ANNUAL REPORT 2015 Year ended March 31, 2015

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

005_0808001372708.indd 1 2015/09/09 11:48:18 Company Profile (As of March 31, 2015)

Headquarters and Branches Headquarters: Chuo-ku, Tokyo Branches: Tokyo, Yokohama, Nagoya, Osaka, Kobe and Fukuoka Date of Establishment April 15, 1887 Capital ¥22,393,986,570 Number of Shares Issued 175,921,478 Authorized Shares 440,000,000 Number of Employees 845 persons (parent only; not including 145 employees temporarily on loan to other companies. There are also 118 temporary employees, as well as 564 persons temporarily loaned or dispatched within the Group and those from outside the Group companies and accepted by the Company.) 4,452 persons (on a consolidated basis; not including 64 employees temporarily on loan to companies outside the Group. There are also 1,375 temporary employees, as well as 992 persons temporarily loaned or dispatched from outside the Group companies and accepted by the Company.) Stock Exchange Listing First Section of the Tokyo Stock Exchange Securities Code 9301

Major Shareholders Shareholder’s Name Number of Shares Held (Thousands) Shareholding Ratio (%) The Master Trust Bank of Japan, Ltd. (trust account) 13,715 7.8 Japan Trustee Services Bank, Ltd. (trust account) 11,658 6.7 Meiji Yasuda Life Insurance Company 9,707 5.5 MITSUBISHI ESTATE CO., LTD. 7,331 4.2 Kirin Holdings Company, Limited 5,932 3.4 Tokio Marine & Nichido Fire Insurance Co., Ltd. 5,831 3.3 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3,728 2.1 BNP Paribas Securities (Japan) Limited 3,487 2.0 Contents ASAHI GLASS CO., LTD. 3,315 1.9 1 ... To Our Shareholders Mitsubishi Corporation 3,205 1.8 Notes: 2 ... Topics 1. The Bank of Tokyo-Mitsubishi UFJ, Ltd. has set 1,500,000 Mitsubishi Logistics’ shares as trust funds for retirement benefits for which voting rights are reserved, in addition to the shares stated in the table above. 4 ... Overview of the Mitsubishi Logistics Group 2. The “Shareholding ratio” is calculated after excluding treasury stock (628,906 shares). 5 ... Independent Auditor’s Report Directors and Corporate Auditors (As of June 26, 2015) 6 ... Consolidated Balance Sheets Position Name Responsibilities and/or Primary Occupation 8 ... Consolidated Statements Of Income Chairman of the Board Tetsuro Okamoto President* Akio Matsui 9 ... Consolidated Statements Of Comprehensive Income Managing Director Yuichi Hashimoto Responsible for Accounting & Financing, Information Systems and Internal Audit, and General Manager, Information Systems Division 10 ... Consolidated Statements Of Changes In Net Assets Managing Director Yoshinori Watabe Responsible for International Transportation Business 11 ... Consolidated Statements Of Cash Flows Managing Director* Masato Hoki Responsible for General Affairs, Corporate Communications, Personnel and Planning Managing Director Kazuhiko Takayama Responsible for Warehousing & Distribution Business 13 Notes To Consolidated Financial Statements ... Managing Director Takanori Miyazaki Responsible for Technical, Harbor Transportation and Real Estate Businesses 43 ... Company Pro le Director Minoru Makihara Senior Corporate Advisor, Mitsubishi Corporation Director Shigemitsu Miki Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Director Koji Miyahara Board Counselor, Nippon Yusen Kabushiki Kaisha Director Yoshiji Ohara General Manager, Harbor Transportation Division Director Yoichiro Hara General Manager, Yokohama Branch Director Noboru Hiraoka General Manager, Warehousing & Distribution Business Division Director Fumihiro Shinohara General Manager, General Affairs Division and Corporate Communications Chamber Standing Corporate Auditor Tohru Watanabe Standing Corporate Auditor Yoshihito Yoshizawa Corporate Auditor Yohnosuke Yamada Lawyer Corporate Auditor Shunkyo Harada Corporate Auditor Kenji Sakurai Certified Public Accountant Notes: 1. Directors with an asterisk (*) are representative directors. 2. Minoru Makihara, Shigemitsu Miki and Koji Miyahara are Outside Directors as stipulated in the Companies Act, Article 2, Item 15. The Company designated them as independent directors as required by the rules of the Tokyo Stock Exchange, and reported it to the Exchange. 3. Yoshihito Yoshizawa, Yohnosuke Yamada and Kenji Sakurai are Outside Corporate Auditors as stipulated in the Companies Act, Article 2, Item 16. The Company designated them as independent corporate auditors as required by the rules of the Tokyo Stock Exchange, and reported it to the Exchange. 43

005_0808001372708.indd 2 2015/09/09 11:48:19 To Our Shareholders

We are obliged to you for your continued support and patronage. I hereby report the business overview of the Mitsubishi Logistics Group for the 212th fiscal term (from April 1, 2014, to March 31, 2015). During the year under review, the global economy was characterized by a steady economic recovery in the United States and a continued recovery trend in Europe despite the deceleration of growth in emerging countries such as China. The Japanese economy showed a continued moderate recovery, reflecting solid consumer spending and signs of a recovery in exports and production. In these economic conditions, the business environment surrounding the Group remained difficult in the business segments of “Logistics” and “Real Estate.” For Logistics, the warehousing and port and harbor operations businesses were adversely affected mainly by the sluggish growth in freight volume and intensifying competition. For Real Estate, the previous decline in the rent level for rental office buildings has not fully recovered, although signs of an improvement in the supply and demand of such buildings were seen. Under these circumstances, the Mitsubishi Logistics Group year due to a decrease in income taxes payable because the promoted aggressive marketing activities. In Logistics, we strove effective statutory tax rate was lowered for the fiscal year under to extend distribution center operations, especially for review. pharmaceuticals, and expand and reinforce operational bases With respect to the prospect of the world economy, a steady overseas. In Real Estate, we focused our efforts on securing good economic recovery is predicted to continue in the United States, tenants, and maintaining and improving rent levels. We also while European economies gradually head toward recovery, and proceeded with construction of the Nihonbashi Dia Building, a in emerging countries such as China, moderate economic disaster-resistant and eco-friendly high-rise office building, in expansion is expected to continue. Concerning the Japanese Nihonbashi, Tokyo, and it was completed and started operation economy, a moderate recovery is predicted, supported by in September 2014. Meanwhile, we endeavored to further continuous improvements in the employment and income improve business performance via thorough cost management environments and the effects of various government policies. and efficiency improvement of business operations by In this economic climate, concerning the business implementing a new logistics information system and other environment surrounding the Group, harsh business conditions measures. will continue with intensifying competition in Logistics, mainly As a result, combined revenue for the year under review in the warehousing and port and harbor operations industries, amounted to ¥204,362 million, an increase of ¥6.2 billion, or although a moderate increase in freight volume is projected. In 3.1%, from the previous fiscal year. Although there was a the Real Estate business segment, although an improvement in concern about the effect of the reactionary decline to the rush in supply and demand for rental office buildings is expected, it will demand before the consumption tax hike on Logistics, the freight take more time to achieve a full-scale recovery of rent levels in handled increased in each business of warehousing, trucking, the real estate industry. port and harbor operations and international transportation. In Under these circumstances, the Mitsubishi Logistics Group Real Estate, while mainly the Kobe Harborland commercial will strive for sustainable growth by further expanding its facility complex “umie” contributed to revenue, revenue logistics businesses in response to globalization and the real decreased because of a decline in demand for office buildings estate business with an emphasis on building leases in line with and a decrease in condominiums sold. Cost of services overall the Medium-Term Management Plan (2013–2015), which covers increased ¥6,284 million, or 3.6%, year over year to ¥183,226 three years beginning fiscal 2013. million. In Logistics, operational and transportation consignment As for the distribution of profits of Mitsubishi Logistics for costs and other costs increased as the freight handled increased. the fiscal year ended March 31, 2015, we intend to distribute a In Real Estate, depreciation accompanying the start of operation year-end dividend of ¥6 per share, the same amount as the of the Nihonbashi Dia Building and temporary expenses interim dividend, taking into account operating results for the including real estate acquisition tax increased cost of services, year. As a result, the annual dividend per share, including the despite an absence of temporary expenses associated with the interim dividend of ¥6 per share, totals ¥12, the same as for the opening of the Kobe Harborland commercial facility complex previous fiscal year. “umie” and other facilities, which had been posted for the As for dividends for the fiscal year ending March 31, 2016, previous term, and a decrease in real estate sales costs as sales of based on the basic dividend policy of stably distributing condominiums decreased. Selling, general and administrative dividends with due regard to the profitability level, the interim expenses increased ¥615 million, or 6.8%, year over year to dividend and the year-end dividend will be ¥6 per share, ¥9,686 million due to the posting of temporary expenses for the respectively, and the annual dividend per share therefore will be Company’s headquarters office associated with the start of ¥12, unless any exceptional circumstances take place. operation of the Nihonbashi Dia Building. We look forward to your continued support and As a consequence, operating income decreased ¥699 million, encouragement. or 5.8%, year over year to ¥11,449 million, reflecting the rise in June 2015 operating income for the Logistics segment and the fall in the Real Estate segment. However, ordinary income increased ¥342 Akio Matsui, President million, or 2.4%, to ¥14,456 million due to an increase in dividend income and equity in earnings of unconsolidated subsidiaries and affiliates. Consolidated net income increased ¥613 million, or 7.2%, to ¥9,133 million from the previous fiscal 1

010_0808001372708.indd 1 2015/09/03 21:55:30 Topics

Expansion and Reinforcement of Our Overseas Logistics Business The Company has a basic strategy to expand and reinforce its domestic/overseas

integrated logistics business under the Medium-Term Management Plan (2013– Beijing Dalian 2015) and is accelerating its business development focusing on the United States, China and Southeast Asia, where growth is projected, harnessing the Group’s Shandong province strengths. Xi’an 1. Expansion and Reinforcement of the Warehouse and Distribution Jiangsu province Network in China Shanghai Chengdu In China, where increasing domestic consumption is boosting demand for Wuhan Zhejiang distribution centers in major cities, demand is rising mainly from Japanese province manufacturers for Japanese-standard logistic services even in China. Fujian province The Mitsubishi Logistics Group is reinforcing its warehouse and Shenzhen distribution network in China. By utilizing the know-how of high-quality Guangzhou Hong Kong logistics services nurtured in Japan, it has been developing distribution The Mitsubishi Logistics network within centers for household appliances, office equipment, pharmaceuticals, auto China (The blue line indicates the core line parts, and other products in various locations in China. transportation network of the Group.) Currently, we are operating warehousing & distribution centers at locations that are the core of logistics such as Beijing, Shanghai, Guangzhou, Chengdu and Wuhan, the aggregate area of which exceeds 200,000 m2. With these warehousing & distribution centers as our operational bases, we installed a truck distribution network that connects various locations in China, thereby establishing a system to provide logistics services not simply at each separate “point” but as a “plane” where all service areas are connected. In addition, not only to strengthen our logistics business inside China, but also to further expand our international transportation business that connects various locations in China with those around the world using marine and air freight services, we are expanding operational bases and strengthening logistics functions. Mitsubishi Logistics China Co., Ltd., the Company’s subsidiary located in Shanghai that controls the Group’s logistics operations in China, formulates overall strategies for our businesses in China and promotes strengthening of sales capability under the Company’s brand and improvement of the efficiency of management and administration. The Group will strive to expand and reinforce its logistics business, addressing demand for logistics services in China, where economic growth will continue.

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010_0808001372708.indd 2 2015/09/03 21:55:30 2. Acquired a Warehouse in the United States Mitsubishi Logistics America Corporation (“MLA”), a wholly owned subsidiary of Mitsubishi Logistics Corporation, acquired a warehouse near Los Angeles in March 2015 to address an increase in import freight against the backdrop of a favorable U.S. economy. The acquired warehouse “Los Angeles Distribution Center of Mitsubishi Logistics America Corporation (the “Warehouse”)” started operation in April 2015. Conveniently located midway between the Los Angeles International Airport and Port of Long Beach, California, with good access to nearby highway interchanges, the Warehouse is mainly for the operation of a distribution center for made-in-Japan household Los Angeles Distribution Center of Mitsubishi Logistics appliance products and MLA’s Los Angeles Branch has moved into its America Corporation office area. Upon acquisition of the Warehouse and the start of operation, MLA, which previously operated mainly the international transportation business, will further expand and reinforce its logistics service including storage operation. In alliance with Mitsubishi Warehouse California Corporation, the Company’s wholly owned subsidiary which mainly operates warehousing, MLA will continue to focus on the Group’s logistics business in the United States.

Outline of the Los Angeles Distribution Center of Mitsubishi Logistics America Corporation …………………………… (1) Location: Torrance, CA, USA (2) Total floor area: approximately 13,200 m² (One-story building including a partial two-story area) (3) Completion: November 2013 (4) Purpose: Household appliance products distribution center, storage of chemical fiber products

Participated in Kumano Ryo (Dormitory) for Employees of Kyoto University Development and Management Project The Company received a work order for an entire project to develop and manage the Kumano Ryo (dormitory) for employees of Kyoto University as a public- private partnership (PPP) project by the university. This project is to construct a dorm for university employees within the premises owned by Kyoto University located in Sakyo-ku, Kyoto, and manage the dorm. The construction is scheduled to start in April 2016 and be completed in February 2017, and dorm management will start in March 2017. To expand businesses other than building leasing, which is one of the basic strategies under the Medium-Term Management Plan (2013–2015), the Company

is proactively expanding businesses in the PPP project field. Image of completed dorm This is the Company’s third business in the PPP project field following the development and management project of a dorm for Kanagawa Police employees, for which dorm management started in 2013, and the development and management project of the campus of the University of Electro-Communications commemorating the 100th anniversary of the university, for which the campus management will start in April 2017. The Company intends to expand businesses in the PPP project field, drawing on experience and actual business results nurtured through these projects.

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010_0808001372708.indd 3 2015/09/03 21:55:31 Overview of the Mitsubishi Logistics Group (As of March 31, 2015)

Mitsubishi Logistics Corporation

Logistics Real Estate Consolidated Subsidiaries (50 companies)

Tohoku Ryoso Transportation Co., Ltd. Dia Buil-Tech Co., Ltd. Sairyo Service Co., Ltd. Yokohama Dia Building Management Corporation Dia Pharmaceutical Network Co., Ltd. Tokyo Dia Service Co., Ltd. Chubo Kaihatsu Co., Ltd. Dia Systems Corporation Nagoya Dia Buil-Tech Co., Ltd. Ryoso Transportation Co., Ltd. Unitrans Ltd. Osaka Dia Buil-Tech Co., Ltd. Keihin Naigai Forwarding Co., Ltd. Kobe Dia Service Co., Ltd. Touryo Kigyo Co., Ltd. Kobe Dia Maintenance Co., Ltd. Fuji Logistics Co., Ltd. Tokyo Juki Transport Co., Ltd. T’ACT Co., Ltd. SII Logistics Inc. Fuji Logistics Operations Co., Ltd. Fuji Logistics Support Co., Ltd. Kinko Service Co., Ltd. Chubu Trade Warehousing Co., Ltd. Meiryo Kigyo Co., Ltd. Ryoyo Transportation Co., Ltd. Kyokuryo Warehouse Co., Ltd. Hanryo Kigyo Co., Ltd. Shinryo Koun Co., Ltd. Naigai Forwarding Co., Ltd. Kyushu Ryoso Transportation Co., Ltd. Monryo Transport Corporation Hakuryo Koun Co., Ltd. Seiho Kaiun Kaisha., Ltd. Saryo Service Co., Ltd. Mitsubishi Logistics America Corporation Mitsubishi Warehouse California Corporation Mitsubishi Logistics Europe B.V. Fuji Logistics Europe B.V. Mitsubishi Logistics China Co., Ltd. Shanghai Linghua Logistics Co., Ltd. Shanghai Qingke Warehouse Management Co., Ltd. Fuji Logistics (China) Co., Ltd. Fuji Logistics (Dalian F.T.Z.) Co., Ltd. Fuji Logistics (Shanghai) Co., Ltd. Mitsubishi Logistics Hong Kong Ltd. Fuji Logistics (H.K.) Co., Ltd. Mitsubishi Logistics Thailand Co., Ltd. P.T. Mitsubishi Logistics Indonesia Fuji Logistics Malaysia SDN. BHD.

Subsidiaries and Af liates Accounted for by the Equity Method (3 companies)

Nippon Container Terminals Co., Ltd. Kusatsu Soko Co., Ltd. Jupiter Global Limited

Major Businesses Logistics: Warehousing and Distribution: Storage of outsourced cargo in warehouses and bringing in/delivery thereof to/from warehouses by cargo handling Trucking: Transportation using trucks Port and harbor operations: Coastal and in-vessel cargo handling at ports and harbors International transportation: Handling of international freight deliveries (including marine freight transportation in Japan)

Real Estate: Buying, selling, leasing and management of real estate, as well as contracting of construction work, and design and supervision thereof

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010_0808001372708.indd 4 2015/09/03 21:55:32 5

011_0808001372708.indd 5 2015/09/03 22:09:00 Consolidated Balance Sheets

March 31, March 31, ASSETS 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) (Note 1) CURRENT ASSETS: Cash and deposits (Notes 2 and 3) ¥38,493 ¥35,523 $320,321 Marketable securities (Notes 2, 3 and 4) 6,600 7,600 54,922

Notes and accounts receivable (Notes 3 and 5) 35,600 33,477 296,247 Allowance for doubtful accounts (82) (86) (682) 35,518 33,391 295,565 Real estate held for sale 6,040 6,004 50,262 Deferred income taxes (Note 6) 1,906 1,872 15,861 Other (Note 2) 1,963 1,708 16,335 TOTAL CURRENT ASSETS 90,520 86,098 753,266

PROPERTY AND EQUIPMENT (Notes 8, 9, 13 and 15): Land 73,861 71,349 614,638 Buildings and structures 364,778 346,662 3,035,516 Machinery and equipment 34,738 33,288 289,074 Transportation equipment 8,086 7,927 67,287 Construction in progress 1,334 5,144 11,101 482,797 464,370 4,017,616 Accumulated depreciation (282,192) (274,010) (2,348,273) NET PROPERTY AND EQUIPMENT 200,605 190,360 1,669,343

INVESTMENTS AND OTHER ASSETS: Investments in unconsolidated subsidiaries and affiliates 8,485 7,633 70,608 Investments in securities (Notes 3, 4 and 9) 108,955 87,362 906,674 Long-term loans receivable 510 545 4,244 Intangible assets 14,675 14,388 122,119 Goodwill 1,925 2,147 16,019 Deferred income taxes (Note 6) 2,461 2,858 20,479 Other 4,929 4,870 41,017 Allowance for doubtful accounts (23) (22) (191) TOTAL INVESTMENTS AND OTHER ASSETS 141,917 119,781 1,180,969 ¥433,042 ¥396,239 $3,603,578

The accompanying notes are an integral part of these statements.

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011_0808001372708.indd 6 2015/09/03 22:09:00 LIABILITIES AND NET ASSETS March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) (Note 1) CURRENT LIABILITIES: Short-term bank loans and current maturities of long-term debt (Notes 3, 9 and 10) ¥25,043 ¥24,448 $208,396 Notes and accounts payable (Notes 3, 5 and 10) 28,065 25,678 233,544 Income taxes payable 2,795 3,122 23,259 Other (Notes 6 and 9) 3,410 3,357 28,377 TOTAL CURRENT LIABILITIES 59,313 56,605 493,576

LONG-TERM LIABILITIES: Long-term debt, less current maturities (Notes 3, 9 and 10) 51,265 47,715 426,604 Deposits on long-term leases (Notes 3, 5 and 9) 22,972 22,443 191,163 Retirement benefits (Note 11) 13,766 16,125 114,554 Deferred income taxes (Note 6) 22,125 16,079 184,114 Other (Note10) 512 630 4,261 TOTAL LONG-TERM LIABILITIES 110,640 102,992 920,696 TOTAL LIABILITIES 169,953 159,597 1,414,272

CONTINGENT LIABILITIES (Notes 14)

NET ASSETS SHAREHOLDERS’ EQUITY: Common stock authorized – 440,000,000 shares, issued – 175,921,478 shares, 22,394 22,394 186,353 Capital surplus 19,618 19,618 163,252 Retained earnings 164,905 157,686 1,372,264 Treasury stock (784) (747) (6,524) TOTAL SHAREHOLDERS’ EQUITY 206,133 198,951 1,715,345 ACCUMULATED OTHER COMPREHENSIVE INCOME Net unrealized holding gains on securities 51,994 35,044 432,670 Foreign currency translation adjustments 2,300 957 19,140 Remeasurements of defined benefit plans 129 (551) 1,073 TOTAL ACCUMULATED OTHER COMPREHENSIVE INCOME 54,423 35,450 452,883 MINORITY INTERESTS 2,533 2,241 21,078 TOTAL NET ASSETS 263,089 236,642 2,189,306 ¥433,042 ¥396,239 $3,603,578

The accompanying notes are an integral part of these statements.

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011_0808001372708.indd 7 2015/09/03 22:09:00 Consolidated Statements Of Income

Year ended March 31, Year ended March 31, 2015 2014 2013 2015 (Millions of yen) (Thousands of U.S. dollars) (Note 1) REVENUE ¥204,362 ¥198,162 ¥192,261 $1,700,607 COST OF SERVICES 183,227 176,942 170,901 1,524,731 Gross profit 21,135 21,220 21,360 175,876 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,686 9,072 9,055 80,603 Operating income 11,449 12,148 12,305 95,273 OTHER INCOME (EXPENSES): Interest and dividend income 2,517 2,141 2,138 20,945 Interest expense (769) (777) (763) (6,399) Gain on sale of marketable securities and investments 2,107 1,917 51 17,533 in securities Gain (loss) on revaluation of marketable securities and 69 (13) (92) 574 investments in securities Loss on disposal of property and equipment, net (1,018) (880) (769) (8,471) Impairment loss (Note13) (727) – – (6,050) Equity in earnings of unconsolidated subsidiaries and 487 186 372 4,053 affiliates Indemnity income of exiting facilities for lease (Note 12) 35 18 37 291 Other, net (Note 11) 701 (338) 443 5,834 3,402 2,254 1,417 28,310 Income before income taxes and minority interests 14,851 14,402 13,722 123,583 INCOME TAXES (Note 6) Current 5,078 5,289 4,922 42,257 Deferred 489 430 123 4,069 5,567 5,719 5,045 46,326 Income before minority interests 9,284 8,683 8,677 77,257 MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED SUBSIDIARIES (150) (162) (86) (1,248) NET INCOME ¥9,134 ¥ 8,521 ¥ 8,591 $76,009

AMOUNTS PER SHARE: Yen U.S. dollars (Note 1) Net income ¥52.12 ¥48.62 ¥49.02 $0.43 Cash dividends applicable to the year ¥12.00 ¥12.00 ¥12.00 $0.10

The accompanying notes are an integral part of these statements.

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011_0808001372708.indd 8 2015/09/03 22:09:00 Consolidated Statements Of Comprehensive Income

Year ended March 31, Year ended March 31, 2015 2014 2013 2015 (Millions of yen) (Thousands of U.S. dollars) (Note 1) INCOME BEFORE MINORITY INTERESTS ¥9,284 ¥ 8,683 ¥ 8,677 $77,257 OTHER COMPREHENSIVE INCOME: Net unrealized holding gains on securities 16,976 686 8,772 141,267 Foreign currency translation adjustments 1,118 1,803 858 9,303 Remeasurements of defined benefit plans, net of tax 681 – – 5,667 Share of other comprehensive income of affiliates 364 366 179 3,029 accounted for using the equity method Total other comprehensive income (Note 7) 19,139 2,855 9,809 159,266

COMPREHENSIVE INCOME (Note 7) ¥ 28,423 ¥11,538 ¥18,486 $236,523

Comprehensive income attributable to: Comprehensive income attributable to owners of the parent ¥28,107 ¥11,273 ¥18,334 $233,893 Comprehensive income attributable to minority interests 316 265 152 2,630

The accompanying notes are an integral part of these statements.

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011_0808001372708.indd 9 2015/09/03 22:09:00 Consolidated Statements Of Changes In Net Assets

Common Stock Foreign Net unrealized currency Remeasurements Capital Retained Treasury holding gains translation of defined Minority Shares Amount surplus earnings stock on securities adjustments benefit plans interests (Thousands (Millions of yen) of shares)

Balance at March 31, 2012 175,921 ¥22,394 ¥19,618 ¥144,782 ¥(696) ¥25,634 ¥(2,128) ¥– ¥1,932 Net income for the year ––– 8,591 – – – – – Cash dividends – – – (2,104) – – – – – Purchase of treasury stock – – – – (16) – – – – Sale of treasury stock –––––––– – Changes other than to stockholders’ – – – – – 8,749 993 – 79 equity, net Balance at March 31, 2013 175,921 ¥22,394 ¥19,618 ¥151,269 ¥(712) ¥34,383 ¥(1,135) ¥– ¥2,011 Net income for the year ––– 8,521 – – – – – Cash dividends – – – (2,104) – – – – – Purchase of treasury stock – – – – (35) – – – – Sale of treasury stock – – 0 – 0 – – – – Changes other than to stockholders’ – – – – – 661 2,092 (551) 230 equity, net Balance at March 31, 2014 175,921 ¥22,394 ¥19,618 ¥157,686 ¥(747) ¥35,044 ¥ 957 ¥(551) ¥2,241 Cumulative effects of changes in – – – 189 – – – – – accounting policies Restated balance at March 31, 2014 175,921 ¥22,394 ¥19,618 ¥157,875 ¥(747) ¥35,044 ¥ 957 ¥(551) ¥2,241 Net income for the year ––– 9,134 – – – – – Cash dividends – – – (2,104) – – – – – Purchase of treasury stock – – – – (37) – – – – Sale of treasury stock –––––––– – Changes other than to stockholders’ – – – – – 16,950 1,343 680 292 equity, net Balance at March 31, 2015 175,921 ¥22,394 ¥19,618 ¥164,905 ¥(784) ¥51,994 ¥2,300 ¥ 129 ¥2,533

Foreign Net unrealized currency Remeasurements Common Capital Retained Treasury holding gains translation of defined Minority Stock surplus earnings stock on securities adjustments benefit plans interests (Thousands of U.S. dollars) (Note 1) Balance at March 31, 2014 $186,353 $163,252 $1,312,191 $(6,216) $291,620 $7,964 $(4,585) $18,649 Cumulative effects of changes in – – 1,573 – – – – – accounting policies Restated balance at March 31, 2014 $186,353 $163,252 $1,313,764 $(6,216) $291,620 $7,964 $(4,585) $18,649 Net income for the year – – 76,009 – – – – – Cash dividends – – (17,509) –––– – Purchase of treasury stock – – – (308) – – – – Sale of treasury stock ––––––– – Changes other than to stockholders’ – – – – 141,050 11,176 5,658 2,429 equity, net Balance at March 31, 2015 $186,353 $163,252 $1,372,264 $(6,524) $432,670 $19,140 $ 1,073 $21,078

The accompanying notes are an integral part of these statements.

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011_0808001372708.indd 10 2015/09/03 22:09:00 Consolidated Statements Of Cash Flows

Year ended March 31, Year ended March 31, 2015 2014 2013 2015 (Millions of yen) (Thousands of U.S. dollars) (Note 1) CASH FLOWS FROM OPERATING ACTIVITIES: Income before income taxes and minority interests ¥ 14,851 ¥ 14,402 ¥ 13,722 $ 123,583 Depreciation and amortization 13,389 12,517 12,098 111,417 Impairment loss 727 – – 6,050 Increase (decrease) in retirement benefits (2,309) 57 (558) (19,214) Loss (gain) on revaluation of marketable (69) 5 96 (574) securities and investments in securities Gain on sales of marketable securities and (2,107) (1,914) (51) (17,533) investments in securities Loss on disposal of property and equipment 348 244 93 2,896 Equity in earnings of unconsolidated subsidiaries and (487) (186) (372) (4,053) affiliates Interest and dividend income (2,517) (2,141) (2,138) (20,945) Interest expense 769 777 763 6,399 Decrease (increase) in notes and accounts receivable (1,736) 621 10,608 (14,447) Decrease (increase) in real estate held for sale (36) 320 (3,826) (300) Increase (decrease) in notes and accounts payable 1,548 (1,158) (1,057) 12,882 Increase (decrease) in deposits payable 590 (36) (5,177) 4,910 Other, net 1,313 (856) (626) 10,926 Subtotal 24,274 22,652 23,575 201,997 Interest and dividend income received in cash 2,605 2,254 2,198 21,678 Interest expense paid in cash (774) (750) (743) (6,441) Income taxes paid in cash (5,414) (4,455) (5,478) (45,053) NET CASH PROVIDED BY OPERATING ACTIVITIES 20,691 19,701 19,552 172,181

CASH FLOWS FROM INVESTING ACTIVITIES: Cash investment in time deposits (1,508) (1,048) (665) (12,549) Cash return from time deposits 1,628 604 702 13,547 Acquisition of property and equipment (23,765) (25,166) (14,002) (197,762) Proceeds from sales of property and equipment 95 218 157 791 Acquisition of marketable securities and (366) (844) (780) (3,046) investments in securities Proceeds from sales of marketable securities and 3,349 3,406 128 27,869 investments in securities Acquisition of investments in subsidiaries – (322) – – Acquisition of investments in subsidiaries – – (2,599) – resulting in change in scope of consolidation Payments for sales of shares of subsidiaries resulting – (7) – – in change in scope of consolidation Other, net 4 14 546 34 NET CASH USED IN INVESTING ACTIVITIES (20,563) (23,145) (16,513) (171,116)

The accompanying notes are an integral part of these statements. 11

011_0808001372708.indd 11 2015/09/03 22:09:01 Consolidated Statements Of Cash Flows

Year ended March 31, Year ended March 31, 2015 2014 2013 2015 (Millions of yen) (Thousands of U.S. dollars) (Note 1) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term bank loans ¥ 8,048 ¥ 9,972 ¥ 2,170 $ 66,972 Repayments of short-term bank loans (9,255) (1,985) (3,772) (77,016) Proceeds from long-term debt 11,767 1,294 9,976 97,920 Repayments of long-term debt (1,473) (5,202) (4,193) (12,258) Issue of bonds – 10,000 – – Redemption of bonds (5,000) – – (41,608) Dividends paid (2,104) (2,104) (2,105) (17,509) Other, net (344) (340) (315) (2,862) NET CASH PROVIDED BY 1,639 11,635 1,761 13,639 FINANCING ACTIVITIES

Effect of exchange rate changes on cash and cash equivalents 273 584 245 2,271 NET INCREASE IN CASH AND CASH EQUIVALENTS 2,040 8,775 5,045 16,975 CASH AND CASH EQUIVALENTS AT 41,237 32,462 27,417 343,156 BEGINNING OF YEAR (Note 2) CASH AND CASH EQUIVALENTS AT END OF YEAR (Note 2) ¥43,277 ¥41,237 ¥32,462 $360,131

The accompanying notes are an integral part of these statements.

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011_0808001372708.indd 12 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 1 – SUMMARY OF ACCOUNTING POLICIES

BASIS OF PRESENTING CONSOLIDATED FINANCIAL March 31, STATEMENTS The accompanying consolidated financial statements of 2015 2014 2013 Mitsubishi Logistics Corporation (the “Company”) have been Consolidated subsidiaries 50 50 51 prepared in accordance with the provisions set forth in the Unconsolidated subsidiaries Japanese Financial Instruments and Exchange Law and its and affiliates under the equity related accounting regulations, and in conformity with accounting principles generally accepted in Japan (“Japanese method 3 3 3 GAAP”), which are different in certain respects as to application and disclosure requirements of International Financial Reporting CONSOLIDATED STATEMENTS OF CASH FLOWS Standards. In preparing the consolidated statements of cash flows, cash on The accompanying consolidated financial statements have hand, readily-available deposits and short-term highly liquid been restructured and translated into English from the investments with negligible risk of changes in value and consolidated financial statements of the Company prepared in maturities not exceeding six months at the time of purchase are accordance with Japanese GAAP and filed with the appropriate considered to be cash and cash equivalents. Local Finance Bureau of the Ministry of Finance as required by the Japanese Financial Instruments and Exchange Law. Some CONVERSION OF ASSETS AND LIABILITIES supplementary information included in the statutory Japanese DENOMINATED IN FOREIGN CURRENCIES language consolidated financial statements, but not required for Receivables and payables denominated in foreign currencies are fair presentation, is not presented in the accompanying translated into Japanese yen at the year-end rates. consolidated financial statements. Gains or losses resulting from conversion are credited or The translations of Japanese yen amounts into U.S. dollars charged to income as incurred. are included solely for the convenience of readers outside Japan, using the prevailing exchange rate at March 31, 2015, which was DERIVATIVES AND HEDGE ACCOUNTING ¥120.17 to U.S. $1. The convenience translations should not be The accounting standard for financial instruments requires construed as representations that the Japanese yen amounts have companies to state derivative financial instruments at fair value been, could have been, or could in the future be converted into and to recognize changes in fair value as gains and losses unless U.S. dollars at this or any other rate of exchange. derivative financial instruments are used for hedging purposes. If derivative financial instruments are used as hedges and CONSOLIDATION meet certain hedging criteria, the Company and its consolidated In consolidation, all significant inter-company transactions, subsidiaries defer recognition of gains and losses resulting from account balances and unrealized profits are eliminated. changes in fair value of derivative financial instruments until Differences between the acquisition costs and underlying net related gains and losses on the hedged items are recognized. equities of investments in consolidated subsidiaries are recorded However, in cases where forward foreign exchange as goodwill in the consolidated balance sheets and amortized contracts are used as hedges and meet certain hedging criteria, over 5 to 10 years on a straight-line basis. Any immaterial forward foreign exchange contracts and hedged items are amounts are fully recognized as expenses as incurred. The effect accounted for in the following manner. on retained earnings and net income of unconsolidated subsidiaries and affiliates not accounted for by the equity method (1) If a forward foreign exchange contract is executed to hedge is immaterial to the consolidated financial statements, and an existing foreign currency receivable and payable,: investments therein are carried at cost after adjusting for any (i) The difference, if any, between the Japanese yen substantial and non-recoverable decline in value. amount of the hedged foreign currency receivable or The Company holds 51% of voting rights in MLC ITL payable translated using the spot rate at the inception Logistics Company Limited, however, the other shareholders’ date of the contract and the book value of the agreement is necessary to decide important policies on finance receivable or payable is recognized in the statements of and trade. Therefore, the Company does not treat MLC ITL income in the period which includes the inception date; Logistics Company Limited as its subsidiary. and The numbers of consolidated subsidiaries and affiliates accounted for by the equity method at March 31, 2015, 2014 and 2013 were as follows:

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011_0808001372708.indd 13 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

(ii) The discount or premium on the contract (that is, the SECURITIES difference between the Japanese yen amount of the Available-for-sale securities (see explanation (d) below) with contract translated using the contracted forward rate available fair market values are stated at fair market value. and that translated using the spot rate at the inception Unrealized gains and unrealized losses on these securities are date of the contract) is recognized over the term of the reported, net of applicable income taxes, as a separate contract. component of net assets. Realized gains and losses on sale of (2) If a forward foreign exchange contract is executed to such securities are computed using moving-average cost. hedge a future forecasted transaction denominated in Available-for-sale securities with no available fair value are foreign currency, the future transaction will be recorded stated at moving-average cost. Equity securities issued by using the contracted forward rate, and no gains or losses unconsolidated subsidiaries and affiliates which are not on the forward foreign exchange contract are recognized. consolidated or accounted for using the equity method are stated Also, if interest rate swap contracts are used as hedges and at moving-average cost. meet certain hedging criteria, the net amount to be paid or Under the accounting standard for financial instruments, received under the interest rate swap contract is added to or all companies are required to examine their intent for holding deducted from the interest on the assets or liabilities for which each security and classify those securities as (a) securities held the swap contract was executed. for trading purposes (hereinafter, “Trading Securities”), (b) debt The following summarizes hedging derivative financial securities intended to be held to maturity (hereinafter, “Held-to- instruments used by the Company and its consolidated maturity Debt Securities”), (c) equity securities issued by subsidiaries and hedged items. subsidiaries and affiliates, and (d) all other securities that are not Hedging instruments: Foreign exchange contracts and classified in any of the above categories (“Available-for-sale interest rate swap contracts. Securities”). Hedged items: Foreign currency assets and liabilities and The Company and its consolidated subsidiaries only hold interest rates of bank loans. those securities classified as equity securities issued by The hedge effectiveness of foreign exchange contracts subsidiaries and affiliates and Available-for-sale Securities. accounted for in the above manner and that of interest rate swaps If the market value of Available-for-sale Securities meeting specific hedging criteria are not evaluated at the end of declines significantly, such securities are stated at fair market the period. value, and the difference between fair market value and the book The Company and its consolidated subsidiaries use foreign value is recognized as loss in the period of decline. For equity exchange contracts and interest rate swap contracts for the securities with no available fair market value, if the net asset purpose of managing the exposure to fluctuations in foreign value of the investee declines significantly, such securities are currency exchange and interest rates of bank loans, respectively. required to be written down to the net asset value with the The Company and its consolidated subsidiaries do not corresponding losses recognized in the period of decline. In enter into derivatives for speculative purposes. these cases, such fair market value or the net asset value will be the book value of the securities at the beginning of the next year. TRANSLATION OF FOREIGN CURRENCY STATEMENTS The balance sheets of overseas subsidiaries are translated into REAL ESTATE HELD FOR SALE Japanese yen at the rate of exchange at the balance sheet date of Real estate held for sale is stated at cost determined using the the subsidiaries, which is December 31, 2014, except for specific identification cost method. In case the net selling value shareholders’ equity accounts, which are translated based on falls below the acquisition cost at the end of the period, real historical rates. The year-end rate of the subsidiaries is also used estate held for sale is carried at the net selling value on the for translation of income, expenses and net income for the year. balance sheet. The resulting translation adjustments are presented as “foreign currency translation adjustments” in the accompanying INCOME TAXES consolidated financial statements. Income taxes consist of corporation, enterprise and inhabitants taxes. Income taxes for recognition are computed based on the ALLOWANCE FOR DOUBTFUL ACCOUNTS pretax income of the Company and each of its consolidated Allowance for notes and accounts receivable, including loans and subsidiaries with certain adjustments required for consolidated other receivables, is determined by applying a percentage based and tax purposes. The asset and liability approach is used to on the actual rate of bad debts incurred in the past plus an recognize deferred tax assets and liabilities for loss amount based on individually estimated uncollectible carryforwards and expected future tax consequences of receivables. temporary differences between the book value and the tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets based on the assessment of realizability of tax benefits.

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011_0808001372708.indd 14 2015/09/03 22:09:01 DEPRECIATION In calculating retirement benefit obligations, the method of (1) Property and equipment attributing the projected benefit to the accounting period is based Property and equipment are stated at cost. Depreciation of on the benefit formula basis. Actuarial gains and losses are depreciable assets, except for warehouse facilities (buildings) recognized in statements of income using the straight-line and leased commercial facilities (buildings), is computed on a method over 5 to 16 years, beginning from the fiscal year declining- balance method over the estimated useful life based following the incurred year. Prior service costs are recognized in on the Corporate Income Tax Law of Japan. Depreciation of statements of income using the straight-line method over 5 to 15 warehouse facilities (buildings) is computed on a straight-line years, beginning from the incurred year. method over the estimated useful life based on the Corporate Income Tax Law of Japan. Depreciation of leased commercial (Change in accounting policies) facilities (buildings) is computed on a straight-line method over The Company and its domestic consolidated subsidiaries adopted the economic useful life of the assets (a 20-year period is Article 35 of the “Accounting Standard for Retirement Benefits” considered to be the standard economic useful life, however, it (ASBJ Statement No.26, May 17, 2012 (hereinafter, “Statement varies depending on the contract terms, etc.). No.26”)) and Article 67 of the “Guidance on Accounting The cost and accumulated depreciation applicable to assets Standard for Retirement Benefits” (ASBJ Guidance No.25, retired or otherwise disposed of are eliminated from related March 26, 2015 (hereinafter, “Guidance No.25”)) from the accounts, and gains or losses on disposal is credited or charged current fiscal year, and have changed the determination of to income. Expenditures for new facilities and those which retirement benefit obligations and current service costs. In substantially increase the useful life of existing property and addition, the Company and its consolidated subsidiaries have equipment are capitalized. Maintenance, repair and minor changed the method of attributing the projected benefit to renewal costs are charged to expense as incurred. periods from the point basis and the straight-line basis to the benefit formula basis. Also, the duration of bonds, which is the (2) Intangible assets determination basis of the calculation method used for the Intangible assets are amortized on a straight-line method. discount rate, has been changed from the determination method The capitalized computer software costs for internal use based on the approximate number of years of an employee’s are amortized on a straight-line method over the estimated useful average remaining service period to the method using the single life (over 5 to 10 years). weighted-average rate of discount that reflects the estimated period and amount of benefit payment in each period. (3) Finance leases In accordance with Article 37 of Statement No.26, the Property and equipment capitalized under finance leases, except effect of changing the determination of retirement benefit for finance leases which do not transfer ownership of the leased obligations and service costs has been recognized in retained property to the lessee, are depreciated over the estimated useful earnings at the beginning of the current fiscal year. life or the lease term of the respective assets. As a result of the application, liability for retirement benefits decreased by ¥292 million ($2,430 thousand), and ALLOWANCE FOR BONUSES FOR DIRECTORS retained earnings increased by ¥189 million ($1,573 thousand). The Company provides allowance for bonuses for directors The impact of these changes on operating income and based on the estimated amounts of payment. income before income taxes and minority interests in the year ended March 31, 2015 was minimal. The impact on per share RETIREMENT BENEFITS AND PENSION PLAN information in the year ended March 31, 2015 was also minimal. (1) Employees’ severance and retirement benefits The Company and its consolidated subsidiaries have adopted (2) Officers’ severance and retirement benefits defined benefit plans which include unfunded lump-sum Officers’ (directors and corporate statutory auditors) severing payment plans and funded contributory defined benefit pension their connection with certain consolidated domestic subsidiaries plans. Furthermore, the Company and its consolidated on retirement are entitled to lump-sum retirement benefit subsidiaries provide a defined contribution pension plan. payments based on pay rates, length of services and certain other The Company and its consolidated subsidiaries provide factors. allowance for employees’ severance and retirement benefits Retirement benefits to officers of certain consolidated based on the estimated amounts of projected benefit obligation domestic subsidiaries are provided based on each entity’s rules. and the fair value of the plan assets at year-end. Some consolidated subsidiaries apply the simplified methods for the calculation of retirement benefit obligations and employees’ severance and retirement benefit expenses.

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011_0808001372708.indd 15 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NET ASSETS The maximum amount that the Company can distribute as Under the Japanese Corporate Law (the “Law”) and regulations, dividends is calculated based on the non-consolidated financial the entire amount paid for new shares is required to be statements of the Company in accordance with Japanese laws designated as common stock. However, a company may, by a and regulations. resolution of the board of directors, designate an amount not Appropriations are not accrued in the consolidated exceeding one-half of the price of the new shares as additional financial statements for the corresponding period, but are paid-in capital, which is included in capital surplus in the recorded in the subsequent accounting period after shareholders’ accompanying consolidated balance sheets. approval has been obtained. Under the Law, in cases where a dividend distribution of Retained earnings at March 31, 2015 included amounts surplus is made, the smaller of an amount equal to 10% of the representing year-end cash dividends of ¥1,052 million ($8,754 dividend or the excess, if any, of 25% of common stock over the thousand) at ¥6.0 ($0.05) per share, which were approved at the total of additional paid-in capital and legal earnings reserve must shareholders’ meeting held on June 26, 2015. be set aside as additional paid-in capital or legal earnings reserve. Legal earnings reserve is included in retained earnings PER SHARE INFORMATION in the accompanying consolidated balance sheets. Net income per share is computed based upon the weighted Under the Law, legal earnings reserve and additional paid- average number of shares outstanding during each fiscal year. in capital could be used to eliminate or reduce a deficit or Cash dividends per share are presented on an accrual basis capitalized by a resolution at the shareholders’ meeting. and include dividends to be approved after the balance sheet Additional paid-in capital and legal earnings reserve may date, but applicable to the year then ended. not be distributed as dividends. Under the Law, all additional Information on diluted net income per share is not paid-in capital and all legal earnings reserve may be transferred disclosed as no shares which dilute net income per share were to other capital surplus and retained earnings, respectively, which outstanding for the years ended March 31, 2015, 2014 and 2013. may potentially become available as dividends.

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011_0808001372708.indd 16 2015/09/03 22:09:01 NOTE 2 – CASH AND CASH EQUIVALENTS Reconciliation of cash and deposits in the consolidated balance sheets and cash and cash equivalents in the consolidated statements of cash flows as of March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Cash and deposits ¥38,493 ¥35,523 $320,321 Time deposits with maturities over six months (1,817) (1,886) (15,120) Money funds invested in bonds and domestic certificates of deposits 6,600 7,600 54,922 Current assets other (money deposited) 1 0 8 Cash and cash equivalents ¥43,277 ¥41,237 $360,131

NOTE 3 – FINANCIAL INSTRUMENTS 1. CONDITIONS OF FINANCIAL INSTRUMENTS (1) Policy for using financial instruments The Company and its consolidated subsidiaries raise necessary funds in accordance with their performance plans and capital investment plans mainly by bank loans or issuance of bonds. Temporary cash surplus, if any, are invested in highly-secured deposits, public bonds and corporate bonds. Derivatives are used not for speculative purposes but based on actual demand.

(2) Details of financial instruments used, risks and risk management Notes and accounts receivable are exposed to credit risk of customers. Against such credit risk, the Company and its consolidated subsidiaries perform due date and balance controls for each customer in accordance with internal customer credit management rules and regularly screen customers’ credit status. Stocks as investments in securities are subject to risk of changes in market price. They are mainly stocks issued by companies with which the Company and/or its consolidated subsidiaries have business relations. The Company and its consolidated subsidiaries ascertain the fair values of stocks at regular intervals, and the fair values are reported at each board of directors meeting. The account derived from operating expenses, notes and accounts payable, is all settled within a year, and subject to risk of liquidity. The Company and its consolidated subsidiaries hedge such risk by timely reconsideration of monthly financial plans. Short-term bank loans are obtained mainly for financing related to trade. Otherwise, long-term debts are obtained mainly for financing related to investments in property and equipment. Because long-term debts with floating interest rates are subject to risk of fluctuation of these rates, one consolidated subsidiary utilizes interest rate swap contracts as hedging instrument for each loan contract to attempt to avoid such risk found in long-term debts. It is prescribed that approval by the manager of each entity’s finance section is necessary for execution and management of such derivative transaction in accordance with the Company’s policy on authorizing transactions, limiting the amount and others.

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

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011_0808001372708.indd 17 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

2. FAIR VALUES OF FINANCIAL INSTRUMENTS Book values, on the consolidated balance sheets, fair values and differences between the two on as of March 31, 2015 and 2014 were as follows. Notably, items for which it is extremely difficult to determine the fair value were not included in the following table (see (Note 2)). March 31, 2015 March 31, 2015 Book Book value Fair value Difference value Fair value Difference (Millions of yen) (Thousands of U.S. dollars) Assets (1) Cash and deposits ¥38,493 ¥38,493 ¥– $ 320,321 $ 320,321 $– (2) Notes and accounts receivable 32,570 32,570 – 271,033 271,033 – (3) Marketable securities 6,600 6,600 – 54,922 54,922 –

(4) Investment in securities (available- 107,785 107,785 – 896,938 896,938 – for-sale securities) ¥185,448 ¥185,448 ¥– $1,543,214 $1,543,214 $–

Liabilities (1) Notes and accounts payable ¥20,327 ¥ 20,327 ¥– $ 169,152 $ 169,152 $– (2) Short-term bank loans 16,762 16,762 – 139,486 139,486 – (3) Bonds *1 34,000 34,906 906 282,932 290,471 7,539 (4) Long-term loans payable *2 25,546 25,781 235 212,582 214,538 1,956 (5) Deposits on long-term leases 1,165 1,063 (102) 9,695 8,846 (849) (6) Derivatives – – – – – – ¥97,800 ¥ 98,839 ¥ 1,039 $ 813,847 $ 822,493 $8,646 *1: Bonds include bonds due within one year. *2: Long-term loans payable include long-term loans payable due within one year. March 31, 2014 Book value Fair value Difference (Millions of yen) Assets (1) Cash and deposits ¥ 35,523 ¥ 35,523 ¥– (2) Notes and accounts receivable 30,748 30,748 – (3) Marketable securities 7,600 7,600 – (4) Investment in securities (available-for-sale securities) 86,137 86,137 – ¥160,008 ¥160,008 ¥–

Liabilities (1) Notes and accounts payable ¥ 18,916 ¥ 18,916 ¥– (2) Short-term bank loans 17,950 17,950 – (3) Bonds *1 39,000 40,080 1,080 (4) Long-term loans payable *2 15,213 15,316 103 (5) Deposits on long-term leases 1,165 1,061 (104) (6) Derivatives – – – ¥ 92,244 ¥ 93,323 ¥1,079 *1: Bonds include bonds due within one year. *2: Long-term loans payable include long-term loans payable due within one year.

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011_0808001372708.indd 18 2015/09/03 22:09:01 (Note 1) Calculation method of fair values of financial instruments and matters concerning securities Assets: (1) Cash and deposits (2) Notes and accounts receivable (3) Marketable securities Relevant book values are used because the settlement term of the above items is short and their fair values approximate their book values. (4) Investment in securities (Available-for-sale Securities) The fair values of stocks are determined using the quoted price at the stock exchange, and the fair values of bonds are determined using the market price. Information on securities categorized by holding purpose is described in NOTE 4 (SECURITIES).

Liabilities: (1) Notes and accounts payable (2) Short-term bank loans Relevant book values are used because the settlement term of the above items is short and their fair values approximate their book values. (3) Bonds The fair values of bonds issued by the Company are calculated using the market price. (4) Long-term loans payable Long-term loans payable with floating interest rates require that the interest rates be amended at certain periods of time. Thus, relevant book values are used because their fair values approximate their book values. Long-term loans payable with fixed interest rates are calculated using the present value of the amount of principal and interest discounted using the current borrowing rate for similar loans of comparable maturity. A part of the long-term loans payable with floating interest rates is subject to special treatment of interest rate swaps (See NOTE 16). Thus, the fair values of such long-term loans payable are calculated by discounting the total amount of principal and interest that have been recorded together with said interest rate swap by an interest rate that would reasonably be estimated to apply to a similar loan. (5) Deposits on long-term leases Deposits on long-term leases are calculated by the present value of future cash flows discounted using a risk free rate. (6) Derivatives Information on this item is described in NOTE 16 (DERIVATIVE TRANSACTIONS).

(Note 2) Book value of financial instruments on the consolidated balance sheets for which it is extremely difficult to determine the fair value March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Non-listed stocks and others *1 ¥ 9,147 ¥ 8,447 $ 76,117 Deposits on long-term leases *2 21,807 21,278 181,468

*1 Non-listed stocks are not included in “ investment in securities (available-for-sale securities)” under “assets” because they have no market price and their fair values are extremely difficult to measure. Unconsolidated subsidiary stocks and affiliate stocks are included. *2 Deposits on long-term leases are not included in “deposits on long-term leases” under “liabilities” because their future cash flows cannot be estimated and their fair values are extremely difficult to measure.

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011_0808001372708.indd 19 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

(Note 3) The redemption schedule for monetary claims and securities with contractual maturities March 31, 2015 Millions of yen One year One to Five to Over or less five years ten years ten years Cash and deposits ¥38,493 ¥ – ¥ – ¥ – Notes and accounts receivable 32,569 – – – Marketable securities (certificate of deposits) 6,600 – – – Investment in securities Available-for sale securities with maturities (public bonds) 18 – – – ¥77,680 ¥ – ¥ – ¥ –

March 31, 2014 Millions of yen One year One to Five to Over or less five years ten years ten years Cash and deposits ¥35,523 ¥ – ¥ – ¥ – Notes and accounts receivable 30,748 – – – Marketable securities (certificate of deposits) 7,600 – – – Investment in securities Available-for sale securities with maturities (public bonds) 15 18 – – ¥73,886 ¥18 ¥ – ¥ –

March 31, 2015 Thousands of U.S. dollars One year One to Five to Over or less five years ten years ten years Cash and deposits $320,321 $– $– $– Notes and accounts receivable 271,033 – – – Marketable securities (certificate of deposits) 54,922 – – – Investment in securities Available-for sale securities with maturities (public bonds) 142 – – – $646,418 $– $– $–

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011_0808001372708.indd 20 2015/09/03 22:09:01 (Note 4) Repayment schedule of short-term loans, bonds, long-term loans and deposits on long-term leases March 31, 2015 Millions of yen One year One to Two to Three to four Four to Over or less two years three years years five years five years Short-term loans ¥16,762 ¥ – ¥ – ¥ – ¥ – ¥ – Bonds 7,000 – – 7,000 5,000 15,000 Long-term loans 1,281 5,022 10,197 1,384 5,468 2,194 Deposits on long-term leases – – – – – 1,165 ¥25,043 ¥5,022 ¥10,197 ¥8,384 ¥10,468 ¥18,359

March 31, 2014 Millions of yen One year One to Two to Three to four Four to Over or less two years three years years five years five years Short-term loans ¥17,950 ¥ – ¥ – ¥ – ¥ – ¥ – Bonds 5,000 7,000 – – 7,000 20,000 Long-term loans 1,498 1,143 5,289 4,666 1,269 1,348 Deposits on long-term leases – – – – – 1,165 ¥24,448 ¥8,143 ¥5,289 ¥4,666 ¥8,269 ¥22,513

March 31, 2015 Thousands of U.S. dollars One year One to Two to Three to four Four to Over or less two years three years years five years five years Short-term loans $139,486 $ – $ – $ – $ – $ – Bonds 58,250 – – 58,251 41,608 124,823 Long-term loans 10,660 41,791 84,855 11,517 45,502 18,257 Deposits on long-term leases – – – – – 9,695 $208,396 $41,791 $84,855 $69,768 $87,110 $152,775

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011_0808001372708.indd 21 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 4 – SECURITIES At March 31, 2015, acquisition costs, book values stated at fair values and net unrealized holding gains (losses) of Available-for- sale Securities were as follows: March 31, 2015 March 31, 2015 Unrealized Unrealized holding holding Book Acquisition gains Book Acquisition gains value cost (losses) value cost (losses) (Millions of yen) (Thousands of U.S. dollars) Securities with book values exceeding acquisition costs: Stocks ¥107,588 ¥30,616 ¥76,972 $895,298 $254,772 $640,526 Bonds 18 18 0 150 150 0 Other – – – – – – 107,606 30,634 76,972 895,448 254,922 640,526 Other securities: Stocks 180 184 (4) 1,498 1,531 (33) Bonds – – – – – – Other – – – – – – 180 184 (4) 1,498 1,531 (33) ¥107,786 ¥30,818 ¥76,968 $896,946 $256,453 $640,493

Non-listed stocks and others (book value being ¥1,196 million ($9,953 thousand)) were not included in the above list because their fair values are extremely difficult to estimate (due to lack of market price and inability to estimate their future cash flows).

In the year ended March 31, 2015, the amounts of sale, related gains and related losses of Available-for-sale Securities were as follows: March 31, 2015 March 31, 2015 Amount of Related Related Amount of Related Related sale gains losses sale gains losses (Millions of yen) (Thousands of U.S. dollars) Stocks ¥3,334 ¥2,107 ¥ – $27,744 $17,533 $ – Bonds 15 – – 125 – – Other – – – – – – ¥3,349 ¥2,107 ¥ – $27,869 $17,533 $ –

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011_0808001372708.indd 22 2015/09/03 22:09:01 At March 31, 2014, acquisition costs, book values stated at fair values and net unrealized holding gains (losses) of Available-for-sale Securities were as follows: March 31, 2014 Unrealized holding Book Acquisition gains value cost (losses) (Millions of yen) Securities with book values exceeding acquisition costs: Stocks ¥83,807 ¥28,998 ¥54,809 Bonds 32 32 0 Other – – – 83,839 29,030 54,809 Other securities: Stocks 2,298 2,587 (289) Bonds – – – Other – – – 2,298 2,587 (289) ¥86,137 ¥31,617 ¥54,520

Non-listed stocks and others (book value being ¥1,271 million ($12,349 thousand)) were not included in the above list because their fair values are extremely difficult to estimate (due to lack of market price and inability to estimate their future cash flows).

In the year ended March 31, 2014, the amounts of sale, related gains and related losses of Available-for-sale Securities were as follows: March 31, 2014 Amount of Related Related sale gains losses (Millions of yen) Stocks ¥3,377 ¥1,917 ¥3 Bonds 29 – – Other – – – ¥3,406 ¥1,917 ¥3

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011_0808001372708.indd 23 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 5 – RECEIVABLES FROM AND PAYABLES TO UNCONSOLIDATED SUBSIDIARIES AND AFFILIATES Significant receivables from and payables to unconsolidated subsidiaries and affiliates at March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Notes and accounts receivable ¥159 ¥153 $1,323 Notes and accounts payable ¥490 ¥635 $4,078 Deposits on long-term leases ¥ 24 ¥ 24 $ 200

NOTE 6 – INCOME TAXES The Company and its consolidated subsidiaries are subject to a number of different income taxes which, in the aggregate, reflected a statutory tax rate of approximately 36% for 2015 and 38% for 2014 and 2013. Reconciliations between the statutory tax rate and the effective tax rate for the years ended March 31, 2015, 2014 and 2013 were as follows: March 31, 2015 2014 2013 Statutory tax rate 35.6% – – Entertainment expense, etc. 1.1 – – not deductible for Japanese tax purposes Dividends, etc. (2.8) – – not taxable for Japanese tax purposes Inhabitant taxes 0.7 – – Equity in earnings of unconsolidated (1.2) – – subsidiaries and affiliates Write-down of deferred income tax assets at end of period due to 4.3 – – tax rate changes Other (0.2) – – Effective tax rate 37.5% – –

Information on reconciliation of tax rates for the years ended March 31, 2014 and 2013 is not disclosed as difference between the statutory tax rate and the effective tax rate was not more than 5% for the years ended March 31, 2014 and 2013.

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011_0808001372708.indd 24 2015/09/03 22:09:01 Significant components of the Company and its consolidated subsidiaries’ deferred income tax assets and liabilities as of March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Deferred income tax assets: Accrued enterprise tax ¥ 224 ¥ 232 $ 1,864 Allowance for investment loss 30 57 250 Allowance for doubtful accounts 38 39 316 Accrued employees’ bonuses 932 998 7,756 Retirement benefits 4,516 5,530 37,580 Depreciation 5,973 6,383 49,704 Impairment loss 2,800 2,908 23,300 Other 1,908 1,979 15,878 16,421 18,126 136,648 Valuation allowance (1,111) (1,066) (9,245) Total deferred income tax assets 15,310 17,060 127,403 Deferred income tax liabilities: Net unrealized holding gains on securities (24,543) (19,166) (204,236) Reserves deductible for Japanese tax purposes (7,639) (8,467) (63,568) Other (922) (794) (7,672) Total deferred income tax liabilities (33,104) (28,427) (275,476) Net deferred income tax liabilities ¥(17,794) ¥(11,367) $(148,073)

The “Act for Partial Revision of the Income Tax Act, etc.” and “Act for Partial Revision of the Local Tax Act, etc.” were promulgated in Japan on March 31, 2015. Accordingly, the statutory income tax rate utilized for the measurement of deferred tax assets and liabilities expected to be settled or realized between April 1, 2015 and March 31, 2016 and on or after April 1, 2016 were changed from 35.6% to 33.1% and 32.3%, respectively. As a result of this change, net deferred tax liabilities (after deducting the deferred tax assets) decreased by ¥1,888 million ($15,711 thousand) as of March 31, 2015, deferred income tax expense recognized for the year then ended increased by ¥638 million ($5,309 thousand), net unrealized holding gains on securities increased by ¥2,521 million ($20,979 thousand) and remeasurements of defined benefit plans increased by ¥6 million ($50 thousand).

25

011_0808001372708.indd 25 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 7 – STATEMENTS OF COMPREHENSIVE INCOME Amounts reclassified to net income for the years ended March 31, 2015, 2014 and 2013 were recognized in other comprehensive income in the current or previous periods, and tax effects for each component of other comprehensive income were as follows: Year ended March 31, Year ended March 31, 2015 2014 2013 2015 (Millions of yen) (Thousands of U.S. dollars) Net unrealized holding gains on securities Increase during the year ¥24,555 ¥ 2,969 ¥13,572 $204,335 Reclassification adjustments (2,107) (1,901) 41 (17,533) Sub-total, before tax 22,448 1,068 13,613 186,802 Tax expense (5,472) (382) (4,841) (45,535) Sub-total, net of tax 16,976 686 8,772 141,267

Foreign currency translation adjustments Increase during the year 1,118 1,803 858 9,303

Remeasurements of defined benefit plans, net of tax Increase during the year 1,153 – – 9,594 Reclassification adjustments (104) – – (865) Sub-total, before tax 1,049 – – 8,729 Tax expense (368) – – (3,062) Sub-total, net of tax 681 – – 5,667

Share of other comprehensive income of affiliates accounted for using the equity method Increase during the year 364 366 179 3,029

Total other comprehensive income ¥19,139 ¥ 2,855 ¥ 9,809 $159,266

26

011_0808001372708.indd 26 2015/09/03 22:09:01 NOTE 8 – INVESTMENT AND RENTAL PROPERTY For the year ended March 31, 2015 The Company and some of its consolidated subsidiaries have some investments and rental property such as office buildings for rent (including land) in Tokyo and other regions. For the year ended March 31, 2015, profit and loss concerning investment and rental property comprised lease profit of ¥9,222 million ($76,741 thousand), subsidy income of ¥194 million ($1,614 thousand), indemnity income of exiting facilities for lease of ¥30 million ($250 thousand), impairment loss of ¥727 million ($6,050 thousand) and loss on disposal of property and equipment of ¥693 million ($5,767 thousand).

Information on fair value of investment and rental property included in the consolidated financial statements at March 31, 2015 is as follows: Book value Fair value April 1, 2014 Increase March 31, 2015 March 31, 2015 (Millions of yen) ¥84,940 ¥6,173 ¥91,113 ¥285,256

Book value Fair value April 1, 2014 Increase March 31, 2015 March 31, 2015 (Thousands of U.S. dollars) $706,832 $51,369 $758,201 $2,373,770

Note: 1. Book value is the net amount of acquisition cost and accumulated depreciation. 2. Concerning net amount of increase and decrease in book value, the main factor for the increase was the costs incurred for maintenance and renewal of existing facilities amounting to ¥11,744 million ($97,728 thousand), and the main factor for the decrease was the depreciation of ¥6,824 million ($56,786 thousand). 3. Fair value as of March 31, 2015 was the amount mainly based on appraisal by an external real estate appraiser.

For the year ended March 31, 2014 The Company and some of its consolidated subsidiaries have some investments and rental property such as office buildings for rent (including land) in Tokyo and other regions. For the year ended March 31, 2014, profit and loss concerning investment and rental property comprised lease profit of ¥9,654 million, subsidy income of ¥194 million, indemnity income of exiting facilities for lease of ¥6 million and loss on disposal of property and equipment of ¥733 million.

Information on fair value of investment and rental property included in the consolidated financial statements at March 31, 2014 is as follows: Book value Fair value April 1, 2013 Increase March 31, 2014 March 31, 2014 (Millions of yen) ¥77,216 ¥7,724 ¥84,940 ¥265,008

Note: 1. Book value is the net amount of acquisition cost and accumulated depreciation. 2. Concerning net amount of increase and decrease in book value, the main factor for the increase was the costs incurred for maintenance and renewal of existing facilities amounting to ¥11,483 million, and the main factor for the decrease was the depreciation of ¥6,326 million. 3. Fair value as of March 31, 2014 was the amount mainly based on appraisal by an external real estate appraiser.

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011_0808001372708.indd 27 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 9 – PLEDGED ASSETS The net book values of pledged assets at March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Land ¥1,085 ¥1,085 $ 9,029 Buildings and structures 317 399 2,638 Investments in securities 18 33 150 ¥1,420 ¥1,517 $11,817

Liabilities secured by the pledged assets mentioned above at March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Short-term bank loans ¥ 300 ¥ 700 $ 2,497 Other in current liabilities 480 512 3,994 Long-term loans payable 6,879 6,595 57,244 Deposits on long-term leases 1,160 1,319 9,653 ¥8,819 ¥9,126 $73,388

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011_0808001372708.indd 28 2015/09/03 22:09:01 NOTE 10 – SHORT-TERM BANK LOANS AND LONG-TERM DEBT Short-term bank loans outstanding at March 31, 2015 and 2014 were ¥16,762 million ($139,486 thousand) and ¥17,950 million, respectively, and the annual interest rates of short-term bank loans were 0.380% to 10.750% and 0.390% to 2.650%, respectively.

Long-term debt at March 31, 2015 and 2014 consisted of the following: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Loans from banks, insurance companies and others, generally secured, between 0.100%-3.870% and 0.100%-3.880% ¥25,546 ¥15,213 $212,582 Balance in lease obligations 747 829 6,216 1.670% yen bonds due 2014, unsecured – 5,000 – 1.750% yen bonds due 2015, unsecured 7,000 7,000 58,250 2.080% yen bonds due 2018, unsecured 7,000 7,000 58,250 0.933% yen bonds due 2019, unsecured 5,000 5,000 41,608 1.230% yen bonds due 2021, unsecured 5,000 5,000 41,608 0.442% yen bonds due 2021, unsecured 5,000 5,000 41,608 0.734% yen bonds due 2024, unsecured 5,000 5,000 41,608 60,293 55,042 501,730 Less current portion (8,613) (6,791) (71,673) ¥51,680 ¥48,251 $430,057

The aggregate annual maturities of long-term loans at March 31, 2015 were as follows: Year ending March 31, Amount (Millions of yen) (Thousands of U.S. dollars) 2016 ¥ 1,281 $ 10,660 2017 5,022 41,791 2018 10,197 84,855 2019 1,384 11,517 2020 5,468 45,502 2021 and thereafter 2,194 18,257 ¥25,546 $212,582

The aggregate annual maturities of lease obligation at March 31, 2015 were as follows: Year ending March 31, Amount (Millions of yen) (Thousands of U.S. dollars) 2016 ¥332 $2,763 2017 243 2,022 2018 86 715 2019 52 433 2020 27 225 2021 and thereafter 7 58 ¥747 $6,216

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NOTE 11 – RETIREMENT BENEFITS AND PENSION PLAN 1. Defined benefit plan (1) Movement in retirement benefit obligations, except for plans to which the simplified methods have been applied

March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Balance at beginning of year ¥22,592 ¥21,120 $188,000 Cumulative effects of changes in (292) – (2,430) accounting policies Restated balance ¥22,300 ¥21,120 $185,570 Service cost - benefits earned during the year 1,111 852 9,245 Interest cost on projected benefit obligation 214 488 1,781 Actuarial loss (gain) (191) 1,571 (1,589) Benefits paid (1,597) (1,439) (13,289) Balance at end of year ¥21,837 ¥22,592 $181,718

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

March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Balance at beginning of year ¥11,357 ¥10,072 $94,508 Expected return on plan assets 227 201 1,889 Actuarial gain 962 717 8,005 Contributions from the Group 1,302 1,297 10,835 Benefits paid (1,109) (1,024) (9,229) Other 96 95 799 Balance at end of year ¥12,835 ¥11,358 $106,807

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

March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Balance at beginning of year ¥4,664 ¥4,743 $38,812 Retirement benefit costs 419 464 3,486 Benefits paid (414) (462) (3,445) Contributions from the Group (103) (99) (857) Other 25 18 208 Balance at end of year ¥4,591 ¥4,664 $38,204

30

011_0808001372708.indd 30 2015/09/03 22:09:01 (4) Reconciliations between retirement benefit obligations and plan assets and liability for retirement benefits, including for plans to which the simplified methods have been applied March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Funded retirement benefit obligations ¥19,564 ¥19,378 $162,803 Plan assets (13,973) (12,431) (116,277) 5,591 6,947 46,526 Unfunded retirement benefit obligations 8,002 8,951 66,589 Total net liability (asset) for retirement benefits at end of year ¥13,593 ¥15,898 $113,115 Liability for retirement benefits *1 ¥13,593 ¥15,898 $113,115 Total net liability (asset) for retirement benefits at end of year ¥13,593 ¥15,898 $113,115 *1 Officers’ severance and retirement benefits of ¥173 million ($1,439 thousand) as of March 31, 2015 and ¥227 million as of March 31, 2014 are not included in the above.

(5) Severance and retirement benefit expenses for employees Year ended March 31, Year ended March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Service cost - benefits earned during the year *1 ¥1,015 ¥ 756 $ 8,446 Interest cost on projected benefit obligation 214 488 1,781 Expected return on plan assets (227) (201) (1,889) Amortization of actuarial losses (gains) (19) 75 (158) Amortization of prior service costs (85) (166) (707) Severance and retirement benefit expenses based on simplified methods 419 464 3,486 Severance and retirement benefit expenses for employees ¥1,317 ¥1,416 $10,959 *1 Contributions from employees are not included.

(6) Remeasurements of defined benefit plans, before tax March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Prior service costs ¥ (85) ¥ – $ (707) Actuarial gains 1,134 – 9,436 Total ¥1,049 ¥– $8,729

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011_0808001372708.indd 31 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

(7) Remeasurements of defined benefit plans March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Prior service costs that are yet to be recognized ¥ (34) ¥ (119) $ (283) Actuarial losses (gains) that are yet to be recognized (134) 1,000 (1,115) Total ¥(168) ¥881 $(1,398)

(8) Plan assets (a) Plan assets comprise March 31, 2015 2014 General account 34% 36% Equity securities 34% 34% Bonds 29% 28% Other 3% 2% Total 100% 100%

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

(9) Actuarial assumptions The principal actuarial assumptions at March 31, 2015 and 2014 were as follows: Year ended March 31, 2015 2014 Discount rate 0.9%-1.2% 1.5%-1.7% Long-term expected rate of return 2.0% 2.0%

2. Defined contribution plan The required contribution amount of the Company and its consolidated subsidiaries to the defined contribution plan at March 31, 2015 and 2014 were ¥260 million ($2,164 thousand) and ¥236 million, respectively.

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011_0808001372708.indd 32 2015/09/03 22:09:01 NOTE 12 – INDEMNITY INCOME OF EXITING FACILITIES FOR LEASE Indemnity income of exiting facilities for lease represented mainly income from cancellation of leased commercial facilities in Yokohama and Kobe for the year ended March 31, 2015. For the year ended March 31, 2014, such represented mainly income from cancellation of equipment in leased real estate facilities in Tokyo.

NOTE 13 – IMPAIRMENT LOSS The impairment loss for the year ended March 31, 2015 was as follows:

Year ended March 31, 2015 Asset group Location Asset type Millions of yen Thousands of U.S. dollars Commercial facilities Takasago City, Land, building and ¥727 $6,050 for rent Hyogo Prefecture others

At March 31, 2015, the Company classified fixed assets by cash generating units which were considered to be independent from cash flows of other groups and recognized impairment loss on certain groups of assets. For the year ended March 31, 2015, the Company recognized the impairment loss amounting to ¥727 million ($6,050 thousand) as other expense in the consolidated statements of income by devaluating the book value of each fixed asset to its recoverable amount, comprising ¥676 million ($5,626 thousand) for land, ¥50 million ($416 thousand) for building and ¥1 million ($8 thousand) for others. The recoverable amount of commercial facilities for lease is its net realizable value based on an amount determined by valuations made in accordance with real estate appraisal value.

NOTE 14 – CONTINGENT LIABILITIES At March 31, 2015 and 2014, the balances of guarantee for loans amounted to ¥2,187 million ($18,199 thousand) and ¥2,482 million, respectively.

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011_0808001372708.indd 33 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 15 – LEASE TRANSACTIONS 1. FINANCE LEASES (LESSEE LEASES) Non-transferable finance leases (1) Leased assets Mainly consisted of system equipment relating to the logistics business (accounted for in “machinery and equipment” under property and equipment).

(2) Depreciation method for leased assets As described in (1) Property and equipment under “DEPRECIATION” in NOTE 1 ( SUMMARY OF ACCOUNTING POLICIES)

2. OPERATING LEASES (LESSEE LEASES) Future minimum lease payments under non-cancelable operating lease as of March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Due within one year ¥ 3,245 ¥ 3,196 $ 27,003 Due after one year 10,218 12,288 85,030 ¥13,463 ¥15,484 $112,033

(LESSOR LEASES) Future minimum lease receipts under non-cancelable operating lease as of March 31, 2015 and 2014 were as follows: March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Due within one year ¥12,604 ¥12,269 $104,885 Due after one year 15,026 17,340 125,039 ¥27,630 ¥29,609 $229,924

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011_0808001372708.indd 34 2015/09/03 22:09:01 3. FINANCE LEASES INITIATED BEFORE APRIL 1, 2008 (LESSOR LEASES) Finance lease transactions without transfer of ownership to lessee (1) Purchase price, accumulated depreciation and book value March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Buildings and structures and other Purchase price ¥3,353 ¥3,353 $27,902 Accumulated depreciation 2,362 2,246 19,655 Book value ¥ 991 ¥1,107 $ 8,247

(2) Lease commitments March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Due within one year ¥171 ¥ 162 $ 1,423 Due after one year 1,425 1,596 11,858 ¥1,596 ¥1,758 $13,281

(3) Rental income, depreciation and interest income equivalents Year ended March 31, Year ended March 31, 2015 2014 2013 2015 (Millions of yen) (Thousands of U.S. dollars) Rental income ¥274 ¥274 ¥274 $2,280 Depreciation ¥116 ¥118 ¥124 $ 965 Interest income equivalents ¥112 ¥121 ¥128 $ 932

(4) Calculation of interest income equivalents The excess of total rental income and estimated residual value over acquisition costs is regarded as an amount representing interest income equivalents and is allocated to each period using the interest method.

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011_0808001372708.indd 35 2015/09/03 22:09:01 Notes To Consolidated Financial Statements

NOTE 16 – DERIVATIVE TRANSACTIONS 1. Derivative transactions to which hedge accounting is not applied None

2. Derivative transactions to which hedge accounting is applied

Interest rate-related derivatives Hedge accounting method : Interest income or expense on the hedged items reflects net amount to be paid or received under the derivatives Type of transaction : Interest rate swap, receive floating, pay fixed Major hedged items : Long-term debt March 31, March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Notional amount ¥100 ¥20 $832 Portion due after one year included herein ¥100 – $832 Fair value (Note) – – –

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

NOTE 17 – CHANGES IN NET ASSETS The types and numbers of shares outstanding and treasury stock for the years ended March 31, 2015 and 2014 were as follows: Shares outstanding Treasury stock Type of shares Common stock Common stock Number of shares: (Shares) Year ended March 31, 2015 Balance at beginning of year 175,921,478 676,545 Increase in the accounting period – 21,562 Decrease in the accounting period – – Balance at end of year 175,921,478 698,107 Year ended March 31, 2014 Balance at beginning of year 175,921,478 654,096 Increase in the accounting period – 22,661 Decrease in the accounting period – (212) Balance at end of year 175,921,478 676,545

36

011_0808001372708.indd 36 2015/09/03 22:09:01 Increase in the number of shares was due to purchases of less-than-one-unit shares. Decrease in the number of shares was due to sales of less-than-one-unit shares. Matters related to dividends were as follows:

(a) Dividends payment Dividends payment during the year ended March 31, 2015 was as follows: Approval at Ordinary general shareholders’ meeting Board of directors meeting Approval date June 27, 2014 October 31, 2014 Type of shares Common stock Common stock Total amount of dividends ¥1,052 million ($8,755 thousand) ¥1,052 million ($8,754 thousand) Dividends per share ¥6.0 ($0.05) ¥6.0 ($0.05) Record date March 31, 2014 September 30, 2014 Effective date June 30, 2014 December 1, 2014 Dividends payment during the year ended March 31, 2014 was as follows: Approval at Ordinary general shareholders’ meeting Board of directors meeting Approval date June 27, 2013 October 31, 2013 Type of shares Common stock Common stock Total amount of dividends ¥1,052 million ¥1,052 million Dividends per share ¥6.0 ¥6.0 Record date March 31, 2013 September 30, 2013 Effective date June 28, 2013 December 2, 2013

(b) Dividends payment whose record date is attributable to the accounting period ended March 31, 2015 but which becomes effective after said accounting period is as follows: Approval at Ordinary general shareholders’ meeting Approval date June 26, 2015 Type of shares Common stock Funds for dividends Retained earnings Total amount of dividends ¥1,052 million ($8,754 thousand) Dividends per share ¥6.0 ($0.05) Record date March 31, 2015 Effective date June 29, 2015

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NOTE 18 – SEGMENT INFORMATION For the year ended March 31, 2015, 2014 and 2013 1. General information about reportable segments The Company’s reportable segments are components for which separate financial information is available, and evaluated regularly by the board of directors in determining allocation of management resources and in assessing performance. The Company decided its reportable segments by considering similarities between the business activities of the Company and its consolidated subsidiaries from the aspects of business type, business nature, method of providing service, market of service and others. The Company has two reportable segments - “logistics” and “real estate.” Each segment operates the following businesses. Logistics: - Warehousing, transportation, port-terminal operation and international freight forwarding. Real estate: - Rental of office buildings and sale of real estate

2. Basis of measurement about reported segment revenue, segment income, segment assets and other material items The accounting methods of business segments reported are consistent with those stated in NOTE 1 (SUMMARY OF ACCOUNTING POLICIES). Segment income is based on the figures of operating income. Amounts for inter-segment transactions or transfers are calculated based on market prices. As described in “Change in accounting policies”, the Company and its domestic subsidiaries have changed the determination of retirement benefit obligations and current service costs. The determination of retirement benefit obligations and current service costs for the reporting segment has been changed to reflect the amendment in accounting policies. Due to such change, the impact on segment income in the year ended March 31, 2015 was minimal.

3. Information about reported segment revenue, segment income, segment assets and other material items Reportable segment information for the year ended March 31, 2015 is as follows: March 31, 2015 Logistics Real estate Total Adjustment *1 Consolidated *2 (Millions of yen) Revenues: Non-affiliated customer ¥169,860 ¥34,502 ¥204,362 ¥– ¥204,362 Intersegment 542 1,439 1,981 (1,981) – 170,402 35,941 206,343 (1,981) 204,362 Segment income 7,204 9,166 16,370 (4,921) 11,449 Segment assets ¥191,261 ¥106,753 ¥298,014 ¥135,028 ¥433,042 Depreciation and amortization ¥6,335 ¥6,862 ¥13,197 ¥192 ¥13,389 Amortization of goodwill ¥309 ¥– ¥309 ¥– ¥309 Investments in affiliates accounted for by the equity ¥7,294 ¥– ¥7,294 ¥– ¥7,294 method Increase in tangible and intangible fixed assets ¥11,856 ¥10,306 ¥22,162 ¥2,300 ¥24,462

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011_0808001372708.indd 38 2015/09/03 22:09:01 March 31, 2015 Logistics Real estate Total Adjustment *1 Consolidated *2 (Thousands of U.S. dollars) Revenues: Non-affiliated customer $1,413,497 $287,110 $1,700,607 $– $1,700,607 Intersegment 4,510 11,975 16,485 (16,485) – 1,418,007 299,085 1,717,092 (16,485) 1,700,607 Segment income 59,948 76,275 136,223 (40,950) 95,273 Segment assets $1,591,587 $888,350 $2,479,937 $1,123,641 $3,603,578 Depreciation and amortization $52,717 $57,102 $109,819 $1,598 $111,417 Amortization of goodwill $2,571 $– $2,571 $– $2,571 Investments in affiliates accounted for by the equity $60,697 $– $60,697 $– $60,697 method Increase in tangible and intangible fixed assets $98,660 $85,762 $184,422 $19,140 $203,562

*1: The adjustments were as follows: (1) The adjustment of negative ¥4,921 million ($40,950 thousand) in segment income included inter-segment eliminations of ¥21 million ($175 thousand) and corporate expenses of negative ¥4,942 million ($41,125 thousand) not distributed to any reportable segments. Corporate expenses were mainly general and administrative expenses not attributable to any reportable segments. (2) The adjustment of ¥135,028 million ($1,123,641 thousand) in segment assets was for corporate assets not distributed to any reportable segments. Corporate assets mainly consisted of surplus funds (cash and marketable securities), long-term investments (investments in securities) and assets which belong to the administrative department of the Company. (3) The adjustment of ¥2,300 million ($19,140 thousand) for increase of property and equipment and intangible assets mainly consisted of capital investment by the administrative department of the Company.

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

March 31, 2014 Logistics Real estate Total Adjustment *1 Consolidated *2 (Millions of yen) Revenues: Non-affiliated customer ¥162,058 ¥36,104 ¥198,162 ¥– ¥198,162 Intersegment 424 1,380 1,804 (1,804) – 162,482 37,484 199,966 (1,804) 198,162 Segment income 6,817 9,702 16,519 (4,371) 12,148 Segment assets ¥182,308 ¥102,400 ¥284,708 ¥111,531 ¥396,239 Depreciation and amortization ¥6,019 ¥6,396 ¥12,415 ¥102 ¥12,517 Amortization of goodwill ¥299 ¥– ¥299 ¥– ¥299 Investments in affiliates accounted for by the equity method ¥6,516 ¥– ¥6,516 ¥– ¥6,516 Increase in tangible and intangible fixed assets ¥10,203 ¥13,410 ¥23,613 ¥62 ¥23,675

*1: The adjustments were as follows: (1) The adjustment of negative ¥4,371 million in segment income included inter-segment eliminations of ¥19 million and corporate expenses of negative ¥4,390 million not distributed to any reportable segments. Corporate expenses were mainly general and administrative expenses not attributable to any reportable segments. (2) The adjustment of ¥111,532 million in segment assets was for corporate assets not distributed to any reportable segments. Corporate assets mainly consisted of surplus funds (cash and marketable securities), long-term investments (investments in securities) and assets which belong to the administrative department of the Company.

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011_0808001372708.indd 39 2015/09/03 22:09:02 Notes To Consolidated Financial Statements

(3) The adjustment of ¥62 million for increase in property and equipment and intangible assets mainly consisted of capital investment by the administrative department of the Company.

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

Reportable segment information for the year ended March 31, 2013 is as follows: March 31, 2013 Logistics Real estate Total Adjustment *1 Consolidated *2 (Millions of yen) Revenues: Non-affiliated customer ¥154,917 ¥37,344 ¥192,261 ¥– ¥192,261 Intersegment 405 1,405 1,810 (1,810) – 155,322 38,749 194,071 (1,810) 192,261 Segment income 5,572 11,108 16,680 (4,375) 12,305 Segment assets ¥176,543 ¥94,405 ¥270,948 ¥104,232 ¥375,180 Depreciation and amortization ¥5,592 ¥6,352 ¥11,944 ¥154 ¥12,098 Amortization of goodwill ¥246 ¥– ¥246 ¥– ¥246 Investments in affiliates accounted for by the equity method ¥6,093 ¥– ¥6,093 ¥– ¥6,093 Increase in tangible and intangible fixed assets ¥12,644 ¥5,063 ¥17,707 ¥17 ¥17,724 *1: The adjustments were as follows: (1) The adjustment of negative ¥4,375 million in segment income included inter-segment eliminations of ¥45 million and corporate expenses of negative ¥4,420 million not distributed to any reportable segments. Corporate expenses were mainly general and administrative expenses not attributable to any reportable segments. (2) The adjustment of ¥104,232 million in segment assets was for corporate assets not distributed to any reportable segments. Corporate assets mainly consisted of surplus funds (cash and marketable securities), long-term investments (investments in securities) and assets which belong to the administrative department of the Company. (3) The adjustment of ¥17 million for increase in property and equipment and intangible assets mainly consisted of capital investment by the administrative department of the Company.

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

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011_0808001372708.indd 40 2015/09/03 22:09:02 4. Related information (1) Information about products and services Information is omitted, as the classification is the same as that for reportable segments.

(2) Information about geographic areas The information about geographic areas as of and for the years ended March 31, 2015 and 2014 is as follows:

(a) Revenues Year ended March 31, Year ended March 31, 2015 2014 2015 (Millions of yen) (Thousands of U.S. dollars) Revenues: Japan ¥181,302 ¥178,653 $1,508,712 Other 23,060 19,509 191,895 ¥204,362 ¥198,162 $1,700,607

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

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

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

5. Impairment loss by reportable segment March 31, 2015 Logistics Real estate Total Adjustment Consolidated (Millions of yen) Impairment loss ¥– ¥727 ¥727 ¥– ¥727

March 31, 2015 Logistics Real estate Total Adjustment Consolidated (Thousands of U.S. dollars) Impairment loss $– $6,050 $6,050 $– $6,050

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6. Amortization and unamortized balance of goodwill by reportable segment

March 31, 2015 Logistics Real estate Total Adjustment Consolidated (Millions of yen) Amortization of goodwill ¥ 309 ¥– ¥ 309 ¥– ¥ 309 Unamortized balance ¥ 1,925 ¥– ¥ 1,925 ¥– ¥ 1,925

March 31, 2014 Logistics Real estate Total Adjustment Consolidated (Millions of yen) Amortization of goodwill ¥ 299 ¥– ¥ 299 ¥– ¥ 299 Unamortized balance ¥ 2,147 ¥– ¥ 2,147 ¥– ¥ 2,147

March 31, 2013 Logistics Real estate Total Adjustment Consolidated (Millions of yen) Amortization of goodwill ¥ 246 ¥– ¥ 246 ¥– ¥ 246 Unamortized balance ¥ 2,292 ¥– ¥ 2,292 ¥– ¥ 2,292

March 31, 2015 Logistics Real estate Total Adjustment Consolidated (Thousands of U.S. dollars) Amortization of goodwill $ 2,571 $– $ 2,571 $– $ 2,571 Unamortized balance $ 16,019 $– $ 16,019 $– $ 16,019

42

011_0808001372708.indd 42 2015/09/03 22:09:02 Company Profile (As of March 31, 2015)

Headquarters and Branches Headquarters: Chuo-ku, Tokyo Branches: Tokyo, Yokohama, Nagoya, Osaka, Kobe and Fukuoka Date of Establishment April 15, 1887 Capital ¥22,393,986,570 Number of Shares Issued 175,921,478 Authorized Shares 440,000,000 Number of Employees 845 persons (parent only; not including 145 employees temporarily on loan to other companies. There are also 118 temporary employees, as well as 564 persons temporarily loaned or dispatched within the Group and those from outside the Group companies and accepted by the Company.) 4,452 persons (on a consolidated basis; not including 64 employees temporarily on loan to companies outside the Group. There are also 1,375 temporary employees, as well as 992 persons temporarily loaned or dispatched from outside the Group companies and accepted by the Company.) Stock Exchange Listing First Section of the Tokyo Stock Exchange Securities Code 9301

Major Shareholders Shareholder’s Name Number of Shares Held (Thousands) Shareholding Ratio (%) The Master Trust Bank of Japan, Ltd. (trust account) 13,715 7.8 Japan Trustee Services Bank, Ltd. (trust account) 11,658 6.7 Meiji Yasuda Life Insurance Company 9,707 5.5 MITSUBISHI ESTATE CO., LTD. 7,331 4.2 Kirin Holdings Company, Limited 5,932 3.4 Tokio Marine & Nichido Fire Insurance Co., Ltd. 5,831 3.3 The Bank of Tokyo-Mitsubishi UFJ, Ltd. 3,728 2.1 BNP Paribas Securities (Japan) Limited 3,487 2.0 Contents ASAHI GLASS CO., LTD. 3,315 1.9 1 ... To Our Shareholders Mitsubishi Corporation 3,205 1.8 Notes: 2 ... Topics 1. The Bank of Tokyo-Mitsubishi UFJ, Ltd. has set 1,500,000 Mitsubishi Logistics’ shares as trust funds for retirement benefits for which voting rights are reserved, in addition to the shares stated in the table above. 4 ... Overview of the Mitsubishi Logistics Group 2. The “Shareholding ratio” is calculated after excluding treasury stock (628,906 shares). 5 ... Independent Auditor’s Report Directors and Corporate Auditors (As of June 26, 2015) 6 ... Consolidated Balance Sheets Position Name Responsibilities and/or Primary Occupation 8 ... Consolidated Statements Of Income Chairman of the Board Tetsuro Okamoto President* Akio Matsui 9 ... Consolidated Statements Of Comprehensive Income Managing Director Yuichi Hashimoto Responsible for Accounting & Financing, Information Systems and Internal Audit, and General Manager, Information Systems Division 10 ... Consolidated Statements Of Changes In Net Assets Managing Director Yoshinori Watabe Responsible for International Transportation Business 11 ... Consolidated Statements Of Cash Flows Managing Director* Masato Hoki Responsible for General Affairs, Corporate Communications, Personnel and Planning Managing Director Kazuhiko Takayama Responsible for Warehousing & Distribution Business 13 Notes To Consolidated Financial Statements ... Managing Director Takanori Miyazaki Responsible for Technical, Harbor Transportation and Real Estate Businesses 43 ... Company Pro le Director Minoru Makihara Senior Corporate Advisor, Mitsubishi Corporation Director Shigemitsu Miki Senior Advisor, The Bank of Tokyo-Mitsubishi UFJ, Ltd. Director Koji Miyahara Board Counselor, Nippon Yusen Kabushiki Kaisha Director Yoshiji Ohara General Manager, Harbor Transportation Division Director Yoichiro Hara General Manager, Yokohama Branch Director Noboru Hiraoka General Manager, Warehousing & Distribution Business Division Director Fumihiro Shinohara General Manager, General Affairs Division and Corporate Communications Chamber Standing Corporate Auditor Tohru Watanabe Standing Corporate Auditor Yoshihito Yoshizawa Corporate Auditor Yohnosuke Yamada Lawyer Corporate Auditor Shunkyo Harada Corporate Auditor Kenji Sakurai Certified Public Accountant Notes: 1. Directors with an asterisk (*) are representative directors. 2. Minoru Makihara, Shigemitsu Miki and Koji Miyahara are Outside Directors as stipulated in the Companies Act, Article 2, Item 15. The Company designated them as independent directors as required by the rules of the Tokyo Stock Exchange, and reported it to the Exchange. 3. Yoshihito Yoshizawa, Yohnosuke Yamada and Kenji Sakurai are Outside Corporate Auditors as stipulated in the Companies Act, Article 2, Item 16. The Company designated them as independent corporate auditors as required by the rules of the Tokyo Stock Exchange, and reported it to the Exchange. 43

005_0808001372708.indd 2 2015/09/09 11:48:19 ANNUAL REPORT 2015 Year ended March 31, 2015

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

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