Yusen Air & Sea Service Co., Ltd. Financial Highlights Yusen Air & Sea Service Co., Ltd., and...

1Yusen Air & Sea Service Annual Report 2010

Yusen Air & Sea Service Co., Ltd.Annual Report 2010

YAS PROFILE AND HISTORY

as an agency to handle general travel and air freight services

Establishedto become a member of the NYK Group and start as “YAS”

Changed corporate nameby focusing only on forwarding by acquiring the licence of international air freight forwarder

Became specialized in forwardingand moved to the Tokyo Stock Exchange First Section on the Company’s 50th anniversary in 2005

Listed

1955 1959 1984 1996

0

50,000

100,000

150,000

200,000

250,000

300,000 Net Sales

1960 1965 1970 1975 1980 1985 19901955 1995

(Millions of Yen)

ConsolidatedNon-Consolidated

AIMING FOR INTEActing as an agent to handle necessary procedures and ensure space in aircraft or vessels for freight

transportation.

Yusen Air & Sea Service (YAS) was a pioneer in this business of being a “forwarder” in Japan.

Our history up to the present is a series of challenges and evolution, based on our mission of

transporting customers’ precious items with great care and thereby supporting the world’s industrial

development.

Now, in 2010, we will take on the new challenge of becoming integrated with Nippon Yusen Kabushiki

Kaisha (NYK)'s logistics business, in order to take a big stride forward toward functioning as a total logistics

provider with a solid global presence.

GRATION!

by integrating with NYK logistics businessEvolving to a total logistics provider2010

20012000 2002 2003 2004 2005 2006 2007 2008 2009 2010 20140

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

(Millions of Yen)

2014 ( target)

¥500,000mill ion

All statements contained in this Annual Report other than statements of historical facts are forward-looking statements that

refl ect plans and expectations, based on information available to management as of the date of this Report. These forward-

looking statements involve known and unknown risks, uncertainties and other facts that may cause the Company’s actual

results, performance or achievements to differ materially from stated goals and objectives. The Company undertakes no

obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

Forward-Looking Statements

Consolidated Financial Highlights 2

An Interview with the President 3

Corporate Governance 8

Board of Directors, Corporate Auditors

and Executive Offi cers 10

Financial Section 11

Contents

stics business

By establishing two main business pillars –

freight forwarding (air/ocean) and contract

logistics, Yusen Logistics Co., Ltd. will meet

the needs of global customers for optimized

logistics and provide tailor-made solutions.

YAS Yusen Logistics

NYK Logistics

Forwarding (ocean)

Contract Logistics

Forwarding (air/ocean)

Contract LogisticsForwarding (air/ocean)

Contract Logistics


Consolidated Financial HighlightsYusen Air & Sea Service Co., Ltd., and Consolidated Subsidiaries

Years Ended March 31

Millions of YenThousands of

U.S. Dollars (Note)

Results of Operations 2008 2009 2010 2010Net sales ¥ 187,518 ¥ 167,460 ¥ 123,453 $1,326,879

Operating income 10,216 4,574 2,310 24,833

Net income 7,271 1,083 1,545 16,603

Financial Position

Total assets ¥ 98,366 ¥ 75,733 ¥ 81,443 $ 875,349

Total equity 59,614 51,249 53,663 576,775

Per Share Data Yen U.S. Dollars (Note)

Net income ¥ 172.43 ¥ 25.68 ¥ 36.63 $ 0.394

Net assets 1,368.84 1,173.84 1,225.21 13.169

Dividends 20.00 18.00 16.00 0.172

Key Ratios

Return on equity (ROE) (%) 13.4 2.0 3.1 —

Return on assets (ROA) (%) 7.7 1.2 2.0 —

Equity ratio (%) 58.7 65.4 63.4 —

Number of employees 5,065 5,326 5,252 —

Note: The United States dollar amounts represent translations of Japanese yen amounts at the rate of ¥93.04 = US$1. See Note 1 to the consolidated fi nancial statements on page 23.

Total Assets (Millions of Yen)

100,000

0

20,000

40,000

60,000

80,000

2006 2007 2008 2009 2010

Free Cash Flows (Millions of Yen)

8,000

6,000

4,000

2,000

0

(2,000)2006 2007 2008 2009 2010

20

15

10

5

02006 2007 2008 2009 2010

ROE/ROA (%) ROE ROA

0

50,000

100,000

150,000

200,000

2006 2007 2008 2009 2010

Operating Income (Millions of Yen)

0

4,000

8,000

12,000

2006 2007 2008 2009 2010

Net Income (Millions of Yen)

02006 2007 2008 2009 2010

2,000

4,000

6,000

8,000

Net Sales (Millions of Yen)

2 Yusen Air & Sea Service Annual Report 2010

An Interview with the President

With our planned integration with NYK logistics

business from October 2010, we are excited

to become bigger in size with well-balanced

business portfolio and network reach, as a global

provider of optimal logistics services.

Quarterly Sales and Income

FY08/1Q 2Q 3Q 4Q FY09/1Q 2Q 3Q 4Q

Quarterly Export and Import (Sum of Japan and Overseas)

100,000

Export(Tons)

0

20,000

40,000

60,000

80,000

86,843 83,67773,357

54,813 52,19562,939

80,56986,094

FY08/1Q 2Q 3Q 4Q FY09/1Q 2Q 3Q 4Q

300,000

Import(Number of Custom Clearances)

0

100,000

50,000

150,000

200,000

250,000254,407 260,464 252,574

214,739175,931

208,691238,305

262,289

FY08/1Q 2Q 3Q 4Q FY09/1Q 2Q 3Q 4Q

50,000

Net Sales

0 (1,000)

10,000 0

20,000 1,000

30,000 2,000

40,000 3,000

4,00046,840 46,006 43,986

30,62824,230

28,04034,596 36,587

1,9711,476

1,167

(40)

Operating Income

(428)

553

1,374811

(428)

(Millions of Yen)

We recorded a signifi cant decline in sales and income, mainly due to

the worldwide recession that began in the fall of 2008. However, we

believe that the worst is already behind us.

In fact we recovered to the extent of generating profits by

the second quarter of fi scal 2009, on the back of a recovery trend

in freight volumes particularly in Asia and thanks to the effects

of reduction in fixed costs, after we launched an “urgent project

to improve balances”. Under this project, we implemented cost-

cutting measures for every type of expense item, with the exception

of investment in education and training. We accomplished a

reduction in fixed costs of about ¥3 billion worldwide. Specific

measures included reorganization of personnel and consolidation of

warehouses and business sites.

Thanks to such Group-wide efforts, an earnings recovery

in fiscal 2010 is in sight. Moreover, as we have not cut back our

investments in human resources, which are the key to our future,

we believe that we will return to a growth track once the external

environment stabilizes.

Q1 How would you assess your business

results for fi scal 2009, the year ended

March 31, 2010?

Shunichi YanoPresident



medical equipment, and pharmaceuticals. Such growth areas are

expected to start contributing to our earnings even in next year.

Under the Organizational Strategy, we launched the YAS

Professional College in the Company in April 2009. This is our own

educational program, aimed at developing professional capabilities

in logistics. There is no doubt that human resources are the essential

asset in the forwarding business. We will continue our investment

in human resources even under conditions of a harsh business

environment.

Regarding the Basic Management Strategy, we began

preparation for unifying the fiscal years of domestic and overseas

subsidiaries* from fi scal 2010. This unifi cation will allow us to grasp

operating conditions more quickly and improve transparency for

shareholders and investors. We are also making progress for full

implementation of “YUNAS”**, the next-generation core operating

system, and better dealing with the Japanese version of the

Sarbanes-Oxley Act (J-SOX), as planned.

* Excluding subsidiaries in China which are strictly restricted by the

country’s laws and regulations

** “YUNAS” stands for Yusen Navigation System

As we could not avoid the recent dramatic economic recession,

we are still facing some challenges in terms of numerical targets.

However, we have steadily taken measures for our three sets of

strategies and have enhanced our areas of competence that are

indispensable for our long-term growth.

The heart of the Sales Strategy is improvement of service

quality. We are confi dent that progress has been made, proven by

higher customer satisfaction with results of a number of research

undertakings. I myself became the head of the Global HQ of Total

Logistics Sales & Marketing Bureau, and am leading efforts to

enhance our overall sales capabilities and help our sales to grow.

Our marketing efforts are focused on growth areas which include

environment-related solar cells and electric cars, aircraft components,

YAS FIVE-STAR PROJECT

Sales Strategy

> Aim for an “extremely” high quality of service

> Introduction of the next core system “YUNAS”

> Strengthening of marketing for each item

> Strengthening of overall business capability and increasing sales as a TOTAL LOGISTICS PROVIDER

Organizational Strategy

> Securing competent personnel in preparation for the future

> The re-assignment of personnel in line with changes in the business environments

> Further improvement in education and training using the new “YAS Professional College”

Basic Management Strategy

> Strengthening of risk management, compliance, corporate governance and internal control

> Work on environmental problems and social contribution

> Unifi cation of the accounting term (closing date) of foreign subsidiaries

YAS Professional College’s brochure

Environmental promotion poster

Q2 Will you discuss progress of the YAS

FIVE-STAR PROJECT, your medium-term

business plan to be completed by fi scal

2010?


The NYK Group has had two logistics businesses: one is operated

by NYK under the brand ‘‘NYK Logistics” and another is that of our

company, YAS. Both companies have expanded in the same logistics

industry, but with different business models. YAS’s main focus has

been air freight forwarding, while NYK Logistics is mainly engaged

in contract logistics* and ocean freight forwarding. Up to now, the

two companies have grown more or less separately but recently

have begun to face increasingly diverse needs of their customers.

Responding to such change, both companies have aimed to expand

their business domain and become a total logistics provider. We

have become convinced that in order to accelerate this evolution in

an assured and effi cient manner, integration of both companies will

be the most effective way.

NYK Logistics and YAS can complement each other in terms

of business areas as well as regions. We intend to integrate both

businesses organically, have air/ocean freight forwarding and

contract logistics as a matched pair of activity areas, and establish

an organization as an integrated logistics solution provider. We will

combine our businesses so that we can respond to all logistics needs

at all regions.

Upon integration, the Company will change its corporate name

to Yusen Logistics Co., Ltd. on October 1, 2010.

* Contract logistics: Contracted services of distribution operations, such as

inventory control, transportation/distribution control, and order receipt/

placement management, based on a contract with a customer.

Q3 Please explain about the objectives of

integration with NYK logistics business.

Air

Ocean

Land transport, domestic

Land transport, international

Contract logistics

Other

Sales by Business Segment

Japan

Americas

Europe

East Asia

South Asia/Oceania

Sales by Geographical Segment

YAS* Yusen Logistics

390,038 2,339,776**

248 431**

1,577 1,800**Number of Employees(Japan)

Number of Bases

3,675 13,200**Number of Employees(Overseas)

Warehouse Area (square meters)

*As of March 31, 2010**Rough estimates

(on a simple combined basis)

(on a simple combined basis)

Balanced Sales by Business and Geographical Segment

The New Integrated Company’s Image



The new integrated company, Yusen Logistics, will have a well-

balanced business portfolio. By business segment, the present YAS

generates 70% of sales from air freight forwarding but the new

company will have roughly a quarter of its business from each of

air, ocean, land transport, and contract logistics. By geographical

segment, the higher representation of the Americas and Europe will

result in a better balance among five regions, namely Japan, the

Americas, Europe, East Asia, and South Asia/Oceania. This sort of

balanced geographic profi le will make Yusen Logistics unique among

the many international logistics peers in Japan and overseas.

The new company will also have more facilities and larger

warehouse space particularly in Europe and the Americas. The

number of employees will also increase significantly particularly

overseas. After the integration, we will optimize our organization

but will undoubtedly become bigger in size and network reach.

By making a big leap in improving quality and size, Yusen

Logistics will respond to every need in every region and satisfy

customers’ requests for global optimal logistics services. Yusen

Logistics will be able to jump-start to expand the customer base

and deepen relationships with those companies. For example, the

new company will offer ocean freight forwarding services and land

transportation services to YAS’s customers who previously asked only

for air freight forwarding. Conversely, NYK’s customers in ocean/

land services will receive offers for air freight forwarding services.

Furthermore, we plan to develop new customers by making optimal

logistics proposals.

We believe that preserving the spirit of a combination of equals is

important to assure successful integration. As the fi rst move, on or

around October 1, 2010, YAS will purchase logistics business of NYK

Logistics (Japan) through a business transfer with cash consideration

and change its corporate name to what is expected to be named

Yusen Logistics Co., Ltd. YAS will be a surviving company and

remain to be a listed subsidiary of NYK. Masahiko Fukatsu, current

president of NYK Logistics (Japan), and I, current president of YAS,

will be appointed to be representative directors of Yusen Logistics.

I will also serve as president of new company.

Overseas logistics businesses of YAS and NYK will be integrated

from April 2011 to March 2012, Overseas integration is expected

to take more time than the domestic one, as the process includes

confi rmation of legal and tax systems of each country, valuation of

corporations, and negotiations with joint venture partners.

Japan

Overseas

From February 2010 October 2010 April 2011 March 2012

YAS

NYK Logistics (Japan)

Completion of Integration

(October 1) The new integrated company starts operation.

Preparation for integration

Phase-in of a new organization

Integration Schedule

As of June 30, 2010

May 2010Signing of Integration Agreement

Q4 How will YAS change after the integration?

Q5 What are the method of integration and

the schedule?


We decided to go ahead with the business integration as we believe

that it will enhance our corporate value as well as shareholder

value. By promptly realizing integration benefits and establishing

a balanced business portfolio, we intend to expand the scale

of business, become more global, and strengthen our cost

competitiveness, as we firmly believe our ultimate mission is to

enhance growth potential and profi tability.

NYK logistics business is big in terms of asset size, while its

present capital efficiency may appear lower than that of YAS.

However, this was partly caused by NYK logistics business’ high

depreciation burden. On the other hand, NYK Logistics business’cash

flow looks not bad. In fact, their earnings before interest, tax,

depreciation and amortization (EBITDA) are at a similar level to that

of YAS.

We anticipate that the integration of YAS and NYK logistics

business will create some synergies. Our plan is to generate

additional ¥70 billion in net sales from sales promotion through the

creation of new demand. Integration impact on ordinary income

is estimated to be ¥8 billion, which comprises of ¥5 billion from

sales gains and ¥3 billion from cost synergies resulting from facility

Q6 The integration news has so far been received

positively but how will the integration affect

YAS’s high capital effi ciency? Will you also

elaborate on the impact of integration from

the perspective of corporate value?

integration and economies of scale. By incorporating improvement

potential in the external environment on top of such expected

benefi ts, our fi nancial targets for fi scal 2013 are ¥500 billion in net

sales and ¥18 billion in ordinary income.

We, the YAS Group, are striving hard to make a solid recovery in

earnings, return to growth path, and have a sound launch of Yusen

Logistics.

We recognize that returning profi ts to shareholders is the top

management priority issue. We are committed to stable dividend

payment, with due consideration of investment for growth in future

business development and anticipated change in fi nancial conditions

after integration. Our per-share dividend was ¥16 in fi scal 2009, ¥2

less than in the previous year, but is planned to increase that to ¥18

in fi scal 2010, with anticipated recovery in earnings.

The international logistics business is expected to continue

developing in line with progress in globalization and innovation

of industries and products. Our business is in an area of growth

potential. We will become more capable to capture such growth

opportunities as our new integrated company will become stronger

with a better business portfolio and an enhanced global presence.

I sincerely hope that our shareholders and investors share our

enthusiasm and expectation for future growth for many years to

come.

Q7 Do you have any message to shareholders

and investors?

2006 2007 2008 2009 2010 2014

Business Results and Projections (Billions of yen)

0

100

200

300

400

500

0

5

10

15

20

25

Ordinary income Net Sales

Estimated Integration Impact

Creation of new demand

Income growth from business

Increase in grow profit from sales gains ¥5 billion

Cost synergies from facility integration, etc. ¥3 billion( )

* Ordinary income is calculated by adding to or subtracting from operating income items such as interest

income or expenses, foreign exchange gains or losses, dividend income, securities sales gains, losses,

or evaluation losses. Ordinary income is the Company’s important post-integration income indicator, in

addition to operating income. 7Yusen Air & Sea Service Annual Report 2010

Basic Stance and Initiatives on Corporate GovernanceYAS (the Company) seeks to maintain its standing as a good corporate citizen with the heartfelt trust of all stakeholders and their constant support. Toward this end, the Company upholds a high moral standard in executing its business activities—global logistics services—and strives to engage in dependable and fair business practices in compliance with prevailing laws and within accepted social parameters.

Corporate Governance StructureOutline of Corporate Governance Structure and Reasons for its AdoptionThe Board of Directors, which is the Company’s decision-making body, consists of eight directors* who are engaged in determination of legal matters, setting of significant management policies and strategies, and surveillance of the execution of operations, among other functions. The Company has also adopted the Executive Offi cer System with the aim of accelerating decision making in the execution of operations. At present, the Board of Executive Officers, comprised of 17 executive officers, executes operations under the authority and direction of the Board of Directors.

In addition, the Board of Corporate Auditors consists of four auditors, two of which are from outside the Company, and whose assignment is to audit the execution of duties of the Board of Directors and the Board of Executive Offi cers from an objective and neutral perspective.

* Masahiko Fukatsu, who was appointed as Director the General Meeting of Shareholders held on June 29, 2010, will assume position as such on October 1, 2010.

Status of the Internal Control SystemThe Company carries out effi cient compliance promotion, risk management and internal audits to ensure that its internal control system functions effectively.

Compliance

The Company established a Code of Conduct in May 2005 to ensure that each YAS Group employee carries out and accomplishes corporate activities and routine work in accordance with corporate ethical guidelines and social morals, as well as by observing laws and regulations. The Company also distributed the Group Compliance Manual group-wide (domestically in March 2006 and overseas in March 2008). All Group executives and employees have since adhered to its guidelines in their daily activities.

As an internal compliance system, the Compliance Committee, chaired by the President, the position of Chief Compliance Offi cer (CCO) and the CSR/Risk Management Chamber have been established. Moreover, 62 employees of YAS and its Group companies have been assigned as CSR Leaders to promote compliance within their workplaces.

Risk Management SystemThe Company has established the CSR/Risk Management Chamber as a dedicated unit to consistently monitor, analyze and assesse major risks that could potentially affect the Company’s management and corporate operations, and implement appropriate countermeasures. Individual divisions manage risks relating to their specific areas of activity in cooperation with the CSR/Risk Management Chamber, and in accordance with internal regulations. The CSR/Risk Management Chamber reports to the Compliance Committee, which is chaired by the President, and to the Disaster Risk Management Meeting.

Internal Audits, Corporate Audits and Accounting AuditsThe Company has established the Internal Audit Chamber, staffed by four employees, to undertake regular internal audits of the Group. The corporate audits are conducted by four auditors including two external auditors, in accordance with the auditing plan established by the Board of Auditors. Taizo Taguchi, a full-time auditor, had held positions of the head of South Asia & Oceania Region as well as Chairman of Yusen Air & Sea Service (Deutschland) GmbH, while Motonobu Kobayashi, another full-time auditor, have long accumulated experience and knowledge of logistics business management as executive managing director of NYK Logistics (Japan) Co., Ltd. The two external directors have knowledge and understanding of accounting and finances: Tsuguo Yamada by having served as General Manager of Group Accounting Group of NYK and the President of NYK Accounting Co., Ltd.; and Rikuichi Yoshisue through his long experience and performance in fi nancial institutions.

At the beginning of each fi scal year, the Company’s corporate auditors hear from the accounting auditor’s representatives regarding their auditing plan for the year, and at the year-end, they receive their reports on the audit results and confi rm the methods used.

They also hear from the Internal Audit Chamber regarding its auditing plan and receive regular updates on auditing results. The certifi ed public accountants, who execute accounting audits of the Company, are Takashi Nagata, Michiharu Matsuda, and Tomoyasu Maruyama, all from Deloitte Touche Tohmatsu. They are assisted in their accounting operations by three additional certifi ed public accountants and nine assistants.

External Directors and External AuditorsAmong two external auditors, Tsuguo Yamada is an advisor of Nippon Yusen Kabushiki Kaisha (NYK) and an auditor of Yusen Real Estate Corporation, while Rikuichi Yoshisue is a corporate auditor for Bellrock Media Japan Inc. and Sedona Capital, Inc.

The Company maintains a cooperative relationship in all logistics services with NYK, the Company’s principal shareholder, but has little business transactions with it. With regard to real estate transactions, the Company’s business relations with Yusen Real Estate are determined through negotiations between both companies, with due consideration given to the local market. No business transactions take place between YAS and Bellrock Media or Sedona Capital, and neither of our external auditors has any particular interest in the Company.

External Auditors attend the Board of Directors and the Board of Corporate Auditors and contribute to the meetings from an independent perspective and with insights and views accumulated from a great deal of experience. The Company believes that the Board of Directors is ensured to make objective and neutral decisions by reflecting views of External Auditors in its auditing and using their independent external perspectives in managing the Company.

While the Company has not appointed an External Director for this year, the monitoring capability toward the Board of Directors, which is a management decision-making body and has a function of authority and direction regarding Executive Offi cers’ execution of duties, has been enhanced by having two external auditors among the four auditors. The current structure satisfies the function of external objective and neutral management surveillance, which the Company believes is an important element of corporate governance.

Corporate Governance


Instructions

General Meeting of Shareholders

Direction, supervision

Appointment, dismissal Appointment, dismissal Appointment, dismissal

Appointment,dismissal

Appointment,dismissal, supervision

ReportsEstablishment, dissolution

Audits

Audits

Audits

Cooperation

Opinionexchange

Reports

ReportsReportsReports

Instructions

Instructions CooperationReports

Instructions Direction, supervisionReports

Board of Directors*Eight directors

(make business decisions)

Board of Corporate AuditorsFour auditors, two of whom are

external auditors

RepresentativeDirectors

AccountingAuditor

Internal Audit Chamber(internal auditing department)

Board of Executive Officers17 executive officers (execute operations)

PersonalInformationProtectionCommittee

ComplianceCommittee

Head Office (departments and offices)

Branch Structure (sales division, departments, branches)

(2) Total amount of consolidated remuneration for directors with remuneration of ¥100 million and more: Not applicable.

(3) Significant employee compensation for employee-directors: Not applicable

(4) The amount of remuneration, bonuses and any other proprietary benefi ts to be granted to Directors by the Company in consideration of their performance of duty (hereinafter referred to as ‘‘remuneration, etc.”) shall be determined by a resolution of a General Meeting of Shareholders.

The total amount of Directors’ remuneration,etc is limited to ¥300 million per year according to the resolution passed at the 53rd Annual Meeting of Shareholders held on June 28, 2007.

The total amount of Auditors’ remuneration,etc is limited to ¥80 million per year according to the resolution passed at the 53rd Annual Meeting of Shareholders held on June 28, 2007.

Number of DirectorsThe number of directors of the Company is stipulated at 20 or less, according to the Articles of Incorporation.

Requirements for Resolutions Concerning the Election of

DirectorsResolutions to appoint directors must be approved by a majority of the votes represented by shareholders at meetings in which at least one-third of the shareholders eligible to exercise voting rights are in attendance. Under the Articles of Incorporation, no cumulative voting shall be allowed for the election of directors.

Remuneration Paid for Audit Certifi cation Services, etc.

Other Important Details on Remuneration(Fiscal 2008)Fourteen consolidated subsidiaries of YAS have paid ¥100 million for audit certification services and ¥25 million for non-audit services to Deloitte Touche Tohmatsu member fi rms, which belong to the same network as the certifi ed public accountants that conduct audits for YAS.

(Fiscal 2009)Thirteen consolidated subsidiaries of YAS have paid ¥83 million for audit certification services and ¥17 million for non-audit services to Deloitte Touche Tohmatsu member fi rms, which belong to the same network as the certifi ed public accountants that conduct audits for YAS.

Non-Audit Services Provided by Certified Public Accountants,

etc. to YAS(Fiscal 2008)The non-audit services provided by certifi ed public accountants, to which the Company paid remuneration, consisted of advice and guidance concerning the establishment of internal control systems relating to fi nancial reporting.

(Fiscal 2009) Not applicable.

Policy on Determining Audit Remuneration, etcThere is no specifi c policy. Remuneration is determined according to the days spent on the audit, the size or the company and the characteristics of its activities, and other factors.

Category

Fiscal 2008 Fiscal 2009

Payments foraudit certifi cation

services(Millions of Yen)

Payments fornon-auditservices

(Millions of Yen)

Payments foraudit certifi cation

services(Millions of Yen)

Payments fornon-auditservices

(Millions of Yen)

The Company ¥ 56 ¥ 18 ¥ 56 ¥ —

Consolidated subsidiaries

8 — 4 —

Total ¥64 ¥18 ¥60 ¥—

Category Amount paid(Millions of Yen)

Types of remuneration (Millions of Yen)Number of recipients

Basic salary Bonus Retirement benefi ts

Directors (excl. external directors) ¥ 167 ¥ 120 ¥ 12 ¥ 35 ¥ 8

Auditors (excl. external auditors) 38 31 — 7 2

External directors and auditors 12 12 — — 3

Total ¥217 ¥163 ¥12 ¥42 ¥13

(1) Details of remuneration

*The number of directors will be nine from October 1, 2010.

(As of June 30, 2010)


Board of Directors, Corporate Auditors and Executive Offi cers

Board of Directors

ShunichiYano*

President

HiromitsuKuramoto

Director, Executive Vice President

MasakiTanaka

Director, Senior Managing Executive Officer

MasahiroOmori

Director, Managing Executive Officer

HiroyukiYasukawa

Director, Managing Executive Officer

TakaoTakano

Director,Executive Officer

KazuoKato


ShojiMurakami


Corporate Auditors

TaizoTaguchi

Auditor

MotonobuKobayashi

Auditor

RikuichiYoshisue

External Auditor

TsuguoYamada

External Auditor

Executive Offi cers

ShizuoKikuyama

Executive Officer

KazuyoshiIwahazama

Executive Officer

TakashiIsobe

Executive Officer

KunioFujii

Executive Officer

ShotaroOmura

Executive Officer

TatsuoAoyagi

Executive Officer

ToshioMaekawa

Executive Officer

KenichiKotoku

Executive Officer

ToshiyukiKimura

Executive Officer

MasahikoFukatsu**

Director

**Term as director begins October 1, 2010.

*Representative Director


F I N A N C I A L S E C T I O N

Consolidated Six-Year Summary 12

Management’s Discussion and Analysis 13

Consolidated Balance Sheets 18

Consolidated Statements of Income 20

Consolidated Statements of Changes in Equity 21

Consolidated Statements of Cash Flows 22

Notes to Consolidated Financial Statements 23

Independent Auditors’ Report 38

Principal Group Companies 39

Corporate History 40

Shareholders’ Information 41

Financial Section Contents

Yusen Air & Sea Service Co., Ltd., and Consolidated Subsidiaries

Years Ended March 31

Consolidated Six-Year Summary

Millions of Yen

Results of Operations 2010 2009 2008 2007 2006 2005Net sales ¥123,453 ¥167,460 ¥187,518 ¥182,617 ¥168,454 ¥148,263Cost of sales 92,127 128,663 141,736 138,278 127,321 109,255Gross profi t 31,326 38,797 45,782 44,339 41,133 39,008Selling, general and administrative expenses 29,016 34,223 35,566 33,901 30,698 28,600Operating income 2,310 4,574 10,216 10,438 10,435 10,408Income before income taxes and minority interests 3,004 2,859 12,178 11,514 11,197 10,828Net income 1,545 1,083 7,271 6,722 7,006 6,797

Sales by Geographic Region

Japan ¥ 61,227 ¥ 72,337 ¥ 87,355 ¥ 82,757 ¥ 86,517 ¥ 84,249North America 10,782 16,696 17,758 17,364 16,813 12,470Europe 11,888 20,564 21,417 19,236 15,674 15,261East Asia 22,315 33,079 35,185 39,080 34,192 24,262South Asia and Oceania 19,332 26,958 28,520 26,915 17,786 14,131Intersegment sales/transfers 2,091 2,174 2,717 2,735 2,528 2,110Net sales 123,453 167,460 187,518 182,617 168,454 148,263

Consolidated to non-consolidated ratio (times) 2.21 2.57 2.38 2.46 2.16 1.93

Key Ratios %

Gross profi t to net sales 25.4 23.2 24.4 24.3 24.4 26.3Operating income to net sales 1.9 2.7 5.4 5.7 6.2 7.0Cost of sales to net sales 74.6 76.8 75.6 75.7 75.6 73.7Selling, general and administrative expenses to net sales 23.5 20.4 19.0 18.6 18.2 19.3Net income to net sales 1.3 0.6 3.9 3.7 4.2 4.6Return on equity (ROE) 3.1 2.0 13.4 14.1 17.5 20.8Return on assets (ROA) 2.0 1.2 7.7 7.7 8.7 9.6Asset turnover (times) 1.6 1.9 2.0 2.1 2.1 2.1Equity ratio (Note 3) 63.4 65.4 58.7 57.2 51.6 47.6

Financial Position

Current assets ¥ 52,690 ¥ 47,245 ¥ 66,558 ¥ 58,300 ¥ 54,883 ¥ 46,171Current liabilities 21,462 17,193 32,716 29,175 31,243 26,978Equity (Note 1) 51,668 49,501 57,725 51,191 44,138 35,894Total equity (Note 2) 53,663 51,249 59,614 52,551 — —Total assets 81,443 75,733 98,366 89,567 85,613 75,485Cash fl ows from operating activities 840 8,213 8,127 9,048 6,755 8,371Free cash fl ows (796) 4,394 5,255 6,139 4,859 3,235

Other Year-End Data

Number of shares outstanding (Note 4) 42,220,800 42,220,800 42,220,800 42,220,800 21,110,400 21,067,412

Per Share Data Yen

Net income — primary (Note 3) 36.63 25.68 172.43 159.46 327.48 317.17Net income — fully diluted — — — — — —Dividends (full year) (Note 3) 16.00 18.00 20.00 15.00 30.00 30.00Net assets (Note 3) 1,225.21 1,173.84 1,368.84 1,213.90 2,090.18 1,698.40

Notes: 1. Equity capital (¥51,668 million at 2010) = total equity - minority interests.

2. From the fi scal year ended March 31, 2007, total equity includes minority interests in accordance with the enforcement of Japan’s Corporate Law.

3. These fi gures do not include any adjustments for the execution of a 1.2-for-1 stock split in May 2004, and a 2-for-1 stock split in April 2006.

4. The above fi gures included treasury stock of 50,484 shares in 2007, 50,236 shares in 2008, 50,212 shares in 2009 and 50,296 shares in 2010. On April 1, 2006, the Company executed a 2-for-1 stock split.


Management’s Discussion and Analysis

As of March 31, 2010, the YAS Group comprised of Yusen Air & Sea Service Co., Ltd. (“YAS” or “the Company”), 35 consolidated subsidiaries, including Yusen Air & Sea Service (U.S.A.) Inc., Yusen Air & Sea Service (Deutschland) GmbH., Yusen Air & Sea Service (H.K.) Ltd., Yusen Air & Sea Service (Singapore) Pte. Ltd., as well as fi ve equity-method affi liates.

Yusen Air & Sea Service (Guangdong) Ltd. and Yusen Air & Sea Service (India) Pvt. Ltd. have been added to the scope of consolidation because of their increased importance, as of fi scal 2009 (ended March 31, 2010).

OverviewWith regard to the global economy in the fiscal year under review, following the worldwide recession triggered by the “Lehman Shock” in September 2008, the Asian economies, including China, were the fi rst to head toward a recovery from the start of the fi scal year. Then, from the third quarter onward, the U.S. economy also started to recover, as large-scale economic stimulus measures adopted by the U.S. government began to have an effect. In Europe, the pace of economic recovery varied from country to country, but conditions remained generally sluggish.

In contrast, the Japanese economy experienced a moderate recovery supported by a rebound in overseas demand, mainly in Asia, and the effect of economic countermeasures. Although the export environment, which was assisted by external demand in Asia, turned favorable, capital investment inclination among companies was weak, and consumer spending saw a weak recovery on concerns about the future employment and income environments. Japan consequently failed to achieve a full-fl edged economic recovery.

Against this backdrop, in the international air freight market, freight volumes bottomed out in the fi rst quarter, which subsequently led to a shortage in the supply of transportation space stemming from the revision of routes, a reduction in the number of fl ights, and downsizing in aircraft by airline companies. By the third quarter, procured air freight rates began to rise due to this shortage in the space supply.

In response to these substantial changes in the management environment, the Yusen Air & Sea Service Group (hereafter referred to as “the YAS Group” or “the Group”) made Groupwide efforts to cut fi xed costs and expand sales by launching an “urgent project to improve balances” at the start of 2009.

In fi scal 2009, consolidated net sales declined by 26.3% year on year to ¥123,453 million (US$1,327 million). Consolidated operating income was 49.5% lower at ¥2,310 million (US$25 million), while consolidated net income increased by 42.6% to ¥1,545 million (US$17 million).

Segment Performance by Business Type(Figures include intersegment transactions)

Cargo Freight BusinessDuring the year under review, freight volumes from Japan to Asia recovered in the case of electronic components, electronic equipment, and fl at-panel TV-related products while freight volumes also recovered in the case of exports from Asia to the U.S. and Europe and component transportation within the Asian region. Global freight volumes recovered steadily, as they were also supported by spot shipments of automotive components from Japan to Asia, Europe and the U.S. driven by economic stimulus measures adopted by governments in various countries.

Nevertheless, while air freight volumes showed a recovery, procured air freight rates on routes from Asia to the U.S. and Europe rose due to the imbalance caused by a shortage in the supply of transportation space stemming from the revision of routes, a reduction in the number of fl ights, and downsizing in aircraft by airline companies. Although ocean freight did not show as much recovery momentum as air freight, ocean transportation export and import freight volumes registered a moderate recovery mainly in Asia. In the warehousing and transportation and delivery logistics businesses as well, volumes recovered in proportion to the increase in export and import freight.

As a result, the cargo freight business posted total sales of ¥120,181 million (US$1,292 million), down 26.1% year on year, and operating income of ¥1,983 million (US$21 million), down 51.3%.

Travel BusinessThe volume of overseas business travel arrangements handled slumped due to weak demand for corporate business travel stemming from both cutbacks in business travel caused by stagnant corporate earnings and the impact of the H1N1 influenza virus. Although cruise sales showed a steady performance and, from the third quarter onward, corporate demand also rebounded, albeit only slightly, general travel demand was weak, refl ecting the stagnant trend in consumer sentiment. Moreover, a business environment persisted where the impact of the abolition of ticket commissions from airlines had a harsh impact.

Consequently, total sales were ¥3,160 million (US$34 million), down 31.6% year on year, and operating income amounted to ¥142 million (US$2 million), down 44.4%.

Other BusinessThe main businesses in this segment are staffi ng services, fi nancing and real estate leasing. Total sales reached ¥1,467 million (US$16 million), down 8.2% year on year, and operating income was ¥186 million (US$2 million), down 21.4%.

Note: Net income per share fi gures do not include

any adjustments for a 2-for-1 stock split in

April 2006.

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Segment Performance by Geographic Region(Figures include intersegment transactions)

JapanTotal sales declined by 15.4% from the previous year to ¥61,227 million (US$658 million), but operating income increased by 500.6% to ¥944 million (US$10 million).

Air-freighted exports emerged from an unprecedented slowdown in freight movements brought on by the worldwide downturn, and from the second quarter onward a recovery in freight movements began to appear in the case of electronic components and automotive components bound for Asia, primarily for China. Subsequently, as volumes of digital consumer electronic equipment-related freight handled by the Group showed an upward trend and spot shipments of automotive components to the U.S. and Europe also increased moderately, volumes handled during the year under review recovered by 6.3% year on year. In contrast, transportation space became tight from the third quarter mainly on U.S. and European routes due to a reduction in fl ights by airline companies and other factors, and a rise in procured air freight rates consequently materialized.

Handling of air-freighted imports was weak until the second quarter due to sluggish market conditions in Japan and the delayed recovery of the U.S. and European economies. From the third quarter onward, however, the number of shipments handled also showed a recovery trend, driven by emergency imports of automotive components as well as medical equipments and electronic components, but the number of shipments handled by the Group in the year under review declined by 5.3% year on year.

As regards ocean-freighted exports, the number of shipments handled fell below the previous year’s level, as the recovery was sluggish compared to air-freighted export cargo movements. However, handling of ocean-freighted imports recovered roughly to the previous year’s level, as products such as medical equipments and household cooking utensils recorded a solid performance.

In the travel services segment, demand for corporate business travel declined in response to the prolonged recession and the H1N1 infl uenza trend but then gradually swung to a recovery from the third quarter onward. In addition, cruise sales posted a strong performance from the start of the year.

North AmericaTotal sales in North America declined by 35.4% to ¥10,782 million (US$116 million), and the segment recorded an operating loss of ¥5 million (US$60 thousand).

Air-freighted exports were generally weak until the second quarter. In the third quarter as well, actual handling fell by 16% compared to the same quarter a year earlier. Shipments of automotive components and food-related products to Japan and other parts of Asia and handling of agricultural processed products for export to Europe gradually began to increase, and in the fourth quarter, exports of semiconductor production equipment-related products to ASEAN countries also staged a recovery.

Among air-freighted imports, the number of digital consumer electronic equipments, communications equipment and automotive component shipments handled from Asia recorded a strong upward trend from the start of the third quarter. In particular, emergency imports of automotive components from Japan and East Asia grew and supported a recovery in earnings.

In the case of ocean-freighted exports, freight volumes of automotive components to Asia and solar panels to Japan increased. Handling of ocean-freighted imports also grew gradually, as apparel shipments from Asia began to pick up from the third quarter.

Freight movements for automotive components and offi ce equipment-related products picked up steam from the start of the third quarter, but their momentum was limited and freight volumes did not recover fully. In the face of a harsh environment, we strove to expand sales and cut costs by making changes to our organizational structure and operating bases.

EuropeTotal sales from European operations declined 42.2% to ¥11,888 million (US$128 million), and the segment reported an operating loss of ¥472 million (US$5 million).

In air-freighted exports, shipments were sluggish over the full year, and from the start of the fourth quarter, which marked the arrival of the peak season leading up to Christmas, freight movements for automotive components and medical equipments bound for Japan and the ASEAN region picked up.

Refl ecting the downturn in the European economy, full-year freight volumes for air-freighted imports also fell 19% year on year. Signs of a recovery in freight conditions started to become apparent mainly in the case of emergency exports of automotive components in response to economic stimulus measures in European countries and digital consumer electronic equipment such as cameras and fl at-panel TVs in the Christmas season. However, the pace of recovery was slow and a full-scale recovery in freight movements failed to eventuate.

In ocean-freighted exports, handling of automotive components to Asia showed a recovery trend from the third quarter onward. In ocean-freighted imports, we handled mechanical components and equipment originating in Japan and other parts of Asia, but ocean freight rates rose

Net Sales by Geographic Region (%)

Japan

North America

Europe

East Asia

South Asia/Oceania

49.6%

8.7%8.7%9.6%

18.1%

15.7%

Japan Total Sales (Left) Operating Income (Right)

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and it was diffi cult to procure cargo space.In the logistics segment, demand recovered gradually in tandem with

a rebound in air and ocean transportation freight volumes, and we made efforts to further bolster sales.

The environment was challenging mainly in terms of the procurement of cargo space and rising procured air freight rates, but we endeavored to cut costs by improving operational efficiency and streamlining and reviewing our organizational structure.

East AsiaTotal sales in the East Asia region were 32.5% lower at ¥22,315 million (US$240 million), and operating income fell 61.0% to ¥651 million (US$7 million).

With regard to air-freighted exports, freight volumes for office equipments, fl at-panel TVs, and digital consumer electronic equipments increased. However, in the fourth quarter, which marked the Christmas season in the U.S. and Europe, robust freight movements to these regions were combined with a reduction in fl ights and contraction on European and U.S. routes by airline companies, which led to an imbalance in supply and demand.

As a result, conditions became temporarily tight and it was diffi cult to procure cargo space.

Air-freighted imports performed strongly thanks to an increase in interregional freight movements for electronic components as well as for mobile phones and digital equipment components from ASEAN countries. In the fourth quarter, in particular, handling of electronic components, semiconductor-related products, and fl at-panel TV-related products was favorable, refl ecting Christmas demand.

In the ocean freight segment, handling of imports and exports was robust mainly in the case of small motors, transportation machinery components, and fl at-panel TV-related products.

Freight volumes recovered to the level before the “Lehman shock” due to the support of East Asian economies. However, in the fourth quarter, when freight conditions were stimulated by the Christmas season in the U.S. and Europe, there was also a shortage of cargo space, which led to a very tough environment for the procurement of freight rates from airline companies. Consequently, we pursued more effi cient management through organizational and operational changes and carried out activities to reduce the cost of sales.

South Asia and OceaniaTotal sales in the South Asia and Oceania region decreased by 28.3% to ¥19,332 million (US$208 million) while operating income declined 17.8% to ¥1,198 million (US$13 million).

Air-freighted exports traced a steady recovery path, as freight volumes rose favorably month by month. Vigorous conditions prevailed thanks to strong freight movements for flat-panel TV-related products and electronic components for digital equipment bound for East Asia. From the start of the fourth quarter, component exports to emerging nations within the region also grew on the back of a recovery in demand for communications terminals and digital consumer electronics-related products. As it was diffi cult to secure cargo space on some routes due to the impact of a reduction in fl ights by airline companies, we made efforts to ensure the stable supply of cargo space to customers.

Air-freighted imports got on the recovery track due to an increase in the number of shipments handled mainly for semiconductor-related items and automotive components.

Although handling of air freight recovered slowly until the second quarter, from the third quarter onward, freight volumes were also buoyant and recovered to the level before the “Lehman Shock”, as in the case of the East Asian segment.

Ocean-freighted exports saw an increase in freight volumes, as there was a partial shift toward ocean transportation due to concerns about rising air freight rates and a shortage of cargo space. In the ocean-freighted imports category, automotive components and digital consumer electronics components and materials from China showed an uptrend.

Financial PositionAs of March 31, 2010, total assets amounted to ¥81,443 million (US$875 million), up ¥5,710 million or 7.5% year on year. While tangible fixed assets decreased by ¥1,211 million from a year ago, trade notes and accounts receivable increased by ¥6,159 million and other assets stated in the category of investments and other assets increased by ¥1,837 million.

Total liabilities were ¥27,780 million (US$299 million), up ¥3,296 million or 13.5% year on year. Major factors include an increase of ¥3,723 million in trade notes and accounts payable, which more than offset a decrease of ¥500 million in interest-bearing liabilities.

Total equity amounted to ¥53,663 million (US$577 million), mainly due to an increase in retained earnings and foreign currency translation adjustments. The equity ratio was 63.4%.

Cash FlowsCash and cash equivalents as of March 31, 2010 decreased by ¥1,456 million from a year ago to ¥16,740 million (US$180 million). Cash used in investing and fi nancing activities exceeded cash provided by operating activities.

Net cash provided by operating activities amounted to ¥840 million (US$9 million). This was mainly contributed by ¥3,004 million of income

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before income taxes and minority interests, depreciation and amortization of ¥1,743 million, and an increase in trade notes and accounts payable of ¥3,258 million, while an increase in trade notes and accounts receivable of ¥5,260 million, surcharge payment of ¥1,728 million, and income tax payment of ¥843 million reduced cash.

Net cash used in investing activities totaled ¥1,636 million (US$18 million). Placement in fi xed-term time deposits exceeded proceeds from matured time deposits by ¥888 million, while ¥986 million was used to purchase property, plant and equipment.

Net cash used in financing activities amounted to ¥1,367 million (US$15 million). This was mainly attributable to expenditures of ¥500 million for repayment of long-term debt and an outfl ow of ¥674 million for the payment of cash dividends.

Dividend Policy YAS recognizes the return of profits to shareholders as one of its top priorities. The Company’s basic policy is to offer a stable dividend within the limits set by business results, and to steadily raise shareholder returns while accurately gauging the stages of corporate growth and the eventual need for funds to fi nance future expansion.

YAS pays dividends twice a year – an interim dividend and a year-end dividend. The Company treats payments of year-end dividends as a matter at the General Meeting of Shareholders, while the Company’s Articles of Incorporation stipulate that “interim dividends can be distributed to shareholders of record as of September 30 each year pursuant to the resolution of the Board of Directors.”

Based on the above policy, we have decided to set the year-end dividend for fiscal 2009 at ¥8.00 per share. This will bring the annual dividend to ¥16.00 per share, including the ¥8.00 yen per share interim dividend paid on December 4, 2009.

Internal reserves will be used for enhancement of IT infrastructure, including YUNAS, our next-generation core operating system, and for continued improvement of quality and operating effi ciency. We see such capital spending as essential as we continue to work toward growth of our corporate value through careful investment.

Toward the planned integration with NYK’s logistics business in fi scal 2010, we intend to enhance convenience of our customers, expand sales, and strengthen cost competitiveness by bringing forward with efforts to realize business synergies, among other measures. We will make groupwide efforts for earnings recovery. We sincerely ask our shareholders for their continued support and understanding.

Business Risk Factors

1. General Business TrendsDemand for international air transportation services can be influenced by economic conditions of a specifi c country or region and, in particular, by those of Europe and the United States, which tend to greatly affect the status of the world economy. Indeed, air freight forwarding services are used predominantly for products and components intended for consumers, such as digital home appliances and IT-related goods. Business conditions of the importing countries could have an impact on demand for such services.

The YAS Group seeks to build an operating structure that facilitates stable growth, and therefore is working to boost transactions for products, such as medical equipment and pharmaceutical- and automotive-related items, which are relatively less susceptible to the changing economic conditions.

2. Fuel Price FluctuationsTypically, the fuel surcharge charged by airline companies in line with short-term fl uctuations in fuel prices is a fee that customers are required to pay on top of air freight. Consequently, a surcharge in and of itself should not have a material impact on the operating results or the fi nancial

conditions of the YAS Group. However, the Group’s profi tability may be temporarily impaired if and when conditions precipitate a sudden rise in the fuel surcharge.

3. Inherent in Global Business ExpansionThe Group’s business activities extend beyond Japan to other areas of Asia, as well as Oceania, the Middle East, Europe, and the Americas. Roughly half of the Group’s sales activities are conducted outside of Japan. Possible risks that could emerge as the Group works to expand its presence globally are:i. Political and economic factors,ii. Impacts of official rules and regulations, such as business and

investment permits, taxation, foreign exchange control, trade regulations, and travel regulations,

iii. Impacts from natural disasters, such as earthquakes, tsunami, typhoons, and hurricanes,

iv. Social unrest prompted by such events as war, international disputes, riots, terrorism, and strikes,

v. Globally pervasive economic disruption caused by sudden fl uctuations in exchange rates,

vi. An epidemic of a highly infectious disease with a high mortality rate, such as a new type of infl uenza.

When expanding to a new overseas location, we closely examine local political and economic conditions as well as its culture, customs, and public health situation, and strive to eliminate as effectively as possible whatever risks may exist.

Nevertheless, unexpected events do occur and the state of the world does change in ways that cannot always be fully anticipated. Such developments, which include advanced information and communications technology, increasingly borderless economic and cultural environments, the frequency of terrorist activities, and the spread of new infectious diseases, could have a material impact on the business results and fi nancial conditions of the Group.

4. Computer Viruses, Hackers and Cyber-TerrorismYAS has established a backup system for its computer lines. The Company is also working to enhance backup capabilities to minimize damage to hardware and data in the event of natural disasters, such as earthquakes or severe storms and fl ooding.

The Company has taken all possible measures to prevent unauthorized access to its systems from outside and to block infection of its systems by computer viruses. Specifi cally, the Company has installed fi rewalls and virus-checking software into its mail servers and all terminals.

Despite these defensive measures, it is possible that unforeseen situations, such as the use of technology that breaches presumed security protocols and allows a hacker to gain entry to in-house information systems, could lead to a temporary shutdown of system functions or facilitate unauthorized disclosure of information. Such situation could hurt the business results and fi nancial conditions of the Group.

5. Leaks of Customer Information Leading to Claims for Damages and Tarnished CredibilityThe YAS Group handles a vast amount of customer information. The Group also undertakes customs clearance services. The Group thus has an obligation to protect customer information and strives to prevent information from leaking outside. Despite such precautions, it is possible that unforeseen circumstance could result in an information leak. The Group’s business results could be adversely affected if, for example, such leak were to lead to claims for damages or if the situation tarnished the Group’s reputation.

6. Exchange Rate FluctuationsThe YAS Group endeavors to minimize the impact of exchange rate


fluctuations on foreign-currency-denominated receivables and payables by utilizing forward exchange contracts, and does not take such risk that would exert a major impact on the Group’s business. However, in preparing the Group’s consolidated financial statements, the Company translates the fi nancial results of overseas consolidated subsidiaries into yen, and changes in exchange rates could affect the consolidated business results and fi nancial conditions of the Group.

7. Statutory RegulationsYAS is licensed by the Ministry of Land, Infrastructure, Transport and Tourism as a provider of type 2 freight use forwarding services, based on Article 20 of the Freight Use Forwarding Business Law, and conducts air and sea cargo transportation operations – the primary business of the YAS Group.

While this license has no expiration date, if and when an event of the Company justifi es suspension or withdrawal of the business, as stipulated on Article 33 of the law, the Company’s business could be partially or

completely suspended for a set period or permission to engage in such business could be withdrawn. As of preparation of this document, the YAS Group has not encountered any such event, but if and when such situations, including withdrawal of permission to conduct business, may occur for whatever reason, they could have a material impact on the Group’s business results and fi nancial conditions.

In addition, the YAS Group is subject to various statutory regulations in different parts of the world. Major ones include social regulations (such as those ensuring safety) and legal regulations associated with transportation services. In Japan, YAS has obtained approval and required licenses, including the aforementioned permission to provide type 2 freight use forwarding services, from the relevant authorities. If statutory regulations pertaining to such approval and licenses are amended or if approval and licensing status currently held are cancelled, the fiscal performance and financial conditions of the Group could be adversely affected.

Approval and licenses currently held by YAS are listed below:

8. Relationship with the NYK Group(1) Role of YAS within the NYK GroupAs of March 31, 2010, the NYK Group consisted of Nippon Yusen Kabushiki Kaisha (NYK), 711 consolidated subsidiaries and 74 companies accounted for by the equity method. These companies primarily conduct integrated logistics business centered largely on ocean transportation.

The business of YAS, one of consolidated subsidiaries of NYK, and its Group companies, centers largely on the use of air transportation. No other company within the NYK Group conducts business operations using air transportation in the same manner as YAS, which is licensed by the Ministry of Land, Infrastructure and Transport and Tourism as a provider of type 2 freight use forwarding services.

Moreover, the Company strives to ensure its independence as a listed company. As such, YAS does not need prior approval from NYK for its own decision-making.(2) Business relationship with Nippon Yusen Kabushiki Kaisha and its

consolidated subsidiaries (excluding YAS)The Company’s main business relationships with Nippon Yusen Kabushiki

Kaisha (NYK) and its consolidated subsidiaries during this fi scal year are as follows. Business transactions take place under the same conditions as general transactions, taking market conditions into consideration. In the case of real estate transactions, conditions are determined through negotiations between both companies, with due consideration given to the local market.a) Transactions with Nippon Yusen Kabushiki KaishaThe main business relationships between the Company and Nippon Yusen Kabushiki Kaisha (NYK) are transactions in which NYK consigns the transportation of ocean cargo to the Company. Business transactions in this fi scal year amounted to ¥207 million.b) Transactions with other consolidated subsidiaries of Nippon Yusen

Kabushiki KaishaThe Company’s main business relationships with other companies in the NYK Group are transactions involving ocean transportation and related peripheral business, which are consigned to NYK Logistics (Japan) Co., Ltd. and 23 other companies as well as transactions in which Yusen Real Estate Corporation rents the Company’s head office and its Kanagawa Branch Offi ce. In this fi scal year business transactions amounted to ¥4,249 million and real estate rental transactions stood at ¥141 million.

Approval and Licensing Designation Issuing Authority Requirements forApproval and Licensing Validity

Type 2 freight use forwarding services Minister for Land, Infrastructure, Transport and Tourism Business license Open

Air service agency business Minister for Land, Infrastructure, Transport and Tourism Application to operate as a business Open

Customs brokerage services Director-General of Customers in each jurisdictional area Business license Open

General cargo transportation services(trucks) Director of District Transport Bureau in each jurisdictional area Business registration Open

Warehousing services Director of District Transport Bureau in each jurisdictional area Business registration Open

Medical devices manufacturing business:packaging, labeling or storage category Prefectural Governors Business license Sept. 26, 2005 to

Sept. 25, 2010

Retail or rental business of speciallycontrolled medical devices Prefectural Governors Business license June 12, 2007 to

June 11, 2013



U.S. Dollars (Note 1)

ASSETS 2010 2009 2010

CURRENT ASSETS:

Cash and cash equivalents (Note 10) ¥ 16,740 ¥ 18,196 $ 179,926

Time deposits (Note 10) 1,623 705 17,444

Trade notes and accounts receivable (Note 10) 29,007 22,848 311,759

Deferred tax assets—current (Note 8) 732 670 7,873

Other current assets 4,729 4,957 50,822

Allowance for doubtful accounts (141) (131) (1,519)

Total current assets 52,690 47,245 566,305

PROPERTY, PLANT AND EQUIPMENT:Land (Note 3) 6,856 7,327 73,692

Buildings and structures (Note 3) 17,851 17,858 191,869

Furniture and fi xtures 4,255 3,904 45,736

Machinery, equipment and vehicles 1,039 1,032 11,167

Construction in progress 2 0 20

Total 30,003 30,121 322,484

Accumulated depreciation (11,937) (10,844) (128,306)

Total property, plant and equipment 18,066 19,277 194,178

INVESTMENTS AND OTHER ASSETS:Investments in securities (Notes 4 and 10) 990 961 10,639

Investments in unconsolidated subsidiaries and affi liate companies 1,992 2,121 21,415

Goodwill 12 21 130

Deposits 1,725 1,715 18,546

Deferred tax assets—non-current (Note 8) 2,261 2,438 24,307

Other assets 3,707 1,955 39,829

Total investments and other assets 10,687 9,211 114,866

TOTAL ¥ 81,443 ¥ 75,733 $ 875,349

Yusen Air & Sea Service Co., Ltd. and Consolidated Subsidiaries

March 31, 2010 and 2009

Consolidated Balance Sheets


See notes to consolidated fi nancial statements.



LIABILITIES AND EQUITY 2010 2009 2010

CURRENT LIABILITIES:

Trade notes and accounts payable (Note 10) ¥ 14,521 ¥ 10,798 $ 156,073

Short-term bank loans (Note 5) — 0 —

Current portion of long-term debt (Notes 5 and 10) 1,063 577 11,430

Accrued income taxes 562 382 6,045

Accrued bonuses to employees 1,232 1,325 13,242

Deferred tax liabilities—current (Note 8) 8 12 89

Other current liabilities 4,076 4,099 43,797

Total current liabilities 21,462 17,193 230,676

LONG-TERM LIABILITIES:Long-term debt (Note 5) 65 1,089 700

Accrued pension and severance costs for:

Employees (Note 6) 3,923 3,923 42,161

Directors and corporate auditors 358 351 3,845

Provision for alleged Antimonopoly Act violation 1,728 1,728 18,576

Negative goodwill 5 8 51

Deferred tax liabilities—non-current (Note 8) 75 72 803

Other long-term liabilities 164 120 1,762

Total long-term liabilities 6,318 7,291 67,898

EQUITY (Notes 7 and 17):Common stock, no par value—

authorized; 160,000,000 shares in 2010 and 2009, issued; 42,220,800 shares in 2010 and 2009 4,301 4,301 46,227

Capital surplus 4,812 4,812 51,715

Retained earnings 47,691 46,668 512,587

Unrealized gain on available-for-sale securities 160 2 1,720

Foreign currency translation adjustments (5,228) (6,214) (56,187)

Treasury stock—at cost; 50,296 shares in 2010 and 50,212 shares in 2009 (68) (68) (734)

Total 51,668 49,501 555,328

Minority interests in consolidated subsidiaries 1,995 1,748 21,447

Total equity 53,663 51,249 576,775

TOTAL ¥ 81,443 ¥ 75,733 $ 875,349




2010 2009 2010

NET SALES ¥ 123,453 ¥ 167,460 $ 1,326,879

COST OF SALES 92,127 128,663 990,184

Gross profi t 31,326 38,797 336,695

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 13) 29,016 34,223 311, 862

Operating income 2,310 4,574 24,833

MINORITY INTERESTS IN NET INCOME OF CONSOLIDATED SUBSIDIARIES 365 430 3,922

NET INCOME ¥ 1,545 ¥ 1,083 $ 16,603

OTHER INCOME (EXPENSES):Interest and dividend income 164 469 1,763

Interest expense (31) (53) (337)

Foreign currency exchange gain—net 528 317 5,670

Equity in earnings of unconsolidated subsidiaries and affi liate companies 221 32 2,376

Amortization of negative goodwill 3 26 32

Provision for alleged Antimonopoly Act violation — (1,728) —

Loss on impairment of fi xed assets (Note 3) (229) (15) (2,459)

Loss on revaluation of investments in securities (19) (681) (207)

Others—net 57 (82) 620

Other income (expense)—net 694 (1,715) 7,458

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 3,004 2,859 32,291

INCOME TAXES (Note 8):Current 1,100 1,544 11,828

Deferred (6) (198) (62)

Total income taxes 1,094 1,346 11,766

Yen U.S. Dollars

PER SHARE:Basic net income per share (Note 15) ¥ 36.63 ¥ 25.68 $ 0.394

Cash dividends 16.00 18.00 0.172



Years Ended March 31, 2010 and 2009

Consolidated Statements of Income




Consolidated Statements of Changes in Equity

Thousands Millions of Yen

OutstandingNumber ofShares ofCommon

Stock

CommonStock

CapitalSurplus

RetainedEarnings

UnrealizedGain (Loss) on Available-for-sale Securities

Foreign Currency

Translation Adjustments

TreasuryStock

Total

MinorityInterests in

ConsolidatedSubsidiaries

TotalEquity

BALANCE, APRIL 1, 2008 42,171 ¥ 4,301 ¥ 4,812 ¥ 46,775 ¥ 69 ¥ 1,836 ¥ (68) ¥ 57,725 ¥ 1,889 ¥ 59,614

Adjustment of retained earnings due to an adoption of PITF No.18 (Note 2b) — — — (80) — — — (80) — (80)

Net income for the year ended March 31, 2009 — — — 1,083 — — — 1,083 — 1,083

Cash dividends (¥21.0 per share) — — — (886) — — — (886) — (886)

Purchase of treasury stock (0) — — — — — (1) (1) — (1)

Disposal of treasury stock 0 — (0) — — — 1 1 — 1

Adjustment of retained earnings due to recognition of unrecognized actuarial differences by a foreign consolidated subsidiary

— — — (224) — — — (224) — (224)

Net change in the year — — — — (67) (8,050) — (8,117) (141) (8,258)

BALANCE, MARCH 31, 2009 42,171 4,301 4,812 46,668 2 (6,214) (68) 49,501 1,748 51,249

Net income for the year ended March 31, 2010 — — — 1,545 — — — 1,545 — 1,545

Cash dividends (¥16.0 per share) — — — (675) — — — (675) — (675)

Purchase of treasury stock (0) — — — — — (0) (0) — (0)

Disposal of treasury stock 0 — (0) — — — 0 0 — 0


— — — 59 — — — 59 — 59

Adjustment of retained earnings for newly consolidated subsidiaries 94 94 94

Net change in the year — — — — 158 9869 — 1,144 247 1,391

BALANCE, MARCH 31, 2010 42,171 ¥ 4,301 ¥ 4,812 ¥ 47,691 ¥ 160 ¥ (5,228) ¥ (68) ¥ 51,668 ¥ 1,995 ¥ 53,663

Thousands of U.S. Dollars (Note 1)

CommonStock

CapitalSurplus

RetainedEarnings

UnrealizedGain (Loss) on Available-for-

saleSecurities

Foreign Currency

Translation Adjustments

TreasuryStock

Total

MinorityInterests in

ConsolidatedSubsidiaries

TotalEquity

BALANCE, MARCH 31, 2009 $ 46,227 $ 51,715 $ 501,599 $ 18 $ (66,779) $ (733) $ 532,047 $ 18,780 $ 550,827

Net income for the year ended March 31, 2010 — — 16,603 — — — 16,603 — 16,603

Cash dividends ($0.172 per share) — — (7,252) — — — (7,252) — (7,252)

Purchase of treasury stock — — — — — (3) (3) — (3)

Disposal of treasury stock — (0) — — — 2 2 — 2


— — 629 — — — 629 — 629

Adjustment of reta ined earn ings for newly consolidated subsidiaries — — 1,008 — — — 1,008 — 1,008

Net change in the year — — — 1,702 10,592 — 12,294 2,667 14,961

BALANCE, MARCH 31, 2010 $ 46,227 $ 51,715 $ 512,587 $ 1,720 $ (56,187) $ (734) $ 555,328 $ 21,447 $576,775





Consolidated Statements of Cash Flows

Millions of Yen Thousands ofU.S. Dollars (Note 1)

2010 2009 2010

OPERATING ACTIVITIES:

Income before income taxes and minority interests ¥ 3,004 ¥ 2,859 $ 32,291

Adjustment for:Depreciation and amortization 1,743 1,879 18,731

Amortization of goodwill 6 (16) 67

Increase (decrease) in accrued pension and severance costs 81 (220) 870

Interest and dividend income (164) (468) (1,763)Interest expense 31 53 337

Loss (gain) on foreign currency exchange, net (7) 55 (72)Equity in earnings of unconsolidated subsidiaries and affiliate companies (221) (32) (2,376)Decrease (increase) in trade notes and accounts receivable (5,260) 13,220 (56,542)Increase (decrease) in trade notes and accounts payable 3,258 (7,968) 35,009

Loss on sale of property, plant and equipment, net 13 34 137

Loss on impairment of fixed assets 229 15 2,459

Loss (gain) on sale of investments in securities 67 (0) 716

Loss on revaluation of investments in securities 19 681 207

Loss on write-down of golf club membership 13 17 144

Increase in allowance for doubtful accounts 21 167 229

Increase in provision for alleged Antimonopoly Act violation — 1,728 —

Other—net 450 (762) 4,843

Total 3,283 11,242 35,287

Interest and dividend received 177 504 1,904

Interest paid (49) (55) (531)Fine for alleged Antimonopoly Act violation paid (1,728) — (18,576)Income taxes paid (843) (3,478) (9,055)

Net cash provided by operating activities 840 8,213 9,029

INVESTING ACTIVITIES:

Payments into time deposits (3,018) (872) (32,442)Proceeds from withdrawal of time deposits 2,130 205 22,893

Purchase of property, plant and equipment (986) (1,161) (10,602)Proceeds from sale of property, plant and equipment 399 104 4,286

Purchase of investments in securities (18) (32) (196)Proceeds from sale of investments in securities 42 1 451

Increase in investments in unconsolidated subsidiaries and affiliate company (55) (730) (591)Lending of loans receivable (9,511) (6,033) (102,217)Collection of loans receivable 9,241 4,760 99,329

Other—net 140 (61) 1,508

Net cash used in investing activities (1,636) (3,819) (17,581)FINANCING ACTIVITIES:

Short-term bank loans, net (3) (138) (32)Repayment of long-term debt (500) (1,521) (5,376)Repayment of obligations under finance lease (82) (124) (889)Cash dividends paid (674) (886) (7,239)Cash dividends paid to minority shareholders (108) (111) (1,156)Other—net (0) 0 (1)

Net cash used in financing activities (1,367) (2,780) (14, 693)FOREIGN CURRENCY TRANSLATION ADJUSTMENTS

565 (4,182) 6,075ON CASH AND CASH EQUIVALENTS

DECREASE IN CASH AND CASH EQUIVALENTS (1,598) (2,568) (17,170)CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 18,196 20,764 195,568

CASH AND CASH EQUIVALENTS OF NEWLY142 — 1,528

CONSOLIDATED SUBSIDIARIES, BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS, END OF YEAR ¥ 16,740 ¥ 18,196 $ 179,926





Notes to Consolidated Financial Statements

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements have been prepared in accordance with the provisions set forth in the Japanese Companies Act and Financial Instruments and Exchange Act 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.

In preparing these consolidated fi nancial statements, certain reclassifi cations and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form of which is more familiar to readers outside Japan. In addition, certain reclassifi cations have been made in the 2009 fi nancial statements to conform to the classifi cations used in 2010.

The consolidated fi nancial statements are stated in Japanese yen, the currency of the country in which Yusen Air & Sea Service Co., Ltd. (the “Company”) is incorporated and operates. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan and have been made at the rate of ¥93.04 to $1, the approximate rate of exchange at March 31, 2010. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.

a. Consolidation—The consolidated fi nancial statements as of March 31, 2010 include the accounts of the Company and its 35 signifi cant (33 in 2009) subsidiaries (together, the “Group”) listed below:

Consolidated SubsidiariesEquity

OwnershipPercentage*1

Capital Stock*1

Yusen Air & Sea Service (U.S.A.) Inc. 100.00% US$ 14,000 thousandYusen Air & Sea Service (H.K.) Ltd. 100.00 HK$ 55,000 thousandYusen Air & Sea Service (Singapore) Pte. Ltd. 100.00 S$ 16,700 thousandYusen Air & Sea Service (Europe) B.V. 100.00 EUR 18,518 thousandYusen Air & Sea Service (Benelux) B.V. 100.00*2 EUR 700 thousandYusen Air & Sea Service (Deutschland) GmbH. 100.00*2 EUR 4,000 thousandYusen Air & Sea Service (U.K.) Ltd. 100.00*2 STG 1,050 thousandYusen Air & Sea Service (Australia) Pty. Ltd. 100.00*3 A$ 1,500 thousandYusen Air & Sea Service (Canada) Inc. 100.00 C$ 5,000 thousandYusen Air & Sea Service (France) S.a.r.l. 100.00*2 EUR 4,700 thousandYusen Air & Sea Service (Taiwan) Ltd. 100.00*4 NT$ 22,505 thousandYusen Air & Sea Service (Italia) S.r.l. 100.00*2 EUR 774 thousandYusen Air & Sea Service (China) Ltd. 100.00*5 HK$ 11,000 thousandPT. Yusen Air & Sea Service Indonesia 80.00*6 US$ 177 thousandYusen Air & Sea Service Management (Thailand) Co., Ltd. 49.00*7 THB 10 millionYusen Air & Sea Service (Thailand) Co., Ltd. 100.00*8 THB 100 millionYusen Shenda Air & Sea Service (Shanghai) Ltd. 50.00*9 RMB 16,457 thousandYusen Air & Sea Service (Beijing) Co., Ltd. 75.00*10 RMB 9,312 thousandYusen Air & Sea Service (Korea) Co., Ltd. 100.00 KRW 2,000 millionYusen Air & Sea Service (Vietnam) Co., Ltd. 49.00*7 US$ 600 thousandYusen Air & Sea Service Philippines Inc. 51.00 PHP 175,000 thousandYusen Air & Sea Service (Guangdong) Ltd. 100.00*5 RMB 8,009 thousandYusen Air & Sea Service (India) Pvt. Ltd. 100.00*11 INR 90 millionYusen Air & Sea Service Keihin Trans Co., Ltd. 100.00 ¥ 36 millionYusen Air & Sea Service (Kitakanto) Co., Ltd. 100.00 ¥ 50 millionYusen Air & Sea Service (Tsukuba) Co., Ltd. 100.00 ¥ 50 millionYusen Travel Co., Ltd. 100.00 ¥ 270 millionYusen Air & Sea Service (Shinshu) Co., Ltd. 90.00 ¥ 50 millionYusen Air & Sea Service (Tohoku) Co., Ltd. 100.00 ¥ 30 millionYusen Air Logitec Co., Ltd. 100.00 ¥ 20 millionRyowa Diamond Air Service Co., Ltd. 99.17*12 ¥ 50 millionYusen Air & Sea Service (Kyushu) Co., Ltd. 100.00 ¥ 30 millionYusen Air & Sea Service (Hokuriku) Co., Ltd. 100.00 ¥ 20 millionYusen Air & Sea Service (Chugoku) Co., Ltd. 80.00 ¥ 30 millionYusen Air Loginet Co., Ltd. 100.00 ¥ 20 million

*1 as of March 31, 2010

*2 owned 100.00% by Yusen Air & Sea Service (Europe) B.V.

*3 owned 80.00% by the Company, 20.00% by Yusen Air & Sea Service (Singapore) Pte. Ltd.

*4 owned 60.01% by the Company, 39.99% by Yusen Air & Sea Service (H.K.) Ltd.

*5 owned 100.00% by Yusen Air & Sea Service (H.K.) Ltd.

*6 owned 10.50% by the Company, 69.50% by Yusen Air & Sea Service (Singapore) Pte. Ltd.

*7 owned 49.00% by Yusen Air & Sea Service (Singapore) Pte. Ltd.

*8 owned 51.00% by Yusen Air & Sea Service Management (Thailand) Co., Ltd., 49.00% by Yusen Air & Sea Service (Singapore) Pte. Ltd.



*11 owned 100.00% by Yusen Air & Sea Service (Singapore) Pte. Ltd.

*12 owned 99.17% by Yusen Travel Co., Ltd.


Under the control or infl uence concept, those companies in which the Company, directly or indirectly, is able to exercise control over operations are fully consolidated, and those companies over which the Group has the ability to exercise signifi cant infl uences are accounted for by the equity method.

Yusen Air & Sea Service (Guangdong) Ltd. and Yusen Air & Sea Service (India) Pvt. Ltd. are included in the scope of consolidation from this year since materiality has increased.

Investments in three (three in 2009) unconsolidated subsidiaries and two (one in 2009) affi liate company are accounted for by the equity method. Investments in the remaining unconsolidated subsidiaries and affi liate companies are stated at cost, which is determined by moving-average method. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated fi nancial statements would not be material.

The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiaries at the date of acquisition is being amortized over a period of fi ve years.

All signifi cant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profi t included in assets resulting from transactions within the Group is eliminated.

b. Unifi cation for Accounting Policies Applied to Foreign Subsidiaries for the

Consolidated Financial Statements—In May 2006, the Accounting Standards Board of Japan (the‘‘ASBJ”) issued ASBJ Practical Issues Task Force (PITF) No. 18, ‘‘Practical Solution on Unifi cation of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements”. PITF No.18 prescribes: (1) the accounting policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar circumstances should in principle be unifi ed for the preparation of the consolidated fi nancial statements, (2) fi nancial statements prepared by foreign subsidiaries in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States of America tentatively may be used for the consolidation process, (3) however, the following items should be adjusted in the consolidation process so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years’ effects of changes in accounting policies in the income statement where retrospective adjustments to fi nancial statements have been incorporated; and 6) exclusion of minority interests from net income, if contained. PITF No.18 was effective for fi scal years beginning on or after April 1, 2008 with early adoption permitted.

The Group applied this accounting standard effective April 1, 2008. In addition, the Group adjusted the beginning balance of retained earnings at April 1, 2008 as if this accounting standard had been retrospectively applied.

c. Cash Equivalents—Cash equivalents are short-term investments that are readily convertible into cash and that are exposed to insignifi cant risk of changes in value. Cash equivalents include time deposits of which mature or become due within three months of the date of acquisition.

d. Investments in Securities—Securities are classified into three categories, depending on management’s intent: trading, available-for-sale securities or held-to-maturity. The Company classifi es all investments in securities as available-for-sale securities. Marketable available-for-sale securities are reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. Non-marketable available-for-sale securities are stated at cost determined by the moving-average method. For other than temporary declines in fair value, non-marketable investment securities are reduced to net realizable value by a charge to income.

e. Property, Plant and Equipment—Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment of the Company and domestic consolidated subsidiaries is computed substantially by the declining-balance method at rates based on the estimated useful lives of the assets, except for the buildings and structures at Toyooka distribution center, Iwata distribution center and Yusen Air Fukumoto building which are depreciated on the straight-line method. The depreciation of property, plant and equipment of foreign consolidated subsidiaries is generally computed by the straight-line method over the estimated useful lives of the assets. The range of useful lives is principally as follows:

Buildings and structures ...........................3–60 yearsFurniture and fi xtures ...............................2–20 yearsMachinery, equipment and vehicles ............4–6 years

f. Other Assets—Amortization of intangible assets included in other assets is computed by the straight-line method. Software for internal use is amortized over a fi ve-year period.

g. Long-lived Assets—The Group reviews its long-lived assets for impairment whenever events or changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash fl ows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash fl ows from the continued use and eventual disposition of the asset or the net selling price at disposition.

h. Allowance for Doubtful Accounts—The Group provides the allowance for doubtful accounts based on the aggregated amount of estimated credit losses for doubtful receivables plus an amount for receivables other than doubtful receivables calculated using historical write off experience over a certain period.

i. Accrued Bonuses to Employees—Employees are paid bonuses in June of every year. The bonuses include amounts for services rendered during the previous fi scal year which are recorded as accrued bonuses on the balance sheet as of the respective fi scal year-end.

j. Accrued Pension and Severance Costs

Employees’ retirement and pension plans—The Company and certain domestic consolidated subsidiaries have a non-contributory funded defined benefi t pension plan and an unfunded retirement benefi t plan. The Company’s certain domestic consolidated subsidiaries have a contributory funded defined contribution pension plan, while certain foreign consolidated subsidiaries have either of a non-contributory funded defined benefit pension plan or a contributory funded defi ned contribution pension plan.

The liability for employees’ retirement benefits is accounted for based on projected benefi t obligations and plan assets at the balance sheet date.

In July 2008, the ASBJ issued ASBJ Statement No. 19, ‘‘Partial Amendments to Accounting Standard for Retirement Benefits (Part 3)”, that remove the treatment, which provides that an entity may use the discount rate determined taking into consideration fluctuations in yield of bonds over a certain period, in Note 6 of ‘‘Interpretive Note to the Accounting Standard for Retirement Benefits”. The yield of a long-term safe bond on closing date should be used for the calculation of discount rate in this accounting standard. The Company applied the revised accounting standard effective April 1, 2009, however, there is no effect from this change.Retirement allowance for directors and corporate auditors—Retirement allowance for directors and corporate auditors for certain subsidiaries are recorded to state the liability at the amount that would be required if all directors and corporate auditors retired at each balance sheet date.


k. Provision for Alleged Antimonopoly Act Violation—On March 18, 2009 the Company received the notice of a cease-and-desist order and a surcharge payment order from the Japan Fair Trade Commission (the‘‘JFTC”) for violations of Article 3 of the Antimonopoly Act (prohibition of unreasonable restraint of trade). In the period that followed, the Company scrutinized, confirmed and carefully examined the JFTC orders. Determining that it was unable to accept the orders as a result of these steps, the Company resolved at an Extraordinary Meeting of the Board of Directors held on April 17, 2009 to fi le an application for the commencement of hearings with the JFTC and to take other appropriate actions in response to the orders. The estimated losses arising from surcharge payment order were recorded as a provision for the years ended March 31, 2010 and 2009.

l. Leases—In March 2007, the ASBJ issued ASBJ Statement No. 13, ‘‘Accounting Standard for Lease Transactions”, which revised the previous accounting standard for lease transactions issued in June 1993. The revised accounting standard for lease transactions is effective for fi scal years beginning on or after April 1, 2008 with early adoption permitted for fi scal years beginning on or after April 1, 2007.

Under the previous accounting standard, finance leases that deem to transfer ownership of the leased property to the lessee were to be capitalized. However, other fi nance leases were permitted to be accounted for as operating lease transactions if certain ‘‘as if capitalized” information is disclosed in the note to the lessee’s financial statements. The revised accounting standard requires that all fi nance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. In addition, the accounting standard permits leases which existed at the transition date and do not transfer ownership of the leased property to the lessee to be accounted for as operating lease transactions.

The Company applied the revised accounting standard effective April 1, 2008. In addition, the Company accounted for leases which existed at the transition date and do not transfer ownership of the leased property to the lessee as operating lease transactions.

All other leases are accounted for as operating leases.

m. Income Taxes—The provision for income taxes is computed based on the pretax income included in the consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.

n. Accounting for the Consumption Tax—In Japan, the consumption tax is imposed at a fl at rate of 5% on all domestic consumption of goods and services (with certain exemptions). The consumption tax imposed on the Group’s domestic sales to customers is withheld by the Group at the time of sale and is paid to the national government subsequently. The consumption tax withheld upon sale and the consumption tax paid by the Group on the purchases of goods and services are not included in the related amounts in the accompanying consolidated statements of income.

o. Appropriation of Retained Earnings—Appropriations of retained earnings are refl ected in the fi nancial statements for the following year upon shareholders’ approval.

p. Treasury Stock—Under the Japanese Companies Act, the Company is allowed to acquire its own shares to the extent that the aggregate cost of treasury stock does not exceed the maximum amount available for dividends. Treasury stock is stated at cost in the equity of the accompanying consolidated balance sheets. Net gain on disposal of treasury stock is presented under‘‘Capital surplus”in the equity of the accompanying consolidated balance sheets.

q. Foreign Currency Transactions—All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen at the exchange rates at the balance sheet date. The foreign exchange gains and losses from translation are recognized in the consolidated statement of income.

r. Foreign Currency Financial Statements—The balance sheet accounts of foreign consolidated subsidiaries, and foreign subsidiaries accounted for by the equity method are translated into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at historical rate. Differences arising from such translations were shown as‘‘Foreign currency translation adjustments”in a separate component of equity.

Effective April 1, 2008, the Company translated foreign currency revenue and expense accounts of foreign consolidated subsidiaries, and foreign subsidiaries accounted for by the equity method, into Japanese yen at the average exchange rates. Previously the Company applied the current exchange rates as of the balance sheet date. This change is for presenting more accurate operating result in case of sharp fl uctuation in exchange rates. Further, statutory quarterly reporting was introduced from April 2008, the exchange rates fl uctuation came to have greater implication.

s. Derivatives—The Group uses derivative financial instruments to manage their exposures to fluctuations in foreign exchange and interest rates. Foreign exchange forward contracts and interest rate swaps are utilized by the Group. The Group does not enter into derivatives for trading or speculative purposes.

Derivative financial instruments and foreign currency transactions are classifi ed and accounted for as follows: (a) all derivatives are recognized as either assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated statement of income and (b) for derivatives used for hedging purposes, if derivatives qualify for hedge accounting because of high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses on derivatives are deferred until maturity of the hedged transactions.

The foreign exchange forward contracts employed to hedge foreign exchange exposures in the Group’s operating activities measured at the fair value and the unrealized gains/losses are recognized in income. Interest rate swaps are utilized to hedge interest rate exposures of long-term debt. The interest rate swaps which qualify for hedge accounting and matching criteria are not remeasured at market value but the differential paid or received under the swap agreements are recognized and included in interest expense or income.

t. Per Share Information—Net assets per share is computed based on the outstanding shares of common stock at relevant balance sheet dates.

Basic net income per share is computed by dividing net income available to shareholders by the weighted-average number of shares of common stock outstanding for the period.

Diluted net income per share for the years ended March 31, 2010 and 2009 is not presented since the Company had no securities with dilutive effect.

Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.

u. New Accounting Pronouncements

Business Combinations—In December 2008, the ASBJ issued a revised accounting standard for business combinations, ASBJ Statement No. 21, ‘‘Accounting Standard for Business Combinations.” Major accounting changes under the revised accounting standard are as follows;

(1) The current accounting standard for business combinations allows companies to apply the pooling of interests method of accounting when certain specific criteria are met such that the business combination is essentially regarded as a uniting-of-interests. The revised standard requires to account for such business combination by the purchase method and the pooling of interests method of accounting is no longer allowed.


(2) The current accounting standard accounts for the research and development costs to be charged to income as incurred. Under the revised standard, an in-process research and development (IPR&D) acquired by the business combination is capitalized as an intangible asset.

(3) The current accounting standard accounts for a bargain purchase gain (negative goodwill) to be systematically amortized within 20 years. Under the revised standard, the acquirer recognizes a bargain purchase gain in profi t or loss on the acquisition date after reassessing whether it has correctly identifi ed all of the assets acquired and all of the liabilities assumed with a review of such procedures used.

This standard is applicable to business combinations undertaken on or after April 1, 2010 with early adoption permitted for fi scal years beginning on or after April 1, 2009.

Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method—The current accounting standard requires to unify accounting policies within the consolidation group. However, the current guidance allows to apply the equity method for the financial statements of its foreign associated company which have been prepared in accordance with generally accepted accounting principles in their respective jurisdictions without unifi cation of accounting policies.

In December 2008, the ASBJ issued ASBJ Statement No.16 (Revised 2008), ‘‘Revised Accounting Standard for Equity Method of Accounting for Investments”. The new standard requires adjustments to be made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the parent company when the associate’s fi nancial statements are used in applying the equity method unless it is impracticable to determine adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either International Financial Reporting Standards or the generally accepted accounting principles in the United States tentatively may be used in applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese GAAP unless they are not material: 1) amortization of goodwill; 2) scheduled amortization of actuarial gain or loss of pensions that has been directly recorded in the equity; 3) expensing capitalized development costs of R&D; 4) cancellation of the fair value model accounting for property, plant, and equipment and investment properties and incorporation of the cost model accounting; 5) recording the prior years’ effects of changes in accounting policies in the income statement where retrospective adjustments to the financial statements have been incorporated; and 6) exclusion of minority interests from net income, if contained.

This standard is applicable to equity method of accounting for investments effective on or after April 1, 2010 with early adoption permitted for fi scal years beginning on or after April 1, 2009.

Asset Retirement Obligations—In March 2008, the ASBJ published a new accounting standard for asset retirement obligations, ASBJ Statement No.18 ‘‘Accounting Standard for Asset Retirement Obligations” and ASBJ Guidance No.21 ‘‘Guidance on Accounting Standard for Asset Retirement Obligations”. Under this accounting standard, an asset retirement obligation is defined as a legal obligation imposed either by law or contract that results from the acquisition, construction, development and the normal operation of a tangible fi xed asset and is associated with the retirement of such tangible fi xed asset.

The asset retirement obligation is recognized as the sum of the discounted cash fl ows required for the future asset retirement and is recorded in the period in which the obligation is incurred if a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in

the period the asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of asset retirement obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of undiscounted cash fl ows are refl ected as an increase or a decrease in the carrying amount of the liability and the capitalized amount of the related asset retirement cost. This standard is effective for fi scal years beginning on or after April 1, 2010 with early adoption permitted for fi scal years beginning on or before March 31, 2010.

Accounting Changes and Error Corrections—In December 2009, ASBJ issued ASBJ Statement No. 24 ‘‘Accounting Standard for Accounting Changes and Error Corrections” and ASBJ Guidance No. 24 ‘‘Guidance on Accounting Standard for Accounting Changes and Error Corrections”. Accounting treatments under this standard and guidance are as follows;

(1) Changes in Accounting Policies:When a new accounting policy is applied with revision of accounting standards, a new policy is applied retrospectively unless the revised accounting standards include specifi c transitional provisions. When the revised accounting standards include specifi c transitional provisions, an entity shall comply with the specifi c transitional provisions.

(2) Changes in PresentationsWhen the presentation of financial statements is changed, prior period fi nancial statements are reclassifi ed in accordance with the new presentation.

(3) Changes in Accounting EstimatesA change in an accounting estimate is accounted for in the period of the change if the change affects that period only, and is accounted for prospectively if the change affects both the period of the change and future periods.

(4) Corrections of Prior Period ErrorsWhen an error in prior period fi nancial statements is discovered, those statements are restated.

This accounting standard and the guidance are applicable to accounting changes and corrections of prior period errors which are made from the beginning of the fi scal year that begins on or after April 1, 2011.

Segment Information Disclosures—In March 2008, the ASBJ revised ASBJ Statement No. 17 ‘‘Accounting Standard for Segment Information Disclosures” and issued ASBJ Guidance No. 20 ‘‘Guidance on Accounting Standard for Segment Information Disclosures”. Under the standard and guidance, an entity is required to report financial and descriptive information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate fi nancial information is available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments.

This accounting standard and the guidance are applicable to segment information disclosures for the fi scal years beginning on or after April 1, 2010.


3. LONG-LIVED ASSETS

The Group reviewed its long-lived assets for impairment as of the years ended March 31, 2010 and 2009. Due to a signifi cant decline in market value of certain fi xed assets planned to be disposed, the Group recognized an impairment loss of ¥229 million ($2,459 thousand) and ¥15 million as other expense for the years ended March 31, 2010 and 2009, respectively. The impairment loss for the year ended March 31, 2010 consisted of ¥136 million on certain land, building and

structure in Aichi and ¥93 million on idle assets in Osaka. The impairment loss of ¥15 million for the year ended March 31, 2009 was recorded on land in Osaka. The carrying amounts of the relevant assets were written down to the recoverable amounts. The recoverable amounts of those assets planned to be disposed by sale were measured at its net selling price determined by quotation from a third-party vendor.

4. INVESTMENTS IN SECURITIES

Detailed information about the investments in securities classifi ed as “available-for-sale securities” at March 31, 2010 and 2009 is as follows:

(1) Available-for-sale securities for which market quotations are available:

(2) Available-for-sale securities for which market quotations are not available:

(4) Proceeds from sale of available-for-sale securities and total amounts of gain and loss on sale of available-for-sale securities:

(5) The impairment losses on available-for-sale equity securities for the years ended March 31, 2010 and 2009 were ¥19 million ($207 thousand) and ¥681 million, respectively.

(3) The future redemption schedule of available-for-sale securities with maturities comprises the following:

Millions of Yen Thousands of U.S. Dollars

2010 2009 2010

CostFair Value(Carrying Amount)

Difference CostFair Value(Carrying Amount)

Difference CostFair Value(Carrying Amount)

Difference

Securities for which market value exceeds cost—

Equity securities ¥ 304 ¥ 582 ¥ 278 ¥ 80 ¥ 140 ¥ 60 $ 3,273 $ 6,251 $ 2,977

Government bonds 59 60 1 57 58 1 627 640 13

Securities for which market value does not exceed cost—

Equity securities 74 70 (4) 354 303 (51) 789 751 (38)Total ¥ 437 ¥ 712 ¥ 275 ¥ 491 ¥ 501 ¥ 10 $ 4,689 $ 7,642 $ 2,952


2010 2009 2010

Within One Year

Over One Year but within Five Years

Over Five Years

Within One Year


Over Five Years

Within One Year


Over Five Years

Debt securities—Government bonds ¥ 18 ¥ 42 — — ¥ 58 — $ 193 $ 447 —

Debt securities—Corporate bonds — — — — ¥ 128 — — — —

Total ¥ 18 ¥ 42 — — ¥ 186 — $ 193 $ 447 —

Carrying Amount


2010 2009 2010

Unlisted equity securities ¥ 279 ¥ 332 $ 2,997

Corporate bonds — 128 —

Total ¥ 279 ¥ 460 $ 2,997


2010 2009 2010

Proceeds from sale of available-for-sale securities ¥ 41 ¥ 1 $ 451

Total amount of gain on sale of available-for-sale securities 14 0 152

Total amount of loss on sale of available-for-sale securities 81 0 868


5. SHORT–TERM BANK LOANS AND LONG–TERM DEBT

Short-term bank loans at March 31, 2009 consisted of notes to banks and bank overdrafts. The weighted average interest rate applicable to the short-term bank loans was 16.00% at March 31, 2009. There was no short-term bank loan at March 31, 2010.

Long-term debt at March 31, 2010 and 2009 consisted of the following:

Millions of YenThousands of U.S. Dollars

2010 2009 2010

Loans from banks and other financial institutions, due serially to 2011 with average interest rates of 1.08% (2010) and 0.93% (2009):

Unsecured ¥ 1,000 ¥ 1,500 $ 10,748

Finance lease obligation 128 166 1,382

Total 1,128 1,666 12,130

Less current portion (1,063) (577) (11,430)Long-term debt, less current portion ¥ 65 ¥ 1,089 $ 700


2010 2009 2010

Projected benefit obligation ¥ 10,601 ¥ 10,285 $ 113,943

Fair value of plan assets (5,931) (5,172) (63,751)Unrecognized actuarial gain (1,075) (1,605) (11,562)Prepaid pension cost 328 415 3,531

Accrued pension and severance costs for employees ¥ 3,923 ¥ 3,923 $ 42,161


2010 2009 2010

Service cost ¥ 608 ¥ 635 $ 6,530

Interest cost 269 272 2,890

Expected return on plan assets (193) (240) (2,080)Amortization of unrecognized actuarial loss 259 139 2,783

Past service cost 0 6 4

Total ¥ 943 ¥ 812 $ 10,127

2010 2009

Discount rate Principally 2.0% Principally 2.0%Expected rate of return on plan assets Principally 3.0% Principally 3.0%

Recognition period of actuarial gain/loss

Principally 10 years

Principally 10 years

Amortization period of prior service cost 1 year 1 year

Year Ending March 31 Millions of YenThousands of U.S. Dollars

2011 ¥ 1,063 $ 11,430

2012 36 393

2013 17 178

2014 9 96

2015 3 33

Total ¥ 1,128 $ 12,130

6. RETIREMENT AND PENSION PLANS

The Company and certain consolidated subsidiaries have severance payment plans for employees, directors and corporate auditors. Under most circumstances, employees terminating their employment are entitled to retirement benefits determined based on the rate of pay at the time of termination, years of service and certain other factors. Such retirement benefits are made in the form of a lump-sum severance payment from the Company or from certain consolidated subsidiaries and annuity payments from a trustee. Employees are entitled to larger payments if the termination is involuntary, by retirement at the mandatory retirement age, by death, or by voluntary retirement at certain specifi c ages prior to the mandatory retirement age.

Accrued pension and severance costs for employees at March 31, 2010 and 2009 consisted of the following:

Annual maturities of long-term debt including fi nancial lease obligation at March 31, 2010, were as follows:

The components of net periodic benefi t costs for the years ended March 31, 2010 and 2009 are as follows:

Assumptions used for the years ended March 31, 2010 and 2009 are set forth as follows:

As is customary in Japan, the Company maintains substantial deposit balances with banks with which it has borrowings. Such deposit balances are not legally or contractually restricted as to withdrawal.

General agreements with respective banks provide, as is customary in Japan, that additional collateral must be provided under certain circumstances if requested by such banks and that certain banks have the right to offset cash deposited with them against any long-term or short-term debt or obligation that becomes due and, in case of default and certain other specifi ed events, against all other debt payable to the banks. The Company has never been requested to provide any additional collateral.


7. EQUITY

Japanese companies are subject to the Companies Act of Japan (the”Companies Act“). The significant provisions in the Companies Act that affect financial and accounting matters are summarized below:

a. Dividends

Under the Companies Act, companies can pay dividends at any time during the fi scal year in addition to the year-end dividend upon resolution at the shareholders meeting. For companies that meet certain criteria such as; (1) having the Board of Directors, (2) having independent auditors, (3) having the Board of Corporate Auditors, and (4) the term of service of the directors is prescribed as one year rather than two years of normal term by its articles of incorporation, the Board of Directors may declare dividends (except for dividends in kind) at any time during the fi scal year if the company has prescribed so in its articles of incorporation. The Company meets all the above criteria.

Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the Articles of Incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends or the purchase of treasury stock. The limitation is defi ned as the amount available for distribution to the shareholders, but the amount of net assets after dividends must be maintained at no less than ¥3 million.

b. Increases/Decreases and Transfer of Common Stock, Reserve and Surplus

The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of retained earnings) or as additional paid-in capital (a component of capital surplus) depending on the equity account charged upon the payment of such dividends until the total of aggregate amount of legal reserve and additional paid-in capital equals 25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other capital surplus and retained earnings can be transferred among the accounts under certain conditions upon resolution of the shareholders.

c. Treasury Stock and Treasury Stock Acquisition Rights

The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the shareholders which is determined by specifi c formula.

Under the Companies Act, stock acquisition rights are presented as a separate component of equity.

The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.


2010 2009 2010Deferred tax assets:

Accrued pension and severance costs for employees ¥ 1,440 ¥ 1,389 $ 15,481

Accrued bonuses to employees 526 590 5,655

Accrued enterprise tax 51 32 547

Accrued pension and severance costs for directors and corporate auditors 144 141 1,543

Allowance for doubtful accounts 197 197 2,113

Depreciation 339 324 3,647

Tax loss carryforward 41 56 441

Loss on impairment of fi xed assets 446 409 4,795

Loss on revaluation of investments in securities 124 231 1,338

Loss on write-down of golf club membership 138 132 1,479

Others 240 126 2,584

Total 3,686 3,627 39,623

Less valuation allowance (519) (416) (5,583)Total deferred tax assets 3,167 3,211 34,040

Deferred tax liabilities:Depreciation 79 83 845

Prepaid pension expenses 39 87 420

Others 139 17 1,488

Total deferred tax liabilities 257 187 2,753

Net deferred tax assets ¥ 2,910 ¥ 3,024 $ 31,287

8. INCOME TAXES

The Company and domestic consolidated subsidiaries are subject to Japanese national and local income taxes which, in the aggregate, resulted in a normal effective statutory rate of approximately 40.4% for the years ended March 31, 2010 and 2009.

The tax effects of signifi cant temporary differences resulted in deferred tax assets and liabilities at March 31, 2010 and 2009 are as follows:


2010 2009Normal effective tax rate 40.4% 40.4%Adjustments:

Entertainment expenses and other non-deductible permanent differences 2.2 2.5Dividends income not taxable (1.6) (5.4)Effective of elimination of intercompany dividends received 1.8 13.4Per capital levy of local tax 2.0 2.3Lower income tax rates applicable to income in certain foreign countries (7.1) (23.8)Provision for alleged Antimonopoly Act violation — 23.2Valuation allowance on deferred tax 2.7 2.4Foreign tax credits (1.4) (3.6)Income tax for previous period 0.6 (3.4)Equity in earnings of affi liated companies and unconsolidated companies (3.0) (0.5)Other—net (0.2) (0.4)

Actual effective tax rate 36.4% 47.1%

The reconciliation of the difference between the normal effective tax rate and the actual effective tax rate refl ected in the accompanying consolidated statements of income for the years ended March 31, 2010 and 2009 is as follows:

9. LEASES

The Group has various lease agreements whereby the Group acts as lessee.Pro forma information of leased property whose lease inception was before March 31, 2008ASBJ Statement No.13,“Accounting Standard for Lease Transactions“requires that all fi nance lease transactions should be capitalized to recognize lease assets and lease obligations in the balance sheet. However, the ASBJ Statement No. 13 permits leases without ownership transfer of the leased property to the lessee whose lease inception was before March 31, 2008 to be accounted for as

operating lease transactions if certain“as if capitalized”information is disclosed in the note to the fi nancial statements. The Company applied the ASBJ Statement No. 13 effective April 1, 2008 and accounted for such leases as operating lease transactions. Pro forma information of leased property whose lease inception was before March 31, 2008 such as acquisition cost, accumulated depreciation, obligations under finance leases, depreciation expense, interest expense and other information of fi nance leases that do not transfer ownership of the leased property to the lessee on an“as if capitalized“basis was as follows:

(2) Obligations under fi nance leases:

Millions of Yen

2010 2009Machinery, Equipment

and VehiclesFurniture and Fixtures Total

Machinery, Equipmentand Vehicles

Furnitureand Fixtures

Total

Acquisition cost ¥ 61 ¥ 5 ¥ 66 ¥ 65 ¥ 28 ¥ 93Accumulated depreciation (46) (4) (50) (38) (26) (64)Net leased property ¥ 15 ¥ 1 ¥ 16 ¥ 27 ¥ 2 ¥ 29

Thousands of U.S. Dollars

2010Machinery, Equipment

and VehiclesFurniture and Fixtures Total

Acquisition cost $ 656 $ 52 $ 708

Accumulated depreciation (494) (40) (534)Net leased property $ 162 $ 12 $ 174


2010 2009 2010Due within one year ¥ 13 ¥ 13 $ 142

Due over one year 3 16 33

Total ¥ 16 ¥ 29 $ 175


2010 2009 2010Due within one year ¥ 1,696 ¥ 1,927 $ 18,233

Due over one year 4,902 5,859 52,688

Total ¥ 6,598 ¥ 7,786 $ 70,921

(1) Acquisition cost, accumulated depreciation:

The amount of obligations under fi nance leases includes the imputed interest expense portion. Depreciation expense which was not refl ected in the consolidated statements of income, computed by the straight-line method over the lease term was ¥13 million ($142 thousand) and ¥18 million for the years ended March 31, 2010 and 2009, respectively.

The minimum rental commitments under non-cancelable operating leases at March 31, 2010 and 2009 were as follows:


10. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES

On March 10, 2008, the ASBJ revised ASBJ Statement No. 10“Accounting Standard for Financial Instruments”and issued ASBJ Guidance No.19“Guidance on Accounting Standard for Financial Instruments and Related Disclosures”. This accounting standard and the guidance are applicable to fi nancial instruments and related disclosures at the end of the fi scal years ending on or after March 31, 2010 with early adoption permitted from the beginning of the fi scal years ending before March 31, 2010. The Group applied the revised accounting standard and the new guidance effective March 31, 2010.

(1) Group policy for fi nancial instrumentsThe Group limits the use of fi nancial instruments for fund management purposes to short term bank deposit. The Group also makes it the basic policy to use the cash management system operated within the Group and bank loans to fund its ongoing operations. Derivatives are used, not for speculative purposes, but to manage exposure to fi nancial risks as described in (2) below.

(2) Nature and extent of risks arising from fi nancial instrumentsReceivables such as trade notes and trade accounts are exposed to customer credit risk. Although receivables in foreign currencies are exposed to the market risk of fluctuation in foreign currency exchange rates, the position, net of payables in foreign currencies, is hedged by using forward foreign currency contracts. Investment securities, mainly equity securities of customers and suppliers of the Group, are exposed to the risk of market price fl uctuations.

Payment terms of payables, such as trade notes and trade accounts, are less than one year. Although payables in foreign currencies are exposed to the market risk of fl uctuation in foreign currency exchange rates, those risks are netted against the balance of receivables denominated in the same foreign currency as noted above.

Maturities of bank loans and lease obligation are less than five years after the balance sheet date. Although a part of such bank loans and lease obligation are exposed to market risks from changes in variable interest rates, those risks are mitigated by using interest-rate swap derivatives.

Derivatives mainly include forward foreign currency contracts and interest-rate swaps, which are used to manage exposure to market risks from changes in foreign currency exchange rates of receivables and payables, and from changes in interest rates of bank loan. Please see Note 11 for more detail about derivatives.

(3) Risk management for fi nancial instrumentsCredit risk managementCredit risk is the risk of economic loss arising from a counterparty’s failure to repay or service debt according to the contractual terms. The Group manages its credit risk from receivables on the basis of internal guidelines, which include monitoring of payment term and balances of major customers by each business administration department to identify the default risk of customers in early stage.

The maximum credit risk exposure of fi nancial assets is limited to their carrying amounts as of March 31, 2010.Market risk management (foreign exchange risk and interest rate risk)Foreign currency trade receivables and payables are exposed to market risk resulting from fl uctuations in foreign currency exchange rates. Such foreign exchange risk is hedged principally by forward foreign currency contracts. In addition, when foreign currency trade receivables and payables are expected from forecasted transaction, forward foreign currency contract may be used under the limited contract term of quarter year.

Interest-rate swaps are used to manage exposure to market risks from changes in interest rates of loan payables.

Investment securities are managed by monitoring market values and fi nancial position of issuers on a regular basis.

The execution and management of derivative transactions are approved by CFO or the board of directors according to the internal guidelines which prescribe the authority and the limit for each transaction. Counterparties to these derivative transactions are limited to major fi nancial institutions in order to mitigate credit risks.Liquidity risk managementLiquidity risk comprises the risk that the Group cannot meet its contractual obligations in full on maturity dates. The Group manages its liquidity risk by holding adequate volumes of liquid assets, along with adequate fi nancial planning by the corporate treasury department.

(4) Fair values of fi nancial instrumentsFair values of fi nancial instruments are based on quoted price in active markets. If quoted price is not available, other rational valuation techniques are used instead. As the valuation needs various assumptions, the fair values of fi nancial instruments are subject to change when different assumptions are used. Also please see Note 11 for the detail of fair value for derivatives.

(a) Fair value of fi nancial instrumentsMillions of Yen

March 31, 2010 Carrying Amount Fair Value Unrealized Gain/loss

Cash and cash equivalents ¥ 16,740 ¥ 16,740 —

Time deposits 1,623 1,623 —

Trade notes and accounts receivable 29,007 29,007 —

Investments in securities Available-for-sale securities 712 712 —

Total ¥ 48,082 ¥ 48,082 —

Trade notes and accounts payable ¥ 14,521 ¥ 14,521 —

Current portion of long-term debt 1,063 1,063 —

Accrued income taxes 562 562 —

Total ¥ 16,146 ¥ 16,146 —


Thousands of U.S.Dollars

March 31, 2010 Carrying Amount Fair Value Unrealized Gain/loss

Cash and cash equivalents $ 179,926 $ 179,926 —

Time deposits 17,444 17,444 —

Trade notes and accounts receivable 311,759 311,759 —

Investments in securities Available-for-sale securities 7,642 7,642 —

Total $ 516,771 $ 516,771 —

Trade notes and accounts payable $ 156,073 $ 156,073 —

Current portion of long-term debt 11,430 11,430 —

Accrued income taxes 6,045 6,045 —

Total $ 173,548 $ 173,548 —

Current assets and liabilitiesThe fair value of all current assets and liabilities(cash and cash equivalents, time deposit, trade notes and accounts receivable, trade notes and accounts payable, current portion of long-term debt, and accrued income taxes) is considered to be equivalent to their carrying amount due to their short-term maturities.

Investments in securities (available-for-sale securities)The fair values of investments in securities are measured at the quoted market price of the stock exchange of the equity instruments, and at the quotes obtained from the fi nancial institution for certain debt instruments. All investments in securities are classifi ed as available-for-sale securities.

Millions of Yen

March 31, 2010 Due in One Year or LessDue after One Yearthrough Five Years

Due after Five Yearsthrough Ten Years

Due after Ten Years

Cash and cash equivalents ¥ 16,740 — — —

Time deposits 1,623 — — —

Trade notes and accounts receivable 29,007 — — —

Investments in securities Available-for-sale securities with contractual maturities 18 ¥ 42 — —

Total ¥ 47,388 ¥ 42 — —


March 31, 2010 Due in One Year or LessDue after One Yearthrough Five Years

Due after Five Yearsthrough Ten Years

Due after Ten Years

Cash and cash equivalents $ 179,926 — — —

Time deposits 17,444 — — —

Trade notes and accounts receivable 311,759 — — —

Investments in securities Available-for-sale securities with contractual maturities 193 $ 447 — —

Total $ 509,322 $ 447 — —

Carrying Amount

March 31, 2010 Millions of Yen Thousands of U.S. Dollars

Investments in equity instruments that do not have a quoted market price in an active market ¥ 279 $ 2,997

DerivativesThe information of the fair value for derivatives is included in Note 11.

(b) Financial instruments whose fair value cannot be reliably determined

(5) Maturity analysis for fi nancial assets and securities with contractual maturities


11. DERIVATIVES

The Group enters into derivative fi nancial instruments, including interest swap and currency forward contracts, to reduce the exposure to fl uctuations in interest rates risk and foreign exchange rates risk associated with certain assets and liabilities denominated in foreign currencies.

All derivative transactions are entered into to hedge interest and foreign currency exposures incorporated within its business. Accordingly, market risk in these derivatives is basically offset by opposite movements in the value of hedged assets or liabilities.

Because the counterparties to these derivatives are limited to major international fi nancial institutions, the Group does not anticipate any losses arising from credit risk.Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the authorization.As noted in Note 10, the Group applied ASBJ Statement No. 10“Accounting Standard for Financial Instruments”and ASBJ Guidance No.19“Guidance on Accounting

Standard for Financial Instruments and Related Disclosures”. The accounting standard and the guidance are applicable to fi nancial instruments and related disclosures at the end of the fi scal years ending on or after March 31, 2010; therefore, the required information is disclosed only for 2010.

The Group had the following derivatives contracts outstanding at March 31, 2010 and 2009:

Derivative transactions to which hedge accounting is not applied for the years ended March 31, 2010 and 2009


2010 2009 2010Contracts OutstandingDue Within One Year

Unrealized Gain (Loss)

Contracts OutstandingDue Within One Year


Contracts OutstandingDue Within One Year


Foreign currency forward contracts:

Selling U.S. dollar ¥ 185 ¥ (0) ¥ 283 ¥ 2 $ 1,988 $ (2)Buying U.S. dollar 391 7 405 5 4,205 78

Buying Swiss franc 36 1 48 0 386 8

Buying Singapore dollar — — 17 (0) — —Buying pound sterling — — 45 0 — —Buying Hong Kong dollar 178 (2) 144 (2) 1,908 (14)Buying Thai baht 19 1 31 1 210 1

Buying euro 322 (6) 306 (0) 3,459 (67)Buying Swedish krona 3 (0) 2 (0) 33 (0)Buying Canadian dollar 11 0 30 (0) 119 2

Buying New Zealand dollar — — 4 1 — —

The contract or notional amounts of derivatives which are shown in the above table do not represent the amounts exchanged by the parties and do not measure the Group’s exposure to credit or market risk.

12. COMMITMENTS AND CONTINGENT LIABILITIES

The Group was contingently liable for guarantees of trade payables and bank loans owed by their unconsolidated subsidiaries, affi liate companies and a third party company in the amount of ¥46 million ($494 thousand) and ¥39 million at March 31, 2010 and 2009, respectively.

13. BREAKDOWN OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses during the years ended March 31, 2010 and 2009 are summarized as follows:

Derivative transactions to which hedge accounting is applied for the years ended March 31, 2010 and 2009There is no derivative transaction to which hedge accounting is applied for the year ended March 31, 2010.

Interest swap contracts which qualify for hedge accounting for the year ended March 31, 2009 are excluded from the disclosure of market value information, as not required by previous accounting standard.


2010 2009 2010Labor and payroll cost ¥ 13,406 ¥ 15,254 $ 144,085

Provision for accrued bonuses to employees 953 1,037 10,244

Provision for accrued pension and severance costs for:

Employees 806 681 8,658

Directors and corporate auditors 101 110 1,090

Provision for doubtful accounts 61 110 659

Depreciation 1,112 1,114 11,951

Amortization of goodwill 9 9 99

Other 12,568 15,908 135,076

Total ¥ 29,016 ¥ 34,223 $ 311,862


14. SEGMENT INFORMATION

(1) Industry Segments

The Group operates principally in the following three industry segments:(1) Air and sea cargo (2) Travel (3) OtherThe segment information of the Group in respect to the years ended March 31, 2010 and 2009, classifi ed by industry segments are presented below:

Millions of Yen

2010Industry Segment Elimination or

UnallocatableAmounts

ConsolidatedTotalAir and Sea Cargo Travel Other Total

a. Net sales and operating income

Net sales:

Net sales to outside customers ¥ 120,181 ¥ 3,160 ¥ 112 ¥ 123,453 — ¥ 123,453

Inter-segment sales/transfers — — 1,355 1,355 ¥ (1,355) —

Total sales 120,181 3,160 1,467 124,808 (1,355) 123,453

Operating expenses 118,198 3,018 1,281 122,497 (1,354) 121,143

Operating income ¥ 1,983 ¥ 142 ¥ 186 ¥ 2,311 ¥ (1) ¥ 2,310

b. Assets, depreciation and capital expenditures

Assets ¥ 72,592 ¥ 5,770 ¥ 6,538 ¥ 84,900 ¥ (3,457) ¥ 81,443

Depreciation 1,577 47 119 1,743 — 1,743

Capital expenditures 925 41 4 970 — 970

Millions of Yen





Net sales:

Net sales to outside customers ¥ 162,686 ¥ 4,618 ¥ 156 ¥ 167,460 — ¥ 167,460Inter-segment sales/transfers — — 1,441 1,441 ¥ (1,441) —

Total sales 162,686 4,618 1,597 168,901 (1,441) 167,460Operating expenses 158,617 4,363 1,361 164,341 (1,455) 162,886Operating income ¥ 4,069 ¥ 255 ¥ 236 ¥ 4,560 ¥ 14 ¥ 4,574


Assets ¥ 64,444 ¥ 6,050 ¥ 6,849 ¥ 77,343 ¥ (1,610) ¥ 75,733Depreciation 1,700 53 126 1,879 — 1,879Capital expenditures 1,010 78 11 1,099 — 1,099

Notes: The amounts of the common assets included in the column”Elimination or unallocatable amounts“were ¥2,882 million ($30,976 thousand) and ¥5,208 million for the years ended March 31, 2010 and 2009,

respectively, which mainly consisted of surplus funds (cash and securities).






Net sales:Net sales to outside customers $ 1,291,716 $ 33,961 $ 1,202 $ 1,326,879 — $ 1,326,879

Inter-segment sales/transfers — — 14,561 14,561 $ (14,561) —

Total sales 1,291,716 33,961 15,763 1,341,440 (14,561) 1,326,879

Operating expenses 1,270,401 32,437 13,765 1,316,603 (14,557) 1,302,046

Operating income $ 21,315 $ 1,524 $ 1,998 $ 24,837 $ (4) $ 24,833


Assets $ 780,224 $ 62,019 $ 70,268 $ 912,511 $ (37,162) $ 875,349

Depreciation 16,943 507 1,282 18,732 — 18,732

Capital expenditures 9,940 442 47 10,429 — 10,429


(2) Geographical Segments

The segment information of the Group in respect of the years ended March 31, 2010 and 2009, classifi ed by geographic segments is presented below:

Millions of Yen

2010Geographic Segment Elimination or


ConsolidatedTotalJapan

NorthAmerica

Europe East AsiaSouth Asia

and OceaniaTotal


Net sales:Net sales to outside customers ¥ 61,047 ¥ 10,198 ¥ 11,219 ¥ 21,813 ¥ 19,176 ¥ 123,453 — ¥ 123,453

Inter-segment sales/transfers 180 584 669 502 156 2,091 ¥ (2,091) —

Total sales 61,227 10,782 11,888 22,315 19,332 125,544 (2,091) 123,453

Operating expenses 60,283 10,787 12,360 21,664 18,134 123,228 (2,085) 121,143

Operating income ¥ 944 ¥ (5) ¥ (472) ¥ 651 ¥ 1,198 ¥ 2,316 ¥ (6) ¥ 2,310

b. Assets ¥ 45,324 ¥ 8,149 ¥ 9,988 ¥ 15,107 ¥ 10,779 ¥ 89,347 ¥ (7,904) ¥ 81,443

Millions of Yen




NorthAmerica


and OceaniaTotal


Net sales:Net sales to outside customers ¥ 72,156 ¥ 15,992 ¥ 19,668 ¥ 32,850 ¥ 26,794 ¥ 167,460 — ¥ 167,460Inter-segment sales/transfers 181 704 896 229 164 2,174 ¥ (2,174) —

Total sales 72,337 16,696 20,564 33,079 26,958 169,634 (2,174) 167,460Operating expenses 72,180 16,168 19,740 31,411 25,499 164,998 (2,112) 162,886Operating income ¥ 157 ¥ 528 ¥ 824 ¥ 1,668 ¥ 1,459 ¥ 4,636 ¥ (62) ¥ 4,574

b. Assets ¥ 40,574 ¥ 7,400 ¥ 10,493 ¥ 12,950 ¥ 8,968 ¥ 80,385 ¥ (4,652) ¥ 75,733





NorthAmerica


and OceaniaTotal


Net sales:Net sales to outside customers $ 656,137 $ 109,607 $ 120,579 $ 234,449 $ 206,107 $ 1,326,879 — $ 1,326,879

Inter-segment sales/transfers 1,939 6,278 7,188 5,391 1,677 22,473 $ (22,473) —

Total sales 658,076 115,885 127,767 239,840 207,784 1,349,352 (22,473) 1,326,879

Operating expenses 647,921 115,945 132,841 232,848 194,906 1,324,461 (22,415) 1,302,046

Operating income $ 10,155 $ (60) $ (5,074) $ 6,992 $ 12,878 $ 24,891 $ (58) $ 24,833

b. Assets $ 487,147 $ 87,584 $ 107,354 $ 162,368 $ 115,853 $ 960,306 $ (84,957) $ 875,349

Notes: The amounts of the common assets included in the column“Elimination or unallocatable amounts“were ¥2,882 million ($30,976 thousand) and ¥5,208 million for the years ended March 31, 2010 and 2009,

respectively, which mainly consisted of surplus funds (cash and securities).

(3) Net Sales in Foreign Countries

Net sales in foreign countries for the years ended March 31, 2010 and 2009 are presented below:Millions of Yen Thousands of U.S. Dollars

2010 2009 2010Net sales in foreign countries:

North America ¥ 10,323 ¥ 16,133 $ 110,950

Europe 11,444 19,901 122,996

East Asia 21,972 33,021 236,157

South Asia and Oceania 19,382 27,046 208,327

Others 3 12 28

Total ¥ 63,124 ¥ 96,113 $ 678,458

Percentage of such sales against consolidated net sales 51.1% 57.4%

Note: Net sales in India is switched from“Others”for the year ended March 31, 2009 to“South Asia & Oceania”for the year ended March 31, 2010. The modifi cation was made upon the inclusion of Yusen Air & Sea

Service (India) Pvt.Ltd. for consolidation in a manner consistent with the internal management reporting purpose. The effect of this change was to increase net sales in foreign countries by ¥683 million ($7,340

thousand) in South Asia & Oceania and to decrease by ¥683 million ($7,340 thousand) in Others for the years ended March 31, 2010.


15. PER SHARE INFORMATION

Per share information for the years ended March 31, 2010 and 2009 is summarized as follows:

Diluted net income per share is not mentioned since there was no securities with dilutive effect for the years ended March 31, 2010 and 2009.

Per share information is computed based on the following:

Yen U.S. Dollars

2010 2009 2010Net assets per share ¥ 1,225.21 ¥ 1,173.84 $ 13.169

Basic net income per share 36.63 25.68 0.394

Millions of YenThousands ofU.S. Dollars

2010 2009 2010Net income ¥ 1,545 ¥ 1,083 $ 16,603

Net income not subject to distribution to common shareholders — — —

Net income subject to current and future distribution to common stock 1,545 1,083 16,603

Number of Shares of Common Stock

2010 2009Weighted-average shares for the period 42,170,622 42,170,588

For the year ended March 31, 2010 Transaction for the Year Balance at End of Year

Name Address Amount of Capital Nature of BusinessOwnership

Interest (%)Relationship

Description of the Transactions

Millions of Yen

Thousands of U.S.Dollars

Account NameMillions of Yen

Thousands ofU.S. Dollars

Transaction with subsidiaries of a common parent:

NYKCruisesCo., Ltd.

Tokyo, Japan

¥2,000 million

Marine transportation

Travel business

(Owns the Company’s

shares)0.0

Purchasingcruisetours

Operatingcost ¥1,366 $14,683

Other current assets

(Prepaid cost)¥ 503 $ 5,411

Tradenotes and

accounts payable88 946

NYKFTC (Singapore) Pte. Ltd.

Singapore $5,000thousand Finance — Financing

Loan 6,215 66,797Other current assets (Loanreceivable)

2,035 21,869

Interest received 15 165

Other current assets (Accrued interest

receivable)0 2

16. RELATED PARTY TRANSACTION

Major transactions and major balances the years ended March 31, 2010 and 2009, respectively, with related parties are as follows:

For the year ended March 31, 2009 Transaction for the Year Balance at End of Year

Name Address Amount of Capital Nature of BusinessOwnership

Interest (%)Relationship

Description of the Transactions

Millions of Yen Account Name Millions of Yen

Transaction with subsidiaries of a common parent:

NYKCruisesCo., Ltd.

Tokyo, Japan

¥2,000 million

Marine transportation

Travel business

(Owns the Company’s

shares)0.0

Purchasingcruisetours

Operatingcost ¥2,160

Other current assets

(Prepaid cost)¥ 953

Tradenotes and

accounts payable98

NYKFTC (Singapore) Pte. Ltd.

Singapore $5,000thousand Finance — Financing

Loan 5,676Other current assets (Loanreceivable)

1,741

Interest received 37

Other current assets (Accrued interest

receivable)1

Information of parent company

Nippon Yusen Kabushiki Kaisha (Listed in Tokyo Stock Exchange, Nagoya Stock Exchange and Osaka Securities Exchange)

Notes: Consumption taxes are excluded from the amount of transactions.

Business policy on terms and conditions

(1) Purchase prices are decided based on market price.

(2) Interest on loans is decided in consideration of market rate.


17. SUBSEQUENT EVENT

1. The Company made an appropriation of retained earnings, proposed by the Board of Directors and approved at the General Meeting of Shareholders on June 29, 2010, as follows:

2. At the Board of Directors meeting held on May 28, 2010, the Company resolved to purchase a part of the logistics business of NYK Logistics (Japan) Co., Ltd. (NLJ; head offi ce: Chuo-ku, Tokyo, Japan; president: Masahiko Fukatsu), a consolidated subsidiary of Nippon Yusen Kabushiki Kaisha (NYK; head offi ce: Chiyoda-ku, Tokyo, Japan; president: Yasumi Kudo) in the form of a business transfer to the Company and concluded the contract on the same day.

(1) Corporate Name of the TransferorNYK Logistics Japan Co., Ltd.

(2) Business transferred International NVOCC and agency services associated with NVOCC, cargo transportation, container consolidation and other services

(3) Background and Objective of the Business Transferred Agreement

As released in“Nippon Yusen and Yusen Air & Sea Service Execute Letter of Intent for Integration of Logistics Business”on February 25, 2010, the Company and NYK have continued to work toward integration in order to gain a position as a world-class logistics service provider by reorganizing and optimizing logistics business units. As a result, the Company and NYK have reached an agreement to transfer a part of the logistics business of NLJ to the Company for integration in Japan.

(4) Assets and Liabilities to be Transferred

Notes: The above amounts are subject to change on the closing date.

(5) Business Transfer Price170 Millions of Yen

(6) Business Transfer (Effective Date)October 1, 2010 (tentative)


Cash dividends (¥8 ($0.08) per share) ¥337 $3,626

Assets Liabilities

ItemBook Value

ItemBook Value

Millions of Yen Thousands of U.S. Dollars Millions of Yen Thousands of U.S. Dollars

Current Assets ¥ 11 $ 118 — — —

Fixed Assets 90 967 — — —

Total ¥ 101 $ 1,085 Total — —


Independent Auditors’ Report


AMERICAS

● Yusen Air & Sea Service (U.S.A.) Inc.*

● Yusen Air & Sea Service (Canada) Inc.*

● Yusen Air & Sea Service do Brasil Ltda.

● Yusen Air & Sea Service (Mexico) S.A. de C.V.

▲ Yusen Travel (U.S.A.) Inc.

EUROPE

■ Yusen Air & Sea Service (Europe) B.V.*

● Yusen Air & Sea Service (Benelux) B.V.*

● Yusen Air & Sea Service (Deutschland) GmbH.*

● Yusen Air & Sea Service (U.K.) Ltd.*

● Yusen Air & Sea Service (France) S.a.r.l.*

● Yusen Air & Sea Service (Italia) S.r.l.*

● Yusen Air & Sea Service (Czech) s.r.o.

● Yusen Air & Sea Service (RUS) LLC

EAST ASIA

● Yusen Air & Sea Service (H.K.) Ltd.*

● Yusen Air & Sea Service (China) Ltd.*

● Yusen Shenda Air & Sea Service (Shanghai) Ltd.*

● Yusen Air & Sea Service (Beijing) Co., Ltd.*

● Yusen Air & Sea Service (Guangdong) Ltd.*

● Yusen Air & Sea Service Logistics (Shanghai) Co., Ltd.

● Yusen Air & Sea Service Logistics (Suzhou) Co., Ltd.

● Yusen Air Logistics (Xiamen) Co., Ltd.

● Yusen Air & Sea Service Logistics (Shenzhen) Ltd.

● Yusen Air & Sea Service (Taiwan) Ltd.*

● Yusen Air & Sea Service (Korea) Co., Ltd.*

▲ Yusen Travel (H.K.) Ltd.

SOUTH ASIA AND OCEANIA

● Yusen Air & Sea Service (Singapore) Pte. Ltd.*

● PT. Yusen Air & Sea Service Indonesia*

● Yusen Air & Sea Service (Australia) Pty. Ltd.*

● Yusen Air & Sea Service Philippines Inc.*

● Yusen Air & Sea Service (Thailand) Co., Ltd.*

■ Yusen Air & Sea Service Management (Thailand) Co., Ltd.*

● Yusen Air & Sea Service (Vietnam) Co., Ltd.*

● Yusen Air & Sea Service (India) Pvt. Ltd.*

■ YAS Real Estate (Vietnam) Co., Ltd.

● TASCO Berhad

▲ Yusen Travel (Singapore) Pte. Ltd.

JAPAN

● Yusen Air & Sea Service (Tohoku) Co., Ltd.*

● Yusen Air & Sea Service (Kitakanto) Co., Ltd.*

● Yusen Air & Sea Service (Tsukuba) Co., Ltd.*

● Yusen Air & Sea Service (Shinshu) Co., Ltd.*

● Yusen Air & Sea Service (Hokuriku) Co., Ltd.*

● Yusen Air & Sea Service (Chugoku) Co., Ltd.*

● Yusen Air & Sea Service (Kyushu) Co., Ltd.*

● Yusen Air Logitec Co., Ltd.*

● Yusen Air & Sea Service Keihin Trans Co., Ltd.*

▲ Yusen Travel Co., Ltd.*

▲ Ryowa Diamond Air Service Co., Ltd.*

■ Yusen Air Loginet Co., Ltd.*

*Consolidated subsidiary

● Cargo freight business (air and sea cargo)

▲ Travel business

■ Other business

Principal Group Companies (As of August 1, 2010)


Corporate History

1955Feb. Established ‘‘Kokusai Ryoko Kosha”

for handling of general travel and aircargo industry.

Mar. Transferred the goodwill fromInternational Travel Consultants Inc.(ITC), the member of International AirTransport Association (IATA).

Jun. Acquired a customs broker license andstarted customs clearance.

1959Sep. NYK Line acquired stocks which Osaka

Shosen Kaisha (O.S.K. Line) owned, andmade a subsidiary company by naming it‘‘Yusen Air Service Co., Ltd.”

1961Nov. Changed English corporate name to “Yusen Air

& Sea Service Co., Ltd.”

1968Oct. Established Yusen Air & Sea Service

(U.S.A.) Inc.

1973Aug. Established Yusen Air & Sea Service

(H.K.) Ltd.

1979Mar. Established Yusen Air & Sea Service

(Singapore) Pte. Ltd.

Dec. Acquired the license of domesticairfreight forwarder.

1984Feb. Acquired the license of international

airfreight forwarder.

1986Oct. Established Yusen Air International B.V.

and Yusen Air & Sea Service (Benelux)B.V. in the Netherlands.


(Deutschland) GmbH.

Apr. Established Yusen Air & Sea Service(U.K.) Ltd.

Dec. Invested in Tosho Unyu Co., Ltd. inNaka-ku, Yokohama City, Kanagawa.

1988Jun. Established Yusen Air & Sea Service

(Australia) Pty. Ltd.

Oct. Established Yusen Air & Sea Service(Canada) Inc.

1989Nov. Established Yusen Air & Sea Service

(France) S.a.r.l.

1990Jul. Established Yusen Air & Sea Service

(Taiwan) Ltd.

1991Jul. Established Yusen Air & Sea Service

(Kitakanto) Co., Ltd. in Utsunomiya City, Tochigi.

Sep. Established Yusen Air & Sea Service(Czech) s.r.o.

Established Yusen Air & Sea Service(Thailand) Co., Ltd. and Yusen Air & SeaService Management (Thailand) Co., Ltd.

Nov. Established Yusen Air & Sea Service(Korea) Co., Ltd. in South Korea.

Dec. Established Yusen Shenda Air & SeaService (Shanghai) Ltd. in China.

2003Sep. Tosho Unyu Co., Ltd. changed its name

to Yusen Air & Sea Service Keihin TransCo., Ltd.

Nov. Established Yusen Air & Sea Service(Beijing) Co., Ltd. in China.

2004Jun. Established the Istanbul Representative

Offi ce in Turkey.

Sep. Established Yusen Air & Sea Service(Vietnam) Co., Ltd.

Nov. Established the Krakow RepresentativeOffi ce in Poland.

2005Feb. Listed on the First Section of the Tokyo

Stock Exchange.

Nov. Established Yusen Air & Sea ServiceLogistics (Shenzhen) Ltd. in China.

2006Feb. Established Yusen Air & Sea Service

(Guangdong) Ltd. in China.

Apr. Established Dubai Representative Offi cein United Arab Emirates.

Jun. Yusen Air & Sea Staff Service Co., Ltd.changed its name to Yusen Air LoginetCo., Ltd.


(India) Pvt. Ltd.

May Established Yusen Air & Service (RUS)LLC. in Russia.

Jun. Yusen Air Logistics (Nagoya) Co., Ltd.changed name to Yusen Air LogitecCo., Ltd.

2008Oct. Established Yusen Air & Sea Service

Logistics (Suzhou) Co., Ltd. in China.

Nov. Established Yusen Air & Sea Service(Mexico) S.A.de C.V.

2009Nov. Commenced discussions for reorganization and

integration of logistics business with Nippon Yusen.

2010May Made agreement to transfer a part of the

logistics business of NYK Logistics Japan Co., Ltd. to YAS.

1992Apr. Established Yusen Air & Sea Service

Philippines Inc.

Oct. Established Yusen Air & Sea Service(Tsukuba) Co., Ltd. in Ibaraki.

1994Apr. Established Yusen Travel Co., Ltd. in

Chiyoda-ku, Tokyo.

Oct. Transferred the sales section of the traveldepartment to Yusen Travel Co., Ltd.

1996Jan. Established Yusen Air & Sea Service

(Italia) S.r.l.

Feb. Established Yusen Air & Sea Service(Shinshu) Co., Ltd. in Okaya City, Nagano.

Nov. Registered as over-the-counter stocksto Japan Securities Dealers Association.


(Tohoku) Co., Ltd. in Yamagata City,Yamagata.

Apr. Established Yusen Air Logistics (Nagoya)Co., Ltd. in Nagoya City, Aichi.

Jun. Invested in Ryowa Diamond Air ServiceCo., Ltd. in Chuo-ku, Tokyo.

Nov. Established Yusen Air & Sea Service DoBrasil Ltda.


(Kyushu) Co., Ltd. in Hakata-ku,Fukuoka City, Fukuoka.

Established Yusen Air & Sea Service(Hokuriku) Co., Ltd. in Komatsu city,Ishikawa.


(Chugoku) Co., Ltd. in Kurashiki City,Okayama.

Sep. Established Yusen Air & Sea Service(China) Ltd. in Hong Kong.

2001Jul. Established Yusen Air Staff Service Co.,

Ltd. in Chuo-ku, Tokyo.

Sep. Established Yusen Air & Sea ServiceLogistics (Shanghai) Co., Ltd. in China.

Oct. Established Yusen Air & Sea Service(Europe) B.V. to succeed YusenAir International B.V. to presidethe European business corporation.

2002Jan. Yusen Air & Sea Service (Singapore) Pte.

Ltd. invested in PT. Pusaka Yudhanusaof Indonesia, and changed name to PT. Yusen Air & Sea Service Indonesia.

Jun. Established Yusen Air Logistics (Xiamen)Co., Ltd. in China.



(As of March 31, 2010)

Shareholders’ Information

Head Offi ceYusen Hakozaki-cho Building,

30-1, Nihonbashi Hakozaki-cho,

Chuo-ku Tokyo 103-0015 Japan

Phone: +81-3-3669-4381

Fax: +81-3-3669-8540

URL: http://www.yusen.co.jp/

EstablishedFebruary 28, 1955

Paid-in Capital¥4,301 million

Common SharesNumber of authorized shares: 160,000,000

Number of issued shares: 42,220,800

Number of Shareholders4,587

Number of Employees (Consolidated)5,252

General MeetingThe 56th General Meeting of shareholders

in June 29, 2010 in Tokyo, Japan.

Independent Registered Public

Accounting FirmDeloitte Touche Tohmatsu LLC

MS Shibaura Building,

13-23, Shibaura

4-chome, Minato-ku,

Tokyo 108-8530, Japan

Transfer AgentThe Mitsubishi UFJ Trust and Banking Corporation

4-5, Marunouchi 1-chome, Chiyoda-ku,

Tokyo 100-8212, Japan

Stock ListingFirst Section of Tokyo Stock Exchange

For Contact:Corporate Communications & IR Department,

Yusen Air & Sea Service Co., Ltd.

E-mail: [email protected]

Stock Price

Years ended March 31 (Yen)

2006 2007 2008 2009 2010

High 6,840 3,750 3,210 2,140 1,446

3,480*

Low 3,500 2,330 1,066 841 932

2,950*

Stock prices are based on the Tokyo Stock Exchange trading.* Indicates the ex-rights price by stock split.

Major Shareholders

Name

Number ofshares held

(Thousand of Shares)

Percentage of Shares Held

Nippon Yusen Kabushiki Kaisha (NYK) 25,132 59.53%

BBH for Fidelity Low-Priced Stock Fund 4,221 10.00%

Japan Trustee Services Bank, Ltd.(Trust Account) 1,184 2.80%

The Master Trust Bank of Japan, Ltd.(Trust Account) 880 2.09%

Trust & Custody Service Bank, Ltd. 710 1.68%

Japan Trustee Services Bank, Ltd.(Trust Account 9) 702 1.66%

Yamato Holdings Co., Ltd. 605 1.43%

Morgan Stanley & Co. Inc. 569 1.35%

Bank of Tokyo-Mitsubishi UFJ, Ltd. 537 1.27%

Morgan Stanley & Co. International Plc 407 0.97%

Yusen Hakozaki-cho Building,

30-1, Nihonbashi Hakozaki-cho,

Chuo-ku Tokyo 103-0015 Japan

Cert no. SGS-COC-002499

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