) If a forward foreign exchange contract is executed to hedge an existing foreign currency receivable and payable:(i) The difference, if any, between the Japanese yen

amount of the hedged foreign currency receivable or payable translated using the spot rate at the inception date of the contract and the book value of the receivable or payable is recognized in the statements of income in the period which includes the inception date; and

(ii) The discount or premium on the contract (that is, the difference between the Japanese yen amount of the contract translated using the contracted forward rate and that translated using the spot rate at the inception date of the contract) is recognized over the term of the contract.


NOTE 1 – SUMMARY OF ACCOUNTING POLICIES

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(2) If a forward foreign exchange contract is executed to hedge a future forecasted transaction denominated in foreign currency, the future transaction will be recorded using the contracted forward rate, and no gains or losses on the forward foreign exchange contract are recognized.Also, if interest rate swap contracts are used as hedges and

meet certain hedging criteria, the net amount to be paid or received under the interest rate swap contract is added to or deducted from the interest on the assets or liabilities for which the swap contract was executed.

The following summarizes hedging derivative financial instruments used by the Company and its consolidated subsidiaries and hedged items.

Hedging instruments: Foreign exchange contracts and interest rate swap contracts.

Hedged items: Foreign currency assets and liabilities and interest rates of bank loans.

The hedge effectiveness of foreign exchange contracts accounted for in the above manner and that of interest rate swaps meeting specific hedging criteria are not evaluated at the end of the period.

The Company and its consolidated subsidiaries use foreign exchange contracts and interest rate swap contracts for the purpose of managing the exposure to fluctuations in foreign currency exchange and interest rates of bank loans, respectively.

The Company and its consolidated subsidiaries do not enter into derivatives for speculative purposes.

TRANSLATION OF FOREIGN CURRENCY STATEMENTS

The balance sheets of overseas subsidiaries are translated into Japanese yen at the rate of exchange at the balance sheet date of the subsidiaries, which is December 31, except for shareholders’ equity accounts, which are translated based on historical rates. The year-end rate of the subsidiaries is also used for translation of income, expenses and net income for the year. The resulting translation adjustments are presented as “foreign currency translation adjustments” and “non-controlling interests” in the accompanying consolidated financial statements.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

To provide for losses resulting from unrecoverable claims such as accounts and loans receivable, allowance for doubtful accounts is recorded based on the historical write-off rate for ordinary receivables, and based on expected uncollectable amounts individually for receivables.

SECURITIES

Available-for-sale securities (see explanation (d) below) with available fair market values are stated at fair market value. Unrealized gains and unrealized losses on these securities are

reported, net of applicable income taxes, as a separate component of net assets. Realized gains and losses on sale of such securities are computed using moving-average cost. Available-for-sale securities with no available fair value are stated at moving-average cost. Equity securities issued by non-consolidated subsidiaries and affiliates which are not consolidated or accounted for using the equity method are stated at moving-average cost.

Under the accounting standard for financial instruments, all companies are required to examine their intent for holding each security and classify those securities as (a) securities held for trading purposes (hereinafter, “Trading Securities”), (b) debt securities intended to be held to maturity (hereinafter, “Held-to-maturity Debt Securities”), (c) equity securities issued by subsidiaries and affiliates, and (d) all other securities that are not classified in any of the above categories (“Available-for-sale Securities”).

The Company and its consolidated subsidiaries only hold those securities classified as equity securities issued by subsidiaries and affiliates and Available-for-sale Securities.

If the market value of Available-for-sale Securities declines significantly, such securities are stated at fair market value, and the difference between fair market value and the book value is recognized as loss in the period of decline. For equity securities with no available fair market value, if the net asset value of the investee declines significantly, such securities are required to be written down to the net asset value with the corresponding losses recognized in the period of decline. In these cases, such fair market value or the net asset value will be the book value of the securities at the beginning of the next year.

REAL ESTATE HELD FOR SALE

Real estate held for sale is stated at cost determined using the specific identification cost method. In case the net selling value falls below the acquisition cost at the end of the period, real estate held for sale is carried at the net selling value on the balance sheet.

INCOME TAXES

Income taxes consist of corporation, enterprise and inhabitants taxes. Income taxes for recognition are computed based on the pretax income of the Company and each of its consolidated subsidiaries with certain adjustments required for consolidated and tax purposes. The asset and liability approach is used to recognize deferred tax assets and liabilities for loss carryforwards and expected future tax consequences of temporary differences between the book value and the tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets based on the assessment of realizability of tax benefits.


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DEPRECIATION

(1)Property and equipment (excluding leased assets)

Property and equipment are stated at cost. The declining-balance method is applied.

Warehouse facilities (actual buildings), commercial facilities for lease (actual buildings) and facilities and structures attached to buildings acquired on or after April 1, 2016 are calculated using the straight-line method. Furthermore, useful lives are estimated according to stipulations of the Corporation Tax Act, and lives for commercial facilities for lease (actual buildings) are determined with a standard of 20 years, taking into account the lease agreement period, etc.

(2)Intangible assets (excluding leased assets)

The straight-line method is applied.Computer software for internal use is amortized over the

estimated internal useful life (5 to 10 years) using the straight-line method.

(3)Leased assets

Leased assets held under finance lease which do not transfer ownership to the lessee are depreciated using the straight-line method with no residual value over the lease term of the leased assets.

ALLOWANCE FOR BONUSES FOR DIRECTORS

The Company provides allowance for bonuses for directors based on the estimated amounts of payment.

RETIREMENT BENEFITS AND PENSION PLAN

(1) Employees’ severance and retirement benefits

The Company and its consolidated subsidiaries have adopted defined benefit plans which include unfunded lump-sum payment plans and funded contributory defined benefit pension plans. Furthermore, the Company and its consolidated subsidiaries provide a defined contribution pension plan.

The Company and its consolidated subsidiaries provide allowance for employees’ severance and retirement benefits based on the estimated amounts of projected benefit obligation and the fair value of the plan assets at year-end. Some consolidated subsidiaries apply the simplified methods for the calculation of retirement benefit obligations and employees’ severance and retirement benefit expenses.

Upon calculating the retirement benefit obligation, the estimated benefit obligation is attributed to the period up until the fiscal year on a benefit formula basis. Actuarial calculation differences are amortized using the straight-line method over a certain period (5 to 15 years) within the average remaining years of service of employees, beginning from the fiscal year following the incurred year. Prior service costs are recognized using the straight-line method over a certain period (15 years) within the average remaining years of service of employees, beginning from the incurred year.

(2)Provision for directors’ retirement benefits

To provide for payments of retirement benefits for directors at certain consolidated subsidiaries, amounts to be paid at the end of the current fiscal year are recorded, based on entity’s rules.

NET ASSETS

Under the Japanese Corporate Law (the “Law”) and regulations, the entire amount paid for new shares is required to be designated as common stock. However, a company may, by a resolution of the board of directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus in the accompanying consolidated balance sheets.

Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets.

Under the Law, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit or capitalized by a resolution at the shareholders’ meeting.

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Law, all additional paid-in capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings, respectively, which may potentially become available as dividends.

The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company in accordance with Japanese laws and regulations.

Appropriations are not accrued in the consolidated financial statements for the corresponding period, but are recorded in the subsequent accounting period after shareholders’ approval has been obtained.

Retained earnings at March 31, 2019 included amounts representing year-end cash dividends of ¥2,629 million ($23,687 thousand) at ¥30.0 ($0.27) per share, which were approved at the shareholders’ meeting held on June 27, 2019.

PER SHARE INFORMATION

Basic earnings per share is computed based upon the weighted average number of shares outstanding during each fiscal year.

Cash dividends per share are presented on an accrual basis and include dividends to be approved after the balance sheet date, but applicable to the year then ended.

Information on diluted earnings per share is not disclosed as no shares which diluted earnings per share were outstanding for the years ended March 31, 2019, 2018 and 2017.

As the Company carried out a reverse stock split at a ratio of one share for every two shares of common stock, with an effective date of October 1, 2017, basic earnings per share of the Group and the Company are calculated based on the assumption

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that the reverse stock split was conducted at the beginning of the fiscal year ended March 31, 2017.

The annual dividend per share for the fiscal year ended March 31, 2018, amounting to ¥21.0, is a total of the interim dividend per share of ¥7.0 and the year-end dividend per share of ¥14.0. As the Company carried out a reverse stock split at a ratio of one share for every two shares of common stock, with an effective date of October 1, 2017, the interim dividend per share of ¥7.0 is the amount before the reverse stock split and the year-end dividend per share of ¥14.0 is the amount after the reverse stock split.

CHANGES IN PRESENTATION

(Changes due to the Application of “Partial Amendments to Accounting Standard for Tax Effect Accounting”)In accordance with the application of “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018), from the beginning of the fiscal year, presentation have been changed so that deferred income tax assets are presented as investments and other assets, and deferred income tax liabilities are presented as long-term liabilities.

As a result, “deferred income taxes” of ¥1,695 million that were included in “current assets,” and “deferred income taxes” of ¥1 million that were included in “other” under “current liabilities” in the consolidated balance sheet for the previous consolidated fiscal year are included in “deferred income tax assets” of ¥2,866 million under “investments and other assets,” and “deferred income tax liabilities” under “long-term liabilities” of ¥23,468 million.

Due to the effect of offsetting “deferred income tax assets” and “deferred income tax liabilities” with the same tax authority, total assets for the previous consolidated fiscal year decreased by ¥1,143 million.

STANDARDS AND GUIDANCE NOT YET ADOPTED

The following standard and guidance were issued but not yet adopted. • “Accounting Standard for Revenue Recognition” (ASBJ

Statement No.29, March 30, 2018) • “Implementation Guidance on Accounting Standard for

Revenue Recognition” (ASBJ Guidance No.30, March 30, 2018)

(1) Overview The above standard and guidance provide comprehensive principles for revenue recognition. Under the standard and guidance, revenue is recognized by applying following 5 steps:Step 1: Identify contract(s) with customers.Step 2: Identify the performance obligations in the

contract.Step 3: Determine the transaction price.Step 4: Allocate the transaction price to the performance

obligation in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

(2) Effective date Effective from the beginning of the fiscal year ending March 31, 2022.

(3) Effects of the application of the standards The Company and its consolidated domestic subsidiaries are currently in the process of determining the effects of these new standards on the consolidated financial statements.


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1. CONDITIONS OF FINANCIAL INSTRUMENTS(1) Policy for using financial instruments

The Company and its consolidated subsidiaries raise necessary funds in accordance with their performance plans and capital investment plans mainly by bank loans or issuance of bonds. Temporary cash surplus, if any, are invested in highly-secured deposits, public bonds and corporate bonds. Derivatives are used not for speculative purposes but based on actual demand.

(2) Details of financial instruments used, risks and risk managementNotes and accounts receivable are exposed to credit risk of customers. Against such credit risk, the Company and its consolidated subsidiaries perform due date and balance controls for each customer in accordance with internal customer credit management rules and regularly screen customers’ credit status.

Stocks as investments in securities are subject to risk of changes in market price. They are mainly stocks issued by companies with which the Company and/or its consolidated subsidiaries have business relations. The Company and its consolidated subsidiaries ascertain the fair values of stocks at regular intervals, and the fair values are reported at each board of directors meeting.

The account derived from operating expenses, notes and accounts payable, is all settled within a year, and subject to risk of liquidity. The Company and its consolidated subsidiaries hedge such risk by timely reconsideration of monthly financial plans.

Short-term bank loans are obtained mainly for financing related to trade. Otherwise, long-term debts are obtained mainly for financing related to investments in non-current assets. Because long-term debts with floating interest rates are subject to risk of fluctuation of these rates, one consolidated subsidiary utilizes interest rate swap contracts as hedging instrument for each loan contract to attempt to avoid such risk found in long-term debts.

It is prescribed that approval by the manager of each entity’s finance section is necessary for execution and management of such derivative transaction in accordance with the Company’s policy on authorizing transactions, limiting the amount and others.

NOTE 4 – FINANCIAL INSTRUMENTS

Reconciliation of cash and deposits in the consolidated balance sheets and cash and cash equivalents in the consolidatedstatements of cash flows as of March 31, 2019, 2018 and 2017 were as follows:

March 31, March 31,


Cash and deposits ¥41,337 ¥38,330 ¥37,841 $372,439

Time deposits with maturities over six months (365) (749) (919) (3,289)

Money funds invested in bonds and domestic

certificates of deposits2,000 2,000 – 18,020

Cash and cash equivalents ¥42,972 ¥39,581 ¥36,922 $387,170

With respect to accounting for notes maturing at the end of the fiscal year, they are settled on the clearance date. As the consolidated fiscal year end date fell on a bank holiday, the following notes maturing on the fiscal year end date were included in the balance as of the end of the fiscal year.

March 31, March 31,

2019 2018 2019 (Millions of yen) (Thousands of U.S. dollars)

Notes receivable ¥109 ¥40 $982

Notes payable ¥ 2 ¥20 $ 18

NOTE 2 – CASH AND CASH EQUIVALENTS

NOTE 3 – EFFECT OF THE MARCH 31, 2019, BANK HOLIDAY

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(3) Supplemental information on fair valuesFair values of financial instruments comprise values determined based on market prices and values determined reasonably when there is no market price available. Since variable factors are considered in computing the relevant fair values, such fair values may vary depending on different factors used.

2. FAIR VALUES OF FINANCIAL INSTRUMENTSThe amounts posted on the consolidated balance sheet, the fair values, and the differences thereof as of March 31, 2019 and 2018 are as follows. Items whose fair values are extremely difficult to measure are not included in the following table (see (Note 2)).

March 31,2019 March 31,2019

Consolidated balance sheet

amount Fair value Difference


amount Fair value Difference(Millions of yen) (Thousands of U.S. dollars)

Assets(1) Cash and deposits ¥ 41,337 ¥ 41,337 ¥ – $ 372,439 $ 372,439 $ –

(2) Notes and accounts receivable 40,603 40,603 – 365,826 365,826 –

(3) Marketable securities 2,000 2,000 – 18,020 18,020 –

(4) Investment in securities (available-for-sale securities) 113,203 113,203 – 1,019,939 1,019,939 –

¥ 197,143 ¥ 197,143 ¥ – $ 1,776,224 $ 1,776,224 $ –

Liabilities

(1) Notes and accounts payable ¥ 27,397 ¥ 27,397 ¥ – $ 246,842 $ 246,842 $ –

(2) Short-term bank loans 20,995 20,995 – 189,161 189,161 –

(3) Bonds payable 36,000 36,472 472 324,354 328,606 4,252

(4) Long-term loans payable *1 29,708 29,858 150 267,664 269,015 1,351

(5) Deposits on long-term leases 1,165 1,181 16 10,496 10,641 145

(6) Derivatives – – – – – –

¥ 115,265 ¥ 115,903 ¥ 638 $ 1,038,517 $ 1,044,265 $ 5,748

*1: Including current maturities of long-term debt.

March 31, 2018


amount Fair value Difference(Millions of yen)

Assets(1) Cash and deposits ¥ 38,330 ¥ 38,330 ¥ –

(2) Notes and accounts receivable 37,633 37,633 –

(3) Marketable securities 2,000 2,000 –

(4) Investment in securities (available-for-sale securities) 118,543 118,543 –

¥ 196,506 ¥ 196,506 ¥ –

Liabilities

(1) Notes and accounts payable ¥ 23,838 ¥ 23,838 ¥ –

(2) Short-term bank loans 10,753 10,753 –

(3) Bonds payable 43,000 43,464 464

(4) Long-term loans payable *1 18,159 18,248 89

(5) Deposits on long-term leases 1,165 1,162 (3)

(6) Derivatives – – –

¥ 96,915 ¥ 97,465 ¥ 550

*1: Including current maturities of long-term debt.


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(Note 1) Calculation method of fair values of financial instruments and securities & derivative transactionsAssets:(1) Cash and deposits (2) Notes and accounts receivable (3) Marketable securities

Relevant consolidated balance sheet amounts are used because the settlement term of the above items is short and their fair values approximate their consolidated balance sheet amounts.

(4) Available for-sale securities in investment in securitiesThe fair values of stocks are determined using the quoted price at the stock exchange, and the fair values of bonds are

determined using the market price. Information on securities categorized by holding purpose is described in NOTE 5 (SECURITIES).

Liabilities:(1) Notes and accounts payable (2) Short-term bank loans

Relevant consolidated balance sheet amounts are used because the settlement term of the above items is short and their fair values approximate their consolidated balance sheet amounts.

(3) Bonds payableThe fair values of bonds issued by the Company are calculated using the market price.

(4) Long-term loans payableLong-term loans payable with floating interest rates require that the interest rates be amended at certain periods of

time. Therefore, relevant book values are used because their fair values approximate their book values. Long-term loans payable with fixed interest rates are calculated using the present value of the amount of principal and interest discounted using the current borrowing rate for similar loans of comparable maturity.

Certain long-term loans payable with floating interest rates are subject to special treatment of interest rate swaps (See NOTE 17). Therefore, the fair values of such long-term loans payable are calculated by discounting the total amount of principal and interest that have been recorded together with said interest rate swap by an interest rate that would reasonably be estimated to apply to a similar loan.

(5) Deposits on long-term leasesDeposits on long-term leases are calculated by the present value of future cash flows discounted using a risk-free rate.

(6) DerivativesInformation on this item is described in NOTE 17 (DERIVATIVE TRANSACTIONS).

(Note 2) Book value of financial instruments on the consolidated balance sheets for which it is extremely difficult to determine the fair value

March 31, March 31,


Unlisted securities and others *1 ¥21,376 ¥ 8,197 $192,594

Deposits on long-term leases *2 ¥19,515 ¥20,782 $175,827

*1 Unlisted securities are not included in “(4) Investment in securities (available-for-sale securities)” under “Assets” because they have no market price and their fair values are extremely difficult to measure. Non-consolidated subsidiary stocks and affiliate stocks are included.*2 Deposits on long-term leases are not included in “(5) Deposits on long-term leases” under “Liabilities” because their future cash flows cannot be estimated and their fair values are extremely difficult to measure.

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(Note 3) The redemption schedule for monetary claims and securities with contractual maturities

March 31, 2019Millions of yen

One yearor less

One tofive years

Five toten years

Overten years

Cash and deposits ¥41,337 ¥ – ¥ – ¥ –

Notes and accounts receivable 40,603 – – –

Marketable securities (certificate of deposits) 2,000 – – –

¥83,940 ¥ – ¥ – ¥ –


One year or less

One to five years

Five to ten years

Over ten years

Cash and deposits ¥38,330 ¥ – ¥ – ¥ –



¥77,963 ¥ – ¥ – ¥ –

March 31, 2019Thousands of U.S. dollars

One yearor less

One tofive years

Five toten years

Overten years

Cash and deposits $372,439 $ – $ – $ –



$756,285 $ – $ – $ –


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(Note 4) Repayment schedule of short-term bank loans, bonds payable, long-term loans and deposits on long-term leases


One yearor less

One totwo years

Two tothree years

Three to four years

Four tofive years

Overfive years

Short-term bank loans ¥ 20,995 ¥ – ¥ – ¥ – ¥ – ¥ –

Bonds payable 5,000 5,000 5,000 – 5,000 16,000

Long-term loans 5,472 5,345 444 11,842 6,248 357

Deposits on long-term leases – – – – – 1,165

¥ 31,467 ¥ 10,345 ¥ 5,444 ¥ 11,842 ¥ 11,248 ¥ 17,522


One year or less

One to two years

Two to three years

Three to four years

Four to five years

Over five years

Short-term bank loans ¥ 10,753 ¥ – ¥ – ¥ – ¥ – ¥ –

Bonds payable 7,000 5,000 5,000 5,000 – 21,000

Long-term loans 1,377 5,573 5,246 345 5,056 562


¥ 19,130 ¥ 10,573 ¥ 10,246 ¥ 5,345 ¥ 5,056 ¥ 22,727

March 31, 2019Thousands of U.S. dollars

One yearor less

One totwo years

Two tothree years

Three to four years

Four tofive years

Overfive years

Short-term bank loans $ 189,161 $ – $ – $ – $ – $ –

Bonds payable 45,049 45,049 45,049 – 45,049 144,158

Long-term loans 49,302 48,158 4,000 106,694 56,293 3,217


$ 283,512 $ 93,207 $ 49,049 $ 106,694 $ 101,342 $ 157,871

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At March 31, 2019, acquisition costs, consolidated balance sheet amount stated at fair values and net unrealized holding gains (losses) of Available-for-sale Securities were as follows:

March 31, 2019 March 31, 2019

Consolidatedbalance sheet

amountAcquisition

cost

Unrealizedholding gains

(losses)

Consolidatedbalance sheet

amountAcquisition

cost

Unrealizedholding gains

(losses)(Millions of yen) (Thousands of U.S. dollars)

Securities with book values exceeding

acquisition costs:

Stocks ¥108,138 ¥24,905 ¥83,233 $ 974,304 $224,390 $749,914

108,138 24,905 83,233 974,304 224,390 749,914

Other securities:

Stocks 5,064 5,800 (736) 45,626 52,257 (6,631)

5,064 5,800 (736) 45,626 52,257 (6,631)

¥113,202 ¥30,705 ¥82,497 $1,019,930 $276,647 $743,283

Unlisted securities and others (book value being ¥1,145 million ($10,316 thousand)) were not included in the above list because the identification of their fair values is deemed extremely difficult due to the absence of market values and inability to estimate future cash flows.

In the year ended March 31, 2019, the amounts of sale, related gains and related losses of Available-for-sale Securities were as follows:

March 31, 2019 March 31, 2019

Amount of sale

Relatedgains

Relatedlosses

Amount of sale

Relatedgains

Relatedlosses

(Millions of yen) (Thousands of U.S. dollars)

Stocks ¥1,256 ¥990 ¥ – $11,316 $8,920 $ –

¥1,256 ¥990 ¥ – $11,316 $8,920 $ –

At March 31, 2018, acquisition costs, consolidated balance sheet amount stated at fair values and net unrealized holding gains (losses) of Available-for-sale Securities were as follows:

March 31, 2018


amount

Acquisition cost

Unrealized holding gains

(losses)(Millions of yen)

Securities with book values exceeding acquisition costs:

Stocks ¥115,610 ¥27,160 ¥88,450

115,610 27,160 88,450

Other securities:

Stocks 2,933 3,334 (401)

2,933 3,334 (401)

¥118,543 ¥30,494 ¥88,049

NOTE 5 – SECURITIES

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NOTE 7 – INCOME TAXES

Income taxes in the accompanying consolidated statements of income comprise corporation, enterprise and inhabitants’ taxes. The aggregated statutory tax rate was approximately 30.6%, 30.9% and 30.9% for the years ended March 31, 2019, 2018 and 2017, respectively.Information on reconciliation of tax rates for the year ended March 31, 2019, 2018 and 2017 were not disclosed as difference between the statutory tax rate and the effective tax rate was not more than 5% of the statutory tax rate.

NOTE 6 – RECEIVABLES FROM AND PAYABLES TO NON-CONSOLIDATED SUBSIDIARIES AND AFFILIATES

Significant receivables from and payables to non-consolidated subsidiaries and affiliates at March 31, 2019 and 2018 were as follows:

March 31, March 31,


Notes and accounts receivable ¥159 ¥193 $1,433

Notes and accounts payable ¥830 ¥794 $7,478

Deposits on long-term leases ¥ 26 ¥ 26 $ 234

Unlisted securities and others (book value being ¥1,156 million ($10,881 thousand)) were not included in the above list because the identification of their fair values is deemed extremely difficult due to the absence of market values and inability to estimate future cash flows.

In the year ended March 31, 2018, the amounts of sale, related gains and related losses of Available-for-sale Securities were as follows:

March 31, 2018

Amount of sale

Related gains

Related losses

(Millions of yen)

Stocks ¥372 ¥369 ¥ –

¥372 ¥369 ¥ –

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Significant components of the Company and its consolidated subsidiaries’ deferred income tax assets and liabilities as of March 31, 2019 and 2018 were as follows:

March 31, March 31,

2019 2018 2019 (Millions of yen) (Thousands of U.S. dollars)

Deferred income tax assets:

Enterprise taxes payable ¥ 209 ¥ 188 $ 1,883

Allowance for investment loss 5 16 45

Allowance for doubtful accounts 26 26 234

Accrued bonuses 949 899 8,550

Retirement benefits 3,113 3,395 28,048

Depreciation 6,520 6,276 58,744

Impairment loss 2,350 2,516 21,173

Other 2,138 1,862 19,263

15,310 15,178 137,940

Valuation allowance (1,216) (1,022) (10,956)

Total deferred income tax assets 14,094 14,156 126,984

Deferred income tax liabilities:

Net unrealized holding gains on securities (25,045) (26,729) (225,652)

Reserve for reduction entry (7,140) (7,122) (64,330)

Other (865) (907) (7,793)

Total deferred income tax liabilities (33,050) (34,758) (297,775)

Net deferred income tax liabilities ¥ (18,956) ¥ (20,602) $ (170,791)

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NOTE 8 – STATEMENTS OF COMPREHENSIVE INCOME

Amounts reclassified to net income for the years ended March 31, 2019, 2018 and 2017 were recognized in other comprehensive income in the current or previous periods, and tax effects for each component of other comprehensive income were as follows:



Net unrealized holding gains (losses) on securities

Increase (Decrease) during the year ¥(5,102) ¥13,651 ¥16,144 $(45,968)

Reclassification adjustments (450) (7) (37) (4,055)

Sub-total, before tax (5,552) 13,644 16,107 (50,023)

Tax effect 1,708 (4,174) (4,937) 15,389

Sub-total, net of tax (3,844) 9,470 11,170 (34,634)

Foreign currency translation adjustments

Increase (Decrease) during the year (713) 101 (702) (6,424)

Remeasurements of defined benefit plans

Increase (Decrease) during the year (68) 431 547 (613)

Reclassification adjustments (70) (113) 11 (630)

Sub-total, before tax (138) 318 558 (1,243)

Tax effect 42 (97) (171) 378

Sub-total, net of tax (96) 221 387 (865)

Share of other comprehensive income of

affiliates accounted for using the equity method

Increase (Decrease) during the year (21) (119) (64) (189)

Total other comprehensive income ¥(4,674) ¥ 9,673 ¥10,791 $(42,112)

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NOTE 9 – REAL ESTATE FOR RENT

For the year ended March 31, 2019The Company and some of its consolidated subsidiaries have some investments and rental property such as office buildings for rent (including land) in Tokyo and other regions. For the year ended March 31, 2019, profit and loss concerning investments and rental property comprised lease profit of ¥11,295 million ($101,766 thousand), subsidy income of ¥221 million ($1,991 thousand), loss on disposal of non-current assets of ¥185 million ($1,667 thousand) and loss on disaster of ¥19 million ($171 thousand).

Information on fair value of investment and rental property included in the consolidated financial statements at March 31, 2019 is as follows:

Amount on the consolidated balance sheet Fair valueApril 1, 2018 Decrease March 31, 2019 March 31, 2019

(Millions of yen)¥94,123 (¥1,101) ¥93,022 ¥359,231


(Thousands of U.S. dollars)$848,031 ($9,920) $838,111 $3,236,607

Note:1. The amount on the consolidated balance sheet is the amount obtained by deducting accumulated depreciation from

acquisition cost.2. Concerning net amount of increase and decrease in book value, the main factor for the increase was the costs incurred for

maintenance and renewal of existing facilities amounting to ¥5,683 million ($51,203 thousand), and the main factor for the decrease was the depreciation of ¥5,759 million ($51,888 thousand).

3. Fair value as of March 31, 2019 was the amount mainly based on appraisal by an external real estate appraiser.

For the year ended March 31, 2018The Company and some of its consolidated subsidiaries have some investments and rental property such as office buildings for rent (including land) in Tokyo and other regions. For the year ended March 31, 2018, profit and loss concerning investments and rental property comprised lease profit of ¥10,649 million, subsidy income of ¥211 million, loss on disposal of non-current assets of ¥629 million and compensation for eviction of ¥94 million.

Information on fair value of investment and rental property included in the consolidated financial statements at March 31, 2018 is as follows:


(Millions of yen)¥95,598 (¥1,475) ¥94,123 ¥331,837

Note:1. The amount on the consolidated balance sheet is the amount obtained by deducting accumulated depreciation from

acquisition cost.2. Concerning net amount of increase and decrease in book value, the main factor for the increase was the costs incurred for

maintenance and renewal of existing facilities amounting to ¥5,761 million, and the main factor for the decrease was the depreciation of ¥6,128 million.

3. Fair value as of March 31, 2018 was the amount mainly based on appraisal by an external real estate appraiser.

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The net book values of the assets pledged as collateral at March 31, 2019 and 2018 were as follows:

March 31, March 31,


Land ¥ 1,042 ¥ 1,085 $ 9,388

Buildings and structures 14 12 126

¥ 1,056 ¥ 1,097 $ 9,514

Liabilities secured by the pledged assets mentioned above at March 31, 2019 and 2018 were as follows:

March 31, March 31,


Short-term bank loans ¥ 300 ¥ 300 $ 2,703

Other in current liabilities 192 225 1,730

Long-term loans payable 2,387 6,514 21,506

Deposits on long-term leases 1,000 1,000 9,010

¥ 3,879 ¥8,039 $34,949

NOTE 10 – COLLATERAL ASSETS

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Short-term bank loans outstanding at March 31, 2019 and 2018 were ¥20,995 million ($189,161 thousand) and ¥10,753 million, respectively, and the annual interest rates of short-term bank loans were 0.310% to 10.750% and 0.310% to 10.750%, respectively.

Long-term debt at March 31, 2019 and 2018 consisted of the following:

March 31, March 31,


Loans from banks, insurance companies and others,

generally secured, between 0.470%-3.520% and

0.550%-3.520% ¥29,708 ¥18,159 $267,664

Balance in lease obligations 264 298 2,378

2.080% yen bonds due 2018, unsecured – 7,000 –

0.933% yen bonds due 2019, unsecured 5,000 5,000 45,049






65,972 61,457 594,396

Less current portion (5,584) (8,517) (50,311)

¥60,388 ¥52,940 $544,085

The aggregate annual maturities of long-term loans at March 31, 2019 were as follows:

Year ending March 31, Amount(Millions of yen) (Thousands of U.S. dollars)

2020 ¥ 5,472 $ 49,302

2021 5,344 48,148

2022 444 4,000

2023 11,842 106,694

2024 6,248 56,293

2025 and thereafter 358 3,227

¥29,708 $267,664

The aggregate annual maturities of lease obligation at March 31, 2019 were as follows:

Year ending March 31, Amount(Millions of yen) (Thousands of U.S. dollars)

2020 ¥112 $1,009

2021 71 640

2022 43 387

2023 30 270

2024 8 72

2025 and thereafter 0 0

¥264 $2,378

NOTE 11 – SHORT-TERM BANK LOANS AND LONG-TERM DEBT

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1. Defined benefit plan (1) Movement in retirement benefit obligations, except for plans to which the simplified methods have been applied

March 31, March 31,


Balance at beginning of year ¥21,671 ¥21,654 $195,252

Service cost-benefits earned during the year 1,093 1,112 9,848

Interest cost on projected benefit obligation 161 160 1,451

Actuarial loss (gain) (34) (117) (306)

Benefits paid (1,264) (1,138) (11,389)

Balance at end of year ¥21,627 ¥21,671 $194,856

(2) Movements in plan assets, except for plans to which the simplified methods have been applied

March 31, March 31,



Expected return on plan assets 303 279 2,730

Actuarial gain (loss) (103) 314 (928)

Contributions from the Group 1,319 1,270 11,884

Benefits paid (826) (767) (7,442)

Other 102 100 919


(3) Defined benefit plans to which the simplified methods have been applied

March 31, March 31,



Retirement benefit costs 433 460 3,901

Benefits paid (390) (397) (3,514)

Contributions from the Group (126) (126) (1,135)

Other (1) 16 (9)


NOTE 12 – RETIREMENT BENEFITS AND PENSION PLAN

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(4) Reconciliations between retirement benefit obligations and plan assets and liability for retirement benefits, including for plans to which the simplified methods have been applied

March 31, March 31,2019 2018 2019


Funded retirement benefit obligations ¥19,037 ¥19,048 $171,520

Pension assets (17,181) (16,332) (154,798)

1,856 2,716 16,722

Unfunded retirement benefit obligations 8,203 8,267 73,908

Total net liability (asset) for retirement benefits

at end of year ¥10,059 ¥10,983 $ 90,630

Liability for retirement benefits *1 ¥10,059 ¥10,983 $ 90,630

Total net liability (asset) for retirement benefits

at end of year ¥10,059 ¥10,983 $ 90,630

*1 Directors’ retirement benefits of ¥178 million ($1,604 thousand) as of March 31, 2019 and ¥176 million as of March 31, 2018 are not included in the above.

(5) Severance and retirement benefit expenses for employees

Year ended March 31, Year ended March 31,2019 2018 2019


Service cost-benefits earned during the year *1 ¥ 962 ¥ 987 $ 8,667

Interest cost on projected benefit obligation 161 160 1,451

Expected return on plan assets (303) (279) (2,730)

Amortization of actuarial gains (67) (110) (604)

Amortization of prior service costs (3) (3) (27)

Severance and retirement benefit expenses based on

simplified methods 433 460 3,901

Severance and retirement benefit expenses for employees ¥1,183 ¥1,215 $10,658

*1 Contributions from employees are not included.

(6) Remeasurements of defined benefit plans, before tax

March 31, March 31,2019 2018 2019


Prior service costs ¥ (3) ¥ (3) $ (27)

Actuarial gains (losss) (135) 321 (1,216)

Total ¥(138) ¥318 $(1,243)

(7) Remeasurements of defined benefit plans

March 31, March 31,2019 2018 2019


Prior service costs that are yet to be recognized ¥(21) ¥ (24) $(189)

Actuarial losses that are yet to be recognized (22) (157) (198)

Total ¥(43) ¥(181) $(387)


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(8) Pension assets (a) Pension assets comprise:

March 31,2019 2018

General account 34% 36%

Equity securities 23% 30%

Bonds 36% 32%

Other 7% 2%

Total 100% 100%

(b) Long-term expected rate of returnCurrent and target asset allocations and current and expected returns on various categories of plan assets have been considered in determining the long-term expected rate of return.

(9) Actuarial assumptionsThe principal actuarial assumptions at March 31, 2019 and 2018 were as follows:

Year ended March 31,2019 2018

Discount rate 0.3%-0.9% 0.3%-0.9%

Long-term expected rate of return 2.0% 2.0%

2. Defined contribution planThe required contribution amount of the Company and its consolidated subsidiaries to the defined contribution plan at March 31, 2019 and 2018 were ¥257 million ($2,316 thousand) and ¥248 million, respectively.

Indemnity income of exiting facilities for lease represented mainly income from cancellation of leased commercial facilities in Yokohama and Kobe and leased real estate facilities in Nagoya for the year ended March 31, 2017.

NOTE 13 – INDEMNITY INCOME OF EXITING FACILITIES FOR LEASE

The Company recognized impairment loss in the following asset group for the year ended March 31, 2019, 2018 and 2017 :

Year ended March 31, 2019Use Location Type Millions of yen Thousands of U.S. dollars

Warehouse facilities Yokkaichi City, Mie Building and others ¥69 $622

Year ended March 31, 2018Use Location Type Millions of yen

Warehouse facilities Kobe City, Hyogo Building and others ¥99

Warehouse facilitiesFukuoka City,

FukuokaBuilding and others ¥11

Warehouse facilities The NetherlandsBuilding, software and

others¥37

NOTE 14 – IMPAIRMENT LOSS

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At March 31, 2019 and 2018, the balances of guarantee for loans amounted to ¥987 million ($8,893 thousand) and ¥1,101 million, respectively.

NOTE 15 – CONTINGENT LIABILITIES

1. OPERATING LEASES(LESSEE LEASES)Future minimum lease payments under non-cancelable operating lease as of March 31, 2019 and 2018 were as follows:

March 31, March 31,


Due within one year ¥ 4,518 ¥ 2,589 $ 40,706

Due after one year 14,120 11,235 127,219

¥18,638 ¥13,824 $167,925

(LESSOR LEASES)Future minimum lease receipts under non-cancelable operating lease as of March,31 2019 and 2018 were as follows:

March 31, March 31,


Due within one year ¥12,618 ¥12,192 $113,686


¥25,326 ¥22,431 $228,183

NOTE 16 – LEASE TRANSACTIONS

Year ended March 31, 2017Use Location Type Millions of yen

Rent of real estate facilities

Osaka City,Osaka

Building ¥194

In calculating impairment loss, assets are grouped by the smallest level that generates a cash flow independent from other assets or asset groups.

The above asset group has decided to rebuild, book values for assets related to said asset groups have been reduced to the recoverable amounts, and the reduction amount of ¥69 million ($622 thousand) (¥64 million ($568 thousand) in buildings, and ¥5 million ($54 thousand) in others) has been recorded as impairment loss in extraordinary losses.

The recoverable amounts are measured based on value in use, and are considered to be zero since future cash flow cannot be expected.

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2. FINANCE LEASES INITIATED BEFORE APRIL 1, 2008(LESSOR LEASES)Finance lease transactions without the transfer of ownership (1) Purchase price, accumulated depreciation and book value

March 31, March 31,


Buildings and structures and other

Purchase price ¥1,372 ¥1,372 $12,361

Accumulated depreciation 747 705 6,730

Book value ¥ 625 ¥ 667 $ 5,631

(2) Lease commitments

March 31, March 31,


Due within one year ¥ 36 ¥ 34 $ 324


¥1,087 ¥1,122 $9,794

(3) Rental income, depreciation and interest income equivalents



Rental income ¥111 ¥111 ¥274 $1,000

Depreciation ¥ 42 ¥ 43 ¥110 $ 378

Interest income equivalents ¥ 77 ¥ 79 ¥ 94 $ 694

(4) Calculation of interest income equivalents The excess of total rental income and estimated residual value over acquisition costs is regarded as an amount representing

interest income equivalents and is allocated to each period using the interest method.

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NOTE 17 – DERIVATIVE TRANSACTIONS

1. Derivative transactions to which hedge accounting is not applied None

2. Derivative transactions to which hedge accounting is applied

Interest rate-related derivativesHedge accounting method : Interest income or expense on the hedged items reflects net amount to be paid or received

under the derivativesType of transaction : Interest rate swap, receive floating, pay fixedMajor hedged itemes : Long-term debt

March 31, March 31,


Notional amount ¥100 ¥100 $901

Portion due after one year included herein – ¥100 –

Fair value (Note) – – –

Note: With respect to interest rate swap contracts which meet certain conditions, fair values of the interest rate swap contracts are included in the fair values of the relevant long-term loans payable, since they are used for recording long-term loans payable as hedged items.

The types and numbers of shares outstanding and treasury shares for the years ended March 31, 2019, 2018 and 2017 were as follows:

Shares outstanding Treasury shares

Type of shares Common stock Common stockNumber of shares: (Shares)

Year ended March 31, 2019

Balance at beginning of year 87,960,739 367,583

Increase during the year – 1,170

Decrease during the year – (53)

Balance at end of year 87,960,739 368,700




Decrease during the year (87,960,739) (365,969)





Decrease during the year – (758)


Increase in the number of shares was due to purchases of less-than-one-unit shares. Decrease in the number of shares was due to sales of less-than-one-unit shares.

NOTE 18 – CHANGES IN NET ASSETS

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Matters related to dividends were as follows:

(a) Dividends payment Dividends payment during the year ended March 31, 2019 was as follows:

Approval at Annual general meeting of shareholders Meeting of the Board of directors

Approval date June 28, 2018 October 31, 2018

Type of shares Common stock Common stock

Total dividends ¥1,227 million ($11,055 thousand) ¥1,314 million ($11,839 thousand)

Dividends per share ¥14.0 ($0.13) ¥15.0 ($0.14)

Record date March 31, 2018 September 30, 2018

Effective date June 29, 2018 December 3, 2018

Dividends payment during the year ended March 31, 2018 was as follows:




Total dividends ¥1,402 million ¥1,227 million

Dividends per share ¥8.0 ¥7.0



Dividends payment during the year ended March 31, 2017 was as follows:




Total dividends ¥1,052 million ¥1,051 million

Dividends per share ¥6.0 ¥6.0



(b) Dividends payment whose record date is attributable to the accounting period ended March 31, 2019 but which becomes effective after said accounting period is as follows:

Approval at Annual general meetings of shareholders

Approval date June 27, 2019

Type of shares Common stock

Source of dividends Retained earnings

Total dividends ¥2,629 million ($23,687 thousand)

Dividends per share ¥30.0 ($0.27)

Record date March 31, 2019

Effective date June 28, 2019

Note:1. The Cash dividends per share for the year ended March 31, 2017 includes $2.0 commemorative dividend in celebration of the

130th anniversary of the Company’s establishment.2. Dividend per share whose record date is March 31, 2018 takes into consideration the reverse stock split at a ratio of one share

for every two shares of common stock, with an effective date of October 1, 2017.

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For the year ended March 31, 2019, 2018 and 20171. General information about reportable segmentsThe Company’s reportable segments are components for which separate financial information is available, and evaluated regularly by the board of directors in determining allocation of management resources and in assessing performance.

The Company decided its reportable segments by considering similarities between the business activities of the Company and its consolidated subsidiaries from the aspects of business type, business nature, method of providing service, market of service and others. The Company has two reportable segments - “logistics” and “real estate.”

Each segment operates the following businesses.Logistics: - Warehousing & distribution, land transportation, harbor transportation and international transportation.Real estate: - Rental of office buildings and sale of real estate

2. Basis of measurement about reported segment revenue, segment income, segment assets and other material itemsThe accounting methods of business segments reported are consistent with those stated in NOTE 1 (SUMMARY OF ACCOUNTING POLICIES).

Segment income is based on the figures of operating income. Amounts for inter-segment transactions or transfers are calculated based on market prices.

As the Company applied “Partial Amendments to Accounting Standard for Tax Effect Accounting” (ASBJ Statement No. 28, February 16, 2018), etc., from the beginning of the fiscal year under review, segment assets of the Group in the fiscal year ended March 31,2018 are amounts after applying the accounting standard etc., retroactively.

3. Information about reported segment revenue, segment income, segment assets and other material itemsReportable segment information for the year ended March 31, 2019 is as follows:

March 31, 2019

Logistics Real estate Total Adjustment *1 Consolidated *2(Millions of yen)

Revenues:

Non-affiliated customer ¥ 189,695 ¥ 37,491 ¥ 227,186 ¥ – ¥ 227,186

Intersegment 740 1,188 1,928 (1,928) –

190,435 38,679 229,114 (1,928) 227,186

Segment income 7,609 10,783 18,392 (5,731) 12,661

Segment assets ¥ 229,908 ¥ 113,854 ¥ 343,762 ¥ 138,813 ¥ 482,575

Depreciation and amortization ¥ 6,955 ¥ 5,778 ¥ 12,733 ¥ 263 ¥ 12,996

Amortization of goodwill ¥ 294 ¥ – ¥ 294 ¥ – ¥ 294Investments in affiliates accounted for by the equity method ¥ 19,559 ¥ – ¥ 19,559 ¥ – ¥ 19,559

Increase in property and equipment and intangible assets ¥ 12,195 ¥ 5,433 ¥ 17,628 ¥ 409 ¥ 18,037

NOTE 19 – SEGMENT INFORMATION

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March 31, 2019

Logistics Real estate Total Adjustment *1 Consolidated *2(Thousands of U.S. dollars)

Revenues:

Non-affiliated customer $ 1,709,118 $ 337,787 $ 2,046,905 $ – $ 2,046,905

Intersegment 6,667 10,704 17,371 (17,371) –

1,715,785 348,491 2,064,276 (17,371) 2,046,905

Segment income 68,555 97,153 165,708 (51,635) 114,073

Segment assets $ 2,071,430 $ 1,025,804 $ 3,097,234 $ 1,250,680 $ 4,347,914

Depreciation and amortization $ 62,663 $ 52,059 $ 114,722 $ 2,370 $ 117,092

Amortization of goodwill $ 2,649 $ – $ 2,649 $ – $ 2,649Investments in affiliates accounted for by the equity method $ 176,223 $ – $ 176,223 $ – $ 176,223

Increase in property and equipment and intangible assets $ 109,875 $ 48,950 $ 158,825 $ 3,685 $ 162,510

*1: The adjustments were as follows; (1) The adjustment of negative ¥5,731 million ($51,635 thousand) in segment income included inter-segment eliminations of

¥22 million ($198 thousand) and corporate expenses of negative ¥5,753 million ($51,833 thousand) not distributed to any reportable segments. Corporate expenses were mainly general and administrative expenses not attributable to any reportable segments.

(2) The adjustment of ¥138,813 million ($1,250,680 thousand) in segment assets was for corporate assets not distributed to any reportable segments. Corporate assets mainly consisted of surplus funds (cash and marketable securities), long-term investments (investments in securities) and assets which belong to the administrative department of the Company.

*2: Segment income was reconciled to operating income as described in the consolidated statements of income.

Reportable segment information for the year ended March 31, 2018 is as follows:

March 31, 2018


Revenues:


Intersegment 718 1,177 1,895 (1,895) –

181,277 36,026 217,303 (1,895) 215,408

Segment income 7,663 10,181 17,844 (5,423) 12,421

Segment assets ¥ 209,915 ¥ 111,359 ¥ 321,274 ¥ 140,757 ¥ 462,031



Increase in property and equipment and intangible assets ¥ 17,130 ¥ 4,453 ¥ 21,583 ¥ – ¥ 21,583

*1: The adjustments were as follows:(1) The adjustment of negative ¥5,423 million in segment income included inter-segment eliminations of ¥21 million and

corporate expenses of negative ¥5,444 million not distributed to any reportable segments. Corporate expenses were mainly general and administrative expenses not attributable to any reportable segments.

(2) The adjustment of ¥141,862 million in segment assets was for corporate assets not distributed to any reportable segments. Corporate assets mainly consisted of surplus funds (cash and marketable securities), long-term investments (investments in securities) and assets which belong to the administrative department of the Company.

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Reportable segment information for the year ended March 31, 2017 is as follows:

March 31, 2017


Revenues:


Intersegment 710 1,373 2,083 (2,083) –

167,908 42,894 210,802 (2,083) 208,719

Segment income 6,662 11,720 18,382 (5,634) 12,748



Increase in property and equipment and intangible assets ¥ 11,907 ¥ 15,034 ¥ 26,941 ¥ 395 ¥ 27,336

*1: The adjustments were as follows:(1) The adjustment of negative ¥5,634 million in segment income included inter-segment eliminations of ¥17 million and

corporate expenses of negative ¥5,651 million not distributed to any reportable segments. Corporate expenses were mainly general and administrative expenses not attributable to any reportable segments.

(2) The adjustment of ¥121,541 million in segment assets was for corporate assets not distributed to any reportable segments. Corporate assets mainly consisted of surplus funds (cash and marketable securities), long-term investments (investments in securities) and assets which belong to the administrative department of the Company.

(3) The adjustment of ¥395 million for increase in property and equipment and intangible assets mainly consisted of capital investment by the administrative department of the Company.


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4. Related information (1) Information about products and services

Information is omitted, as the classification is the same as that for reportable segments.

(2) Information about geographic areasThe information about geographic areas as of and for the years ended March 31, 2019, 2018 and 2017 is as follows:

(a) Revenues



Revenues:

Japan ¥202,093 ¥191,567 ¥187,647 $1,820,822

Other 25,093 23,841 21,072 226,083

¥227,186 ¥215,408 ¥208,719 $2,046,905

Note: Revenues are classified by country and region based on customer location.

(b) Property and equipment

Information is omitted, as the balance of property and equipment located in Japan amounts to more than 90% of the total

balance of property and equipment.

(3) Information about major customersInformation is omitted, as there is no major non-affiliated customer who accounts for 10% or more of the revenues on the consolidated statements of income.

5. Impairment loss by reportable segment

March 31, 2019

Logistics Real estate Total Adjustment Consolidated(Millions of yen)

Impairment loss ¥ 69 ¥ – ¥ 69 ¥ – ¥ 69

March 31, 2018


Impairment loss ¥ 147 ¥ – ¥ 147 ¥ – ¥ 147

March 31, 2017


Impairment loss ¥ – ¥ 194 ¥ 194 ¥ – ¥ 194

March 31, 2019

Logistics Real estate Total Adjustment Consolidated(Thousands of U.S. dollars)

Impairment loss $ 622 $ – $ 622 $ – $ 622

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6. Amortization and unamortized balance of goodwill by reportable segment

March 31, 2019


Amortization of goodwill ¥ 294 ¥ – ¥ 294 ¥ – ¥ 294

Unamortized balance ¥ 630 ¥ – ¥ 630 ¥ – ¥ 630

March 31, 2018



Unamortized balance ¥ 950 ¥ – ¥ 950 ¥ – ¥ 950

March 31, 2017



Unamortized balance ¥ 1,237 ¥ – ¥ 1,237 ¥ – ¥ 1,237

March 31, 2019

Logistics Real estate Total Adjustment Consolidated(Thousands of U.S. dollars)

Amortization of goodwill $ 2,649 $ – $ 2,649 $ – $ 2,649

Unamortized balance $ 5,676 $ – $ 5,676 $ – $ 5,676

NOTE 20 – SIGNIFICANT SUBSEQUENT EVENTS

At the meeting of the Board of Directors held on April 26, 2019, the Company resolved matters relating to the purchase of treasury shares pursuant to the provisions of Article 156 of the Companies Act, which is applied by replacing certain terms pursuant to the provisions of Article 165, Paragraph 3 of the Companies Act.

1. Reasons for purchasing treasury sharesIn accordance with the policy of returning profits to shareholders in the New Medium-term Management Plan FY2019–2021 announced on March 22, 2019, the Company will flexibly purchase treasury shares.

2. Details of the matters concerning purchase (1) Type of shares to be purchased Common stock of the Company (2) Total number of shares to be purchased 2,000,000 shares (maximum)

(Ratio to the total number of issued shares (excluding treasury shares): 2.3%

(3) Total purchase price of shares 5 billion yen (maximum) (4) Purchase period May 7, 2019 - September 30, 2019 (5) Purchase method Market purchase on the Tokyo Stock Exchange

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Company Profile (As of March 31, 2019)

Headquarters and Branches

Headquarters Chuo-ku, Tokyo

Branches Tokyo, Yokohama, Nagoya, Osaka, Kobe and Fukuoka

Date of Establishment April 15, 1887

Capital ¥22,393,986,570

Number of Shares Issued 87,960,739

Authorized Shares 220,000,000

Number of Employees 926 people (parent only; not including 125 people on leave and seconded outside of the Company. There are also 132 temporary employees and 627 seconded and contracted employees from outside the Company.)

4,466 people (on a consolidated basis; not including 49 people on leave and seconded outside of the Group. There are also 1,419 temporary employees and 1,207 seconded and contracted employees from outside the Group.)

Stock Exchange Listing First Section of the Tokyo Stock Exchange

Securities Code 9301

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To Our Shareholders


Topics

Overview of the Mitsubishi Logistics Group

Independent Auditor’s Report







Company Pro�le

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Major ShareholdersShareholder name Number of shares (Thousands) Shareholding ratio (%)The Master Trust Bank of Japan, Ltd. (trust account) 12,707 14.5Japan Trustee Services Bank, Ltd. (trust account) 6,710 7.7Meiji Yasuda Life Insurance Company 5,153 5.9MITSUBISHI ESTATE CO., LTD. 3,665 4.2Kirin Holdings Company, Limited 2,966 3.4Tokio Marine & Nichido Fire Insurance Co., Ltd. 2,915 3.3MUFG Bank, Ltd. 1,864 2.1Japan Trustee Services Bank, Ltd. (trust account 9) 1,791 2.0State Street Bank and Trust Company 505001 1,671 1.9AGC Inc. 1,657 1.9Notes:1. MUFG Bank, Ltd. has set 750 thousand shares of the Company as trust funds for retirement benefits for which voting rights are reserved, in addition to the

shares stated in the table above.2. The Company’s treasury shares (334,099 shares) were excluded in the calculation of the percentage of shares held.

Directors and Corporate Auditors (As of June 27, 2019)Position Name Responsibilities and/or Primary Occupation

Chairman of the Board Akio MatsuiPresident* Masao FujikuraManaging Director Yoshiji Ohara Responsible for Harbor Transportation BusinessManaging Director Hitoshi Wakabayashi Responsible for Warehousing & Distribution Business, General Manager, Warehousing & Distribution Business DivisionManaging Director Yasushi Saito Responsible for Accounting & Financing and Information SystemManaging Director Shinji Kimura Responsible for Planning, Technical and Real Estate BusinessManaging Director* Saburo Naraba Responsible for General Affairs, Corporate Communications, Personnel, and Internal AuditManaging Director Hiroshi Nishikawa Responsible for International Transportation Business, General Manager, International Business Coordination ChamberDirector Minoru MakiharaDirector Koji Miyahara Senior Advisor, Nippon Yusen Kabushiki KaishaDirector Tatsuo Wakabayashi Chairman, Mitsubishi UFJ Trust and Banking CorporationDirector Toshifumi Kitazawa Vice Chairman of the Board, Tokio Marine & Nichido Fire Insurance Co., Ltd.Director Tatsushi Nakashima General Manager, Nagoya BranchDirector Akira Yamao General Manager, Planning & Business Coordination DivisionDirector Akio Miura General Manager, International Transportation Business DivisionStanding Corporate Auditor (full time) Tohru WatanabeCorporate Auditor (full time) Mikine HasegawaCorporate Auditor Yohnosuke Yamada LawyerCorporate Auditor Kenji Sakurai Certified Public AccountantCorporate Auditor Hiroshi Imai

Notes:1. Directors with an asterisk (*) are Representative Directors.2. Of Directors, Mr. Minoru Makihara, Mr. Koji Miyahara, Mr. Tatsuo Wakabayashi and Mr. Toshifumi Kitazawa are Outside Directors as stipulated by Article 2, item 15 of the

Companies Act. The Company designated them as independent officers as stipulated by Tokyo Stock Exchange, Inc. and registered them with the said Exchange.3. Of Corporate Auditors, Mr. Mikine Hasegawa, Mr. Yohnosuke Yamada and Mr. Kenji Sakurai are Outside Corporate Auditors as stipulated by Article 2, item 16 of the

Companies Act. The Company designated them as independent officers as stipulated by Tokyo Stock Exchange, Inc. and registered them with the said Exchange.4. Mr. Akio Matsui, Chairman of the Board, concurrently serves as President of Japan Warehousing Association Inc.

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ANNUAL REPORT 2019Year ended March 31, 2019

Nihonbashi Dia Building 19-1 Nihonbashi, 1-chome Chuo-ku, Tokyo 103-8630, Japanhttp://www.mitsubishi-logistics.co.jp

005_0808001371908.indd 1 2019/09/20 17:41:25

Documents

ANNUAL REPORT 2019 - Mitsubishi Logistics · Meiji Yasuda Life Insurance Company 5,153 5.9 MITSUBISHI ESTATE CO., LTD. 3,665 4.2 Kirin Holdings Company, Limited 2,966 3.4 Tokio Marine