MLC ANNUAL REPORT 2020 - Mitsubishi Logistics

ANNUAL REPORT 2020Year ended March 31, 2020

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

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To Our Shareholders

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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47

MEMO

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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 217th fiscal term (from April 1, 2019, to March 31, 2020).

During the fiscal year under review, in the global economy, while the economy in China continued to slow moderately, economic recovery continued in the United States, and the economy in Europe also continued to follow a mild recovery. Japan, despite a weakness in exports, recovered moderately with improved employment environment and a recovery in consumer spending. However, from the fourth quarter of the fiscal year, the economy, both in Japan and overseas, deteriorated drastically and currently faces an extremely severe situation due to the impact of the COVID-19 pandemic worldwide.

In these economic conditions, the business environment surrounding the Group presents an even more adverse situation in the warehousing and harbor transportation business in the Logistics Segment due to a decline in export cargo, intensifying competition with other companies and increased costs owing to labor shortages and other factors, as well as the impact of COVID-19 from the fourth quarter of the fiscal year. 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 229,057 million yen, an increase of 1,871 million yen, or 0.8% from the previous fiscal year. In the Logistics Segment, revenue increased due to an increase in freight handled both in the warehousing & distribution and land transportation businesses, while revenue decreased due to a decrease in freight handled in both harbor transportation and international transportation businesses. In the Real Estate Segment, revenue increased mainly due to an increase in property sales in the condominiums sales business, despite a decline in the revenue due mainly to change of tenants. In addition, cost of services overall increased 2,315 million yen, or 1.1% from the previous fiscal year to 206,141 million yen. In the Logistics Segment, operational and transportation consignment costs decreased. However, in the Real Estate Segment, real estate sales costs increased in line with an increase in condominiums sold. Selling, general and administrative expenses amounted to 10,721 million yen, the same level as the previous fiscal year.

As a result, operating income decreased by 465 million yen, or 3.7% year on year to 12,195 million yen, reflecting the decline in income in the Logistics Segment and the rise in income in the Real Estate Segment. Ordinary income decreased by 511 million yen, or 3.0% to 16,822 million yen. Profit attributable to owners of parent increased by 286 million yen, or 2.5% from the previous fiscal year to 11,851 million yen despite posting loss on valuation of marketable securities and investments in securities, due to an increase in gain on sale of marketable securities and investments in securities.

For the time being, the world economy will face even more risk of downfall due to the impact of COVID-19. The Japanese economy is expected to continue to face an extremely difficult situation due to the impact of COVID-19.

In this economic climate, under the business environment surrounding the Group, extremely harsh situations continue in the warehousing & distribution business and harbor transportation business due to a decrease in freight volume caused by the impact of COVID-19, intensified competition and an increase in cost resulting from labor shortage. There is concern that business conditions may become stagnant in the real estate business due to a decline in demand for rental office buildings caused by a downturn in the economy, in addition to the expectation of measures such as rent reductions at commercial facilities due to the impact of COVID-19.

Under these circumstances, the Group upholds a vision titled “MLC2030 Vision” to be accomplished in 2030. By making “contributing to the improvement of customer’s value,” our first priority, we aim to be a corporate group that continues to be selected by customers both in Japan and abroad 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, 2020, under the Medium-term Management Plan FY2019-2021, for which fiscal year 2019 was the initial year, 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 retained earnings level as well as profit for the period under review. As a result, the annual dividend, including the interim dividend of ¥30 per share, will be ¥60 per share, an increase of ¥15 from the previous fiscal year.

As for dividends for the fiscal year ending March 31, 2021, which are based on the above policy, both the interim dividend and the year-end dividend will be ¥30 per share, barring any extraordinary circumstances. The annual dividend per share will be ¥60, the same as the previous fiscal year.

We look forward to your continued support and encouragement.

June 2020

Masao Fujikura, President

To Our Shareholders

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Topics

The Company completed construction of the Seishin Distribution

Center (Phase 2) on November 29, 2019, and started operations

in December 2019.

The Center was expanded in response to an increase in

freight handled at the Seishin Distribution Center (Phase 1),

which was completed in March 2018. The Center is located

adjacent to the Fusehata JCT on Kobe-Awaji-Naruto

Expressway, an ideal spot as a distribution base in western Japan.

It has been designed to share the spiral rampway with the

Phase 1 building which allows vehicles to access every floor to

address the high-frequency shipping of cargo. Operating the

Center in integration with the Phase 1 building enables us to

provide even more efficient logistics services.

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 has been is 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 natural disasters 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.

Completion of 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.

Outline of the Seishin Distribution Center (Phase 2)

Seishin Distribution Center(Left: Phase 2 building, Right: Phase 1 building)

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In recent years, economic partnership agreements and free trade agreements (hereinafter, “EPAs & FTAs”) have been signed

between countries and regions, and accordingly, market accessibility is gradually improving through initiatives such as

reduction and phasing-out of tariffs. Meanwhile, multiple bilateral EPAs & FTAs have been signed in some cases, resulting in

the tariff rates applicable to international transactions becoming increasingly multifold and complicated.

Under these circumstances, the Company has decided to launch a new consulting service that supports the optimization of

customers’ supply chains.

Leveraging the Company’s database on different countries’ tariffs as well as its expertise in handling international freight

cultivated through ocean and air transportation services operated in Japan and overseas, we will provide services such as

research on applicable EPAs & FTAs regulations and estimations of tariff cost reductions by taking advantage of EPAs &

FTAs. By proposing the construction of supply chains that will benefit effectively from EPAs & FTAs, we aim to contribute to

the increased efficiency of customers’ logistics.

Launch of a Consulting Service for Supply Chain Optimization

(1) Location: Minami-Honmoku, Naka-ku, Yokohama, Kanagawa Prefecture

(2) Total floor area: approx. 35,600 m² (five-story building)

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

Outline of the Minami-Honmoku Distribution Center

The Minami-Honmoku Distribution Center was completed on February

18, 2020 and started operating the same month.

The Center is located adjacent to the Minami-Honmoku Futo

Container Terminal operated by the Company, and has good access to

all parts of the Tokyo Metropolitan area by way of Minami-Honmoku

Hama Road, which is a port road that connects directly to the

Metropolitan Expressway Wangan Line. It is located in an ideal spot to

handle maritime container cargo such as food products and food

ingredients.

Under the concept of a “Disaster-Resistant and Eco-Friendly

Warehouse,” solar power generation equipment has been installed and

LED lighting is adopted throughout the building to reduce the

environmental burden. By installing emergency power generators in preparation for a power outage, the Center is designed to

support customers’ business continuity from the aspect of logistics.

The Company will capture logistics needs accurately in the Tokyo Metropolitan area and strive to expand its business.

Completion of the Minami-Honmoku Distribution Center in Yokohama

Minami-Honmoku Distribution Center

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Overview of the Mitsubishi Logistics Group (As of March 31, 2020)

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 2020 2019 2020(Millions of yen) (Thousands of U.S. dollars)

(Note 1)

CURRENT ASSETS:

Cash and deposits (Notes 2 and 4) ¥ 38,855 ¥ 41,337 $ 357,025

Marketable securities (Notes 2, 4 and 5) 2,000 2,000 18,377

Notes and accounts receivable (Notes 3, 4 and 6) 40,730 44,745 374,253

Allowance for doubtful accounts (39) (41) (358)

40,691 44,704 373,895

Real estate held for sale 14,882 14,332 136,745

Other 2,066 2,185 18,984

TOTAL CURRENT ASSETS 98,494 104,558 905,026

PROPERTY AND EQUIPMENT (Notes 9, 10, 13 and 15):

Land 89,630 89,571 823,578

Buildings and structures 405,792 387,661 3,728,678

Machinery and equipment 43,653 39,236 401,112

Transportation equipment 9,218 9,116 84,701

Construction in progress 2,421 2,068 22,246

550,714 527,652 5,060,315

Accumulated depreciation (317,653) (308,152) (2,918,800)

NET PROPERTY AND EQUIPMENT 233,061 219,500 2,141,515

INVESTMENTS AND OTHER ASSETS:

Investments in non-consolidated subsidiaries and affiliates (Note 4) 21,342 20,628 196,104

Investments in securities (Notes 4 and 5) 90,604 114,342 832,528

Long-term loans receivable 360 517 3,308

Intangible assets (Note 13) 14,176 14,058 130,258

Goodwill 330 630 3,032

Deferred income taxes (Note 7) 2,966 2,915 27,254

Other 6,924 5,448 63,622

Allowance for doubtful accounts (14) (21) (129)

TOTAL INVESTMENTS AND OTHER ASSETS 136,688 158,517 1,255,977

¥468,243 ¥ 482,575 $4,302,518

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LIABILITIES AND NET ASSETS March 31, March 31,

2020 2019 2020(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) ¥ 30,404 ¥ 31,467 $ 279,371

Notes and accounts payable (Notes 3, 4 and 6) 31,434 37,480 288,836

Income taxes payable 2,869 2,717 26,362

Other (Notes 10 and 11) 3,551 3,526 32,630

TOTAL CURRENT LIABILITIES 68,258 75,190 627,199

LONG-TERM LIABILITIES:

Long-term debt, less current maturities (Notes 4, 10 and 11) 65,680 55,236 603,510

Deposits on long-term leases (Notes 4, 6 and 10) 20,987 20,680 192,842

Retirement benefits (Note 12) 10,399 10,237 95,553

Deferred income taxes (Note 7) 14,925 21,871 137,140

Other (Note 11) 1,638 256 15,051

TOTAL LONG-TERM LIABILITIES 113,629 108,280 1,044,096

TOTAL LIABILITIES 181,887 183,470 1,671,295

CONTINGENT LIABILITIES (Notes 14)

NET ASSETS

SHAREHOLDERS’ EQUITY:

Common stock

authorized – 220,000,000 shares,

issued – 87,960,739 shares, 22,394 22,394 205,770

Capital surplus 19,588 19,565 179,987

Retained earnings 204,320 197,675 1,877,424

Treasury shares (5,848) (845) (53,735)

TOTAL SHAREHOLDERS’ EQUITY 240,454 238,789 2,209,446

ACCUMULATED OTHER COMPREHENSIVE INCOME

Net unrealized holding gains on securities 43,253 57,098 397,436

Foreign currency translation adjustments 389 234 3,574

Remeasurements of defined benefit plans (755) 46 (6,937)

TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 42,887 57,378 394,073

NON-CONTROLLING INTERESTS 3,015 2,938 27,704

TOTAL NET ASSETS 286,356 299,105 2,631,223

¥ 468,243 ¥ 482,575 $ 4,302,518



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Year ended March 31, Year ended March 31,

2020 2019 2018 2020(Millions of yen) (Thousands of U.S. dollars)

(Note 1)

REVENUE ¥ 229,058 ¥ 227,186 ¥ 215,408 $2,104,732

COST OF SERVICES 206,141 203,826 192,594 1,894,156

Gross profit 22,917 23,360 22,814 210,576

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 10,722 10,699 10,393 98,521

Operating income 12,195 12,661 12,421 112,055

OTHER INCOME (EXPENSES):

Interest and dividend income 3,831 3,742 2,874 35,202

Interest expense (578) (491) (602) (5,311)

Gain on sale of marketable securities and investments

in securities (Note 5)3,276 990 369 30,102

Gain (loss) on revaluation of marketable securities and

investments in securities(1,939) (519) 9 (17,817)

Gain (loss) on disposal of property and equipment (1,418) (716) (876) (13,028)

Impairment loss (Note 13) (163) (69) (147) (1,498)

Compensation income 159 261 – 1,461

Equity in earnings of non-consolidated subsidiaries and

affiliates1,411 1,535 1,403 12,965

Foreign exchange gains (losses) (316) (528) (267) (2,904)

Other, net 279 (74) 186 2,564

4,542 4,131 2,949 41,736

Profit before income taxes 16,737 16,792 15,370 153,791

INCOME TAXES (Note 7)

Current 5,232 4,890 4,843 48,075

Deferred (527) 106 (145) (4,842)

4,705 4,996 4,698 43,233

Profit 12,032 11,796 10,672 110,558

PROFIT ATTRIBUTABLE TO NON-CONTROLLING

INTERESTS (180) (231) (154) (1,654)

PROFIT ATTRIBUTABLE TO OWNERS OF PARENT ¥ 11,852 ¥ 11,565 ¥ 10,518 $ 108,904

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

Profit attributable to owners of parent ¥ 137.31 ¥ 132.03 ¥ 120.07 $ 1.26

Cash dividends applicable to the year ¥ 60.00 ¥ 45.00 ¥ 21.00 $ 0.55

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(Note 1)

PROFIT ¥ 12,032 ¥ 11,796 ¥ 10,672 $ 110,558

OTHER COMPREHENSIVE INCOME:

Net unrealized holding gains (losses) on securities (13,841) (3,844) 9,470 (127,180)

Foreign currency translation adjustments 182 (713) 101 1,672

Remeasurements of defined benefit plans (801) (96) 221 (7,360)

Share of other comprehensive income of affiliates

accounted for using the equity method(48) (21) (119) (441)

Total other comprehensive income (Note 8) (14,508) (4,674) 9,673 (133,309)

COMPREHENSIVE INCOME (Note 8) ¥ (2,476) ¥ 7,122 ¥ 20,345 $ (22,751)

Comprehensive income attributable to:

Comprehensive income attributable to owners of parent ¥ (2,639) ¥ 6,965 ¥ 20,162 $ (24,249)

Comprehensive income attributable to non-controlling interests 163 157 183 1,498



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

Cash dividends – – – (2,629) – – – – –Profit attributable to owners of parent – – – 10,518 – – – – –

Purchase of treasury shares – – – – (10) – – – –

Disposal of treasury shares – – 0 – 0 – – – –Change in treasury shares of parent arising from transactions with non-controlling shareholders

– – – – – – – – –

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


Purchase of treasury shares – – – – (3) – – – –

Disposal of treasury shares – – 0 – 0 – – – –Change in treasury shares of parent arising from transactions with non-controlling shareholders

– – (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


Purchase of treasury shares – – – – (5,003) – – – –

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

– – 23 – – – – – –

Changes other than to stockholders' equity,net – – – – – (13,845) 155 (801) 77

Balance at March 31, 2020 87,961 ¥22,394 ¥19,588 ¥204,320 ¥(5,848) ¥43,253 ¥ 389 ¥(755) ¥3,015


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, 2019 $205,770 $179,776 $1,816,365 $ (7,764) $ 524,653 $2,150 $ 423 $26,996

Cash dividends – – (47,845) – – – – –

Profit attributable to owners of parent – – 108,904 – – – – –

Purchase of treasury shares – – – (45,971) – – – –

Disposal of treasury shares – – – – – – – –Change in treasury shares of parent arising from transactions with non-controlling shareholders – 211 – – – – – –

Changes other than to stockholders’ equity, net – – – – (127,217) 1,424 (7,360) 708

Balance at March 31, 2020 $205,770 $179,987 $1,877,424 $(53,735) $ 397,436 $3,574 $(6,937) $27,704

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(Note 1)

CASH FLOWS FROM OPERATING ACTIVITIES:

Profit before income taxes ¥16,737 ¥16,792 ¥15,370 $153,791

Depreciation and amortization 14,252 12,996 12,747 130,957

Impairment loss 163 69 147 1,498

Increase (decrease) in retirement benefits 204 (922) (1,228) 1,874

Loss (gain) on revaluation of marketable securities and

investments in securities1,939 501 (44) 17,817

Loss (gain) on sales of marketable securities and

investments in securities(3,276) (990) (369) (30,102)

Loss (gain) on disposal of property and equipment 166 434 404 1,525

Equity in earnings of non-consolidated subsidiaries

and affiliates(1,411) (1,535) (1,403) (12,965)

Interest and dividend income (3,831) (3,742) (2,874) (35,202)

Interest expense 578 491 602 5,311

Decrease (increase) in notes and accounts receivable 4,102 (3,415) (4,476) 37,692

Decrease (increase) in real estate held for sale (550) (2,620) (1,866) (5,054)

Increase (decrease) in notes and accounts payable (4,568) 4,214 1,914 (41,974)

Increase (decrease) in deposits payable (3,264) 866 752 (29,992)

Other, net (2,429) 136 2,078 (22,319)

Subtotal 18,812 23,275 21,754 172,857

Interest and dividend income received in cash 4,446 5,028 5,575 40,853

Interest expense paid in cash (554) (516) (567) (5,091)

Income taxes paid in cash (5,079) (4,435) (5,281) (46,669)

NET CASH PROVIDED BY OPERATING ACTIVITIES 17,625 23,352 21,481 161,950

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash investment to time deposits (278) (311) (729) (2,554)

Cash return from time deposits 519 881 912 4,769

Acquisition of property and equipment (23,570) (19,886) (22,814) (216,576)

Proceeds from sales of property and equipment 129 251 54 1,185

Acquisition of marketable securities and investments

in securities(845) (13,981) (41) (7,764)

Proceeds from sales of marketable securities and

investments in securities6,006 1,256 372 55,187

Other, net 16 4 27 146

NET CASH USED IN INVESTING ACTIVITIES (18,023) (31,786) (22,219) (165,607)


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(Note 1)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from short-term bank loans ¥15,703 ¥19,148 ¥13,311 $144,289

Repayments of short-term bank loans (16,672) (8,902) (13,224) (153,193)

Proceeds from long-term debt 900 12,900 100 8,270

Repayments of long-term debt (5,549) (1,349) (9,858) (50,988)

Issue of bonds 19,863 – 15,900 182,514

Redemption of bonds (5,000) (7,000) – (45,943)

Purchase of treasury shares (5,016) (3) (10) (46,090)

Dividends paid (5,203) (2,541) (2,629) (47,809)

Other, net (1,385) (186) (171) (12,726)

NET CASH PROVIDED BY (USED IN)

FINANCING ACTIVITIES(2,359) 12,067 3,419 (21,676)

EFFECT OF EXCHANGE RATE CHANGES ON CASH

AND CASH EQUIVALENTS327 (242) (22) 3,005

NET INCREASE (DECREASE) IN CASH AND CASH

EQUIVALENTS(2,430) 3,391 2,659 (22,328)

CASH AND CASH EQUIVALENTS AT

BEGINNING OF YEAR 42,972 39,581 36,922 394,854

CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 2) ¥40,542 ¥42,972 ¥39,581 $372,526

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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, 2020, which was ¥108.83 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, 2020, 2019 and 2018 were as follows:

March 31,

2020 2019 2018

Consolidated subsidiaries 51 51 51

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, 2020 included amounts representing year-end cash dividends of ¥2,578 million ($23,688 thousand) at ¥30.0 ($0.28) per share, which were approved at the shareholders’ meeting held on June 26, 2020.

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, 2020, 2019 and 2018.

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, 2018.

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.

CHANGE IN ACCOUNTING POLICIES

Subsidiaries of the Company that apply International Financial Reporting Standards have applied the International Financial Reporting Standard 16 “Leases” (“IFRS 16”) from the fiscal year under review. As a result, the lessees of a lease generally recognizes all leases as assets and liabilities in the balance sheet. In applying IFRS 16, the cumulative effect of the change in accounting policy is recognized on the application date in accordance with the transitional treatment.

The impact of this change on consolidated financial statements is immaterial.

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 31, 2020) • “Implementation Guidance on Accounting Standard for

Revenue Recognition” (ASBJ Guidance No. 30, March 31, 2020)

(1) Overview The above standard and guidance provide comprehensive principles for revenue recognition. Under the standard and guidance, revenue is recognized by applying the 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.

• “Accounting Standard for Fair Value Measurement” (ASBJ Statement No. 30, July 4, 2019)

• “Implementation Guidance on Accounting Standard for Fair Value Measurement” (ASBJ Guidance No. 31, July 4, 2019)

• “Accounting Standard for Financial Instruments” (ASBJ Statement No. 10, July 4, 2019)

• “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” (ASBJ Guidance No. 19, March 31, 2020)

(1) Overview In order to improve comparability with the provisions of international accounting standards, “Accounting Standard for Fair Value Measurement” and “Implementation Guidance on Accounting Standard for Fair Value Measurement” (hereinafter, “Fair Value Measurement Accounting Standards, etc.”) were developed as guidance on how to measure fair value. Fair Value Measurement Accounting Standards, etc. are applied to the fair value of financial instruments under the “Accounting Standard for Financial Instruments.”

In addition, “Implementation Guidance on Disclosures about Fair Value of Financial Instruments” was revised to include notes regarding the breakdown by level of fair values of financial instruments.

(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.

• “Revised Accounting Standard for Accounting Policy Disclosures, Accounting Changes and Error Corrections” (ASBJ Statement No. 24, March 31, 2020)

(1) Overview The purpose of this accounting standard is to clarify the principles and the overview of procedures of the accounting treatment adopted, in cases where the provisions of relevant accounting standards, etc. are unclear.

(2) Effective date Effective from the end of the fiscal year ending March 31, 2021

• “Accounting Standard for Disclosure of Accounting Estimates” (ASBJ Statement No. 31, March 31, 2020)

(1) Overview The purpose of this accounting standard is to disclose information that will facilitate the understanding of the users of the financial statements, regarding items of accounting estimates recorded in the financial statements for the current fiscal year that have the risk of significantly impacting the financial statements for the following fiscal year.

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(2) Effective date Effective from the end of the fiscal year ending March 31, 2021

ADDITIONAL INFORMATION

(Accounting estimates regarding the impact of COVID-19)The Company and its consolidated subsidiaries made accounting estimates, including accounting for impairment of non-current assets, based on the information available at the time of preparing the consolidated financial statements. The accounting estimates are based on the assumption that the impact of COVID-19 on business operations of the Company and its consolidated subsidiaries will maintain the same level until the end of the second quarter of the fiscal year ending March 31, 2021 and will start to ease from the third quarter.

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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. At March 31, 2020, the Company and its consolidated subsidiaries did not utilize interest rate swap contracts.

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.

(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.

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, 2020, 2019 and 2018 were as follows:

March 31, March 31,


Cash and deposits ¥38,855 ¥41,337 ¥38,330 $357,025

Time deposits with maturities over six months (313) (365) (749) (2,876)

Money funds invested in bonds and domestic

certificates of deposits 2,000 2,000 2,000 18,377

Cash and cash equivalents ¥40,542 ¥42,972 ¥39,581 $372,526

As financial institutions in Japan were closed on March 31, 2019, notes receivable of ¥109 million and notes payable of ¥2 million were settled on April 1, 2019 and accounted for accordingly.

NOTE 2 – CASH AND CASH EQUIVALENTS

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

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2. FAIR VALUES OF FINANCIAL INSTRUMENTSThe amounts posted on the consolidated balance sheet, the fair values, and the differences thereof as of March 31, 2020 and 2019 are as follows. Items whose fair values are extremely difficult to measure are not included in the following table (see (Note 2)).

March 31,2020 March 31,2020

Consolidated balance sheet

amount Fair value Difference


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

Assets(1) Cash and deposits ¥ 38,855 ¥ 38,855 ¥ – $ 357,025 $ 357,025 $ –

(2) Notes and accounts receivable 36,393 36,393 – 334,402 334,402 –

(3) Marketable securities 2,000 2,000 – 18,377 18,377 –

(4) Investment in securities (available-for-sale securities) 88,903 88,903 – 816,898 816,898 –

¥ 166,151 ¥ 166,151 ¥ – $ 1,526,702 $ 1,526,702 $ –

Liabilities

(1) Notes and accounts payable ¥ 22,250 ¥ 22,250 ¥ – $ 204,447 $ 204,447 $ –

(2) Short-term bank loans 20,122 20,122 – 184,894 184,894 –

(3) Bonds payable 51,000 50,924 (76) 468,621 467,923 (698)

(4) Long-term loans payable *1 24,962 25,020 58 229,366 229,900 534

(5) Deposits on long-term leases 1,165 1,174 9 10,705 10,787 82

(6) Derivatives – – – – – –

¥ 119,499 ¥ 119,490 ¥ (9) $ 1,098,033 $ 1,097,951 $ (82)

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

March 31,2019


amount Fair value Difference(Millions of yen)

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

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

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

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

¥ 197,143 ¥ 197,143 ¥ –

Liabilities

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

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

(3) Bonds payable 36,000 36,472 472

(4) Long-term loans payable *1 29,708 29,858 150

(5) Deposits on long-term leases 1,165 1,181 16

(6) Derivatives – – –

¥ 115,265 ¥ 115,903 ¥ 638

*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 16). 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 16 (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 ¥22,683 ¥21,376 $208,426

Deposits on long-term leases *2 ¥19,822 ¥19,515 $182,137

*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 in unlisted securities.*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, 2020Millions of yen

One yearor less

One tofive years

Five toten years

Overten years

Cash and deposits ¥38,855 ¥ – ¥ – ¥ –

Notes and accounts receivable 36,393 – – –

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

¥77,248 ¥ – ¥ – ¥ –


One yearor less

One tofive years

Five toten years

Overten years

Cash and deposits ¥41,337 ¥ – ¥ – ¥ –



¥83,940 ¥ – ¥ – ¥ –

March 31, 2020Thousands of U.S. dollars

One yearor less

One tofive years

Five toten years

Overten years

Cash and deposits $357,025 $ – $ – $ –



$709,804 $ – $ – $ –

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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 ¥20,122 ¥ – ¥ – ¥ – ¥ – ¥ –

Bonds payable 5,000 5,000 – 5,000 8,000 28,000

Long-term loans 5,282 635 12,125 6,340 296 284

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

¥30,404 ¥ 5,635 ¥ 12,125 ¥ 11,340 ¥ 9,461 ¥ 28,284


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 ¥ 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

March 31, 2020Thousands 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 $184,894 $ – $ – $ – $ – $ –

Bonds payable 45,943 45,943 – 45,943 73,509 257,283

Long-term loans 48,534 5,835 111,412 58,256 2,720 2,609

Deposits on long-term leases – – – – 10,705 –

$279,371 $51,778 $111,412 $104,199 $ 86,934 $259,892

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At March 31, 2020, 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 31,2020 March 31,2020

Consolidatedbalance sheet

amountAcquisition

cost

Unrealizedholding gains

(losses)


amountAcquisition

cost


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

Securities with book values exceeding

acquisition costs:

Stocks ¥83,134 ¥19,992 ¥63,143 $763,889 $183,699 $580,199

83,134 19,992 63,143 763,889 183,699 580,199

Other securities:

Stocks 5,769 6,364 (595) 53,009 58,477 (5,468)

5,769 6,364 (595) 53,009 58,477 (5,468)

¥88,903 ¥26,356 ¥62,548 $816,898 $242,176 $574,731

Unlisted securities and others (book value being ¥1,704 million ($15,657 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, 2020, the amounts of sale, related gains and related losses of Available-for-sale Securities were as follows:

March 31,2020 March 31,2020

Amount of sale

Relatedgains

Relatedlosses

Amount of sale

Relatedgains

Relatedlosses

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

Stocks ¥6,006 ¥3,686 ¥410 $55,187 $33,869 $3,767

¥6,006 ¥3,686 ¥410 $55,187 $33,869 $3,767

In the year ended March 31, 2020, the Company recorded impairment losses of ¥1,908 million ($17,532 thousand) on Available-for-sale Securities.For securities whose fair values have declined by 30% or more compared with their acquisition cost, the Company judges them as significant declines. Loss on impairment is recorded as deemed necessary in consideration of the possibility of their recoverability.

NOTE 5 – SECURITIES

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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, 2020 and 2019 were as follows:

March 31, March 31,


Notes and accounts receivable ¥181 ¥159 $1,663

Notes and accounts payable ¥691 ¥830 $6,349

Deposits on long-term leases ¥ 26 ¥ 26 $ 239

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


amountAcquisition

cost


(losses)(Millions of yen)

Securities with book values exceeding

acquisition costs:

Stocks ¥108,138 ¥24,905 ¥83,233

108,138 24,905 83,233

Other securities:

Stocks 5,064 5,800 (736)

5,064 5,800 (736)

¥113,202 ¥30,705 ¥82,497

Unlisted securities and others (book value being ¥1,145 million) 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

Amount of sale

Relatedgains

Relatedlosses

(Millions of yen)

Stocks ¥1,256 ¥990 ¥ –

¥1,256 ¥990 ¥ –

In the year ended March 31, 2019, the Company recorded impairment losses of ¥530 million on Available-for-sale Securities.For securities whose fair values have declined by 30% or more compared with their acquisition cost, the Company judges them as significant declines. Loss on impairment is recorded as deemed necessary in consideration of the possibility of their recoverability.

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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%, 30.6% and 30.9% for the years ended March 31, 2020, 2019 and 2018, respectively.Reconciliations between the statutory tax rate and the effective tax rate for the years ended March 31, 2020, 2019 and 2018 were as follows:

March 31,

2020 2019 2018

Statutory tax rate 30.6% – –

Entertainment expense etc. not deductible for Japanese tax purposes 0.7 – –

Dividends etc. not taxable for Japanese tax purposes (1.9) – –

Inhabitant taxes 0.6 – –

Equity in earnings of non-consolidated subsidiaries and affiliates (2.6) – –

Other 0.7 – –

Effective tax rate 28.1% – –

Information on reconciliation of tax rates for the year ended March 31, 2019 and 2018 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.

Significant components of the Company and its consolidated subsidiaries’ deferred income tax assets and liabilities as of March 31, 2020 and 2019 were as follows:

March 31, March 31,

2020 2019 2020 (Millions of yen) (Thousands of U.S. dollars)

Deferred income tax assets:

Enterprise taxes payable ¥ 211 ¥ 209 $ 1,939

Allowance for investment loss 15 5 138

Allowance for doubtful accounts 23 26 211

Accrued bonuses 955 949 8,775

Retirement benefits 3,166 3,113 29,091

Depreciation 6,576 6,520 60,425

Impairment loss 2,295 2,350 21,088

Other 2,746 2,138 25,232

15,987 15,310 146,899

Valuation allowance (1,082) (1,216) (9,942)

Total deferred income tax assets 14,905 14,094 136,957

Deferred income tax liabilities:

Net unrealized holding gains on securities (18,912) (25,045) (173,775)

Reserve for reduction entry (7,101) (7,140) (65,248)

Other (851) (865) (7,820)

Total deferred income tax liabilities (26,864) (33,050) (246,843)

Net deferred income tax liabilities ¥(11,959) ¥ (18,956) $(109,886)

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NOTE 8 – STATEMENTS OF COMPREHENSIVE INCOME

Amounts reclassified to net income for the years ended March 31, 2020, 2019 and 2018 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 ¥(18,581) ¥(5,102) ¥13,651 $(170,734)

Reclassification adjustments (1,368) (450) (7) (12,570)

Sub-total, before tax (19,949) (5,552) 13,644 (183,304)

Tax effect 6,108 1,708 (4,174) 56,124

Sub-total, net of tax (13,841) (3,844) 9,470 (127,180)

Foreign currency translation adjustments

Increase (Decrease) during the year 182 (713) 101 1,672

Remeasurements of defined benefit plans

Increase (Decrease) during the year (926) (68) 431 (8,509)

Reclassification adjustments (229) (70) (113) (2,104)

Sub-total, before tax (1,155) (138) 318 (10,613)

Tax effect 354 42 (97) 3,253

Sub-total, net of tax (801) (96) 221 (7,360)

Share of other comprehensive income of

affiliates accounted for using the equity method

Increase (Decrease) during the year (48) (21) (119) (441)

Total other comprehensive income ¥(14,508) ¥(4,674) ¥ 9,673 $(133,309)

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NOTE 9 – REAL ESTATE FOR RENT

For the year ended March 31, 2020The 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, 2020, profit and loss concerning investments and rental property comprised lease profit of ¥11,355 million ($104,337 thousand), subsidy income of ¥207 million ($1,902 thousand), compensation income of ¥155 million ($1,424 thousand) and loss on disposal of non-current assets of ¥1,044 million ($9,593 thousand).

Information on fair value of investment and rental property included in the consolidated financial statements at March 31, 2020 is as follows:

Amount on the consolidated balance sheet Fair valueApril 1, 2019 Increase March 31, 2020 March 31, 2020

(Millions of yen)¥93,022 ¥944 ¥93,966 ¥368,047

Amount on the consolidated balance sheet Fair valueApril 1, 2019 Increase March 31, 2020 March 31, 2020

(Thousands of U.S. dollars)$854,746 $8,674 $863,420 $3,381,852

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 ¥7,213 million ($66,278 thousand), and the main factor for the decrease was the depreciation of ¥5,704 million ($52,412 thousand).

3. Fair value as of March 31, 2020 was the amount mainly based on appraisal by an external real estate appraiser.

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, subsidy income of ¥221 million, loss on disposal of non-current assets of ¥185 million and loss on disaster of ¥19 million.

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

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, and the main factor for the decrease was the depreciation of ¥5,759 million.

3. Fair value as of March 31, 2019 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, 2020 and 2019 were as follows:

March 31, March 31,


Land ¥745 ¥ 1,042 $ 6,846

Buildings and structures – 14 –

¥745 ¥ 1,056 $ 6,846

Liabilities secured by the pledged assets mentioned above at March 31, 2020 and 2019 were as follows:

March 31, March 31,


Short-term bank loans ¥ 150 ¥ 300 $ 1,378

Other in current liabilities 160 192 1,470

Long-term loans payable 556 2,387 5,109

Deposits on long-term leases 1,000 1,000 9,189

¥ 1,866 ¥ 3,879 $ 17,146

NOTE 10 – COLLATERAL ASSETS

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Short-term bank loans outstanding at March 31, 2020 and 2019 were ¥20,122 million ($184,894 thousand) and ¥20,995 million, respectively, and the annual interest rates of short-term bank loans were 0.300% to 10.750% and 0.310% to 10.750%, respectively.

Long-term debt at March 31, 2020 and 2019 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% ¥24,962 ¥29,708 $229,366

Balance in lease obligations 2,698 264 24,791

0.933% yen bonds due 2019, unsecured – 5,000 –

1.230% yen bonds due 2021, unsecured 5,000 5,000 45,943





0.220% yen bonds due 2029, unsecured 10,000 – 91,887

0.610% yen bonds due 2039, unsecured 10,000 – 91,887

78,660 65,972 722,778

Less current portion (6,447) (5,584) (59,239)

¥72,213 ¥60,388 $663,539

The aggregate annual maturities of long-term loans at March 31, 2020 were as follows:

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

2021 ¥ 5,282 $ 48,534

2022 635 5,835

2023 12,125 111,412

2024 6,340 58,256

2025 296 2,720

2026 and thereafter 284 2,609

¥24,962 $229,366

The aggregate annual maturities of lease obligation at March 31, 2020 were as follows:

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

2021 ¥1,165 $10,705

2022 752 6,910

2023 411 3,776

2024 251 2,306

2025 115 1,057

2026 and thereafter 4 37

¥2,698 $24,791

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 ¥21,627 ¥21,671 $198,723

Service cost-benefits earned during the year 1,057 1,093 9,713

Interest cost on projected benefit obligation 161 161 1,479

Actuarial loss (gain) 69 (34) 634

Benefits paid (1,371) (1,264) (12,598)

Balance at end of year ¥21,543 ¥21,627 $197,951

(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 319 303 2,931

Actuarial gain (loss) (857) (103) (7,875)

Contributions from the Group 1,006 1,319 9,244

Benefits paid (845) (826) (7,764)

Other 103 102 947


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

March 31, March 31,



Retirement benefit costs 478 433 4,392

Benefits paid (329) (390) (3,023)

Contributions from the Group (134) (126) (1,231)

Other 3 (1) 28


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 31,2020 2019 2020


Funded retirement benefit obligations ¥19,019 ¥19,037 $174,759

Pension assets (16,910) (17,181) (155,380)

2,109 1,856 19,379

Unfunded retirement benefit obligations 8,159 8,203 74,970

Total net liability (asset) for retirement benefits

at end of year ¥10,268 ¥10,059 $ 94,349

Liability for retirement benefits *1 ¥10,268 ¥10,059 $ 94,349

Total net liability (asset) for retirement benefits

at end of year ¥10,268 ¥10,059 $ 94,349

*1 Directors’ retirement benefits of ¥131 million ($1,204 thousand) as of March 31, 2020 and ¥178 million as of March 31, 2019 are not included in the above.

(5) Severance and retirement benefit expenses for employees

Year ended March 31, Year ended March 31,2020 2019 2020


Service cost-benefits earned during the year *1 ¥ 954 ¥ 962 $8,766

Interest cost on projected benefit obligation 161 161 1,479

Expected return on plan assets (319) (303) (2,931)

Amortization of actuarial gains (226) (67) (2,076)

Amortization of prior service costs (3) (3) (28)

Severance and retirement benefit expenses based on

simplified methods 478 433 4,392

Severance and retirement benefit expenses for employees ¥1,045 ¥1,183 $9,602

*1 Contributions from employees are not included.

(6) Remeasurements of defined benefit plans, before tax

March 31, March 31,2020 2019 2020


Prior service costs ¥ (3) ¥ (3) $ (28)

Actuarial gains (losss) (1,152) (135) (10,585)

Total ¥(1,155) ¥(138) $(10,613)

(7) Remeasurements of defined benefit plans

March 31, March 31,2020 2019 2020


Prior service costs that are yet to be recognized ¥ (18) ¥(21) $ (165)

Actuarial losses that are yet to be recognized 1,129 (22) 10,374

Total ¥ 1,111 ¥(43) $ 10,209

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

March 31,2020 2019

General account 38% 34%

Equity securities 22% 23%

Bonds 36% 36%

Other 4% 7%

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, 2020 and 2019 were as follows:

Year ended March 31,2020 2019

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, 2020 and 2019 were ¥249 million ($2,288 thousand) and ¥257 million, respectively.

The Company recognized impairment loss in the following asset group for the year ended March 31, 2020, 2019 and 2018 :

Year ended March 31, 2020Use Location Type Millions of yen Thousands of U.S. dollars

Warehouse facilities Osaka City, Osaka Building and others ¥70 $643

Warehouse facilities Kobe City, Hyogo Building, Software and

others¥93 $855

Year ended March 31, 2019Use Location Type Millions of yen

Warehouse facilities Yokkaichi City, Mie Building and others ¥69

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 13 – IMPAIRMENT LOSS

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At March 31, 2020 and 2019, the balances of guarantee for loans amounted to ¥871 million ($8,003 thousand) and ¥987 million, respectively.

NOTE 14 – CONTINGENT LIABILITIES

1. OPERATING LEASES(LESSEE LEASES)Future minimum lease payments under non-cancelable operating lease as of March 31, 2020 and 2019 were as follows:

March 31, March 31,


Due within one year ¥ 4,162 ¥ 4,518 $ 38,243

Due after one year 11,639 14,120 106,947

¥15,801 ¥18,638 $145,190

(LESSOR LEASES)Future minimum lease receipts under non-cancelable operating lease as of March,31 2020 and 2019 were as follows:

March 31, March 31,


Due within one year ¥12,836 ¥12,618 $117,945


¥27,774 ¥25,326 $255,205

NOTE 15 – LEASE TRANSACTIONS

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 groups have been recognized to have reduced profitability from operating activities, and as short-term recovery is not

expected, book values for assets related to said asset groups have been reduced to the recoverable amounts, and the reduction amount of

¥163 million ($1,498 thousand) (¥80 million ($735 thousand) in buildings, ¥39 million ($359 thousand) in softwares and ¥44 million

($404 thousand) in others) has been recorded as impairment loss in other expenses.

The recoverable amounts are measured based on net selling price or value in use. Net selling price are derived from estimated disposal

prices and value in use is 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 $12,607

Accumulated depreciation 788 747 7,241

Book value ¥ 584 ¥ 625 $ 5,366

(2) Lease commitments

March 31, March 31,


Due within one year ¥ 39 ¥ 36 $ 358


¥1,052 ¥1,087 $9,666

(3) Rental income, depreciation and interest income equivalents



Rental income ¥111 ¥111 ¥111 $1,020

Depreciation ¥ 41 ¥ 42 ¥ 43 $ 377

Interest income equivalents ¥ 74 ¥ 77 ¥ 79 $ 680

(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 16 – 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 $–

Portion due after one year included herein ¥– – $–

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, 2020, 2019 and 2018 were as follows:

Shares outstanding Treasury shares

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

Year ended March 31, 2020

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

Increase during the year *1 – 1,683,793

Decrease during the year – –

Balance at end of year 87,960,739 2,052,493



Increase during the year – 1,170

Decrease during the year – (53)

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



Increase during the year – 5,208

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

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

NOTE 17 – CHANGES IN NET ASSETS

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*1 Increase of 1,683,793 treasury shares was due to the purchase of 1,682,600 shares based on the resolution of the Board of Directors’ meeting held on April 26, 2019 and the purchase of less-than-one-unit shares (1,193 shares).

Matters related to dividends were as follows:

(a) Dividends payment Dividends payment during the year ended March 31, 2020 was as follows:

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

Approval date June 27, 2019 October 31, 2019

Type of shares Common stock Common stock

Total dividends ¥2,629 million ($24,157 thousand) ¥2,578 million($23,688 thousand)

Dividends per share ¥30.0 ($0.28) ¥30.0 ($0.28)

Record date March 31, 2019 September 30, 2019

Effective date June 28, 2019 December 2, 2019

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




Total dividends ¥1,227 million ¥1,314 million

Dividends per share ¥14.0 ¥15.0



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



(b) Dividends payment whose record date is attributable to the accounting period ended March 31, 2020 but which becomes effective after said accounting period is as follows:

Approval at Annual general meetings of shareholders

Approval date June 26, 2020

Type of shares Common stock

Source of dividends Retained earnings

Total dividends ¥2,578 million ($23,688 thousand)

Dividends per share ¥30.0 ($0.28)

Record date March 31, 2020

Effective date June 29, 2020

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For the year ended March 31, 2020, 2019 and 20181. 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 ended March 31, 2019, segment assets of the Group in the fiscal year ended March 31, 2018 are amounts after applying the accounting standard etc., retroactively.

As described in “Changes in accounting policies,” certain subsidiaries which apply the International Financial Reporting Standards adopted IFRS 16 Leases from the fiscal year under review. In addition, the effect of this application on segment information is immaterial.

3. Information about reported segment revenue, segment income, segment assets and other material itemsReportable segment information for the year ended March 31, 2020 is as follows:

March 31, 2020

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

Revenues:

Non-affiliated customer ¥ 188,922 ¥ 40,136 ¥ 229,058 ¥ – ¥ 229,058

Intersegment 788 1,064 1,852 (1,852) –

189,710 41,200 230,910 (1,852) 229,058

Segment income 7,184 10,859 18,043 (5,848) 12,195

Segment assets ¥ 243,758 ¥ 113,776 ¥ 357,534 ¥ 110,709 ¥ 468,243

Depreciation and amortization ¥ 8,273 ¥ 5,726 ¥ 13,999 ¥ 253 ¥ 14,252

Amortization of goodwill ¥ 292 ¥ – ¥ 292 ¥ – ¥ 292Investments in affiliates accounted for by the equity method ¥ 20,286 ¥ – ¥ 20,286 ¥ – ¥ 20,286

Increase in property and equipment and intangible assets ¥ 20,351 ¥ 5,847 ¥ 26,198 ¥ 190 ¥ 26,388

NOTE 18 – SEGMENT INFORMATION

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March 31, 2020

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

Revenues:

Non-affiliated customer $ 1,735,937 $ 368,795 $2,104,732 $ – $2,104,732

Intersegment 7,240 9,777 17,017 (17,017) –

1,743,177 378,572 2,121,749 (17,017) 2,104,732

Segment income 66,011 99,779 165,790 (53,735) 112,055

Segment assets $2,239,805 $1,045,447 $3,285,252 $1,017,266 $4,302,518

Depreciation and amortization $ 76,018 $ 52,614 $ 128,632 $ 2,325 $ 130,957

Amortization of goodwill $ 2,683 $ – $ 2,683 $ – $ 2,683Investments in affiliates accounted for by the equity method $ 186,401 $ – $ 186,401 $ – $ 186,401

Increase in property and equipment and intangible assets $ 186,998 $ 53,726 $ 240,724 $ 1,746 $ 242,470

*1 The adjustments were as follows; (1) The adjustment of negative ¥5,848million ($53,735 thousand) in segment income included inter-segment eliminations of

¥20 million ($184 thousand) and corporate expenses ¥5,868 million ($53,910 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 ¥110,709million ($1,017,266 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, 2019 is as follows:

March 31, 2019


Revenues:


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



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

*1: The adjustments were as follows; (1) The adjustment of negative ¥5,731 million in segment income included inter-segment eliminations of ¥22 million and

corporate expenses ¥5,753 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 ¥138,813 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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*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 ¥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.

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

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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, 2020, 2019 and 2018 is as follows:

(a) Revenues



Revenues:

Japan ¥203,849 ¥202,093 ¥191,567 $1,873,096

Other 25,209 25,093 23,841 231,636

¥229,058 ¥227,186 ¥215,408 $2,104,732

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, 2020

Logistics Real estate Total Adjustment Consolidated(Millions of yen)

Impairment loss ¥ 163 ¥ – ¥ 163 ¥ – ¥ 163

March 31, 2019


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

March 31, 2018


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

March 31, 2020

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

Impairment loss $ 1,498 $ – $ 1,498 $ – $ 1,498

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6. Amortization and unamortized balance of goodwill by reportable segment

March 31, 2020


Amortization of goodwill ¥ 292 ¥ – ¥ 292 ¥ – ¥ 292

Unamortized balance ¥ 330 ¥ – ¥ 330 ¥ – ¥ 330

March 31, 2019




March 31, 2018




March 31, 2020

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

Amortization of goodwill $ 2,683 $ – $ 2,683 $ – $ 2,683

Unamortized balance $ 3,032 $ – $ 3,032 $ – $ 3,032

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NOTE 19 – SIGNIFICANT SUBSEQUENT EVENTS

1. Introduction of a Restricted Stock Remuneration PlanAt the meeting of the Board of Directors held on April 30, 2020, the Company reviewed the officer remuneration system and resolved to introduce a restricted stock remuneration plan (the “Plan”) for Directors. A resolution was also made to submit the Plan for discussion at the 217th Annual General Meeting of Shareholders held on June 26, 2020. The proposal related to this Plan was approved by said General Meeting of Shareholders. The details are as follows. (1) Overview of the Plan The Company will provide remuneration in the form of monetary remuneration claims (hereinafter referred to as

“Monetary Remuneration”) for the purpose of granting of restricted stock to Directors (excluding Outside Directors; hereinafter referred to as “eligible Directors”), and eligible Directors shall pay in all the monetary remuneration claims as contribution in kind, and receive issuance or disposal of common stock of the Company. The Company shall sign a restricted stock allotment agreement with the eligible Directors for the issuance or disposal of common stock of the Company with the provisions that eligible Directors shall not transfer, pledge as collateral, or otherwise dispose of the shares, during the period from the date of the issuance of the restricted stock until the date when an eligible Director retires or resigns as the Company’s Director or other position determined by the Board of Directors. The specific timing of provision and distribution to each eligible Director shall be determined by the Board of Directors.

(2) Total amount of Monetary Remuneration It shall be not more than 150 million yen per year, within the scope of 600 million yen per year in total including monthly

remuneration as remuneration for Directors resolved at the 216th Annual General Meeting of Shareholders held on June 27, 2019.

(3) Total number of shares of common stock to be issued or disposed of Not more than 100,000 shares per year

2. Transfer of assets and otherAt the meeting of the Board of Directors held on July 31, 2020, the Company resolved to enter into compensation agreements in line with a transfer of assets and other related agreements. The agreements were concluded on August 12, 2020.

1. Reasons for the transferTo cooperate with the Linear Chuo Shinkansen Project promoted by Central Japan Railway Company, the decision was made to transfer the following assets held by the Company.

2. Details of the assets to be transferred

Name and address of asset Gain on transfer Current status

Land: 2,260.57 m²(3-1616 Meieki, Nakamura-ku,

Nagoya, etc.)Approximately ¥36,600 million

Owned for the real estate leasing business and for the Company’s offices

Notes:1. The book value and the transfer price will not be disclosed due to the confidentiality obligations to the transferee. The transfer

price includes the price for the sale of the land and compensations for the relocation of buildings on the land and others.2. The gain on transfer is an estimated amount calculated by deducting book value and various expenses from the transfer price.

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3. Overview of the transferee (1) Name Central Japan Railway Company (2) Address 1-1-4 Meieki, Nakamura-ku, Nagoya, Aichi (3) Title and name of representative Representative Director & President, Shin Kaneko (4) Business Railway business, related businesses (5) Capital ¥112.0 billion (6) Date of establishment April 1, 1987 (7) Net assets ¥3,872.1 billion (consolidated) (8) Total assets ¥9,603.1 billion (consolidated) (9) Major shareholder and shareholding ratio The Master Trust Bank of Japan, Ltd. (trust account), 6.39% (10)Relationship between the Company and the transferee company There is no significant capital, personnel, or business

relationship between the transferee and the Company.

4. Transfer schedule (1) Date of resolution by the Board of Directors July 31, 2020 (2) Execution date of the agreement August 12, 2020 (3) Delivery date (under registration) To be determined upon consultation with the transferee, with

a deadline of August 31, 2020

5. Impact of the event on consolidated incomeAs a result of this event, we expect to record extraordinary income of approximately ¥36,600 million in the consolidated financial results for the second quarter of the fiscal year ending March 31, 2021.

3. Purchase of Treasury SharesAt the meeting of the Board of Directors held on July 31, 2020, 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 of treasury shares In accordance with the policy of returning profits to shareholders in the 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 5,000,000 shares (maximum) (Ratio to the total number of issued shares (excluding

treasury shares): 5.8%) (3) Total purchase price of shares ¥10,000 million (maximum) (4) Purchase period August 3, 2020 - March 31, 2021 (5) Purchase method Market purchase on the Tokyo Stock Exchange


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Company Profile (As of March 31, 2020)

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 952 people (parent only; not including 107 people on leave and seconded outside of the Company. There are also 156 temporary employees and 638 seconded and contracted employees from outside the Company.)

4,625 people (on a consolidated basis; not including 40 people on leave and seconded outside of the Group. There are also 1,298 temporary employees and 1,266 seconded and contracted employees from outside the Group.)

Stock Exchange Listing First Section of the Tokyo Stock Exchange

Securities Code 9301

Major ShareholdersShareholder name Number of shares (Thousands) Shareholding ratio (%)The Master Trust Bank of Japan, Ltd. (trust account) 11,376 13.2Japan Trustee Services Bank, Ltd. (trust account) 5,997 7.0Meiji Yasuda Life Insurance Company 5,153 6.0MITSUBISHI ESTATE CO., LTD. 3,665 4.3Kirin Holdings Company, Limited 2,224 2.6Tokio Marine & Nichido Fire Insurance Co., Ltd. 2,041 2.4State Street Bank and Trust Company 505001 2,025 2.4MUFG Bank, Ltd. 1,864 2.2AGC Inc. 1,657 1.9TAKENAKA CORPORATION 1,505 1.8Notes: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 holds 2,017 thousand shares as treasury shares, which were excluded from the above list of major shareholders. 3. The Company’s treasury shares were excluded in the calculation of the percentage of shares held.

Directors and Corporate Auditors (As of June 26, 2020)Position Name Responsibilities and/or Primary Occupation

President * Masao FujikuraManaging Director Yoshiji Ohara Responsible for Harbor Transportation BusinessManaging Director Hitoshi Wakabayashi Responsible for Warehousing & Distribution BusinessManaging Director Yasushi Saito Responsible for Accounting & Financing and Information SystemManaging Director Shinji Kimura Responsible for Planning, Technical and Real Estate Business, General Manager, Technical DivisionManaging 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 Tatsuo Wakabayashi Senior Advisor, Mitsubishi UFJ Trust and Banking CorporationDirector Toshifumi Kitazawa Vice Chairman of the Board, Tokio Marine & Nichido Fire Insurance Co., Ltd.Director Tadaaki Naito Chairman, Director, Chairman Corporate Officer, Nippon Yusen Kabushiki KaishaDirector Tatsushi Nakashima General Manager, Yokohama BranchDirector Akira Yamao General Manager, Osaka BranchDirector Akio Miura General Manager, Nagoya BranchDirector Masanori Maekawa General Manager, General Affairs Division, Corporate Communications ChamberStanding Corporate Auditor (full time) Tohru WatanabeCorporate Auditor (full time) Mikine HasegawaCorporate Auditor Yohnosuke Yamada LawyerCorporate Auditor Takao Sato Certified Public AccountantCorporate Auditor Junya Miura

Notes:1. Directors with an asterisk (*) are Representative Directors.2. Of Directors, Mr. Tatsuo Wakabayashi, Mr. Toshifumi Kitazawa and Mr. Tadaaki Naito 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. Takao Sato 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.

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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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MEMO

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ANNUAL REPORT 2020Year ended March 31, 2020

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

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Documents

MLC ANNUAL REPORT 2020 - Mitsubishi Logistics