2013Annual Report
Year ended March 31, 2013
Yusen Logistics Co., Ltd.
Presidents Message P.1 Presidents Message P.1 Presidents Interview
Feature P.7 FY2011 Integration P.10 FY2012 Fusion P.12 FY2013 Driving Dramatic Progress Operations P.17 Operations
Governance P.23 Corporate Social Responsibility (CSR) P.25 Corporate Governance P.31 Management
Financial P.36 Financial Highlights P.38 Managements Discussion and Analysis P.42 Financial Statements P.50 Notes to Consolidated Financial Statements P.81 Independent Auditors Report
About Us P.82 Company Profile P.83 History P.84 Investor Information
Contents
Forward-Looking StatementsThis annual report contains operating results forecasts of the Company and certain other statements that are not historical facts. These forward-looking
statements are based on information currently available to management when the annual report was produced and contain many uncertainties. Actual
performance may differ from projections for various reasons. Furthermore, the information contained in this annual report and other information on the
Company's website referred to herein includes information for reference in making investment decisions. However, this does not constitute solicitation to
buy or sell the Company's shares. The final investment decision rests solely with the user of this website and its content.
Editorial PolicyThe Company issues this annual report only on its website.
Pr ent s Message
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In principle, figures contained in graphs, tables, etc., in this annual report have been rounded to the nearest billion yen or million yen or to the nearest
whole number in the case of percentages, unless otherwise stated.
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Please NoteThis annual report contains links to the Company's website, which includes the latest information on the Company and is outside the reporting scope of
this annual report.
http://www.jp.yusen-logistics.com/ir/library/ar2013/
Annual Report 2013 1
Presidents Message
Reflections on Fiscal 2012
Q: Please summarize the business environment and your performance in fiscal 2012.
A: Our earnings declined even though sales increased year on year thanks to salesexpansion and the integration.
The international logistics market in fiscal 2012 lacked strength as a whole, as highlighted by persistent sluggishness
in the European economy and slowing growth in Asia. Most notable was a 14% year-on-year drop in air freight cargo
originating from Japan, which reflected a combination of industry structural changes, including the off-shore transfer of
production bases and a modal shift for cutting logistics costs.
Under these conditions, consolidated net sales were 339,049 million, up 30,045 million year on year on the back of
expanded sales and the business integration. However, consolidated operating income dropped 4,613 million year on
year to 1,659 million on account of a decline in volumes handled in air freight forwarding and lower profitability in
ocean freight forwarding.
In April 2012, we completed the integration of overseas logistics businesses with Nippon YusenKabushiki Kaisha by consolidating as subsidiaries local companies in China and Malaysia. Infiscal 2012, we also established local subsidiaries in Bangladesh and Turkey, and took otheractions that expanded Yusen Logistics global logistics network to 440 locations in 38 countriesworldwide.
Now we intend to take full advantage of integration synergies to bolster our sales and marketingcapabilities and continue expanding our bases. In tandem, we will focus on building ourcorporate platform, including the fusion of human resources and organizations, as we strive tobecome a world-class international forwarder.
Yusen Logistics Co., Ltd.2
Q: Looking back at fiscal 2012, what went well and not so well?
A: We saw the benefits of the business integration steadily show through and weincreased our international presence.
Having completed the integration of overseas logistics businesses early in the year, we worked hard in fiscal 2012 to
link our ocean freight forwarding, air freight forwarding and logistics businesses, to expand sales through base
expansion, to fuse human resources more and to accomplish other goals.
Medium-term Business Plan Progress
Q: Please explain the revisions to your medium-term business plan targets.
A: We initially made 1,000,000 TEU for ocean freight exports and 500,000 tons for airfreight exports medium-term business plan handling targets. However, because wesubsequently expected to have difficulty achieving these targets, we extended them intomedium- to long-term targets.
We announced revisions to our medium-term business plan numerical targets on April 27, 2012. Furthermore, on April
30, 2013, we made the following revisions for fiscal 2013, the final year of the plan, because market conditions are
vastly different from the ones we initially expected. We recognize that achieving the revised targets is a major
management challenge, and to this end, we are implementing the Project Re-engineering Yusen Logistics program.
In terms of linking ocean freight forwarding, air freight forwarding and logistics businesses, we worked on many fronts
to capitalize on the integration rather than respond as individual businesses. We focused on PLUS ONE sales
activities where we offer comprehensive services to customers spanning our various businesses as the name might
suggest. We also supported customers by harnessing our collective strengths across countries, thereby leveraging
our global network to good effect; we worked on marketing in a bid to win more business from non-Japanese
customers; and we made efforts to develop cross-trade business between Europe and the U.S. to Asia, and off-shore
business. Going forward, we plan to continue to step up these activities.
I feel that our international presence has been increasing recently. Through our businesses we have many
opportunities to make proposals for total logistics solutions to customers around the world.
Another noteworthy development for us in fiscal 2012 was our aggressive base development in emerging economies in
Asia. We established a local subsidiary in Bangladesh, and expanded and enhanced warehouse facilities in India and
Indonesia. And thats in addition to base expansion in East Asia, and South Asia & Oceania that we achieved through
the business integration.
We now have approximately 16,000 employees in the YLK Group. As an international forwarder, we are pushing
ahead with programs to develop global human resources, including training for local staff, in order to ensure that all
staff work from a shared perspective.
Annual Report 2013 3
Feature: FY2011Integration
FY2012Fusion
FY2013Driving Dramatic Progress
Q: What progress have you made with your business and sales strategies?
A: We have stepped up approaches to strategic customers through industry-basedmarketing, and expanded the off-shore business.
Under our business strategy, we have expanded the handling of off-shore business, which doesnt come through
Japan, and European and U.S. business in both air freight and ocean freight. Furthermore, we have worked to
enhance service quality, which is underscored by certification under the Authorized Economic Operator (AEO)
program.
In terms of our sales strategy, we have identified our strong fields and the industries we should focus on, and
developed strategic marketing approaches for each field, and associated sales activities. The eight fields we are
focusing on are health care/medical equipment, automobile-related, aircraft-related, project-related including plant
export, environmental energy, retail, chemical, and technology.
Yusen Logistics Co., Ltd.4
pr gram.
In fiscal 2012, we concentrated on certain marketing activities. These included the international pharmaceuticals trade
show INTERPHEX JAPAN in the health care/medical equipment field, and the Japan International Aerospace
Exhibition in the aircraft-related field. In the automobile-related field, we entered into a business alliance with a major
Mexican trucking company to expand land transport services in Mexico.
Furthermore, we promoted our Corporate Account Program (CAP), which strategically targets approximately 30
customers. Thanks to this initiative to provide strategic support across the group beyond the frameworks of individual
businesses and regions, we were able to expand our business domains in fiscal 2012, including winning new
business.
Our logistics business is working on expanding sales through warehouse facility expansion, and has developed one of
the largest warehouse networks of any Japanese logistics company in Australia and India.
Q: Please explain your area strategy, including developments in emerging markets.
A: We are actively expanding bases with the view to making inroads in emerging markets.
We continue to strategically develop our operations in emerging markets. In fiscal 2012 we established local
subsidiaries in Bangladesh and Turkey.
In the same vein, we are looking at establishing local subsidiaries in Cambodia and Myanmar, where growth potential
is huge, in the summer of 2013. To support these developments, we held well-attended logistics seminars targeting
Cambodia, Myanmar and Bangladesh at three locations in Japan in fiscal 2012. In Russia, we opened a branch as a
stepping stone into the Far East. We have also opened a new branch in China.
In another strategic move, we opened a representative office in South Africa as part of our efforts to develop the African
market, which is expected to witness strong growth going forward. In South America, we are making progress
expanding bases in countries like Brazil.
The YLK Groups base network has increased with the opening of bases in China and warehouse expansion in South
Asia & Oceania.
Annual Report 2013 5
Q: What are the main initiatives you have planned for fiscal 2013?
A: We intend to make even more progress with our existing strategies.
We plan to build on our existing strategies (business, sales, area and basic management) through greater
Corporate Platform Strengthening
Q: Please discuss the development of the people who will be key to strengthening thebusiness platform.
A: We are continuing to run training programs and take other steps to fuse and developpeople with a global outlook.
People are our greatest asset. Indeed, in order for us to grow as an international forwarder, it is crucial that we develop
people with a broad outlook who can provide total logistics solutions.
Global human resources (GHR) is a key aspect of our management plan. True to this positioning, we are promoting
local employees to management positions at overseas subsidiaries and exchanging personnel within the group. To
promote this, we held various training programs in fiscal 2012. These included the Senior Management Program
(SMAP) for employees who are candidates for senior positions in the future, and the Global Sales Enrichment
Program (GSEP) for mid-level sales employees. In the second program after being launched in fiscal 2011, GSEP
aims to develop people who can make proposals for total logistics solutions and to build a network among employees.
Fiscal 2011 program participants have quickly demonstrated the benefits through their activities around the world and
cooperation with fellow participants.
Q: What is your stance on CSR?
A: I view this as an extremely important theme in our drive to raise our value as a globallogistics company.
Only by earning the trust of the global community can a company continuously raise its value as a corporation. I see
CSR activities as an extremely important theme for this. That is why we are working to increase quality, safety and
satisfaction, as we run the company in a way that is mindful of corporate ethics, the protection of human rights and
service to regional communities.
cooperation between Japan and each region around the world.
Under our business strategy, we plan to work actively in all businessesocean freight forwarding, air freight
forwarding and logistics.
Specifically, we aim to handle 650,000 TEU in ocean freight forwarding by strengthening relations with core carriers
globally. A concurrent goal is to improve operational efficiency to secure earnings.
In air freight forwarding, we will strengthen cooperation within the YLK Group network to expand off-shore cargo
transportation, which doesnt come through Japan.
In the logistics business, as we aim to increase earnings at all bases, we plan to continue expanding bases,
especially in South Asia & Oceania, as well as further raise service quality by continuing the No. 1 Kaizen Company
program.
Yusen Logistics Co., Ltd.6
Message for Fiscal 2013
Q: What is your outlook for fiscal 2013? And what expectations do you have for it?
A: We will work to reform our structures and improve our operational efficiency to equipus with top-class international competitiveness.
In fall 2013, we will mark the third year since our business integration. Up to now, we have prioritized the expansion of
volumes handled. In fiscal 2013, in addition to these initiatives, we intend to strengthen our cost competitiveness. For
this, in April 2013, we launched the Project Re-engineering Yusen Logistics program. This is not simply a cost-
reduction project, as we also intend to fundamentally reform our operational and organizational approaches over the
next two years. First of all, during the course of fiscal 2013, we aim to reduce administration division costs by 1.0
l g t p .
Compliance is an issue that each and every employee must make their own respons bility. We are instilling this
awareness in employees and creating frameworks for that so employees practice rigorous compliance in their daily
business. Governance is an equally important issue. We have established a system according to regional needs, built
on close cooperation between Head Office in Japan and each region around the world.
Another important theme is environmental protection. One of our main initiatives here is a forest adoption program in
Japan that seeks to reduce CO2 emissions and protect biodiversity, among other aims. Additionally, in a recent move
in fiscal 2012, Yusen Logistics (Americas) Inc. installed a solar power generation system at one of its warehouse
facilities.
billion. By the end of fiscal 2014, meanwhile, we aim to improve the efficiency of sales and business divisions, as well
as revamp our organizational structure.
Q: Finally, do you have a message for shareholders?
A: We will strive to harness the strengths of all the YLK Groups employees to raise ourcorporate value and in this way meet the expectations of all stakeholders.
Our operating environment remains challenging, as underscored by protracted malaise in the international logistics
market. However, we are gradually seeing the benefits of the integration show through in increased volumes handled
and other areas. We are also making steady progress with the fusion of human resources and other measures toward
achieving our next stage of growth.
So that we continue to meet the expectations of all stakeholders, we aim to raise our corporate value by achieving
growth as a group. We also see the return of profits to shareholders as the highest priority of management. In line with
this, we are committed to paying stable dividends, as long as we generate sufficient profit.
Harnessing the passion and strengths of all the groups employees, we aim to become a world-class international
forwarder.
Annual Report 2013 7
Yusen Logistics was established in October 2010 as result of the integration in Japan of Yusen Air & Sea Service
Co., Ltd., which had strengths in air freight forwarding, and NYK Logistics (Japan) Co., Ltd., which had strengths in
contract logistics and ocean freight forwarding. Following the integration in Japan, overseas logistics businesses were
progressively integrated. This process was completed in April 2012 with the consolidation as subsidiaries of
companies in China and Malaysia.
This integration has created a world-class company with a global network with more than 400 locations in 38
countries. Possessing a broad range of services extending from air and ocean freight forwarding to contract logistics,
we are now capable of supporting customers to optimize their logistics as a total logistics provider.
Yusen Logistics Co., Ltd.8
A global network based on five regionsWe have a global network covering five regionsJapan, Americas, Europe, East Asia, and South Asia & Oceaniain
38 countries and regions, as of March 31, 2013. Leveraging this global network, we can meet customers needs in
any region and offer the operational knowhow we have amassed in Japan for delivering high-quality logistics services
worldwide.
A balanced business structureThe integration has created a well-balanced structure not only in terms of the mix of businesses (air freight forwarding,
ocean freight forwarding and logistics), but also the share of sales in regions around the world. With a business
structure that isnt excessively dependent on any particular region or business, we have a firm business base.
Annual Report 2013 9
The ability to make proposals for various logistics needsYusen Logistics can make optimal and speedy logistics strategy proposals for customers increasingly diverse and
sophisticated needs because we offer air and ocean freight forwarding and contract logistics services, and have a
global network of bases. The proposals are also backed by the extensive expertise and experience of our people
amassed over more than 50 years in the logistics business.
Yusen Logistics Co., Ltd.10
In fiscal 2012, we made progress with our strategies for business, sales, areas and basic management under our GO
FORWARD, Yusen Logistics medium-term business plan. In particular, we worked to expand our business bases for
Driving Dramatic Progress in the future and to fuse the organization and change employee awareness. Following the
completion of overseas logistics business integration in April 2012, we established local subsidiaries in Bangladesh,
Turkey and elsewhere, and expanded our bases in South Asia & Oceania to expand sales. Moreover, we developed
training for local staff and made gains fusing the entire group.
Annual Report 2013 11
Human resources are our greatest asset. The business integration has created a total logistics provider that is able to
offer various servicesair and ocean freight forwarding and contract logistics. As such, we are also developing
logistics professionals who can sell all of these services. We continue to concentrate on equipping all our employees
worldwide with the insight and expertise to provide detailed responses to customers logistics needs. This should
strengthen our organization and enable us to achieve our medium- and long-term targets.
* Click here for more details on "3D Management".
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Yusen Logistics Co., Ltd.12
Under our medium-term business plan, we have made progress with organizational integration and achieved greater
fusion. However, we have revised our numerical targets because business conditions are vastly different from what we
initially expected. In order to achieve the revised targets for fiscal 2013, the final year of our medium-term business
plan, we must make progress expanding sales in a way that meets customer needs, and initiate the Project Re-
engineering Yusen Logistics program to reform operations and improve earnings.
Annual Report 2013 13
Our business integration was basically completed in April 2012. However, in order to avoid any operational confusion
caused by integration, we have essentially maintained the existing organizational structure. In fiscal 2013, we plan to
implement the Project Re-engineering Yusen Logistics program to revamp our cost structures.
Yusen Logistics Co., Ltd.14
We will continue to promote our unique 3D Management strategy, which seeks to secure balanced profits by
expanding sales efficiently in three dimensions, by area, business, and customer or industry, and by managing them
from various aspects. We will further improve our basic management, business, sales and area strategies with
integrity, innovation, and intensity.
Annual Report 2013 15
Yusen Logistics Co., Ltd.16
Annual Report 2013 17
Review of Operations
Yusen Logistics Co., Ltd.18
The Japan segment, including domestic consolidated subsidiaries, saw sales drop 10.6% to74,853 million and segment profit fall 93.8% to 103 million from the previous fiscal year.
Market Conditions and Company InitiativesAir Freight Forwarding
The volume of air freight exports declined 15.2% year on year, reflecting a number of factors. These included
protracted economic sluggishness in Europe, an economic slowdown in Asia, the absence of hit products to create
special demand, and logistics cost revisions, which spurred a shift to ocean freight forwarding and led to lower air
freight movement. Air freight imports mirrored air freight exports in terms of the modal shift to ocean freight forwarding.
Air freight imports were soft as a whole due also to a lackluster domestic economy. As a result, freight volumes
handled declined 2.0% year on year.
Ocean Freight Forwarding
In the ocean freight forwarding business, the volume of ocean freight exports handled on a TEU basis increased 9.7%
year on year due to progress expanding sales. In terms of imports, however, freight volumes handled declined 0.4%
year on year, despite movement of apparel and other imports.
Annual Report 2013 19
The Americas segment recorded sales of 77,269 million, up 10.3% year on year. The segmentrecorded an operating loss of 6 million due primarily to increased expenses at newlyconsolidated companies. In the previous fiscal year, the segment recorded an operating loss of577 million.
Market Conditions and Company InitiativesAir Freight Forwarding
In air freight exports, freight volumes handled in the year under review increased 4.8% year on year mainly on the
back of higher volumes of medical equipment-related products. In air freight imports, freight volume handled rose 6.6%
year on year, reflecting mainly freight movement of automotive components.
Ocean Freight Forwarding
In the ocean freight forwarding business, freight volumes handled on a TEU basis increased 18.5% year on year. This
increase was primarily attributable to volumes handled of automotive components exports. Ocean freight imports
handled rose 10.8% year on year, reflecting mainly consumer goods-related freight.
Logistics
In logistics operations, earnings improved due to the benefits of cost reduction, as well as increased consumer goods-
related volumes in line with recovering personal spending.
*Exchange Rate: 82.33 (2013) ($1) 79.06 (2012)
Yusen Logistics Co., Ltd.20
The Europe segment recorded sales of 76,157 million, down 0.9% year on year, amid persistenteconomic sluggishness. The segment recorded an operating loss of 247 million, compared witha profit of 924 million in the previous fiscal year.
Market Conditions and Company InitiativesAir Freight Forwarding
In air freight exports, volumes handled rose 5.6% year on year, thanks to volumes of electronic and electrical
equipment-related products. Air freight imports, meanwhile, recorded a 15.4% year-on-year decline in volumes
handled, with the main decreases coming in freight originating from Japan and Asia.
Ocean Freight Forwarding
In the ocean freight forwarding business, export volumes handled on a TEU basis increased 1.4%, the result mainly of
volumes handled of automotive components. Imports handled rose 2.4% year on year, even though the market was
soft. This increase was partly due to the modal shift from air freight forwarding.
Logistics
Logistics operations saw volumes handled comprising mainly automotive components and electronic and electrical
equipment-related products. However, some companies, particularly in southern Europe, saw business results
deteriorate.
*Exchange Rate: 106.48 (2013) (1) 110.20 (2012)
Annual Report 2013 21
The East Asia segment recorded sales of 54,988 million, up 37.9% year on year due to growth involumes handled and sales. However, the segment recorded an operating loss of 1,149 million,compared with a profit of 2,114 million in the previous fiscal year, due to higher ocean freightrates and other factors.
Market Conditions and Company InitiativesAir Freight Forwarding
In air freight exports, volumes handled rose 1.0% year on year. However, intensifying competition in the market
pressured profitability. In air freight imports, freight volumes handled increased only 0.3%, with little evidence of an
upturn in freight forwarding due to the protracted global economic malaise.
Ocean Freight Forwarding
In the ocean freight forwarding business, export volumes handled on a TEU basis jumped 111.6% and import volumes
handled climbed 25.6% due to sales expansion and business integration in China.
Logistics
Sales expanded along with increased business from business integration. However, higher costs during the integration
process meant that these higher sales did not translate into improved profits.
Yusen Logistics Co., Ltd.22
The South Asia & Oceania segment recorded sales of 60,483 million, up 42.5%, the result mainlyof business integration. Segment operating income was 3,269 million, up 40.2% year on year.
Market Conditions and Company InitiativesAir Freight Forwarding
In air freight exports, volumes handled declined 4.4% year on year due to a give-back following emergency transport
demand related to the floods in Thailand in the previous fiscal year and an economic slowdown in South Asian
countries. In air freight imports, freight volumes handled rose 9.0% year on year, the result of the contribution from
business integration.
Ocean Freight Forwarding
In the ocean freight forwarding business, business integration and sales expansion led to a 44.9% rise in export
volumes handled on a TEU basis. Import volumes handled rose 99.1% for the same reasons.
Logistics
Sales in logistics operations increased year on year, reflecting efforts to expand bases, as well as the effects of
business integration.
Annual Report 2013 23
Corporate Social Responsibility (CSR)
The YLK Group engages in various activities guided by its CSR activity policy.
Environmental ActivitiesInstallation of LED Lighting at NARITA Logistics Center
In 2011, lighting on the first floor of the warehouse, an
area of approximately 6,864 m2, was replaced with LED
lighting. This move was part of efforts to reduce energy
use and save electricity under the Act on the Rational
Use of Energy. Thereafter, in September 2012 all
mercury lamp light fittings on the third floor of the
warehouse were replaced with LED lights. These
replacements are expected to cut electricity
consumption by approximately 40% in the areas where
LED lighting has been installed. The total reduction for
the warehouse facility as a whole is estimated at
approximately 25%.
Given the meaning of CSR (Corporate Social Responsibility), corporate activities that focus only on compliance are
incomplete. Indeed, companies today are required to go a step further and understand that they are members of
society and must therefore give due consideration to social ethics, human rights, the global environment and local
communities. Embracing this change in the social environment, the YLK Group is tackling its corporate social
responsibility sincerely, determined to meet the expectations of shareholders while aiming to achieve sustainable
development.
Yusen Logistics Co., Ltd.24
replace ents ar e ect
Adopted Forest Absorbs 25.2 Tons of CO2
The YLK Group is participating in Japans National
Campaign for Building Beautiful Forests. As a specific
activity, the YLK Group signed a three-year Forest
Foster Parent (Forest of Creation) agreement with
Tateshina Town in Kitasaku-gun, Nagano Prefecture, in
October 2010 and began forest regeneration activities.
Since then, employees and their family members have
volunteered their time to care for the forest.
In fiscal 2011, the year ended March 31, 2012, the
adopted forest absorbed 25.2 tons of CO2. On July 18, 2012, we received a forest CO2 absorption certificate* from
Nagano Prefecture.
*Certifies via evaluation and screening the CO2 volume absorbed by efforts of environmentally advanced companies through the Adopt-a-ForestProgram being promoted by Nagano Prefecture.
Environmental Load Data Collection Activities
Up to the fiscal year ended March 2010, we
conducted environmental load data collection
activities as part of the NYK Groups environmental
activities. As a new initiative, we developed a
system for managing environmental load data,
which came online in the year ended March 2011.
Using this system to collect environmental load
data for all group companies, we aim to reduce
environmental emissions from each business site
by analyzing the emissions data in more detail than
before.
ComplianceThe Company distributes a Code of Conduct for all YLK Group employees. The Code of Conduct ensures that our
company is in line with social standards, and requires each YLK Group employee not only to observe laws and
regulations, but also to carry out and accomplish corporate activities and routine work in accordance with corporate
ethical guidelines and social morals. Our aim is to ensure that we win recognition from society and are respected as a
trustworthy company. To this end, the Company has also distributed the Group Compliance Manual, which requires
all officers to lead by example in terms of compliance. It also asks Group employees to improve their understanding of
compliance and at the same time serves as guidelines for their daily activities.
Annual Report 2013 25
Corporate Governance
1. Independent Corporate Auditors Support SystemThe Company appoints independent corporate auditors in order to ensure the objectivity and neutrality of Board of
Directors decision making by reflecting external, independent viewpoints in management. Matters for deliberation in
and reporting to the Board of Executive Officers and the Board of Directors are notified in advance to independent
corporate auditors and time is set aside for them to express their opinions at these meetings, so that corporate
auditors can properly fulfill the function expected of them.
Auditors
The Company seeks to maintain its standing as a good corporate citizen, earning the trust of all stakeholders and
their ongoing support. To this end, the Company upholds a high standard of ethics its business activitiesglobal
logistics servicesand strives to engage in fair and dependable business practices in compliance with prevailing laws
and within accepted social parameters.
The Company introduced an executive officer system in June 2005 with two aims: (1) to clarify the functions of the
Board of Directors for quick decision making on management strategies and policies and (2) to accelerate decision
making and clarify responsibility in the execution of operations.
Directors and executive officers are obliged to report to the Board of Directors and the Board of Executive Officers,
respectively, which in turn deliberate on and supervise operations.
The corporate auditors ensure healthy and good-quality corporate governance by inspecting the directors performance
of their duties and by monitoring the directors implementation of their duty of care in cooperation with the Internal
Audit Chamber and through reports from the Accounting Auditor.
Yusen Logistics Co., Ltd.26
The corporate auditors attend meetings of the Board of Directors and Board of Executive Officers to stay abreast of
business challenges. Furthermore, in order to develop a deeper understanding of the actual status of operations, they
also attend other important Company-wide meetings, including sales meetings and budget meetings. Moreover,
corporate auditors conduct proper audits designed to prevent violations of laws and regulations and the Articles of
Incorporation.
The Company has established the Internal Audit Chamber, which carries out planned audits of the Company. The
Companys corporate auditors conduct hearings on the audit plans of the Accounting Auditor at the beginning of the
fiscal year and receive reports on audit results at the end of the fiscal year. Corporate auditors are also present when
the Accounting Auditor conducts audits to confirm the audit methodology. Moreover, corporate auditors cooperate
with the Internal Audit Chamber and receive regular reports on the audit results.
The certified public accountants that performed the accounting audit of the Company were Yuji Itagaki, Tomoya Noda
and Kenji Morita, who all belong to Deloitte Touche Tohmatsu LLC. In addition, four other certified public accountants
and five other people assisted with accounting audit work of the Company.
3. Reasons for Selecting Current Corporate Governance FrameworkThe Companys Board of Directors has five members. In order to inspect the decision making of the Board of Directors
from an objective and neutral viewpoint, four corporate auditors, including two independent corporate auditors, conduct
audits.
The Company has not appointed any outside directors at present. However, the Company believes that it has
established a framework for proper supervision of management functions properly by independent corporate auditors,
who express opinions and offer advice from objective viewpoints at Board of Directors meetings based on their
external insight and experience.
2. Matters Relating to Business Execution, Audit and Supervision, Nomination,Compensation Setting and Other Functions (Overview of Current CorporateGovernance Framework)
The Company has a system where the directors perform their duties properly and efficiently in accordance with their
authority and the decision-making rules stipulated in the regulations of the Board of Directors and the rules for
submitting proposals to the Board of Directors. The Company has five directors. The directors pass resolutions about
matters stipulated in laws and regulations and the Articles of Incorporation and important management issues at
ordinary Board of Directors meetings, which are held once a month, or extraordinary Board of Directors meetings,
which are held as needed.
Furthermore, the Company has introduced an executive officer system. The Board of Executive Officers, which is
made up of 19 executive officers, including executives who are also directors, meets twice a month. All executive
officers perform their duties under the directions and supervision of the representative directors. This system
accelerates decision making, clarifies responsibility in the execution of duties and raises management transparency
and efficiency.
Annual Report 2013 27
The Company is putting in place the necessary mechanism (internal control system) to ensure that work is done
appropriately, based on the Companies Act and in compliance with laws and regulations. The Companys basic
policies are set out below.
1. System ensuring that the directors and other officers performance of their dutiescomply with laws and regulations
1. Considering that fulfilling corporate social responsibility (CSR) is the core of management, the Company has
developed the Compliance Manual and the Code of Conduct. The Code of Conduct stipulates guidelines that the
directors, executive officers and employees should follow. The directors take the lead in complying with the Code of
Conduct, and make sure that a workable internal system is in place to keep concerned parties within and outside of
the Company informed about the Code of Conduct.
2. The Company has established the Compliance Committee as an organ to ensure that the directors and executive
officers comply with laws and regulations and perform their duties appropriately.
3. The Board of Directors is seeking to maintain an environment where the corporate auditors can carry out effective
audits.
2. System ensuring that the employees performance of their duties comply with laws andregulations
1. The Company has prepared the Compliance Manual, a handbook consisting of the Code of Conduct and other
compliance regulations, so that the employees of the Group will comply with laws and regulations and will perform
corporate activities and day-to-day operations in compliance with the corporate ethical guidelines and social morals.
2. To promote compliance, the Company has established the Compliance Committee, chaired by the President, the
position of Chief Compliance Officer (CCO), and the CSR/Risk Management Chamber. The Company and each
Group company appoint a CSR Leader at each workplace, who promotes compliance, to promote thorough
compliance with corporate ethics and social norms in an organized way.
3. To promote compliance, the Company works out a Group compliance program each year to operate education and
training systems, and maintains whistle-blowing and consulting systems to identify compliance risks. By the end of
each fiscal year, a general review of compliance is carried out, and the results are reported to the Compliance
Committee.
3. System for storage and management of information on the directors performance oftheir duties
1. Documents and other information relating to the performance of duties of the directors of the Company are stored
and managed properly under internal regulations including the document management rules.
2. Critical documents of the Company are managed and stored and laid open for inspection in accordance with their
levels of importance and confidentiality.
Yusen Logistics Co., Ltd.28
4. Regulations and system relating to management of risks of loss1. The Company has established the CSR/Risk Management Chamber, which specializes in managing significant
risks that might affect the management of the Company or might have Company-wide effects. The CSR/Risk
Management Chamber is responsible for identifying, analyzing, and assessing risks and for taking appropriate
action.
2. Each division manages risks relating to its operations in accordance with relevant internal regulations and in
cooperation with the CSR/Risk Management Chamber.
3. The CSR/Risk Management Chamber reports risks and risk management to the Compliance Committee, which is
chaired by the President, and to the Disaster Risk Management Meeting.
4. The Company has authorized a Business Continuity Basic Policy and a BCP Manual, which stipulate measures for
disaster prevention and mitigation, steps to confirm the safety of employees and their families, and post-disaster
recovery actions, including the establishment of a disaster response office in the event of an emergency situation,
such as a major disaster or disruption. Based on the policy and manual, the Company has established a crisis-
management system.
5. The Company has established the Personal Information Management Regulations to protect personal information.
5. System ensuring that the directors and other officers perform their duties efficiently1. There is a system where the directors perform their duties properly and efficiently in accordance with their authority
and the decision-making rules stipulated in the regulations of the Board of Directors and the rules for submitting
proposals to the Board of Directors.
2. The directors pass resolutions about matters stipulated in laws and regulations and the Articles of Incorporation
and important management issues at ordinary Board of Directors meetings, which are held once a month, or
extraordinary Board of Directors meetings, which are held as needed.
3. The executive officers pass resolutions on necessary issues and deliberate on issues to be submitted to the Board
of Directors in advance at meetings of the Board of Executive Officers, which are, in principle, held twice a month,
based on the regulations of the Board of Executive Officers. The executive officers thereby ensure prompt and
efficient decision making by the Board of Directors.
4. The Board of Directors determines the rank and responsibilities of each director and executive officer and discloses
them immediately after they are determined.
6. System ensuring appropriate operations at the Company and the Group, consisting ofthe parent company and subsidiaries
1. To ensure the healthy and efficient management of the Group, the Company has established the Group
Management Basic Policy and develops Group management strategies and systems based on the policy.
2. The Company has established sections at head office that are responsible for the operations of its subsidiaries in
Japan and overseas. Those sections manage the subsidiaries appropriately based on the situation of the
subsidiaries under the affiliate management regulations.
Annual Report 2013 29
p
3. The Company has each Group company seek to comply with laws, regulations, and norms through compliance
activities under the Code of Conduct in developing and operating an internal control system.
4. The internal auditing department assesses the status of risk management and compliance activities at each Group
company through internal audits and gives advice and makes suggestions for improvement as needed.
7. Corporate auditors requests to have employees who will support their performance ofduties
1. The directors maintain a system to respect the corporate auditors requests to have employees who will support the
performance of their duties.
8. Independence of the employees mentioned in the preceding item from the directors1. If the corporate auditors have employees who will support the performance of their duties, the directors maintain a
system to respect the opinion of the corporate auditors about the independence of the employees from the
directors.
9. System for the directors and employees to report to the corporate auditors andsystems relating to other reports to the corporate auditors
1. The Board of Directors ensures that the corporate auditors perform their duties stipulated in the regulations of the
Board of Corporate Auditors.
2. Corporate auditors exercise the authority granted them under laws and regulations and communicate with the
directors, executive officers and employees to carry out fair audits of the legality and efficiency of their performance
of duties.
3. Corporate auditors carry out fair audits to prevent violations of laws and regulations and the Articles of Incorporation,
seeking to assess business challenges and actual business conditions through the following activities:
Attendance at meetings of the Board of Directors and the Board of Executive Officers
Attendance at important Company-wide meetings, including sales meetings and budget meetings
Attendance at compliance meetings and disaster risk management meetings
Holding regular meetings for exchanging opinions with the representative directors, including the President
Perusing important documents relating to the execution of business, including the minutes of Board of Directors
meetings and circulars sent to obtain approval for decisions on proposals made at meetings of the Board of
Directors and the Board of Corporate Auditors
10. Another system for ensuring efficient audits by the corporate auditors1. The corporate auditors maintain a system for enhancing the effectiveness and efficiency of audits in which they
cooperate and exchange opinions with the Accounting Auditor and the Internal Audit Chamber.
Yusen Logistics Co., Ltd.30
t
11. System for ensuring compliance with the Financial Instruments and Exchange Act1. The Company has built an internal control system necessary for preparing adequate financial statements under the
Financial Instruments and Exchange Act and assesses the effectiveness of the development and operation of the
system.
Annual Report 2013 31
Motonobu Kobayashi
Auditor (Full-time)
Masaaki Hashimoto
Auditor (Full-time)
Hiromitsu Kuramoto
President andRepresentative Director
Hiroyuki Yasukawa
Representative Director,Senior Managing ExecutiveOfficer
Shoji Murakami
Representative Director,Senior Managing Executive Officer
Kenichi Kotoku
Director,Managing Executive Officer
Akio Futami
Director,Managing Executive Officer
As of June 27, 2013
Management
Makoto Satani
Auditor (Part-time),Independent Auditor
Setsuko Kusumoto
Auditor (Part-time),Independent Auditor
Yusen Logistics Co., Ltd.32
Tatsuo Aoyagi
Managing Executive Officer
Takashi Isobe
Executive Officer
Toshiyuki Kimura
Executive Officer
Tatsuhiko Saeki
Executive Officer
Eiichi Suzuki
Executive Officer
Taiji Kitagawa
Executive Officer
Kazuo Ishizuka
Executive Officer
Hidetoshi Nakanishi
Executive Officer
Minoru Futonaka
Executive Officer
Toru Kamiyama
Executive Officer
In
Annual Report 2013 33
Yasuhiko Ueda
Executive Officer
Masayuki Yokoyama
Executive Officer
Takeshi Hagiwara
Executive Officer
Kunihiko Miyoshi
Executive Officer
Yusen Logistics Co., Ltd.34
Board of Directors
Appointment Name Management Area
President andRepresentative Director
Hiromitsu Kuramoto
Representative Director Hiroyuki Yasukawa Japan Region, Corporate Officer of NipponYusen Kabushiki Kaisha
Shoji Murakami Business Development & Planning Dept.,Global Ocean Freight Business Dept., GlobalAir Freight Business Dept., Contract Logistics& Transport Dept.
Directors Kenichi Kotoku Internal Audit Chamber, CSRRiskManagement Chamber, General Affairs Dept.,Human Resources Dept., OperationAdministration Dept., Information BusinessSystem Dept., Customs Clearance ControlChamber, Public Relations Dept.
Akio Futami Corporate Planning Dept., Accounting Dept.,Investor Relations Dept.
Auditors
Appointment Name
Auditors (Full-time) Motonobu Kobayashi
Masaaki Hashimoto
Auditors (Part-time),Independent Auditors
Makoto Satani
Setsuko Kusumoto
Annual Report 2013 35
Executive Officers
Appointment Name Management Area
President Hiromitsu Kuramoto
Senior Managing ExecutiveOfficers
Hiroyuki Yasukawa East Japan Export Sales Div., East JapanImport Sales Div.,In charge of Central Japan Sales Div., WestJapan Sales Div., Contract Logistics SalesDept.
Shoji Murakami Business Development & Planning Dept.,Global Ocean Freight Business Dept., GlobalAir Freight Business Dept., Contract Logistics& Transport Dept.
Managing Executive Officers Kenichi Kotoku Internal Audit Chamber, CSRRiskManagement Chamber, Human ResourcesDept.In charge of General Affairs Dept., PublicRelations Dept.
Akio Futami Corporate Planning Dept.In charge of Accounting Dept., InvestorRelations Dept.
Tatsuo Aoyagi In charge of Information Business SystemDept., Operation Administration Dept.,Customs Clearance Control Chamber
Executive Officers Takashi Isobe Director of Yamato Global Logistics Japan Co.,Ltd.
Toshiyuki Kimura In charge of South Asia & Oceania Region,Chairman of Yusen Logistics (Singapore) Pte.Ltd.
Tatsuhiko Saeki In charge of Contract Logistics & TransportDept.
Eiichi Suzuki In charge of Internal Audit Chamber, CSRRiskManagement Chamber
Taiji Kitagawa In charge of Business Development & PlanningDept.
Kazuo Ishizuka In charge of Americas Region, President ofYusen Logistics (Americas) Inc.
Hidetoshi Nakanishi General Manager of Global Air FreightBusiness Dept.
Minoru Futonaka In charge of Global Ocean Freight BusinessDept.
Toru Kamiyama In charge of East Asia Region, Chairman ofYusen Logistics (China) Co., Ltd.
Yasuhiko Ueda General Manager of Human Resources Dept.
Masayuki Yokoyama General Manager of Corporate Planning Dept.
Takeshi Hagiwara General Manager of East Japan Export SalesDiv.In charge of East Japan Import Sales Div.
Kunihiko Miyoshi In charge of Europe Region, Managing Directorof Yusen Logistics (Europe) B.V.
Yusen Logistics Co., Ltd.36
Financial Highlights
Yusen Logistics Co., Ltd. and Consolidated SubsidiariesYears Ended March 31
Millions of YenThousands of
U.S. Dollars
Results of Operations 2013 2012 2011 2010 2009 2008 2013 Net sales 339,049 309,004 160,788 123,453 167,460 187,518 $3,604,987 Cost of sales 286,734 257,296 124,514 92,127 128,663 141,736 3,048,742 Gross profit 52,315 51,708 36,274 31,326 38,797 45,782 556,245 Selling, general and administrativeexpenses 50,656 45,436 31,327 29,016 34,223 35,566 538,608 Operating income 1,659 6,272 4,947 2,310 4,574 10,216 17,637 Income before income taxes andminority interests 4,074 6,673 5,887 3,004 2,859 12,178 43,318 Net income 1,119 2,526 3,621 1,545 1,083 7,271 11,896
Millions of YenThousands of
U.S. Dollars
Sales by Geographical Segments 2013 2012 2011 2010 2009 2008 2013 Japan 74,853 83,761 77,635 61,227 72,337 87,355 $795,887 Americas 77,269 70,056 13,471 10,782 16,696 17,758 821,561 Europe 76,157 76,822 15,022 11,888 20,564 21,417 809,760 East Asia 54,988 39,884 31,705 22,315 33,079 35,185 584,667 South Asia and Oceania 60,483 42,440 25,742 19,332 26,958 28,520 643,098 Inter-segment sales/transfers (4,701) (3,959) (2,787) (2,091) (2,174) (2,717) (49,986)Net sales 339,049 309,004 160,788 123,453 167,460 187,518 3,604,987 Consol idated to non-consolidated ratio(times) 4.95 4.00 2.26 2.21 2.57 2.38
Millions of YenThousands of U.S.
Dollars
Financial Position 2013 2012 2011 2010 2009 2008 2013 Current assets 104,700 93,907 60,883 52,690 47,245 66,558 $1,113,234 Current liabilities 62,113 52,580 22,538 21,462 17,193 32,716 660,421 Equity (Note 2) 63,859 57,708 53,164 51,668 49,501 57,725 678,994 Total equity (Note 3) 93,295 79,558 55,360 53,663 51,249 59,614 991,972 Total assets 173,823 151,115 88,363 81,443 75,733 98,366 1,848,196 Net cash provided by operatingactivities 8,910 2,719 5,675 840 8,213 8,127 94,740 Free cash ows (Note 4) (784) (11,182) 6,970 (796) 4,394 5,255 (8,331)
Annual Report 2013 37
3
Yen U.S. Dollars
Per Share Data 2013 2012 2011 2010 2009 2008 2013 Basic net income(Note 5) 26.53 59.91 85.85 36.63 25.68 172.43 $0.282 Cash dividends (full year) (Note 5) 18.00 20.00 18.00 16.00 18.00 20.00 0.191 Net assets (Note 5) 1,514.34 1,368.47 1,260.69 1,225.21 1,173.84 1,368.84 16.101
%
Key Ratios 2013 2012 2011 2010 2009 2008 Gross profit to net sales 15.4 16.7 22.6 25.4 23.2 24.4 Operating income to net sales 0.5 2.0 3.1 1.9 2.7 5.4 Cost of sales to net sales 84.6 83.3 77.4 74.6 76.8 75.6 Selling, general and administrative expenses to net sales 14.9 14.7 19.5 23.5 20.4 19.0 Net income to net sales 0.3 0.8 2.3 1.3 0.6 3.9 Return on equity (ROE) 1.8 4.6 6.9 3.1 2.0 13.4 Net income to total assets 0.7 2.1 4.3 2.0 1.2 7.7 Asset turnover (times) 2.0 2.6 1.9 1.6 1.9 2.0 Equity ratio (Note 5) 36.7 38.2 60.2 63.4 65.4 58.7
Other Year-End Data 2013 2012 2011 2010 2009 2008 Number of shares outstanding (Note 5) 42,220,800 42,220,800 42,220,800 42,220,800 42,220,800 42,220,800
Notes:
1. The translations of Japanese yen amounts into U.S. dollar amounts are included solely for the convenience of readers outside Japan andhave been made at the rate of 94.05 to $1, the approximate rate of exchange at March 31, 2013.
2. Equity (63,859 mill ion in 2013) = total equity - minority interests.
3. From the fiscal year ended March 31, 2007, total equity includes minority interests in accordance with the enforcement of Japan's CorporateLaw.
4. Net cash provided by operating activities + net cash used in investing activities
5. The above figures included treasury stock of 50,236 shares in 2008, 50,212 shares in 2009, 50,296 shares in 2010, 50,734 shares in 2011,50,862 shares in 2012 and 50,958 shares in 2013.
Yusen Logistics Co., Ltd.38
Managements Discussion and Analysis
The economic environment in fiscal 2012, the year ended March 31, 2013, saw economic sluggishness persist in
Europe, as highlighted by a negative real GDP growth rate. The U.S. economy, however, moved onto a moderate
recovery footing on the back of firmer consumer spending and steady capital investment spurred by a job market
recovery, and other factors.
In Asia, Chinas GDP improved as a result of government economic policies. However, Asia as a whole lacked vigor,
with varied economic conditions across the region. Japan, meanwhile, saw only a gentle economic recovery as the
yen weakened due to quantitative easing and other policy measures implemented after the change of government.
Amid global contraction, the international logistics market was generally lackluster, with softness most notable in the
air freight forwarding sector for cargo originating from Asia, including Japan, and bound for Europe.
Under these conditions, the YLK Group recorded much higher sales year on year in its logistics and ocean freight
forwarding businesses due to the integration with Nippon Yusen Kabushiki Kaisha logistics businesses. However, the
YLK Group underperformed compared with its initial plans. Furthermore, growth in freight volumes handled decreased
compared with initial plans, reflecting the market conditions.
In fiscal 2012, consolidated net sales increased 9.7% year on year to 339,049 million (US$3,604 million), reflecting
mainly higher volumes handled in ocean freight forwarding and the business integration. However, operating income
dropped 73.6% year on year to 1,659 million (US$17 million) due to a decline in volumes handled in air freight
forwarding and lower profitability in ocean freight forwarding.
As of March 31, 2013, the Yusen Logistics Group (YLK Group) comprised Yusen Logistics Co., Ltd. (the Company),
Nippon Yusen Kabushiki Kaisha (parent company), 68 consolidated subsidiaries and 5 equity-method affiliates. The
YLK Groups major business activities are the cargo business and the travel business, which the YLK Group is
developing globally.
Annual Report 2013 39
The YLK Group is currently implementing the GO FORWARD, Yusen Logistics medium-term business plan, which
was launched in fiscal 2011.
In terms of progress, in April 2012 the consolidation of local companies in China and Malaysia completed the
integration of overseas logistics businesses with Nippon Yusen Kabush ki Kaisha. The establishment of subsidiaries in
Bangladesh, Turkey and elsewhere was another highlight of the year under review. In addition, the Company
expanded logistics businesses in South Asia & Oceania. Moreover, the Company strove to deepen integration of the
whole group through human resource development of local staff.
In terms of numerical targets, on April 27, 2012, the Company revised its targets. Furthermore, on April 30, 2013, the
Company revised the final-year targets for the year ending March 31, 2014, in light of market conditions. The Company
is now forecasting net sales of \400.0 billion, ordinary income of \4.8 billion and net income of \1.5 billion for the final
year of the current medium-term business plan.
FY2011 FY2012 FY2013
Targets Actual Revised Targets Actual Revised Targets
Net Sales 355,000 309,004 370,000 339,049 400,000
Ordinary Income 11,500 7,485 9,500 2,744 4,800
Net Income 5,200 2,526 5,000 1,119 1,500
Performance Targets (Consolidated)
FY2011 FY2012 FY2013
Targets Actual Revised Targets Actual Revised Targets
Ocean Freight (Exports) 510,000 TEU 450,000 TEU 640,000 TEU 550,000 TEU 650,000 TEU
Air Freight (Exports) 400,000 ton 350,000 ton 420,000 ton 310,000 ton 330,000 ton
Handling Targets (YLK Group Total)
Yusen Logistics Co., Ltd.40
As of March 31, 2013, total assets amounted to 173,823 million (US$1,848 million), up 22,708 million, or 15.0%,
year on year. This change mainly reflected increases in the total of cash and cash equivalents and time deposits of
1,477 million, trade notes and accounts receivable of 8,702 million, and total property, plant and equipment of
11,862 million, which outweighed a decrease of 1,818 million in total investments and other assets.
Total liabilities were 80,528 million (US$856 million), up 8,971 million, or 12.5%, year on year. The main factors
were a 2,481 million increase in trade notes and accounts payable, and a 5,275 million increase in other current
liabilities.
Total equity amounted to 93,295 million (US$991 million), mainly due to an increase in retained earnings and a
decrease in the negative amount of foreign currency translation adjustments. The equity ratio was 36.7%.
Net cash provided by operating activities increased by 6,191 million year on year to 8,910 million (US$94 million).
The main factors were income before income taxes and minority interests of 4,074 million, down 2,599 million year
on year; depreciation and amortization of 4,899 million, up 627 million; a decrease in trade notes and accounts
receivable of 3,961 million, compared with a 4,132 million increase in the previous fiscal year; and an increase in
othernet of 4,023 million, compared with a decrease of 1,855 million in the previous fiscal year. On the other
hand, there was a 4,684 million decrease in trade notes and accounts payable, 3,932 million more than the
decrease in the previous fiscal year; and income taxes paid of 1,928 million, which was 1,009 million less year on
year.
Annual Report 2013 41
The Company recognizes the return of profits to shareholders as one of its top priorities. The Companys policy is to
offer a stable dividend within the limits set by business results. The Companys basic policy is also to steadily raise
shareholder returns by working to increase corporate value through YLK Group business expansion and growth.
Based on the above policy, the Company decided to set the year-end dividend at 9 per share. This will bring the
annual dividend to 18 per share, including the 9 per share interim dividend paid on December 5, 2012. For fiscal
2013, the Company plans to pay a dividend of 18 per share, provided its results are in line with its consolidated
earnings forecast.
Net cash used in investing activities was 9,694 million (US$103 million), down 4,207 million year on year. The main
uses of cash were 2,362 million for payments into time deposits, up 435 million year on year; 8,274 million for
purchase of property, plant and equipment, up 5,035 million year on year; and 2,112 million for purchase of
subsidiaries shares. Cash was mainly provided by proceeds from withdrawal of time deposits of 2,005 million, down
762 million year on year, and 1,043 million from proceeds from sale of property, plant and equipment, up 430
million year on year.
Financing activities used net cash of 1,049 million (US$11 million), compared with 2,149 million provided in the
previous fiscal year. This mainly reflected cash used of 1,444 million for the repayment of long-term debt, 45 million
more year on year, and cash used of 802 million for cash dividends paid, down 1 million year on year. On the other
hand, cash of 1,397 million was provided by a net increase in short-term loans payable, up 609 million year on
year.
Cash and cash equivalents at March 31, 2013 were 24,467 million (US$260 million), up 821 million from March 31,
2012. This was the result of the aforementioned changes as well as the impact of foreign currency translation
adjustments on cash and cash equivalents.
Yusen Logistics Co., Ltd.42
Financial Statements
Consolidated Balance Sheet
sen Logistics Co., Lt . and
Millions of Yen
Thousands ofU.S. Dollars
(Note 1) ASSETS 2013 2012 2013
CURRENT ASSETS: Cash and cash equivalents (Note 10) 24,467 23,646 $ 260,147 Time deposits (Note 10) 1,719 1,063 18,281 Trade notes and accounts receivable (Note 10) 70,539 61,837 750,017 Deferred tax assetscurrent (Note 8) 1,392 1,471 14,804 Other current assets 7,507 6,868 79,814 Allowance for doubtful accounts (924) (978) (9,829)
Total current assets 104,700 93,907 1,113,234
PROPERTY, PLANT AND EQUIPMENT: Land 16,382 13,020 174,180 Buildings and structures 42,042 35,852 447,016 Furniture and fixtures 13,462 10,116 143,143 Machinery, equipment and vehicles 19,585 13,118 208,238 Construction in progress 1,953 173 20,762 Total 93,424 72,279 993,339 Accumulated depreciation (41,796) (32,513) (444,401)
Total property, plant and equipment 51,628 39,766 548,938
INVESTMENTS AND OTHER ASSETS: Investments in securities (Notes 4 and 10) 861 876 9,156 Investments in unconsolidated subsidiaries and affiliate companies 2,351 3,001 24,996 Goodwill 3,054 2,881 32,470 Deposits 2,730 2,447 29,026 Deferred tax assetsnon-current (Note 8) 2,328 2,546 24,752 Other assets 6,171 5,691 65,624
Total investments and other assets 17,495 17,442 186,024
TOTAL 173,823 151,115 $1,848,196
Yusen Logistics Co., Ltd. and Consolidated SubsidiariesMarch 31, 2013 and 2012
Annual Report 2013 43
Millions of Yen
Thousands ofU.S. Dollars
(Note 1) LIABILITIES AND EQUITY 2013 2012 2013
CURRENT LIABILITIES: Trade notes and accounts payable (Note 10) 32,747 30,266 $ 348,191 Short-term loans payable (Notes 5 and 10) 2,393 512 25,446 Current portion of long-term debt (Notes 5 and 10) 1,090 893 11,594 Accrued income taxes (Note 10) 892 1,212 9,490 Accrued bonuses to employees 2,047 2,048 21,760 Provision for alleged antitrust law violation 1,451 1,268 15,428 Deferred tax liabilitiescurrent (Note 8) 139 350 1,477 Other current liabilities 21,354 16,031 227,035
Total current liabilities 62,113 52,580 660,421
LONG-TERM LIABILITIES: Long-term debt (Notes 5 and 10) 13,004 12,302 138,269 Accrued pension and severance costs for: Employees (Note 6) 4,011 4,046 42,650 Directors and audit & supervisory board members 467 383 4,969 Provision for alleged Anti-Monopoly Act violation 1,728 Deferred tax liabilitiesnon-current (Note 8) 345 304 3,671 Other long-term liabilities 588 214 6,244
Total long-term liabilities 18,415 18,977 195,803
EQUITY (Notes 7 and 16): Common stock, no par value authorized; 160,000,000 shares in 2013 and 2012, issued; 42,220,800 shares in 2013 and 2012 4,301 4,301 45,731 Capital surplus 4,733 4,733 50,326 Retained earnings 57,025 56,456 606,324 Treasury stockat cost; 50,958 shares in 2013 and 50,862 shares in 2012 (69) (69) (734) Accumulated other comprehensive income Unrealized gain on available-for-sale securities 87 154 923 Pension liability adjustment of foreign consolidated subsidiaries (50) Deferred gains or losses on hedges (7) (78) Foreign currency translation adjustments (2,211) (7,817) (23,498) Total 63,859 57,708 678,994 Minority interests in consolidated subsidiaries 29,436 21,850 312,978
Total equity 93,295 79,558 991,972
TOTAL 173,823 151,115 $ 1,848,196
See notes to consolidated financial statements.
Yusen Logistics Co., Ltd.44
Consolidated Statement of Income
Yusen Logistics Co., Ltd. and Consolidated SubsidiariesMarch 31, 2013 and 2012
sen Logistic Co., Ltd and Cons Cons lida ed S at en Income
d h , 2
Millions of Yen
Thousands ofU.S. Dollars
(Note 1) 2013 2012 2013
NET SALES 339,049 309,004 $ 3,604,987
COST OF SALES 286,734 257,296 3,048,742
Gross profit 52,315 51,708 556,245
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Note 13) 50,656 45,436 538,608
Operating income 1,659 6,272 17,637
OTHER INCOME (EXPENSES): Interest and dividend income 270 255 2,877 Interest expense (265) (285) (2,823) Foreign currency exchange gainnet 520 508 5,531 Equity in earnings of unconsolidated subsidiaries and affiliate companies 229 657 2,431 Compensation for accidents (91) (968) Gain on negative goodwill 1,314 498 13,966 Loss on revaluation of investments in securities (35) (17) (368) Loss on cancellation of leasehold contracts (79) (842) Loss on abolishment of retirement benefit plan (Note 6) (111) (1,180) Loss related to competition law case (33) Provision for alleged antitrust law violation (1,268) Othersnet 663 86 7,057
Other income (expense)net 2,415 401 25,681
INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS 4,074 6,673 43,318
INCOME TAXES (Note 8): Current 1,740 2,299 18,495 Deferred (135) 663 (1,431)
Total income taxes 1,605 2,962 17,064
NET INCOME BEFORE MINORITY INTERESTS 2,469 3,711 26,254
MINORITY INTERESTS IN NET INCOME OF CONSOLIDATED SUBSIDIARIES 1,350 1,185 14,358
NET INCOME 1,119 2,526 $ 11,896
Yen U.S. Dollars
PER SHARE: Basic net income per share (Note 16) 26.53 59.91 $ 0.282 Cash dividends 18.00 20.00 0.191
See notes to consolidated financial statements.
Annual Report 2013 45
Consolidated Statement of Comprehensive Income
Yusen Logistics Co., Ltd. and Consolidated SubsidiariesMarch 31, 2013 and 2012
sen Logistic Co., Ltd and Consolidated Subsid Conso ida ed S eme t o Comprehensive Inco
h 3 , 2
Millions of Yen
Thousands ofU.S. Dollars
(Note 1) 2013 2012 2013
NET INCOME BEFORE MINORITY INTERESTS 2,469 3,711 $ 26,254
OTHER COMPREHENSIVE INCOME: Unrealized gain (loss) on available-for-sale securities (67) 12 (714) Deferred gains or losses on hedges (16) (169) Foreign currency translation adjustments 9,171 (88) 97,522 Share of other comprehensive income in associates 253 (176) 2,693 Pension liability adjustment of foreign consolidated subsidiaries 99 (64) 1,048 Gain or loss on change in equity 65 3,309 687 Total other comprehensive income(loss) (Note 14) 9,505 2,993 101,067 COMPREHENSIVE INCOME 11,974 6,704 $ 127,321
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO: Owners of the parent 6,884 5,413 $ 73,203 Minority interests 5,090 1,291 54,118
See notes to consolidated financial statements.
Yusen Logistics Co., Ltd.46
Consolidated Statement of Changes in Equity
Yusen Logistics Co., Ltd. and Consolidated SubsidiariesMarch 31, 2013 and 2012
sen Logistics Co., Ltd. and Conso idated S Co so ida ed me o anges in qui y
Thousands
Outstanding Number of Shares of Common
Stock
Common Stock
Capital Surplus
RetainedEarnings
TreasuryStock
BALANCE, MARCH 31, 2011 42,170 4,301 4,812 51,375 (69) Change by transfer of business (79) Net income for the year ended March 31, 2012 2,526 Cash dividends (19.0 per share) (801) Purchase of treasury stock (0 ) (0) Adjustment of retained earnings for newly consolidated subsidiaries 53 Gain or loss on change in equity 3,309 Other (6) Net change in the year BALANCE, MARCH 31, 2012 42,170 4,301 4,733 56,4 (69) Net income for the year ended March 31, 2013 1,119 Cash dividends (19.0 per share) (801) Purchase of treasury stock (0 ) (0) Adjustment of retained earnings for newly consolidated subsidiaries 154 Gain or loss on change in equity 85 Other 12 Net change in the year BALANCE, MARCH 31, 2013 42,170 4,301 4,733 57,025 (69)
Common Stock
Capital Surplus
RetainedEarnings
TreasuryStock
BALANCE, MARCH 31, 2012 $ 45,731 $ 50,326 $ 600,269 $ (733)
Net income for the year ended March 31, 2013 11,896 Cash dividends ($0.202 per share) (8,519) Purchase of treasury stock (1 )
Adjustment of retained earnings for newly consolidated subsidiaries 1,642
Gain or loss on change in equity 899 Other 137 Net change in the year
BALANCE, MARCH 31, 2013 $ 45,731 $ 50,326 $ 606,324 $ (734)
See notes to consolidated financial statements.
Annual Report 2013 47
Millions of Yen
Accumulated Other Comprehensive Income
Unrealized Gain (loss) on
Available-for-sale Securities
Pension Liability Adjustment of
Foreign Consolidated Subsidiaries
Deferred Gains or
Losses on Hedges
Foreign Currency
Translation Adjustments Total
Minority Interests in
ConsolidatedSubsidiaries
Total Equity
142 (7,397) 53,164 2,196 55,360 (79) (79) 2,526 2,526 (801) (801) (0) (0) 53 53 3,309 3,309 (6) (6) 12 (50) (420) (458) 19,654 19,196
154 (50) (7,817) 57,708 21,850 79,558 1,119 1,119 (801) (801) (0) (0) 154 154 85 85 12 12 (67) 50 (7) 5,606 5,582 7,586 13,168
87 (7) (2,211) 63,859 29,436 93,295
Thousands of U.S. Dollars (Note 1) Accumulated Other Comprehensive Income
Unrealized Gain (loss) on
Available-for-saleSecurities
Pension Liability Adjustment of
Foreign Consolidated Subsidiaries
Deferred Gains or
Losses on Hedges
Foreign Currency
Translation Adjustments Total
Minority Interests in
ConsolidatedSubsidiaries
Total Equity
$1,637 $ (534) $ $ (83,107) $ 613,589 $ 232,327 $ 845,916
11,896 11,896 (8,519) (8,519) (1) (1)
1,642 1,642
899 899 137 137 (714) 534 (78) 59,609 59,351 80,651 140,002
$ 923 $ $ (78) $ (23,498) $ 678,994 $ 312,978 $ 991,972
Yusen Logistics Co., Ltd.48
Consolidated Statement of Cash Flows
Yusen Logistics Co., Ltd. and Consolidated SubsidiariesMarch 31, 2013 and 2012
sen Logistic Co., Ltd and Consolid Cons lidated Stat men o Cas Flows
d h , 2
Millions of Yen
Thousands ofU.S. Dollars
(Note 1) 2013 2012 2013
OPERATING ACTIVITIES: Income before income taxes and minority interests 4,074 6,673 $ 43,318 Adjustment for: Depreciation and amortization 4,899 4,272 52,089
Amortization of goodwill and gain on negative goodwill (552) 89 (5,865) Increase (decrease) in accrued pension and severance costs (169) 216 (1,794) Interest and dividend income (270) (255) (2,877) Interest expense 265 285 2,823 Loss (gain) on foreign currency exchange, net (43) 49 (457) Equity in earnings of unconsolidated subsidiaries and affiliate companies (229) (657) (2,431) Decrease (increase) in trade notes and accounts receivable 3,961 (4,132) 42,118 Increase (decrease) in trade notes and accounts payable (4,684) (752) (49,804) Loss on sale of property, plant and equipment, net (325) (13) (3,459) Loss (gain) on sale of investments in securities (65) (38) (696) Loss on revaluation of investments in securities 35 17 368 Increase (decrease) in allowance for doubtful accounts (211) 238 (2,247) Increase in provision for alleged antitrust law violation 1,268 Othernet 4,052 (1,674) 43,089 Total 10,738 5,586 114,175 Interest and dividend received 373 356 3,968 Interest paid (273) (286) 2,906) Income taxes paid (1,928) (2,937) (20,497)
Net cash provided by operating activities 8,910 2,719 94,740
INVESTING ACTIVITIES: Payments into time deposits (2,362) (1,927) (25,113) Proceeds from withdrawal of time deposits 2,005 2,767 21,316 Purchase of property, plant and equipment (8,274) (3,239) (87,971) Proceeds from sale of property, plant and equipment 1,043 613 11,087 Purchase of investments in securities (961) (181) (10,213) Proceeds from sale of investments in securities 67 54 713 Lending of loans receivable (99) (183) (1,053) Collection of loans receivable 56 1,212 Purchase of investments in subsidiaries (2,112) (22,458)
Purchase of investments in subsidiaries resulting in change in scope of consolidation (Note 3) (39) (10,567) (418) Proceeds from purchase of investments in subsidiaries resulting in change in scope of consolidation 458 4,873 Proceeds from purchase of investments in capital of subsidiaries resulting in change in scope of consolidation 392 4,165
Payments for transfer of business (2,282) Othernet 132 (168) 1,403
Net cash (used in) provided by investing activities (9,694) (13,901) (103,071)
FORWARD (784) (11,182) $ (8,331)
Annual Report 2013 49
Millions of Yen
Thousands ofU.S. Dollars
(Note 1) 2013 2012 2013
FORWARD (784) (11,182) $ (8,331)
FINANCING ACTIVITIES: Short-term loans payable, net 1,397 788 14,857 Proceeds from long-term loans payable 862 4,000 9,164 Repayment of long-term debt (1,444) (1,399) (15,358) Repayment of obligations under finance lease (302) (233) (3,215) Cash dividends paid (802) (803) (8,529) Cash dividends paid to minority shareholders (756) (192) (8,038) Othernet (4) (12) (38)
Net cash provided by financing activities (1,049) 2,149 (11,157)
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH AND CASH EQUIVALENTS 2,347 (207) 24,958
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 514 (9,240) 5,470
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 23,646 25,089 251,414
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATED SUBSIDIARIES, BEGINNING OF YEAR 94 180 1,000
INCREASE IN CASH AND CASH EQUIVALENTS RESULTING FROM MERGER 213 7,617 2,263
CASH AND CASH EQUIVALENTS, END OF YEAR 24,467 23,646 $ 260,147
See notes to consolidated financial statements.
Yusen Logistics Co., Ltd.50
Notes to Consolidated Financial Statements
1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL STATEMENTS 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 their 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 financial statements, certain reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present them in a form which is more familiar to readers outside Japan. In addition, certain reclassifications have been made in the 2012 financial statements to conform to the classifications used in 2013.
The consolidated financial statements are stated in Japanese yen, the currency of the country in which Yusen Logistics 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 94.05 to $1, the approximate rate of exchange at March 31, 2013. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S. dollars at that or any other rate.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. ConsolidationThe consolidated financial statements as of March 31, 2013 include the accounts of the Company and its 68 significant (56 in 2012) subsidiaries (together, the "Group") listed below:
Consolidated Subsidiaries Equity Ownership
Percentage*1 Capital Stock*1
Yusen Logistics (Americas) Inc. 51.00% USD 70,976 thousandYusen Logistics (Hong Kong) Limited 100.00 HKD 55,000 thousandYusen Air & Sea Service (China) Ltd. 100.00*2 HKD 11,000 thousandYusen Logistics (Singapore) Pte. Ltd. 79.30 SGD 16,950 thousandYusen Logistics (Benelux) B.V. 100.00*3 EUR 50 thousandYusen Logistics (Deutschland) GmbH. 100.00*3 EUR 2,638 thousandYusen Air & Sea Service (U.K.) Ltd. 100.00*3 GBP 1,050 thousandYusen Logistics (Australia) Pty. Ltd. 50.97*4 AUD 15,478 thousandYusen Logistics (Canada) Inc. 100.00 CAD 5,000 thousandYusen Logistics (France) S.A.S. 100.00*3 EUR 14,185 thousandYusen Logistics (Taiwan) Ltd. 95.30*5 TWD 157,398 thousandYusen Air & Sea Service (Beijing) Co., Ltd. 100.00*2 CNY ,312 thousandYusen Logistics (Italy) S.P.A. 100.00*3 EUR 3,326 thousandP.T. Yusen Logistics Indonesia 67.62*6 USD 3,048 thousandYusen Logistics (Europe) B.V. 53.69 EUR 34,493 thousandYusen Logistics (Korea) Co., Ltd. 100.00 KRW 2,000 million Shanghai Yusen Freight Service Co.,Ltd. 100.00*2 CNY 16,457 thousandYusen Air & Sea Service Management (Thailand) Co., Ltd. 95.00*7 THB 10 million Yusen Air & Sea Service (Thailand) Co., Ltd. 100.00*8 THB 100 million Yusen Logistics International (Vietnam) Co., Ltd. 49.00*9 USD 600 thousandYusen Logistics Philippines, Inc. 51.00 PHP 500,000 thousandYusen Air & Sea Service (Guangdong) Ltd. 100.00*2 CNY 8,009 thousandYusen Logistics (India) Ltd. 51.00*10 INR 594 million Yusen Air & Sea Service Logistics (Shanghai) Co., Ltd. 100.00*2 CNY 5,380 thousandYusen Air & Sea Service Logistics (Suzhou) Co., Ltd. 100.00*2 CNY 6,844 thousandETA TOO, INC 100.00*11 USD 0 Yusen Logistics Transporte S.A.de C.V 100.00*12 MXN 50 thousandBRUNI INTERNATIONAL DE MEXICO, S.A.DE C.V. 100.00*13 MXN 350 thousand
Annual Report 2013 51
Consolidated Subsidiaries
EquityOwnership
Percentage*1 Capital Stock*1
Yusen Logistics (UK) Ltd. 100.00*3 GBP 44,130 thousandYusen Logistics (Iberica) S.A. 100.00*3 EUR 585 thousandYusen Logistics (Polska) Sp.z o.o. 100.00*3 PLN 2,400 thousandYusen Logistics (Hungary) KFT. 100.00*3 HUF 12,420 thousandYusen Logistics (Edam) B.V. 100.00*14 EUR 18 thousandYusen Logistics (Belgium) N.V. 100.00*14 EUR 16,345 thousandYusen Logistics (Czech) s.r.o. 100.00*3 CZK 431,729 thousandYusen Logistics Solutions (Vietnam) Co., Ltd. 49.00*9 VND 6,375 million NANHAI BUSINESS SOLUTIONS PTE LTD. 100.00*15 SGD 100 thousandNYK LOGISTICS (AUSTRALIA) PTY. LTD. 100.00*16 AUD 15,550 thousandYusen Logistics & Kusuhara Lanka (Pvt.) Ltd. 51.00 LKR 6,500 thousandYusen Logistics RUS LLC 100.00*3 RUB 289 thousandYusen Logistics Center,Ltd. 100.00*17 PHP 12,500 thousandYusen Logistics (Thailand) Co., Ltd. 87.80*18 THB 70,000 thousandPT. Puninar Yusen Logistics Indonesia 51.00 USD 10,000 thousandYusen Logistics Do Brasil Ltda. *23 61.88 BRL 14,492 thousandYusen Logistics (China) Co.,Ltd. *24 51.00 CNY 158,047 thousandPT. Yusen Logistics Solutions Indonesia*24 51.00 USD 5,100 thousandTASCO Berhad*25 51.00*19 MYR 100,000 thousandBaik Sepakat Sdn Bhd*24 100.00*20 MYR 100 thousandTunas Cergas Logistik Sdn Bhd*24 100.00*20 MYR 100 thousandEmulsi Teknik Sdn Bhd*24 100.00*20 MYR 100 thousandTASCO Express Sdn Bhd*24 100.00*20 MYR 100 thousandMaya Kekal Sdn Bhd*24 100.00*20 MYR 2 Precious Fortunes Sdn Bhd*24 100.00*20 MYR 8,000 thousandTrans-Asia Shipping Pte Ltd*24 100.00*20 SGD 100 thousandPiala Kristal (M) Sdn Bhd*24 51.22*21 MYR 205 thousandOmega Saujana Sdn Bhd*24 51.22*21 MYR 205 thousandYusen Keihin Trans Co., Ltd. 100.00 JPY 36 million Yusen Logistics (Kitakanto) Co., Ltd. 100.00 JPY 50 million Yusen Logistics (Tsukuba) Co., Ltd. 100.00 JPY 50 million Yusen Logistics (Shinshu) Co., Ltd. 90.00 JPY 50 million Yusen Logistics (Tohoku) Co., Ltd. 100.00 JPY 30 million Yusen Logistics (Kyushu) Co., Ltd. 100.00 JPY 30 million Yusen Logistics (Chugoku) Co., Ltd. 80.00 JPY 30 million Yusen Logistics (Hokuriku) Co., Ltd. 100.00 JPY 20 million Yusen Logitec Co., Ltd. 100.00 JPY 20 million Yusen Travel Co., Ltd. 100.00 JPY 270 million Ryowa Diamond Air Service Co., Ltd. 99.17*22 JPY 50 million Yusen Loginet Co., Ltd. 100.00 JPY 20 million
*1 as of March 31, 2013 *2 owned 100.00% by Yusen Logistics (Hong Kong) Limited *3 owned 100.00% by Yusen Logistics (Europe) B.V. *4 owned 32.04% by the Company, 18.93% by Yusen Logistics (Singapore) Pte. Ltd. *5 owned 57.2% by the Company, 38.10% by Yusen Logistics (Hong Kong) Limited *6 owned 8.88% by the Company, 58.74% by Yusen Logistics (Singapore) Pte. Ltd. *7 owned 49.00% by Yusen Logistics (Singapore) Pte. Ltd., 46.00% by Yusen Logistics (Thailand) Co., Ltd. *8 owned 51.00% by Yusen Air & Sea Service Management (Thailand) Co., Ltd., 49.00% by Yusen Logistics (Singapore) Pte. Ltd. *9 owned 49.00% by Yusen Logistics (Singapore) Pte. Ltd. *10 owned 31.53% by the Company, 19.47% by Yusen Logistics (Singapore) Pte. Ltd. *11 owned 100.00% by Yusen Logistics (Americas) Inc. *12 owned 50.00% by Yusen Logistics (America) Inc., 50.00% by ETA TOO, INC. *13 owned 99.71% by Yusen Logistics (Americas) Inc., 0.29% by Yusen Logistics Tranporte S.A.de C.V. *14 owned 100.00% by Yusen Logistics (Benelux) B.V. *15 owned 100.00% by Yusen Logistics (Singapore) Pte. Ltd. *16 owned 100.00% by Yusen Logistics (Australia) Pty. Ltd. *17 owned 100.00% by Yusen Logistics Philippines, Inc. *18 owned 33.46% by the Company, 10.80% by Yusen Air & Sea Service Management (Thailand) Co., Ltd. *19 owned 27.01% by the Company, 23.99% by Yusen Logistics (Singapore) Pte. Ltd.
Yusen Logistics Co., Ltd.52
*20 owned 100.00% by TASCO Berhad *21 owned 51.22% by TASCO Berhad *22 owned 99.17% by Yusen Travel Co., Ltd. *23 became newly consolidated companies since materiality has increased *24 became newly consolidated companies as the result of the reorganization and integration of the logistics businesses that
have been conducted by the Company and Nippon Yusen Kabushiki Kaisha (NYK LINE) (head office: Chiyoda-ku, Tokyo, Japan; president: Yasumi Kudo) (hereinafter "NYK").
*25 became newly consolidated company as the result of the additional acquisition of the stock.
Under the control or influence 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 significant influences are accounted for by the equity method.
Agate Electro Supplies Sdn Bhd became an affiliate company as a result of the acquisition of the stock and was included in the scope of the companies accounted for by equity method from this year. TASCO Berhad was excluded from the scope of the companies accounted for by equity method since it became a newly consolidated company as the result of the additional acquisition of the stock.
Investments in three (three in 2012) unconsolidated subsidiaries and two (two in 2012) affiliate companies are accounted for by the equity method. Investments in the remaining unconsolidated subsidiaries and affiliate companies are stated at cost, which is determined by the moving-average method. If the equity method of accounting had been applied to the investments in these companies, the effect on the accompanying consolidated financial statements would not be material.
The excess of the cost of an acquisition over the fair value of the net assets of the acquired subsidiary at the date of acquisition is being amortized using the straight-line method principally over a period not exceeding 20 years.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit included in assets resulting from transactions within the Group is eliminated.
b. Unification for Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial
StatementsIn May 2006, the Accounting Standards Board of Japan ("ASBJ") issued ASBJ Practical Issues Task Force (PITF) No. 18, Practical Solution on Unification 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 unified for the preparation of the consolidated financial statements, (2) financial 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; and 5) exclusion of minority interests from net income, if contained.
c. Business Combi
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