Ready for the Next! · PDF filegrowth, and we feel that our success in launching Gati-Kintetsu...

Shinagawa Intercity TowerA-24F, 2-15-1 Konan, Minato-ku, Tokyo 108-6024, JapanTel: +81-3-6863-6443 Fax: +81-3-5462-8501http://www.kwe.com

Printed in Japan

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Global Logistics Partner

Ready for the Next!

Kintetsu World Express, Inc.

Annual Report 2012Year Ended March 31, 2012

Widen KWE’s lead in the Asian market

Cover every part of Asia

Establish an overwhelming advantage in China

Steady Progress Toward Solidifying KWE’s Advantage in Asia

ANNUAL REPORT 2012 CONTENTSExpectations and ForecastsThis annual report contains statements about our expectations and forecasts regarding plans, strategies, and business results related to the future of Kintetsu World Express, Inc. (KWE). These statements reflect our expectations based on personal beliefs and assumptions that were determined in light of information that was available at the time the report was prepared. There are innumerable risk factors and uncertainties that could affect the future, including economic trends, competition in the logistics industry, market conditions, fuel prices, exchange rates, and tax or other regulatory system considerations. Please be well advised that because of these risk factors, actual results may differ from our expectations.

01 Ready for the Next!06 To Our Shareholders08 Top Interview12 KWE at a Glance 12 One-Stop Service 14 Global Network 16 Report by Five Regions

21 Efforts to Protect the Environment22 Corporate Governance24 Management25 Management’s Discussion and Analysis30 Financial Statements47 Investor Information

KWE aims to be the world leader in intra-Asia logistics. Our core strategy for achieving that goal is to

establish an overwhelming advantage in the bonded logistics business in China. We have been quickly

and steadily expanding our warehouse capacity in China’s bonded zones and, as we move forward, we

will continue to enhance our service infrastructure, particularly in the areas of inland China where

manufacturing is growing.

Leveraging our competitive advantage in China, KWE will increase its competitiveness in Asia as a

whole. We will continuously implement strategies and enhance our logistics network in Southeast

Asia and surrounding countries in order to expand our core area of operation to all of Asia.

We will accelerate growth around our base in India, where we recently formed a major business

alliance.

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East Asia & Oceania

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Results Achieved by the East Asia Region in the First Two Years of “Ready for the Next!”

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Results Achieved by the Southeast Asia Region in the First Two Years of “Ready for the Next!”

Kintetsu World Express Annual Report 2012 01

Ready for the Next!

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67.8%

29.9%

2.3%

Overseas

Domestic

Others

Corporate Strategy Headquarters

Corporate Sales & Marketing Headquarters

Corporate Forwarding Headquarters

Corporate Logistics Headquarters

Air Freight Dept.

Sea Freight Dept.

Quality Management Dept.

President and CEO

In order to compete against even the strongest players

Strengthen our global management foundation

Aim to be a true global player

Push Steadily Forward

KWE began actively developing overseas markets almost as soon as it was established. The high-

quality services we provide have earned us the support of overseas customers. As a result, roughly

70% of our operating income in the fiscal year ended March 2012 was generated outside of Japan,

demonstrating that we have already established a part of the solid management foundation that we

will need in order to compete as equals with major global competitors.

KWE has initiated and implemented radical reforms aimed at further reinforcing and solidifying our

management foundation so that we can compete more aggressively in the global market.

These reforms include the introduction of a four headquartered system aimed at achieving overall

group optimization across business sectors and geographical regions while also promoting offshore

business development and increased handling of triangle shipments across regional segments.

Outline of Four Headquarters System

Five Regional Management System

Contributions in Operating Income: Overseas vs. Domestic Operations

02 Kintetsu World Express Annual Report 2012

KWE Group

Japan

Europe, Middle East& Africa

East Asia & Oceania

The Americas

Southeast AsiaSoutheast AsiaSoutheast AsiaSoutheast AsiaSoutheast Asia East Asia &

The AmericasThe AmericasThe Americas


Ready for the Next!

Maintain a steady pace Build a lean, tough, profit-making framework

Expand the range of items we handle in order to boost freight volume

And Keep Moving Forward

In order to boost KWE’s freight volume, we will continue to focus on expanding and diversifying into

different market sectors, which will make us more resilient in the face of economic fluctuations. By

continuing to increase our handling of healthcare products in the Americas and European regions, and

by increasing handling of automotive-related cargo in Japan, we have made significant progress in

balancing the types of cargo that we handle. Our mission now is to push harder than ever to acceler-

ate expansion into these target markets.

Since the financial crisis of September 2008, KWE began implementing no-holds-barred streamlining

and cost-cutting measures in order to create a lean and tough constitution. This constitution has

resulted in steady improvement in our operating margin. In tandem with the continued pursuit of

these “defensive” streamlining strategies, we will continue to pursue “offensive” strategies aimed at

expanding the overall volume of our business.

KWE’s Operating MarginExpansion of KWE’s Healthcare-related Shipments in the Americas and Europe Expansion of KWE’s

Automotive Component Shipments in Japan


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Ready for the Next!

To Our Shareholders

Taking advantage of greater opportunities for growth in a harsher business environment

To Our Shareholders

Kintetsu World Express Annual Report 2012 0706 Kintetsu World Express Annual Report 2012

As a result of our success in reducing operating costs and overall costs, KWE managed to

post record-high net income in the fiscal term through March 2012, despite a slight drop in

net sales due to diminished transport demand amid a sluggish world economy.

The fiscal term through March 2012 was the second year of our “Ready for the Next!”

Medium-Term Management Plan. During the term, we boosted our global competitiveness

and made steady progress toward building a management structure that will allow us to

compete as equals with major global competitors. India is an area of particularly strong

growth, and we feel that our success in launching Gati-Kintetsu Express Pvt. Ltd., a joint

venture with major Indian logistics firm Gati Ltd., marks an important step toward

improving KWE’s position in the global market.

During the same fiscal term, we also initiated a new four headquarters system, which is

intended to allow us to exercise stronger management control and has already been

proving effective in orienting business operations toward overall group optimization

across the business and regional segments. We feel certain that we will turn the current

difficult business environment into opportunity that will drive our next leap forward.

Whenever I visit KWE’s operating locations around the world, I am encouraged by the

dedication and ingenuity displayed by our employees. Because we all work hard to create

new value and provide logistics services that contribute to the global economy, I feel sure

that KWE will continue to grow and to earn the confidence of our shareholders and

investors.

Satoshi IshizakiPresident and Chief Executive Officer

In the second year of our “Ready for the Next!” Medium-Term Management Plan, we were able to demonstrate our commitment to growth

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Top InterviewTop Interview

0’09/3 Result

’10/3 Result

’11/3 Result

’12/3 Result

’09/3 Result

’10/3 Result

’11/3 Result

’12/3 Result

200,000

400,000

600,000

800,000

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500,000


“Ready for the Next!” Summary of Second Year Results

Major improvement in the operating margin of KWE’s business within Japan

Operating margin in the combined four overseas regions rose to 5.9%, from 5.5%, with an especially large contribution from East Asia

Measures Aimed at Expanding the Freight Volume

Speed up expansion of cargo volumes primarily in the high-tech, automotive, healthcare and retail categories

Form global teams to maintain and expand sales to major customers who operate worldwide

Business environment in the second year　In the fiscal term through March 2012, the second year of our “Ready for the Next!” Medium-Term Management Plan, the business environment remained harsh as the European debt crisis bred concerns about economic recession and worldwide transport demand declined amid a feeling that growth was slowing in emerging markets. At the same time, although fuel surcharges continued to rise, the freight cost ratio declined, especially in Japan and East Asia & Oceania, due to decreased demand for transport.

We far exceeded our income target and posted record-high profitsAmidst this environment, the volume of air freight exports handled by the KWE Group declined by　4.8%　from the previous year to　473,722 tons, while the volume of sea freight exports grew by 4.5% to 290,906 TEUs. Net sales fell short of our target, amounting to 264.403 billion yen, or 1.2% less than the previous year. Nevertheless, because we were able to reduce operating costs and reap the benefits of

cost-cutting measures that we have maintained since the financial crisis in September 2008, operating income increased by 16.2% from a year earlier to 13.824 billion yen, compared to our initial target of 12.0 billion. Net income was a record high 9.545 billion yen, up 21.1% from the previous year.

In the final year, we anticipate larger cargo volumes and our best-ever results In the fiscal term through March 2013, the final year covered by “Ready for the Next!,” we aim to set new records by achieving 300.0 billion yen in net sales and 15.0 billion yen in operating income. In order to be a major global player, we need to secure a certain level of freight volume as a foundation. Toward that end, we set targets of 600,000 tons of air freight export (26.7% more than the previous year) and 340,000 TEUs of sea freight exports, up 16.9% from a year earlier. It will not be easy to achieve major increases in freight volume amid today’s harsh business environment, but we believe we can do it by implementing the measures described on the following pages.

Measures aimed at expanding air freight volumeWe will further reinforce our business dealings with major airlines on a worldwide basis. We will speed up expansion of triangle shipments, now that we have already created a framework for it and are starting to see results. Regarding major customers who do business on a global scale, we will form global teams to maintain and expand sales to Korean and Taiwanese corporations in addition to the Western and Japanese companies we have been addressing to date.

Measures aimed at expanding sea freight volumeWe will work at expanding freight volumes that moves in or out of Asia. In addition to strengthening sales to customers who currently use KWE’s air freight forwarding services, we will form the same kind of global teams that we use for air freight in order to concentrate on maintaining and expanding sales to major customers who operate worldwide. Further-more, in addition to reinforcing procurement at the global level, we will actively pursue the effective use of outside resources through business alliances, mergers and acquisitions.

Speed up efforts to expand cargo categoriesWe will accelerate the expansion of cargo categories in order to boost the overall Group’s volume regardless of economic trends. This is something we began addressing even before we started

Outline of “Ready for the Next!” Medium-Term Management Plan

Aim to build a solid corporate structure that will enable us to compete successfullyagainst even the strongest players

“Ready for the Next!” Numerical Targets Group-wide Volume Targets For Air and Sea Freight

Targets by March 2013

Management Strategy

Net sales: ¥300 billion (+40% from FY ended March 2010) Operating income: ¥15 billion (+100% from FY ended March 2010)Operating margin: 5.0% (1.5 point improvement over FY ended March 2010 )

1. Create a Strong Asia (focused investment of management resources)2. Sell a Strong Asia (create a sales structure that allows for competition

with major global competitors)3. Strengthen core competencies (human resources, quality, IT) 4. Ensure thorough compliance and strengthen a management system for the

environment’11/3

Original target’11/3

Results’12/3

Original target’12/3

Results’13/3

Forecast

¥10.0 billion

Operating incomeNet income

Net sales ¥292.3 billion Operating income ¥13.8 billion

¥11.8 billion ¥12.0 billion¥13.8 billion ¥15.0 billion

¥9.5 billion¥9.5 billion¥7.0 billion¥7.8 billion

¥5.8 billion

Net sales¥235billion





¥5.8 billion ¥7.0 billion

Aim for ’08/3’s record highSea Freight (Export) Air Freight (Export)

implementing our current medium-term management plan, and we have already had a certain measure of success, but not enough. For the future, we have designated six primary categories: high-tech (electronics), automotive, healthcare, retail, aircraft, and energy-related freight. For each category, a "global leader" will play a central role in sharing information and expertise with the rest of the Group and speeding up expansion of freight volume in the assigned category.

“The entire KWE Group will work to expand freight volume in order to achieve the goals of our ‘Ready for the Next!’ Medium-Term Management Plan.”

“In the fiscal year through March 2013, we aim to boost freight volumes, primarily by expanding the range of products that we handle, and to set new records for net sales and operating income.”

¥10.0 billion

432,954377,395377,395

497,508497,508 473,722473,722

600,000600,000

277,250277,250248,012248,012

278,263278,263 290,906290,906

340,000340,000TargetTarget

Target

Volume (TEU)Weight (tons)

Top InterviewTop Interview


Enhance KWE's advantage in Asia through combined efforts of East Asia and Southeast Asia regional headquartersThe Chinese economy is the engine driving the overall East Asian economy, and it has reached a crossroads. Meanwhile, the economy of Southeast Asia, where the population includes a high proportion of young people, is expected to develop rapidly in the future as the area is increasingly used as a production base. In light of these trends, we will speed up the reinforcement of our business base in Southeast Asia and, together with the East Asia regional headquarters, we will create a "two- wheeled" framework that will give KWE an even more solid competitive edge in Asia. In addition to strengthen-ing our business bases in India, Indonesia, Vietnam and Thailand, we are also beginning to research the markets of Myanmar, Cambodia and Laos. In India, we began operation in June 2012 of Gati-Kintetsu Express Pvt. Ltd., which provides logistics services with high added value. And in Thailand in March 2012, we began operating a logistics center that primar-ily handles automotive and electronics-related cargo. We will also expand our logistics business in Indonesia and Vietnam.

In East Asia, we established a competitive advantage in

China in the bonded logistics business as a result of the focused investment of management resources that we have practiced to date. We intend to work primarily through Kintetsu World Express (China) Co., Ltd., the administrative headquar-ters for KWE's Chinese business, to expand our network to inland areas of China and further strengthen our bonded logistics business there.

Strengthening our business framework in the Latin American regionLatin America has been experiencing marked economic growth. One sign of accelerating investment in the region's industrial sector has been the construction of new plants by Japanese automotive manufacturers. We plan to establish local subsidiaries in Mexico and Brazil as the most strategically important areas, from which we will strengthen our business framework in the region as a whole. In the past year, Americas-bound automotive-related air freight volume handled by KWE has increased by 50 to 100%. By strengthening our business framework in the region, we plan to take up even more of this robust demand.

Strengthening our transport business within IndiaIndia's economy is continuing to develop, especially the automotive, IT, hi-tech (electronics), and medical industries. The future is expected to hold continued significant growth in population and rapid growth in GDP. One of the big problems that the companies which operate in India face is the unreliable quality of domestic logistics. In a country where roads and transportation infrastructure are still developing, it is not a simple matter to deliver cargo on time. In order to solve this problem, KWE joined forces with Gati Ltd., a major provider of high-quality logistics services within India, to form Gati-Kintetsu Express Pvt. Ltd.*, with 70% participation from Gati and 30% from the KWE Group. The new company began operating in June 2012 with the aim of providing high-quality logistics services to every part of India.

Aiming to expand handling of Indian logistics to the global levelThis new joint venture has taken over Gati Ltd.'s domestic transport and logistics businesses within India. By combining

Gati Ltd.'s high-quality domestic logistics services with KWE's global network, we can enable our customers to manage their supply chains and implement their production plans more precisely. Through these types of initiatives, the KWE Group intends to raise its profile in the Indian logistics market and expand its Indian business to the global level. In the future, we aim to realize in India the same kind of competitive advantage that KWE has already established in China.

Aiming for Further Growth

Adopt a "two-wheeled" framework combining efforts of our East Asia and Southeast Asia regional headquarters

Strengthen our business framework in the Latin American region, which has been experiencing remarkable growth

“We will press ahead and concentrate particularly on measures aimed at growth in Southeast Asia and Latin America.”

1 Aiming for Further GrowthStrengthening domestic logistics within India through our joint venture with Gati Ltd.

Expanding Indian business worldwide by combining domestic Indian logistics with KWE's global network

“Let's build the same kind of competitive edge in India that we built in China.”

2

*Gati-Kintetsu Express, headquartered in the Hyderabad region, has 2,900 employees

and about 500 locations in India. It operates some 3,500 trucks in India, 845 of which

are equipped with GPS. Through the use of information technology, the trucks can

quickly and automatically transmit information about completed deliveries. It offers

logistics services with high added value, such as deliveries at prescheduled times.

Building a "Strong Asia" that Covers Both East and Southeast Asia

In Southeast Asia: Speed up reinforcement of our business base In East Asia: Maintain our leading position, with focus on China

One-Stop ServiceKWE at a Glance:KWE at a Glance:

At KWE, our core business is consolidated services by which cargo collected from multiple shippers are sorted and assembled per airport of overseas destination, and are consigned as KWE cargo to airlines for international air freight forwarding.

Our export services include document preparations for air carriage, customs clearance and surface transportation. We provide such services through a closely working network in our sales division, which includes sales offices and branches, and our operation division.

Once the consolidated cargo arrives at its destination airport, KWE’s local overseas subsidiary or agent picks it up at the airline warehouse for import customs clearance and delivery to the consignee.

The amount of international air freight handled by KWE is ranked among the top 10 in the world.

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Net Sales (Millions of yen) Net Sales (Millions of yen)

Net Sales (Millions of yen) Net Sales (Millions of yen)

Sales Breakdownby Service (’12/3)

49.1%

Main air freight export items• Digital electronic appliances, computers, semiconductors and

other electronics products and components• Telecommunications devices and components, including

mobile phones• Automotive parts and components• Healthcare and chemical products• Machine tools and construction machinery

Main air freight import items• Electronics products and components, including smartphones,

computers, semiconductors and their manufacturing equipment

• Healthcare and chemical products• Apparel-related products• Automotive parts and components• Beaujolais wine, etc.

In the field of sea freight forwarding, KWE is a non-vessel operating common carrier (NVOCC), making use of the shipping lines’ transportation services. The flow of sea freight forwarding is basically the same as that of air freight: In addition to transporting full container loads, we provide consolidated services whereby we pack less-than-container loads into sea containers, arrange transport with a shipping company, clear the cargo through customs and sort it at the destination port, and deliver it to customers.

We provide highly customized sea-based transport services such as buyer's consolidation (combining customers' commercial distribution and logistics), door-to-door service supporting the establishment of overseas production bases (including transport and installation of equipment), environmentally friendly rail transport, etc.


19.4%

Main sea freight export items• Household electric appliances • Raw materials • Parts and semi-finished goods (such as mobile phone

components) • Automotive-related products • Plant equipment transportation • Aircraft-related products• Equipment to be used at events and for broadcasting (such as

for international sporting events, musicals and exhibitions)

Main sea freight import items• Computers and their peripherals • Household electric appliances• Automotive-related products • Healthcare and chemical products• Apparel-related products• General merchandise and retail goods

Services in the field of logistics have the highest growing demand in the distribution industry. At KWE, we have continued to provide total logistics services including customs clearance, providing temporary storage, processing products during distribution, and providing distribution and inventory services.

In recent years, customers’ needs for logistics services have expanded and diversified due to their efforts to streamline and reduce costs of distribution. Services include not only procuring materials, processing products, distribution, handling merchandise returns and waste disposal but also handling orders, inventory management, information management and analyzing results.

We support global companies by developing and operating third-party logistics services that employ the latest technologies to meet our customers’ every need.


21.6%

Main logistics services and systems• Logistics consulting• PO (Purchase Order) management• Inventory control management• Assembly works• Call center functions• Reverse logistics (RMA): Return Material Authorization• Cross-dock operations• VMI (Vendor Managed Inventory)• Project management• Product inspection

One of KWE’s greatest strengths is our ability to provide door-to-door transportation services all over the world. For example, our domestic freight forwarding service, which we provide primarily to users of our international freight forwarding services, uses our nationwide service network to collect freight from every part of Japan from Hokkaido to Okinawa, transport it to an airport via one of our cargo centers, and have an airline fly it to the desired destination. At that destination, we transport the cargo from the airport to the appropriate regional cargo center.

Our various affiliates provide specialized and sophisticated services such as the customized and careful packing of precision machinery that is required for door-to-door delivery, temporary staffing, transport of materials for events and exhibitions, hand carry, and IT support, etc.


9.9%

Main domestic services• Domestic air freight forwarding• Pick-up and delivery of export and import freight• Customized packaging, transport, and installation of precision

machinery• Temporary staffing, primarily for logistics and trading

businesses• Transport of art objects and other materials for events and

exhibitions• Hand carry service • IT and other types of support for 3PL

Five domestic affiliates provide specialized services• Kintetsu Logistics Systems, Inc. • Kintetsu World Express Delivery Co., Ltd.• Kintetsu Cosmos, Inc. • Kintetsu World Express Sales, Inc.• Kintetsu World Express Shikoku, Inc.

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Targets and Policies

KWE’s business structure is definitely superior due to its ability to offer one-stop service that meets various logistics needs.

Air Freight

Sea Freight

Logistics

Other Operations

Net Sales by Category (Millions of yen, %)

Air Freight Forwarding LogisticsSea Freight ForwardingOther Operations

264,403300,000

’12/3 Results ’13/3 Targets

Expand our logistics and sea freight businesses

49.1%

21.6%

19.4%

9.9%9.6%

19.6%

21.8%

49.0%

KWE at a Glance:KWE at a Glance:

JapanEurope, Middle East & AfricaKintetsu World Express (U.K.) Ltd.Kintetsu World Express (Deutschland) GmbHKintetsu World Express (France) S.A.S.Kintetsu World Express (Benelux) B.V.Kintetsu World Express (RUS), Inc. LLC.Kintetsu World Express (Ireland) Ltd.Kintetsu World Express South Africa (Pty) Ltd.Kintetsu World Express (Switzerland) Ltd.Kintetsu World Express (Italia) S.R.L.Kintetsu World Express (Sweden) ABKintetsu World Express (Middle East) FZEKintetsu World Express (Czech) s.r.o.Kintetsu World Express (Saudi Arabia) Ltd.plus 3 other companies

East Asia & OceaniaKintetsu World Express (HK) Ltd.Kintetsu World Express (Taiwan), Inc.Kintetsu World Express (Australia) Pty Ltd.Kintetsu World Express (Korea), Inc.Kintetsu World Express (China) Co., Ltd.Beijing Kintetsu World Express Co., Ltd.Kintetsu World Express (Xiamen) Co., Ltd.Kintetsu Logistics (Shenzhen) Co., Ltd.Shanghai Kintetsu Logistics Co., Ltd.Dalian Kintetsu Logistics Co., Ltd.Suzhou Kintetsu Logistics Co., Ltd.Kintetsu Logistics (Xiamen) Co., Ltd.Yantai Kintetsu Logistics Co., Ltd.Kintetsu World Express (Philippines) Inc.Kintetsu World Express (Subic) Inc.Kintetsu World Express (Clark) Inc.Kintetsu Logistics (Philippines) Inc.plus 8 other companies

Southeast AsiaKWE-Kintetsu World Express (S) Pte Ltd.Kintetsu World Express (Malaysia) Sdn. Bhd.Kintetsu Logistics (M) Sdn. Bhd.KWE-Kintetsu World Express (Thailand) Co., Ltd.Kintetsu Logistics (Thailand) Co., Ltd.Kintetsu World Express (India) Pvt. Ltd.Gati-Kintetsu Express Pvt. Ltd.PT. Kintetsu World Express IndonesiaPT. Kintetsu Logistics IndonesiaKintetsu World Express (Vietnam), Inc.Kintetsu Logistics (Vietnam), Inc.plus 1 other company

Kintetsu World Express, Inc.Kintetsu Logistics Systems, Inc.Kintetsu World Express Delivery Co., Ltd.Kintetsu Cosmos, Inc.Kintetsu World Express Sales, Inc.Kintetsu World Express Shikoku, Inc.plus 3 other companies

The AmericasKintetsu World Express (U.S.A.), Inc.Kintetsu World Express (Canada) Inc.World Wide Customs Brokers Ltd.

OtherKintetsu Global I.T., Inc.KWE Reinsurance, Inc.

Japan

40.8%

Europe, Middle East & AfricaEurope, Middle East & AfricaEurope, Middle East & AfricaEurope, Middle East & AfricaEurope, Middle East & Africa

9.9%

12.0%

East Asia & Oceania

27.2%

9.4%

Sales Breakdownby Region (’12/3)






KWE’s Business Locations

’10/3

189

298

194

308

203

333

’11/3 ’12/3

Cities

Locations

Global NetworkKWE divides the world into five regions and operates the Five Regional Management System, through which it keeps improving management’s efficiency and speed.

Net Sales

Operating Income

Operating Margin

‘09/3

114,252

1,191

1.0%

‘10/3

95,296

1,629

1.7%

‘12/3

110,628

4,159

3.8%

‘11/3

112,725

2,918

2.6%

(Millions of yen)

Net Sales

Operating Income

Operating Margin

‘09/3

37,504

2,538

6.8%

‘10/3

26,053

1,097

4.2%

‘12/3

32,588

2,127

6.5%

‘11/3

32,855

2,327

7.1%

(Millions of yen)

Performance in the Fiscal Year Ended March 2012

Key Policies for the Fiscal Year through March 2013

Operating income increased sharply through operating cost reductionAir freight exports: The Great East Japan Earthquake and the flooding in Thailand led to supply chain disruptions, which in turn stimulated spot shipments of automotive products. However, there was a sharp decline in demand for shipments of electronics-related freight, especially in the Asia-bound market, and overall air freight exports declined 15.6%*1 from the previous term.Air freight imports: There was active movement of cargo related to smart phones and other telecommunications equipment, but there was no vitality in any other product category, so air freight imports declined 2.9%*2.Sea freight: Exports of electronic products decreased, along with shipments of machinery and equipment, resulting in a drop in sea freight exports of 5.0％*3. Imports rose 1.6％*2

thanks to increased demand for housing materials and personal computer peripherals, etc.Results: Overall net sales including those generated by domestic subsidiaries amounted to 110,628 million yen, down 1.9%, but because we worked hard to reduce operating costs, operating income increased sharply by 42.5% to 4,159 million yen.*1 based on weight *2 based on number of shipments *3 based on TEUs (Twenty-foot Equivalent Units)

Highlights of the Fiscal Year Ended March 2012April 2011 Implemented organizational reform, initiating Group

management organization (four headquarters system)

July 2011 Established a joint venture Project Cargo Japan, Inc. with Hitachi Transport System, Ltd.

November 2011 Moved our corporate headquarters to the Shinagawa district of Tokyo



Air freight imports were down, but sea freight exports were strongAir freight exports: For most of the year, there were stable movements of medical- and electronics-related freight, especially semiconductors. In the fourth quarter, however, electronics-related freight declined, and overall air freight exports increased only 1.7%*2, from a year earlier.Air freight imports: Volume declined by 5.0%*3, mostly due to low traffic in flat-panel displays and PCs.Sea freight: Export growth of 12.9%*4 was attributed to increased volumes of paper pulp and food goods, while imports struggled to maintain their past performance and posted a slight drop of 0.3%*3.

Results: Overall net sales by the Americas region amounted to 32,588 million yen (down 0.8%), while operating income was 2,127 million yen (down 8.6%).*1 KWE’s overseas subsidiaries close their accounts at the end of December, *2 based on

weight, *3 based on number of shipments, *4 based on TEUs (Twenty-foot Equivalent Units)

Highlights of the Fiscal Year Ended March 2012August 2011 Expanded our warehouse in Guelph, a suburb of Toronto,

Canada.

February 2012 Opening of second warehouse in Guelph

Key Policies for the Fiscal Year through March 2013Key Policies for the Fiscal Year through March 2013Key Policies for the Fiscal Year through March 2013Key Policies for the Fiscal Year through March 2013

The fiscal year through March 2013 began with few favorable factors pointing to an imminent recovery in freight volumes. Cargo movements were weak in the first quarter (April-June 2012). Relative to the same period a year earlier, air freight exports decreased 11.4%*1 while air freight imports declined 0.3%*2, sea freight exports rose 10.4%*3, and sea freight imports decreased 1.4%*2. As the core company of the KWE Group, KWE Japan will exercise leadership in this difficult situation; we will continue to work as one with our Group companies to promote sales, with the aim of building a business base that will enable us to compete head-to-head with competitors in the global market.

(1) Strengthen our sales framework with an eye toward meeting Group-wide volume targets (①expand business with major customers who operate worldwide, ②actively pursue offshore business ③work horizontally within the

Group to boost sales in product categories like automotive, healthcare, and retail).

(2) Expand the volume of air freight that we transport into and out of Japan.

(3) Further expand sea freight forwarding (work closely with our air freight department to reinforce sea freight sales).

(4) Expand sales of logistics services (bolster solution-oriented business to provide customers with optimal supply chain management solutions).

(5) Engage in aggressive sales efforts focused on South-east Asia and emerging markets.

There was no measurable volume increase early in the fiscal year through March 2013. In the first quarter of the year (January – March 2012*1), weakness affected most of the region's sectors. Year on year, air freight exports decreased 2.3%*2, air freight imports decreased 2.8%*3, and sea freight exports decreased 5.1%*4. On the other hand, sea freight imports increased 16.2%*3. Given the current situation, we will be implementing the following measures.

First, we will boost freight volumes, which is an important task for the entire KWE Group. Specifically, we will strengthen the Corporate Sales & Marketing Department that was established last year within the Americas head-quarters to support the development of major customer accounts that operate worldwide and make large-volume shipments. We will work through sales teams that each focus on a particular field – automotive, healthcare, retail, aircraft, or oil and gas – and step up our efforts to increase volume in these sectors.

Our second measure will be to increase cargo volumes between the Americas and Asia through more resourceful efforts by our sales people. We will have sales people meet

more frequently to share their expertise. We will also reinforce sales efforts aimed at major American customers in the Asia/Pacific region and work to expand cargo volume through Asia, rather than focusing solely on cargo that moves in or out of the Americas.

Third, we will seek out new businesses and solidify our presence in Mexico, Brazil and other parts of Latin America, where we have been seeing signs of growth.

In addition, we will work on expanding sea freight forwarding between Asia and the Americas, partner with the Europe, Middle East & Africa regions to increase volume between the Americas and Europe, and strengthen logistics sales in Toronto and Vancouver.


Japan

General Manager,The AmericasNobutoshi Torii

Report by Five Regions

The AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasThe AmericasReport by Five Regions

As the core company of the Group, we strengthen the Group’s management base

Actively expanding volume by further developing major customers

Net Sales

Operating Income

Operating Margin

‘09/3

24,318

469

1.9%

‘10/3

19,831

(6)

-

‘12/3

26,842

542

2.0%

‘11/3

24,085

679

2.8%

(Millions of yen)

Net Sales

Operating Income

Operating Margin

‘09/3

71,191

3,674

5.2%

‘10/3

56,614

3,433

6.1%

‘12/3

73,716

5,359

7.3%

‘11/3

77,607

4,212

5.4%

(Millions of yen)



Due to the effects of the European debt crisis, air freight in particular got off to a very rough start in the first quarter (January- March 2012*1) of the fiscal year through March 2013. Air freight exports dropped 12.0%*2 from a year earlier, while air freight imports fell 8.6％*3, but sea freight exports increased 5.5％*4, and sea freight imports increased 4.6％*3. Given this situation, we intend to implement the following measures.

The first measure is to reduce our direct cost ratio by 1%. Our 12 European subsidiaries are implementing what we call "DCR1," our Direct Cost Reduction 1% Project, which is aimed at increasing gross profit and improving profitability—while achieving 100% of net sales targets.

The second measure is the promotion of specialized sales by product category, with the aim of expanding freight volume to and from Asia and the Americas. Our subsidiaries in Germany will lead regional sales activities targeting automotive custom-ers, subsidiaries in France, Italy, and Switzerland will focus on retail business, and our Irish subsidiary will concentrate on boosting healthcare-related sales together with Benelux and Germany. We will also work on developing customers in the

oil and gas, aircraft and beverages fields.The third measure is improving sales centered around three

growth markets: Russia, the Middle East, and South Africa. Our Russian subsidiary is licensed for customs clearance, allowing it to do its own customs clearing for air, sea, and truck freight. The company owns 40 45-foot container trucks, and is making the most of its strength in Europe-Russia and intra-Russia transport. In the Middle Eastern market, Kintetsu World Express (Middle East) FZE opened a warehouse inside Al Maktoum International Airport (commonly known as Dubai World Central or DWC) and Kintetsu World Express (Saudi Arabia) Ltd. is developing an oil and gas project by expanding business ties with local companies. Kintetsu World Express South Africa (Pty) Ltd. is the only Japanese-affiliated forwarder running its own one-stop logistics service in South Africa, where it has a total of more than 46,000㎡ of ware-house space. By expanding our business in Russia, the Middle East, and South Africa, we will further the develop-ment of inter-regional logistics between Japan, the rest of Asia, the Americas, and other regions, while simultaneously developing intra-region logistics.

Solid cargo movements in both air freight exports and sea freightAir freight exports: Shipments grew primarily in the medical field, and business was helped by the weaker euro. Air freight exports grew 12.0%*2 over the previous term.Air freight imports: In addition to the effects of the European debt crisis, there was a decline in cargo destined for Central and Eastern Europe, so air freight imports declined by 6.2%*3.Sea freight: Exports rose 5.6%*4 thanks to an increase in handling of medical products bound for Central and Eastern Europe. Imports also grew, by 10.7%*3, as a result of solid shipments by existing customers. Results: Net sales for the Europe, Middle East & Africa region

as a whole totaled 26,842 million yen, up 11.4％, while operating income was 542 million yen, down 20.3%, due to deterioration in the balance of payments of some subsidiaries. *1 KWE’s overseas subsidiaries close their accounts at the end of December, *2 based on weight, *3 based on number of shipments, *4 based on TEUs (Twenty-foot Equivalent Units)

Highlights of the Fiscal Year Ended March 2012September 2011　Kintetsu World Express (Ireland) Ltd. became certified as

an authorized economic operator (AEO), which will simplify and speed up customs clearance procedures

October 2011 Kintetsu World Express (Middle East) FZE opened a warehouse in the cargo district of Al Maktoum International Airport



Solid sea freight movements despite slowing of air freight exportsAir freight exports: Shipments related to smart phones and other telecommunications devices were strong, but there was a conspicuous drop in the volume of shipments of other electronic products bound for the Europe and U.S. Air freight exports declined by 5.3%*2 year on year.Air freight imports: Due to a slowdown in cargo movements, especially of electronic components, air freight imports rose only 2.4%*3.Sea freight: Exports increased 8.6%*4 thanks to strong shipments of printers as well as orders from new customers. Imports increased 1.2%*3, partly because some customers switched from air freight to sea freight.Results: Net sales by the East Asia & Oceania region

decreased 5.0% to 73,716million yen, while operating income rose 27.2% to 5,359 million yen.*1 KWE’s overseas subsidiaries close their accounts at the end of December, *2 based on weight, *3 based on number of shipments, *4 based on TEUs (Twenty-foot Equivalent Units)

Highlights of the Fiscal Year Ended March 2012April 2011 Began operation of Dalian BLP Kintetsu Logistics Co., Ltd.

June 2011 Established Chongqing KG International Logistics Co., Ltd.

July 2011 Established Chengdu Jinda Logistics Co., Ltd.

October 2011 Changed Shanghai Kintetsu World Express Co., Ltd.'s name to Kintetsu World Express (China) Co., Ltd. and gave it responsibil-ity for 11 Group companies in China, not including Hong Kong

February 2012 Opened San Pedro Warehouse in the Philippines

March 2012 Expanded warehouse space in the Shanghai Pudong Integrated Bonded Zone

Slower economic growth and the continued worldwide slump in demand for electronic products caused us to pass the first quarter (January-March 2012*1) of the fiscal year through March 2013 without any significant increase in cargo volume. Air freight exports rose 1.7%*2 over the same quarter a year earlier while air freight imports grew 0.6%*3. Sea freight exports declined 0.6%*4 and sea freight imports decreased by 2.0%*3.

This region is the engine that will join forces with other regional headquarters and drive KWE to realize two of our main management strategies: "Creating a strong Asia," and "Selling a strong Asia." We will implement the following strategies in the fiscal year through March 2013.

First, we will cooperate with Southeast Asia headquarters to strengthen our joint sales framework. We will have staff from both regions meet face-to-face on a regular basis so they can share detailed information and work together to build up our business.

The second measure is to expand the range of products

that we handle. Specifically, we will strengthen sales in the automotive, retail, and healthcare sectors, in addition to electronics.

Third, we will expand our logistics business centered around China, Korea, Taiwan, and the Philippines. Going forward, we will further enhance infrastructure that supports our transport and bonded logistics services in inland areas of China, where further growth is expected. We believe that enhancement of our inland service frame-work is what will distinguish KWE from the competition.

The fourth measure is to expand our sea freight business by further enhancing our sea freight business base.

Fifth, we aim to reduce direct costs in order to achieve our target operating margin of 7.0%.


Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East Europe, Middle East & Africa

General Manager,East Asia & OceaniaKeisuke Hirata

General Manager,Europe, Middle East & AfricaToshiyuki Kase


East Asia & Oceania


Working to boost intra-region and inter-region volumes

Expanding global freight volumes, primarily in Asia

C

M

Y

CM

MY

CY

CMY

K

18-19p.pdf 1 12/08/17 19:29

Net Sales

Operating Income

Operating Margin

‘09/3

19,786

1,178

6.0%

‘10/3

17,640

1,054

6.0%

‘12/3

25,483

1,409

5.5%

‘11/3

25,079

1,522

6.1%

(Millions of yen)



Imports were slow but exports were solidAir freight exports: In addition to demand for spot shipments related to flat-panel TVs early in the term, there were urgent shipments related to the flooding in Thailand. As a result, air freight exports rose 4.3%*2 year on year.Air freight imports: Movements of electronics-related products were slow, and air freight imports declined 6.3%*3.Sea freight: Exports rose 1.5%*4, helped by solid shipments of printers. However, import volumes were affected by production adjustments that resulted from the flooding in Thailand, and imports declined 3.2%*3.Results: Net sales in Southeast Asia increased 1.6% to

25,483 million yen, but operating income declined 7.5% to 1,409 million yen.*1 KWE’s overseas subsidiaries close their accounts at the end of December, *2 based on weight, *3 based on number of shipments, *4 based on TEUs (Twenty-foot Equivalent Units)

Highlights of the Fiscal Year Ended March 2012May 2011 Opened Noida Warehouse in IndiaJune 2011 Began operation of Kintetsu Logistics (Thailand) Co., LtdSeptember 2011 Established PT. Kintetsu Logistics IndonesiaOctober 2011 Opened Manesar Warehouse in IndiaFebruary 2012 Announced establishment of joint venture with Gati Ltd. in India March 2012 Opened Mumbai Warehouse II in IndiaMarch 2012 Opened Eastern Seaboard Logistics Center in Thailand

In the first quarter (January - March 2012*1) of the fiscal year through March 2013, air freight export volumes were lower compared to the previous first quarter, when they had been quite good. Overall, there was a conspicuous increase in demand related to recovery from the flooding in Thailand. Air freight exports decreased by 12.7%*2, while air freight imports increased 4.3%*3. Sea freight exports shot up by 24.1%*4 and sea freight imports rose 3.6%*3. Given this situation, we intend to implement the following measures.

First is a regional strategy. We plan to expand our business in Thailand, Indonesia, and Vietnam, and to strengthen the sales functions of our subsidiary in India by collaborating with Gati Ltd. We will also look into starting full-scale business operations in the emerging markets of Bangladesh, Myanmar, and Cambodia.

The second measure is to expand air freight volumes. We will work to expand our volume by strengthening intra-Asia sales, especially through a joint project between subsidiar-ies in India, Thailand, Hong Kong, and Shanghai. In addition, we will work to boost industry-specific sales,

particularly in the automotive and retail (garment) fields.The third measure is to develop our sea freight business.

We aim to boost our overall handling of sea freight by increasing the volume of consolidated freight that we handle through our own LCL (less than container load) forwarding service, as well as by expanding FCL (full container load) sales.

The fourth measure is ongoing strengthening of our logistics business. Specifically, we will start a full-fledged subsidiary in Indonesia to specialize in logistics and we will beef up our warehouse facilities in Thailand, Malaysia, and India.

The fifth initiative is to expand our cross-border trucking service. We already operate regular service between Singapore and Kuala Lumpur. We plan to provide even broader-based logistics service by expanding regular service to connect five cities: Singapore, Kuala Lumpur, Bangkok, Ho Chi Minh City and Hanoi.


Southeast Asia Southeast Asia Southeast Asia Southeast Asia Southeast Asia Southeast Asia

General Manager,Southeast AsiaYoshinobu Mitsuhashi

Efforts to Protect the EnvironmentReport by Five Regions

Entering emerging markets and promoting stronger intra-Asia sales

Efforts to Protect the Environment

Aiming for a “Low Carbon Society”KWE is working in a variety of ways to realize a “low carbon society” domestically and abroad.

As a result of these efforts, in the fiscal year through March 2012 we achieved a 21.3% reduction in domestic carbon dioxide emissions compared to the previous year.

Environmental Initiatives at KWE WarehousesWays that we reduce electric power consumption at terminals directly operated by KWE include introducing energy-efficient machinery, controlling heating and cooling tempera-tures more carefully, and turning off lights during lunchtime, as well as installing a solar power generator at our Narita Terminal.

We will also continue to work on reducing waste and conserving resources.

Reducing Vehicle Fuel ConsumptionIn order to reduce fuel consumption by delivery trucks, cargo handling vehicles, and company cars, we are reducing fuel consumption in vehicles used for bonded transport between airports and KWE warehouses, and switching to battery-powered forklifts in warehouses and to eco-friendly cars, among other measures.

Acquisition of ISO Certification for Our Environmental Management SystemsAs of March 2012, KWE had received ISO14001 certification from the International Standards Organization for environmental management systems at three of the KWE Group’s locations in Japan, and for 10 locations overseas.

Environmental Protection PoliciesKWE’s behavioral guidelines for employees call for careful use of resources and protection of the environment. In July 2011, we made some additions to our Environmental Protec-tion Policies and created a new Energy Management Policy

in response to revisions to Japan’s Act Concerning the Rational Use of Energy. In the future, we will continue to work hard at preserving the environment through efforts related to our warehouses and equipment, and to our other business activities.

Solar power generator (Narita Terminal, Japan)

Basic PhilosophyKWE will strive to contribute to society through our global logistics services and to protect the global environment.

Basic Policies(1) Having established an organization that allows us to

properly manage the environmental impact of our logistics services, which consist primarily of international forwarding services, we will promote ongoing environ-mental management activities.

(2) We will assess our business’ impact on the environment, establish environmental goals and targets, take steps to prevent pollution, and continuously improve our environ-mental efforts by using environmental management systems.

(3) In addition to abiding by relevant environmental laws, regulations and other requirements, we will go beyond those requirements in protecting the environment.

(4) We will take particular care regarding the following types of environmental impact resulting from our business activities:- Reducing electrical power consumption, promoting

energy-saving activities and updating equipment based on Japan’s Act Concerning the Rational Use of Energy

- Curbing CO2 emissions • Curbing exhaust emissions from vehicles - Reducing waste and promoting recycling

(5) We will prevent environmental pollution by cooperating and collaborating with our business partners and affiliates.

(6) We will educate all of our employees regarding our environmental policies, goals and targets. We will also announce our environmental policies to the public.

Energy Management PolicyWe will actively implement comprehensive, group-wide measures in order to meet our target of reducing annual specific energy consumption by at least 1%.(1) We will expand on our existing energy conservation and

management activities by establishing and implementing stronger energy management regulations.

(2) We will establish and fully implement medium- and long-term plans for boosting energy efficiency at existing facilities and for ensuring a high level of energy efficiency at newly constructed facilities.

(3) When investing in new facilities, we will make the use of energy-saving plant and equipment a priority.

Environmental Protection Policies

Corporate Governance

ComplianceOne of the important principles that is clearly stated in the KWE Ethics and Action Standards that guides the actions of KWE executives and employees is that we should live up to the public’s trust with fairness, a strong sense of ethics and respon-sibility. The KWE Group Compliance Basic Policy and the KWE Group Conduct Compliance Standards as specific standards of behavior establish our basic approach to business execution. We have also assigned personnel responsible for compliance in each division and subsidiary and have established a Compliance Committee to oversee groupwide compliance management, based on provisions in the KWE Group Compliance Rules. We have also prepared a compliance manual, regularly conduct compliance training and auditing, and have introduced a whistle-blower system.

Risk ManagementIn order to create a framework for managing risk, KWE estab-lished risk management standards and ensured that all relevant personnel are familiar with them, based on the KWE Group Risk Management Basic Policy. The Company also established a Risk Management Committee to oversee companywide risk, and designated individuals to be responsible for risk management within each division. The Risk Management Committee deter-mines basic policies and systems for managing risk and works through the divisional risk managers to identify and manage risk factors that need to be addressed from a companywide perspec-tive. In addition, KWE has prepared a crisis plan, which includes rules for responding to accidents, so that we will be prepared in the face of any new dangers that might suddenly emerge and substantially affect the Company’s business operations.

Investor RelationsIn order to make our management more transparent, we disclose information about the status of our business through our website and other means, and work at maintaining good relations with shareholders and investors.

The Company discloses on its website monthly figures for air freight export tonnage and the number of air freight import shipments clearing customs in Japan, for KWE and for the entire industry; KWE’s standing in the industry; and its quarterly overseas cargo volume. In addition, the Company strives to help investors understand its businesses by providing videos that clarify its operations and by providing videos of financial results briefings, and publishing segment information.

Basic PhilosophyKWE’s corporate philosophy is to “create new values and optimal environments through our logistics services, in order to contribute to the development of a global society together with our clients, shareholders and employees.” We work at building corporate value while maintaining good relationships with all stakeholders. From this perspective, it is important that our management strengthens corporate governance and makes its decision-making processes more transparent and fair.

Special Features of KWE’s GovernanceKWE’s governance system basically consists of the Board of Directors and Board of Auditors. In order to speed up decision-making and to make a clear separation between supervisory functions and executive functions, we adopted an executive officer system and elect six executive officers. In addition, we established “KWE Group Top Strategy Meeting” and an “Executive Commit-tee,” both under the supervision of the Board of Directors, in order to ensure that decisions are reached with adequate care and to provide better forums for discussing general management policies and important issues related to business execution.

Board of DirectorsKWE’s Board of Directors consists of 13 members, including two outside directors. The Board of Directors selects executive officers and candidates to be directors or auditors after deliberating such factors as character, insight, and performance within the Company. Directors are appointed for one-year terms, in order to establish clear accountability and to allow for quick response to changes in business conditions. Compensation is structured to reflect each director’s position and the Company’s financial results, based on prescribed Company standards.

The Board of Directors held 17 meetings in the fiscal year ended March 2012, and the two outside directors attended 74% of the meetings.

AuditorsKWE’s internal auditing is supervised by our seven-member Audit Department, which audits operations and accounting, and works to improve operations and management efficiency.

Two of the four members of our Board of Auditors are outside auditors. Each of the auditors conducts audits according to the auditing plan determined by the Board of Auditors. The system allows for adequate supervision of directors’ job execution, with important documents being turned over to auditors and the standing auditors attending important meetings such as Execu-tive Committee and KWE Group Top Strategy Meeting. As a rule, the Board meets once a month. In addition to determining basic policies regarding auditing, etc., board members report to each other the findings of their daily auditing activities and

exchange views.We established Auditors’ Office to support clerical work

related to the Board of Auditors and auditors’ work, and it operates in close coordination with the Audit Department, which conducts internal audits. We have also established mechanisms that enable auditors to demand whatever reports they require from directors, executive officers, or employees, and to investi-gate the status of KWE’s business and assets at any time.

KWE’s accounting auditor is KPMG AZSA LLC. Audits were conducted thoroughly throughout the fiscal term, and we have created an environment that facilitates auditing.

Our Audit Department, Board of Auditors, and accounting auditor meet regularly to coordinate their annual schedules and report on operations, etc. They cooperate even more closely by exchanging information as necessary.

The Board of Auditors held 14 meetings in the fiscal year ended March 2012, and the two outside auditors attended 96% of the meetings.

Relationships with Outside Directors and Outside AuditorsKWE’s outside directors are Akio Tsujii, an adviser to Kintetsu Corporation, and Masanori Yamaguchi, Chairman of the Board of Kintentsu Corporation. Our outside auditors are Naoyuki Okamoto, President and Representative Director of Mie Kotsu Group Holdings, Inc., and Masao Kishida, Professor at Waseda University’s Graduate School of Finance, Accounting and Law. Although Kintetsu Corporation is a major shareholder, holding 40.98% of KWE’s shares, KWE has minimal business dealings with Kintetsu, and our outside directors and outside auditors have no particular vested interest in KWE.

Executive Committee and KWE Group Top Strategy MeetingKWE’s Executive Committee is composed of full-time directors and auditors, executive officers, and departmental managers, etc. It meets twice monthly under the supervision of the Board of Directors as a forum for discussing important matters concerning management policies for the entire group and their execution. In addition, the Company holds a KWE Group Top Strategy Meeting once every three months, with participation from the general managers of the regional headquarters. The Group also holds meetings for the heads of its regional headquarters, sales strategy meetings, and other meetings as its own forums.

Director CompensationWe do not see a need to offer extra incentives to our directors, as we believe our performance management system and other existing mechanisms serve adequately to provide motivation and maintain morale. In the year ended March 2012, we paid a total of 305 million yen to 15 directors, including 27 million yen to the two outside directors.


Corporate Governance

Preparation and publication of disclosure policy

Regular briefings forindividual investors

Posting of IR material on website

Regular briefings foranalysts andinstitutional investors

Establishment of IRgroup or dedicatedpersonnel

Disclosure policy is available onour website

Held several times per year.Most recent briefing wasattended by about 200 people.

Held biannually, in May andNovember. Most recent briefingwas attended by about 80people.

General Affairs Department(IR/PR Group)

Representativesexplain face to faceSupplemental explanation

Yes

Yes

–

–

–

Our website:http://www.kwe.com/ir/index.htmlContains links to President’s message, corporate philosophy, management plans, information about the Company, industry, and Group subsidiaries and affiliates, financial statements, share information

Nomination and dismissal

Supervise


Cooperation

Cooperation Report


General Shareholders’ Meeting

Supervise


Supervise


Board of Directors

Representative Directors

Top Strategy Meeting & Executive CommitteeIndependent Auditors

Auditors’ Office

Cooperation

Board of Auditors

Audit Department

Risk Management Committee

Compliance Committee

Corporate Logistics Headquarters

Corporate Forwarding Headquarters

Corporate Sales & Marketing Headquarters

Corporate Strategy Headquarters

Operational Audit

Accounting Audit

Internal auditing

Risk management

Compliance management

Sales Departments

Administration Departments

24 Kintetsu World Express Annual Report 2012 25Kintetsu World Express Annual Report 2012

Management’s Discussion and Analysis


OVERVIEWThe KWE Group consists of Kintetsu World Express, Inc., 59 consolidated subsidiaries, and six affiliated companies accounted for by the equity method. Our principle businesses are international and domestic freight forwarding using transport provided by airlines and shipping companies and trucking companies, and representation on behalf of air carriers. We also offer customs clearance, warehousing, trucking, packing, temporary staffing, insurance agency, and property management services.

Although KWE’s business falls within the single segment of freight transportation, we divide our operations into the following four categories: air freight forwarding (which accounted for 49.1% of net sales in the fiscal year ended March 2012), logistics (21.6%), sea freight forwarding (19.4%), and other operations (9.9%).

The KWE Group uses a Five Regional Management System. In the fiscal year ended March 2012, each region’s contribution to overall net sales* was as follows: Japan 40.8%, the Americas 12.0%, Europe, Middle East & Africa 9.9%, East Asia & Oceania 27.2%, Southeast Asia 9.4%, and other 0.7%. In all, 59.2% of KWE’s total net sales came from overseas operations.

* Simple totals before eliminations. “Other” is a business segment not included in reportable segments. It consists mainly of overseas incidental logistics operations within the KWE Group.

OPERATIONSThe global economy was generally lackluster during the fiscal year ended March 2012 as a result of mounting concerns about an economic downturn caused by an expansion of the European debt crisis and apparent slowdowns in China, India, and other emerging countries. Japan’s economy resumed a modest recovery during the second half of the year, despite heightened uncertainty caused by the Great East Japan Earthquake and flooding in Thailand, a decline in external demand, and prolonged yen appreciation.

The international freight market in which the KWE Group mainly operates was weak overall, affected by the earthquake and global decline in demand for flat-panel TVs and PCs.

In this environment, the volume of freight handled by the KWE Group in its air freight forwarding business fell below prior year levels, with export volumes (by weight) down 4.8% and imports (by number of shipments) down 1.9%. However, the sea freight forwarding business achieved growth, with export volumes up 4.5% and imports (by number of shipments) up 1.2%.

Net SalesAs a result of the above, the KWE Group’s consolidated net sales fell 1.2% from the previous year to ¥264.403 billion.

By business segment, net sales in the air freight forwarding business fell 2.0%, logistics increased 9.4%, sea freight forwarding edged down 0.1%, and other operations dropped 17.4%.

Trends varied by region, with net sales in Japan down 1.9% from the previous year, the Americas down 0.8%, Europe, Middle East & Africa up 11.4%, East Asia & Oceania down 5.0%, and Southeast Asia up 1.6%*.

* Based on simple totals, before eliminations.

Cost of SalesCost of sales totaled ¥220.918 billion in the fiscal year ended March 2012, down 2.6%, or ¥5.928 billion, from the previous year. The percentage to net sales was 83.6%, down 1.1 percentage points from 84.7% in the previous year.

Selling, General and Administrative ExpensesSelling, general and administrative expenses totaled ¥29.660 billion in the fiscal year ended March 2012, up 2.5%, or ¥0.716 billion, from the previous year. The percentage to net sales was 11.2%, up 0.4 percentage points from 10.8% in the previous year.

Operating IncomeOperating income grew 16.2% from the previous year to ¥13.825 billion in the fiscal year ended March 2012. Moreover, the operating margin improved to 5.2%, up 0.8 percentage points from 4.4% in the previous year. Although selling, general and administrative expenses to net sales

Net Sales by Category

Air freight forwardingLogisticsSea freight forwardingOther operations

49.1%

21.6%

19.4%

9.9%

Management

Akio TsujiiChairman

Satoshi IshizakiPresident andChief Executive Officer

Hirohiko UenoSenior Managing Director

Joji TomiyamaSenior Managing Director

Hiroyuki HoshiaiSenior Managing Director

Haruto NakataManaging Director

Yoshinori WataraiManaging Director

Kazuya MoriManaging Director

Shinya AikawaManaging Director

Masanori YamaguchiOutside Director

Yoshinobu MitsuhashiDirector

Toshiyuki KaseDirector

Nobutoshi ToriiDirector

MD&A2012.indd 24-25 12.8.21 1:55:53 PM



deteriorated slightly by rising 0.4 percentage points from the previous year, cost of sales to net sales improved sharply by declining 1.1 percentage points from the previous year.

Other Income (Expenses)Net other income totaled ¥1.129 billion in the fiscal year ended March 2012, up from ¥0.778 billion in the previous year. This increase is due mainly to extraordinary losses declining by ¥0.517 billion from ¥1.090 billion in the previous year. Extraordinary losses totaled ¥0.573 billion, reflecting the absence of a provision for U.S. antitrust matter of ¥1.014 billion recorded in the previous year and the recording this year of a loss on valuation of investment securities of ¥0.181 billion, a loss on liquidation of subsidiaries of ¥0.140 billion, and a restructuring loss of ¥0.112 billion.

Income Before Income Taxes and Minority InterestsIncome before income taxes and minority interests grew 18.0% from the previous year to ¥14.954 billion in the fiscal year ended March 2012.

Income TaxesIncome taxes rose 12.1% from the previous year to ¥4.939 billion in the fiscal year ended March 2012. After adjustments, the effective tax rate was 33.0%, down from 34.8% in the previous year.

Net IncomeNet income grew 21.1% from the previous year to ¥9.546 billion in the fiscal year ended March 2012. As a result, net income per share rose to ¥265.16, up from ¥218.92 in the previous year; and return on equity improved to 13.1%, up from 11.7% in the previous year.

billion in the fiscal year ended March 2012. Current assets rose 7.0%, or ¥5.454 billion, to ¥83.319 billion, due mainly to an increase in cash and time deposits.

Total property and equipment fell 3.4%, or ¥1.103 billion, to ¥31.661 billion. Intangible assets decreased 12.6%, or ¥0.231 billion, to ¥1.600 billion.

Investments and other assets rose 13.3%, or ¥1.037 billion, to ¥8.857 billion. As a result, total long-term assets declined 0.7%, or ¥0.297 billion, to ¥42.118 billion.

Total liabilities fell 3.3%, or ¥1.606 billion, to ¥47.356 billion. Current liabilities declined 4.4%, or ¥1.858 billion, to ¥40.471 billion. Long-term liabilities grew 3.8%, or ¥0.252 billion, to ¥6.885 billion.

Net assets grew to ¥78.081 billion in the fiscal year ended March 2012, up 9.5%, or ¥6.763 billion, from ¥71.317 billion in the previous year. Retained earnings rose to ¥72.691 billion, up 13.0%, or ¥8.357 billion, from ¥64.332 billion in the previous year; and total shareholders’ equity rose to ¥84.773 billion, up 10.9%, or ¥8.357 billion, from ¥76.415 billion in the previous year. Additionally, total accumulated other comprehensive income (a deduction) increased from ¥7.084 billion to ¥8.681 billion, due partly to foreign currency translation adjustments (a deduction) rising from ¥7.163 billion to ¥8.862 billion. The equity ratio at the end of the fiscal year was 60.7%, up from 57.6% at the end of the previous year.

LIQUIDITY AND CAPITAL RESOURCESNet cash provided by operating activities totaled ¥11.118 billion in the fiscal year ended March 2012, up 13.0%, or ¥1.275 billion, from the previous year. Main items included an increase in income before income taxes and minority

OUTLOOK FOR THE YEAR THROUGH MARCH 2013In the international freight market, despite signs of recovery in the U.S. market, we believe conditions will remain unpredictable due to a large number of concerns, including economic uncertainty in Europe, forecasted slowdowns of economic growth in emerging countries, and rising crude oil prices. In this environment, the KWE Group will work to aggressively expand its business to achieve the final-year targets in our “Ready for the Next!” Medium-Term Management Plan, which commenced in the fiscal year ended March 2011 and covers the three years through the fiscal year ending March 2013. The main objective of this plan is to lay the groundwork for a robust management structure that allows us to compete on an equal footing with major competitors in Europe and the U.S. To increase handling volume as a key factor for achieving this goal, we will work to expand the items we handle, maintain and expand sales to major customers with global operations, and develop business in Southeast Asia and Latin America.

As a result of these efforts, we expect net sales in the fiscal year ending March 2013 to grow 13.5% from the previous year to ¥300.000 billion, operating income to grow 8.5% to ¥15.000 billion, and net income to fall 0.5% to ¥9.500 billion.

SEGMENT TRENDS BY REGIONFor a breakdown of segment trends by region, please refer to the Report by Five Regions on pages 16 to 20.

FINANCIAL POSITIONTotal assets grew 4.3% from the previous year to ¥125.437

interests of ¥2.278 billion and an increase in accrued retirement benefits to employees of ¥0.285 billion, versus a decline of ¥1.134 billion in the previous year.

Net cash used in investing activities totaled ¥3.821 billion, versus net cash provided of ¥0.780 billion in the previous year. This mainly reflects proceeds from sales of securities declining to ¥0.085 billion, down from ¥3.247 billion in the previous year.

Net cash used in financing activities totaled ¥1.397 billion, down ¥1.306 billion from ¥2.703 billion in the previous year. This decrease was due mainly to a net increase in short-term debt of ¥0.143 billion, versus a net decrease of ¥1.102 billion in the previous year. Also, payments of cash dividends rose 13.8% from the previous year to ¥1.188 billion.

As a result of the above, cash and cash equivalents totaled ¥36.096 billion as of March 31, 2012, up ¥5.130 billion from a year earlier.

DISCLOSURE OF RISKSIGNIFICANT RISK FACTORS WITH POTENTIAL TO IMPACT OPERATING RESULTSThe followings are the major risk factors that KWE recognizes as having the potential to affect our operations.

1. Economic conditionsKWE operates on a global basis, with operations primarily located within our Five Regional Management System consisting of Japan; the Americas; Europe, Middle East & Africa; East Asia & Oceania; and Southeast Asia. The main products we handle are shipping items such as electronics items (electronic components, semiconductors and semiconductor production equipment, telecommunications-

Net Sales

0

50

150

100

200

250

300

350

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(Billions of yen)

Net Sales Net Sales2009～2012

0

50

150

100

200

250

300

350

’08/3 ’09/3 ’10/3

(Billions of yen)

’11/3 ’12/30

50

100

150

200

250

300

350

0

5

10

15

SGA Expenses to Net Sales

0

5

10

15

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(%)

0

5

10

15

20

Gross Profit Margin

0

5

10

15

20

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(%)

0

1

2

3

4

5

6

Operating Margin

0

3.0

4.0

6.0

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(%)

5.0

2.0

1.0

Europe, Middle East & AfricaThe AmericasJapanOtherElimination or Unallocated

East Asia & OceaniaSoutheast Asia

Net Sales by Region

-50

150

100

50

200

250

300

350

’08/3 ’09/3 ’10/3

(Billions of yen)

’11/3

0

’12/3

0

50

100

150

200

250

300

350

Europe, Middle East & AfricaThe AmericasJapanOtherElimination or Unallocated

East Asia & OceaniaSoutheast Asia

Operating Income (Loss) by Region

-2.5

5.0

2.5

7.5

10.0

12.5

15.0

’08/3 ’09/3 ’10/3

(Billions of yen)

’11/3 ’12/3

0

-2.5

0.0

2.5

5.0

7.5

10.0

12.5

15.0

MD&A2012.indd 26-27 12.8.21 1:55:55 PM



related items, LCD-related items, digital electronic appliances, etc.), automotive items (including auto parts and fully assembled vehicles), medical and chemical items (related to medical care or pharmaceuticals, and chemicals), high-end apparel and related products, and goods for sale by mass merchandisers.

The performance or financial condition of the KWE Group could be affected if there is a change in demand for electronics items, which are particularly sensitive to economic fluctuations, or in the event of a major international occurrence like the terrorist attacks that took place in the United States in September 2001, the start of the 2003 Iraq war, outbreaks of SARS and avian influenza that occurred in 2004, or the worldwide financial crisis that began in the autumn of 2008, the Great East Japan Earthquake and the flooding in Thailand in 2011 or if there is some other issue of concern at the global level, such as recent fears that swine flu could become a worldwide epidemic.

2. Exchange rate fluctuationsKWE has built a Five Regional Management System, consisting of Japan; the Americas; Europe, Middle East & Africa; East Asia & Oceania; and Southeast Asia regions. Fluctuations in foreign exchange rates in any of these regions could affect KWE’s performance or financial condition. In order to minimize risks arising from such currency fluctuations, KWE uses foreign exchange forward contracts. Our policy is to use these forward contracts only to hedge the amount of KWE’s net debts or credits related to business contracts denominated in foreign currencies. In principle, we do not enter into forward contracts with terms of more than one year. Moreover, we have a policy

logistics business, based on the know-how that we have accumulated as an air freight forwarder. We work hard to secure and increase the trust that our customers place in us. Nevertheless, KWE’s performance could be affected in the event of a transport accident occurring, for example, due to an unpredictable disaster.

6. Storage and security at distribution facilitiesKWE owns distribution-related facilities in five regions: Japan; the Americas; Europe, Middle East & Africa; East Asia & Oceania; Southeast Asia. We take measures to ensure safe storage and security at these facilities; for example, we have obtained Level A certification from the Transported Asset Protection Association (TAPA, an organization that sets international freight security standards) for facilities in 19 locations in Japan and abroad. However, if our storage or security measures should cease to function due to wide-area disaster such as earthquake, war or terrorist attack, etc., KWE’s performance could be adversely affected.

7. Customer data management / information leaksKWE systematically manages customer and freight movement information through our intra-Group information network. We perform regular audits and inspections to ensure that there are no information leaks. In addition, in accordance with Japan’s Act on the Protection of Personal Information, KWE instituted a companywide policy regarding the safeguarding of personal information, and we strive to make every employee familiar with it. Therefore, we believe the risk of customer data being leaked outside the Company is extremely small. Nevertheless, in the unlikely event that

of not engaging in speculative dealings or highly leveraged transactions. We use foreign exchange forward contracts only to offset the risk posed by potential future fluctuations in relation to normal business dealings denominated in a foreign currency.

3. Fluctuations in crude oil pricesTaking into account the influence that a sudden surge in oil prices might have on distribution and transport, KWE maintains close relationships with air and sea carriers and works at expanding our channels for procuring cargo space. Nevertheless, it is possible that unforeseeable circumstances could affect our corporate performance. In the event that airlines should increase their fuel surcharges, we will do our best to pass on the increased costs to customers. However, fuel prices may be volatile in the future and it is possible that they could affect our corporate performance.

4. Legal regulationsEach nation has enacted various regulations governing transport, warehousing, storage management, and other businesses in which we engage. Most of these are statutory regulations (to ensure safety, for example) or legal regulations affecting the transport business. It is possible that changes to existing regulations could cause a temporary spike in capital spending, which could affect KWE’s performance. It is also possible that inappropriate responses to and serious violations of various regulations could affect the KWE Group’s earnings and brand image.

5. Transport accidentsKWE takes the utmost care as we work to expand our

for some reason customer information should be leaked to an outside party, the resulting loss of trust in the Company could affect our corporate performance.

8. Information system securityKWE uses integrated computer systems group-wide and manages much of its global operations with IT systems. We strive to ensure that these information systems operate reliably by using a redundant structure of data centers and network connections, and have hardware and software safeguards against unauthorized access and viruses. Nevertheless, in spite of these precautionary measures, our financial results could be adversely affected if these information systems temporarily malfunction as a result of unforeseen virus, hacker attacks or blackouts, etc.

0

5

10

15

ROE

0

5

10

15

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(%)

0

50

100

150

Total Assets

0

50

100

150

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(Billions of yen)

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

75

80

Net Assets (left)Equity Ratio (right)

Net Assets and Equity Ratio

0

40

60

80

’08/3 ’09/3 ’10/3 ’11/3 ’12/3

(Billions of yen)

20

0

40

60

80

(%)

20

-5

0

5

10

15

Effect of exchange rate changesNet increase in cash and cash equivalents

Investing activitiesOperating activities

Financing activities

Cash Flows

-5

0

5

15

(Billions of yen)

10

MD&A2012.indd 28-29 12.8.21 1:55:56 PM

Thousands of U.S. dollars

(Note 1)

2012 2011 2012

Millions of yen

ASSETS

Current assets:

Cash and time deposits (Notes 3, 6 and 12)

Notes and accounts receivable-trade (Note 12)

Less: Allowance for doubtful accounts

Marketable securities (Notes 4 and 12)

Deferred tax assets (Note 8)

Other current assets

Total current assets

Property and equipment:

Land (Note 6)

Buildings and structures (Note 6)

Machinery and equipment

Lease Assets

Other

Less: Accumulated depreciation

Total property and equipment

Intangible assets:

Goodwill

Other intangible assets

Total intangible assets

Investments and other assets:

Investments in (Notes 4, 6 and 12):

Affiliates

Other

Long-term loans receivable (Note 12)

Deferred tax assets (Note 8)

Other investments

Less: Allowance for doubtful accounts

Total investments

See accompanying notes.

¥ 36,944

43,065

(293)

52

737

2,814

83,319

10,523

31,747

2,456

1,059

8,186

53,971

(22,310)

31,661

336

1,264

1,600

1,576

2,877

185

870

3,579

(230)

8,857

¥ 125,437

¥ 31,755

42,416

(246)

138

773

3,028

77,864

10,706

31,655

2,423

1,111

8,340

54,235

(21,470)

32,765

356

1,475

1,831

1,407

1,445

234

1,049

3,933

(248)

7,820

¥ 120,280

$ 449,495

523,969

(3,565)

633

8,967

34,237

1,013,736

128,033

386,264

29,882

12,885

99,597

656,661

(271,444)

385,217

4,088

15,379

19,467

19,175

35,004

2,251

10,585

43,546

(2,798)

107,763

$ 1,526,183


(Note 1)

2012 2011 2012

Millions of yen

LIABILITIES AND NET ASSETS

Current liabilities:

Notes and accounts payable-trade (Note 12)

Short-term debt (Notes 5 and 12)

Current maturities of long-term debt (Notes 5 and 12)

Lease obligations (Note 5)

Income taxes payable (Note 12)

Deferred tax liabilities (Note 8)

Accrued bonuses to employees

Accrued bonuses to directors and corporate auditors

Provision for U.S. antitrust matter

Other current liabilities

Total current liabilities

Long-term liabilities:

Long-term debt (Notes 5 and 12)

Lease obligations (Note 5)

Accrued retirement benefits to employees (Note 7)

Deferred tax liabilities (Note 8)

Other long-term liabilities

Total long-term liabilities

Contingent liabilities (Note 9)

Net assets (Note 10):

Shareholders’ equity:

Common stock

Authorized 120,000,000 shares

Issued 36,000,000 shares

Capital surplus

Retained earnings

Treasury stock

Total shareholders’ equity

Accumulated other comprehensive income

Unrealized gains (losses) on available-for-sale securities

Foreign currency translation adjustments

Total accumulated other comprehensive income

Minority interests in consolidated subsidiaries

Total net assets


¥ 19,396

8,905

158

161

1,824

96

1,791

196

860

7,084

40,471

4,855

391

1,316

194

129

6,885

7,216

4,868

72,691

(2)

84,773

181

(8,862)

(8,681)

1,989

78,081

¥ 125,437

¥ 19,842

8,852

243

185

1,957

80

1,699

205

1,014

8,252

42,329

4,850

547

1,042

125

70

6,634

7,216

4,868

64,332

(1)

76,415

79

(7,163)

(7,084)

1,986

71,317

¥ 120,280

$ 235,990

108,347

1,922

1,959

22,192

1,168

21,791

2,385

10,464

86,190

492,408

59,070

4,757

16,012

2,360

1,570

83,769

87,796

59,229

884,426

(24)

1,031,427

2,202

(107,823)

(105,621)

24,200

950,006

$ 1,526,183

Kintetsu World Express, Inc. and Subsidiaries

Consolidated Balance SheetsMarch 31, 2012 and 2011



(Note 1)


(Note 1)

2012

2012

2011

2011

2012

2012

Millions of yen

Millions of yen

Net sales (Note 15)Cost of sales Gross profit Selling, general and administrative expenses (Note 16) Operating income (Note 15) Other income (expenses): Interest and dividend income Interest expense Foreign currency exchange gain, net Equity in earnings of affiliates, net Gain on sales of investment securities Gain on negative goodwill Provision for U.S. antitrust matter Loss on valuation of investment securities Subsidy income Reversal of provision for U.S. antitrust matter Compensation income Loss on liquidation of subsidiaries Restructuring loss Other, net (Note 17) Income before income taxes and minority interests

Income taxes (Note 8): Current Deferred

Income before minority interestsMinority interests in net income of consolidated subsidiariesNet income

Income before minority interests

Other comprehensive income (Note 18) Unrealized gains (losses) on available-for-sale securities Foreign currency translation adjustments Share of other comprehensive income of associates accounted for using equity method Total other comprehensive income

Comprehensive Income

Comprehensive income attributable to Owners of the parent Minority interests



¥ 264,403 220,918 43,485

29,660 13,825

252 (240) 420 100 – – – (181) 191 212 390 (140) (112) 237 1,129 14,954

4,706 233 4,939 10,015 469¥ 9,546

¥ 10,015

135 (1,764) (33) (1,662) ¥ 8,353

¥ 7,948 405

¥ 267,688 226,846 40,842

28,943 11,899

192 (269) 628 169 741 188 (1,014) – 45 – – – – 98 778 12,677

4,723 (317) 4,406 8,271 390 ¥ 7,881

8,271

(113) (3,103) 18 (3,198)

5,073

4,750 323

$ 3,216,973 2,687,894 529,079

360,871 168,208

3,066 (2,920) 5,110 1,217 – – – (2,202) 2,324 2,579 4,745 (1,703) (1,363) 2,883 13,736 181,944

57,257 2,835 60,092 121,852 5,706 $ 116,146

$ 121,852

1,643 (21,462) (402) (20,221)

$ 101,630

$ 96,703 4,927

U.S. dollars(Note 1)

2012 2011 2012

Yen

Amounts per share: Net income Cash dividends applicable to the year

¥ 265.16 35.00

¥ 218.92 30.00

$ 3.23 0.43



Consolidated Statements of IncomeYears ended March 31, 2012 and 2011

Consolidated Statements of Comprehensive Income Years ended March 31, 2012 and 2011


Consolidated Statements of Changes in Net AssetsYears ended March 31, 2012 and 2011


Shareholders’ equityThousands of U.S. dollars (Note 1)


Balance at April 1, 2011Net income Adjustments from translation of foreign currency financial statementsUnrealized gains (losses) on available-for-sale securitiesPurchase of treasury stockCash dividends paid Other, netBalance at March 31, 2012

Total netassets

$ 867,709 116,146

(20,671)

1,241 (12) (14,443) 36 $ 950,006

Minority interests in

consolidated subsidiaries

$ 24,164 –

–

– – – 36 $ 24,200

Totalaccumulated

othercomprehensive

income

$ (86,191) –

(20,671)

1,241 – – – $ (105,621)

Foreigncurrency

translationadjustments

$ (87,152) –

(20,671)

– – – – $(107,823)

Net unrealizedholding gainson available-

for-sale securities

$ 961 –

–

1,241 – – – $ 2,202

Total shareholders’

equity

$ 929,736 116,146

–

– (12) (14,443) – $ 1,031,427

Treasurystock

$ (12) –

–

– (12) – – $ (24)

Retained earnings

$ 782,723 116,146

–

– – (14,443) – $ 884,426

Capitalsurplus

$ 59,229 –

–

– – – – $ 59,229

Common stock

$ 87,796 –

–

– – – – $ 87,796

Number of shares of common

stock(thousands)

36,000 –

–

– – – – 36,000

Shareholders’ equityMillions of yen


Balance at April 1, 2010Net income Adjustments from translation of foreign currency financial statementsUnrealized gains (losses) on available-for-sale securitiesPurchase of treasury stockCash dividends paid Other, netBalance at April 1, 2011Net income Adjustments from translation of foreign currency financial statementsUnrealized gains (losses) on available-for-sale securitiesPurchase of treasury stockCash dividends paid Other, netBalance at March 31, 2012

Total netassets

¥ 68,039 7,881

(3,036)

(95) (0) (1,045) (427)¥ 71,317 9,546

(1,699)

102 (1) (1,187) 3 ¥ 78,081

Minority interests in

consolidated subsidiaries

¥ 2,413 –

–

– – – (427)¥ 1,986 –

–

– – – 3 ¥ 1,989

Totalaccumulated

othercomprehensive

income

¥ (3,953) –

(3,036)

(95) – – – ¥ (7,084) –

(1,699)

102 – – – ¥ (8,681)

¥ (4,127) –

(3,036)

– – – – ¥ (7,163) –

(1,699)

– – – – ¥ (8,862)

Unrealized gains (losses) on available-

for-sale securities

¥ 174 –

–

(95) – – – ¥ 79 –

–

102 – – – ¥ 181

Total shareholders’

equity

¥ 69,579 7,881

–

– (0) (1,045) –¥ 76,415 9,546

–

– (1) (1,187) – ¥ 84,773

Treasurystock

¥ (1) –

–

– (0) – –¥ (1) –

–

– (1) – – ¥ (2)

Retained earnings

¥ 57,496 7,881

–

– – (1,045) –¥ 64,332 9,546

–

– – (1,187) – ¥ 72,691

Capitalsurplus

¥ 4,868 –

–

– – – –¥ 4,868 –

–

– – – – ¥ 4,868

Common stock

¥ 7,216 –

–

– – – –¥ 7,216 –

–

– – – – ¥ 7,216

Number of shares of common

stock(thousands)

36,000 –

–

– – – – 36,000 –

–

– – – – 36,000

Foreigncurrency

translationadjustments



(Note 1)

2012 2011 2012

Millions of yen

CASH FLOWS FROM OPERATING ACTIVITIES: Net income before income taxes and minority interests

Adjustments to reconcile net income before income taxes to net cash provided by operating activities: Depreciation and amortization Gain on negative goodwill Loss on liquidation of subsidiaries Increase (Decrease) in accrued bonuses to employees Increase (Decrease) in accrued bonuses to directors and corporate auditors Increase (Decrease) in accrued retirement benefits to employees Interest and dividend income Interest expense Loss (Gain) on sales of investment securities Loss on valuation of investment securities Increase (Decrease) in provision for U.S. antitrust matter Changes in assets and liabilities: (Increase) Decrease in notes and accounts receivable Increase (Decrease) in notes and accounts payable (Increase) Decrease in other assets Increase (Decrease) in other liabilities Other, net Sub-total Interest and cash dividend received Interest paid Income taxes paid Net cash provided by (used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Payments for purchases of securities Proceeds from sales of securities Payments for purchases of property and equipment Proceeds from sales of property and equipment Proceeds from loans receivable Purchase of investments in subsidiaries Other, net Net cash provided by (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in short-term debt Payments of capital lease obligations Proceeds from long-term debt Payments for long-term debt Payments of cash dividends Payments of cash dividends to minority shareholders Other, net Net cash provided by (used in) financing activities Effect of exchange rate changes on cash and cash equivalentsNet increase (decrease) in cash and cash equivalentsCash and cash equivalents at beginning of year Cash and cash equivalents at end of year (Note 3)

¥ 14,954

2,659 – 140 133 (3) 285 (252) 240 3 181 (154)

(2,749) 836 221 (188) (354) 15,952 243 (234) (4,843) 11,118

(1,619) 85 (1,549) 40 7 (267) (518) (3,821)

143 (186) 242 (268) (1,188) (140) (0) (1,397)

(770) 5,130 30,966 ¥ 36,096

¥ 12,677

2,999 (188) – 203 50 (1,134) (192) 269 (741) – 1,014

(4,522) 2,532 (676) 1,336 73 13,700 179 (271) (3,765) 9,843

(68) 3,247 (1,465) 86 19 (978) (61) 780

(1,102) (196) 1,879 (1,923) (1,044) (317) (0) (2,703)

(1,999) 5,921 25,045 ¥ 30,966

$ 181,944

32,352 – 1,703 1,618 (37) 3,468 (3,066) 2,920 37 2,202 (1,874)

(33,447) 10,172 2,689 (2,287) (4,307) 194,087 2,956 (2,847) (58,924) 135,272

(19,698) 1,034 (18,847) 487 85 (3,249) (6,302) (46,490)

1,740 (2,263) 2,944 (3,261) (14,454) (1,703) (0) (16,997)

(9,369) 62,416 376,761 $ 439,177


Consolidated Statements of Cash FlowsYears ended March 31, 2012 and 2011



Notes to Consolidated Financial StatementsYears ended March 31, 2012 and 2011

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

The accounts of overseas consolidated subsidiaries are based on their accounting records maintained in conformity with generally accepted accounting principles prevailing in the respective countries domicile. Based on the accounting standard, “Revised Practical Solution on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements (issued by the Accounting Standards Board of Japan (“ASBJ”) on February 19, 2010)”, the difference between Japanese GAAP and those in overseas are adjusted in the consolidation process. The accompanying consolidated financial statements have been reformatted and translated into English with some expanded descriptions from the consolidated financial statements of the Company provided in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureau of the Ministry of Finance as required by the Financial Instruments and Exchange Law. Certain supplementary information included in the statutory Japanese language consolidated financial statements is not presented in the accompanying consolidated financial statements.

The translations of the Japanese yen amounts into U.S. dollars are included solely for the convenience of readers, using the prevailing exchange rate at March 31, 2012 which was ¥82.19 to U.S. $1. The convenience translations should not be construed as representations of possible future amounts, converted into U.S. dollars at this or any other rate of exchange.

Certain prior year amounts have been reclassified to conform to the year 2012 presentation. These changes had no impact on previously reported results of operations.

(1) Scope of ConsolidationThe Consolidated financial statements include the accounts of the Company and 59 subsidiaries for the year ended March 31, 2012. At March 31, 2011 the Company had 60 subsidiaries and consolidated all of them.

The Company and the consolidated subsidiaries are together referred to as the “Companies” hereinafter.

(2) Consolidation and EliminationFor the purposes of preparing the consolidated financial statements, all significant intercompany transactions, account balances and unrealized profits are eliminated, and the portion thereof attributable to minority interests is charged to minority interests.

In the elimination of investments in subsidiaries, the assets and liabilities of the subsidiaries, including the portion attributable to minority shareholders, are evaluated using the fair value at the time of the Company acquired control of the respective subsidiaries.

(3) Investments in Affiliates At March 31, 2012, 6 affiliates, of which the Company has the ability to exercise significant influence over operating and financial policies, are accounted for by the equity method whereby the costs of

investments are adjusted for equity in undistributed earnings or losses since acquisition. At March 31, 2011, 4 affiliates are accounted for by the equity method.

(4) Cash and Cash EquivalentsIn preparing the consolidated statements of cash flows, cash on hand, readily-available deposits and short term highly liquid investments with maturities not exceeding three months at the time of purchase are considered to be cash and cash equivalents.

(5) SecuritiesSecurities are classified as (a) securities held for trading purposes (hereafter, “trading securities”), (b) debt securities intended to be held to maturity (hereafter, “held-to-maturity debt securities”), (c) equity securities issued by subsidiaries and affiliated companies, and (d) all other securities that are not classified in any of the above categories (hereafter, “available-for-sale securities”).

Securities held by the Companies are classified into three categories. Held-to-maturity debt securities are stated at amortized cost. Available-for-sale securities with market value are stated at market value. Unrealized gains and losses on these securities are reported, net of applicable income taxes, as a separate component of net assets. Realized gains on sales of such securities are computed using weighted-average cost. Other securities that do not have market value are stated at weighted-average cost. If the market value of available-for-sale securities declines significantly, such securities are stated at market value and the difference between market value and the carrying amounts is recognized as loss in the period of the decline.

(6) Allowance for Doubtful Accounts The Company and domestic consolidated subsidiaries adopted the policy of providing the allowance for doubtful accounts using the actual rate of bad debt losses experienced in the past for the receivable other than those, for which allowance is provided based on individual evaluation of their possibility of collection.

The allowance for doubtful accounts held by overseas consolidated subsidiaries represents the amount deemed necessary to cover possible losses.

(7) Property and Equipment(a)Property and Equipment excluding Lease Assets

Property and equipment are stated at cost. Depreciation for buildings held by the Company and domestic consolidated subsidiaries is computed on the straight-line method based on the estimated useful lives of assets. Depreciation for others held by the Company and domestic consolidated subsidiaries is mainly computed using the declining-balance method. Depreciation of property and equipment held by overseas consolidated subsidiaries is mainly computed by the straight-line method. Normal repairs and maintenance, including minor renewals and improvements, are charged to income as incurred. The range of useful lives is principally as follows: Buildings and Structures . .................. 13-38 yearsMachinery and equipment ................. 3-7 yearsOthers ................................................... 2-20 years

(b)Lease Assets Assets used under finance lease arrangements are capitalized. Depreciation for Lease Assets is amortized on the straight-line method with their residual values being zero over their leased periods used as the number of years

Note 1: Basis of Presenting the Consolidated Financial Statements

Note 2: Summary of Significant Accounting Policies


for useful lives. The finance leases without transfer of ownerships started before April 1, 2008 are continuously accounted for by a method similar to that used for operating leases.

(8) Intangible Assets excluding Lease AssetsAmortization of intangible assets is computed using the straight-line method. Software for internal use is amortized on the straight-line method over their estimated useful lives (primarily 5 years). Goodwill and negative goodwill which was accounted on or before March 31, 2010 are amortized on the straight line method over a 20-year-period.Immaterial goodwill is amortized as incurred.

(9) Accounting for impairment of Fixed Assets The Companies review its long lived assets for impairment whenever changes in circumstance indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss would be recognized if the carrying amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued use and eventual disposition of the asset or the net selling price at disposition.

(10) Accrued Bonuses to EmployeesBonuses to employees are provided for the portion relevant to the current year of the estimated amount of bonus payments.

(11) Accrued Bonuses to Directors and Corporate AuditorsBonuses to directors and corporate auditors are provided for the portion relevant to the current year of the estimated amount of bonus payments.

(12)Accrued Retirement Benefits to EmployeesThe Companies adopt the accounting standard for employees’ severance and retirement benefits, under which allowance and expenses for severance and pension benefits are determined based on the amounts obtained by actuarial calculations.

The Company and certain domestic consolidated subsidiaries have a defined benefit pension plan while certain overseas subsidiaries have either a defined benefit pension plan or a defined contribution pension plan. Effective April 1, 2001 the Company integrated entire lump-sum payment plan into funded pension plan. The transition amount arising from the integration of ¥84 million is amortized on the straight-line method over the period of 13 years commencing with the year ended March 31, 2002. The excess of the projected benefit obligation over the total of the fair value of pension assets as of April 1, 2000 and the liabilities for severance and retirement benefits recorded as of April 1, 2000(the “net translation obligation”) amounted to ¥3,788 million, is recognized in expenses in equal amounts primarily over 15 years commencing with the year ended March 31, 2001.Unrecognized net actuarial differences are amortized as expenses from the next fiscal year by the straight-line method over the prescribed years within the estimated remaining service period (13 years).

(13) Provision for U.S. antitrust matterFrom January 2008, the Company had been under an ongoing investigation by the United States Department of Justice into alleged violation of antitrust laws in relation to prices of fuel surcharge on shipments originating in Japan. In September 2011, a negotiated plea agreement was reached which provides that the Company will pay a fine as soon as the plea agreement is approved by the Federal District Court. A best estimate of the future payment is provided.

(14) Foreign Currency Transactions All short-term and long-term monetary receivables and payables denominated in foreign currencies are translated into Japanese yen

at the exchange rates at the year-end date. The foreign exchange gains and losses from transactions are recognized in the consolidated statements of income and the consolidated statement of comprehensive income to the extent that they are not hedged by forward exchange contracts.

(15) Foreign Currency Financial StatementsThe balance sheet accounts of foreign consolidated subsidiaries and affiliates are translated into Japanese yen at current exchange rates prevailing at the relevant balance sheet date except for equity, which is translated at the historical rates. Revenue and expense accounts of the foreign consolidated subsidiaries and affiliates are translated into Japanese yen at the average exchange rates. The differences arising from such translations were shown as “Foreign currency translation adjustments” and “Minority interests in consolidated subsidiaries” in separate components of equity.

(16) Income TaxesIncome taxes consist of corporation, inhabitant and enterprise taxes. The provision for income taxes is computed based on the pretax income of each of the Company and its consolidated subsidiaries with certain adjustments required for tax purposes. The Company and its consolidated subsidiaries recognize tax effects of temporary differences between the carrying amounts of assets and liabilities for tax purposes and financial reporting purposes. The asset and liability approach is used to recognize deferred tax assets and liabilities for the expected future tax consequences of temporary timing differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

(17) DerivativesDerivative financial instruments are stated at fair value and changes in their fair values are recognized as gains or losses.

(18) Per Share Information Net income per share of common stock is computed based upon the weighted-average number of shares outstanding during the year. Diluted earnings per share of common stock for the years ended March 31, 2012 and 2011 are not presented since the Company had no securities with dilutive effect. Cash dividends per share presented in the consolidated statements of income represent dividends declared as applicable to the respective year, including dividends paid after the end of the year.

(19) Additional Information Application of Accounting Standards for Accounting Changes and Error CorrectionsThe Company and its consolidated domestic subsidiaries adopted “Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Statement No.24 issued on December 4, 2009) and “Guidance on Accounting Standard for Accounting Changes and Error Corrections” (ASBJ Guidance No.24, issued on December 4, 2009) for accounting changes and corrections of prior period errors which are made from the fiscal year beginning on April 1, 2011.


¥ – 5,565 5,565

(319) ¥ 5,246

DifferenceFair

valueBookvalue

DifferenceFair

valueBookvalue

Millions of yen Thousands of U.S. dollars

Held-to-maturity debt securities, at March 31, 2012

Securities with available fair values exceeding book valueOther securities Total

¥ 138 – ¥ 138

¥ 138 – ¥ 138

¥ 0 –¥ 0

$ 1,679 – $ 1,679

$ 1,679 – $ 1,679

$ 0 – $ 0

DifferenceFair

valueBookvalue

Millions of yen

Held-to-maturity debt securities, at March 31, 2011

Securities with available fair values exceeding book valueOther securities Total

¥ 138 – ¥ 138

¥ 140 – ¥ 140

¥ 2 – ¥ 2

The following tables summarize acquisition costs, book values and fair values of securities with available fair values at March 31, 2012 and 2011:

Note 4: Securities

DifferenceAcquisition

costBookvalue


costBookvalue


Available-for-sale securities, at March 31, 2012

Securities with book value exceeding acquisition costsOther securities Total

¥ 1,068 1,165 ¥ 2,233

¥ 781 1,181 ¥ 1,962

¥ 287 (16)¥ 271

$ 12,994 14,174 $ 27,168

$ 9,502 14,369 $ 23,871

$ 3,492 (195)$ 3,297


costBookvalue

Millions of yen

Available-for-sale securities, at March 31, 2011

Securities with book value exceeding acquisition costsOther securities Total

¥ 620 245 ¥ 865

¥ 418 369 ¥ 787

¥ 202 (124)¥ 78

Reconciliations of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents shown in the consolidated statements of cash flows as of March 31, 2012 and 2011 are as follows:

Note 3: Cash and Cash Equivalents

Cash and time deposits Deposits over three monthsCash and cash equivalents

¥ 36,944 (848)¥ 36,096

¥ 31,755 (789)¥ 30,966

$ 449,495 (10,318)$ 439,177


2012 2011 2012

Millions of yen

Available-for-sale securities sold during the years ended March 31, 2012 and 2011 are as follows:

Book value of available-for-sale securities, with no fair market value, as of March 31, 2012 and 2011 are as follows:

Securities impairedCertain investment securities (Available-for-sale securities) was impaired, and valuation loss on investment securities of ¥181million ($2,202 thousand) is recorded for the year ended March 31, 2012.

Sales valueGain on salesLoss on sales

¥ 85 0 (3)

¥ 3,098 741 –

$ 1,034 0 (37)


2012 2011 2012

Millions of yen

Available-for-sale securities

Unlisted securitiesUnlisted equity securities issued by affiliates Total

¥ 558

1,576 ¥ 2,134

¥ 580

1,407 ¥ 1,987

$ 6,789

19,175 $ 25,964


2012 2011 2012

Millions of yen

Available-for-sale securities

Short-term debt consists principally of borrowings from banks. The weighted average interest rate of short-term debt as of March 31, 2012 and 2011 are 1.15% and 1.03%, respectively.

Long-term debt at March 31, 2012 and 2011 consists of the following:

Long-term debt from banks and other financial institutions due 2013 to 2036, with average interest of 2.17% for 2012 and 2.37% for 2011 Secured Unsecured

Less: Portion due within one year

¥ 49 5,776 5,825

(428)¥ 5,397

$ – 67,708 67,708

(3,881)$ 63,827


2012 2011 2012

Millions of yen

Note 5: Short-term Debt and Long-term Debt

At March 31, 2012, assets pledged as collateral for payment of Notes and accounts payable-trade and Other current liabilities are as follows:

In addition, the Company pledged security ¥138 million ($1,679 thousand) as collateral for deferred payment of customs duties.

Annual maturities of long-term debt at March 31, 2012 are as follows:

Accrued retirement benefits included in the liability section of the consolidated balance sheets as of March 31, 2012 and 2011 consist of the following:

The components of net periodic benefit cost for the years ended March 31, 2012 and 2011 are as follows:

The discount rates used by the Company to measure the projected pension benefit obligation was 2.0% for 2012 and 2011 and the rate of expected return on plan assets was 3.0% for 2012 and 4.0% for 2011.

Projected benefit obligation Unrecognized prior service cost Unrecognized actuarial differences Less fair value of plan assets Less unrecognized net transition obligation Prepaid pension cost Accrued retirement benefits

¥ 16,570

(25)

(2,497) (11,968)

(764) –

¥ 1,316

¥ 16,904

(32)

(2,943) (12,198)

(1,016) 327

¥ 1,042

$ 201,606

(304)

(30,381) (145,614)

(9,295) –

$ 16,012


2012 2011 2012

Millions of yen

Service cost - benefits earned during the yearInterest cost on projected benefit obligationExpected return on plan assets Amortization on net transition obligationAmortization on prior service costAmortization on actuarial differences Retirement benefit expenses

¥ 1,027

318

(322)

252

6

438

¥ 1,719

¥ 1,023

319

(422)

252

6

391

¥ 1,569

$ 12,495

3,869

(3,917)

3,066

73

5,329

$ 20,915


2012 2011 2012

Millions of yen

Note 7: Accrued Retirement Benefits to Employees


Cash and time depositsBuildings and structuresLand

¥ 66 514 687 ¥ 1,267

$ 803 6,254 8,359 $ 15,416


Millions of yen

20132014201520162017 and thereafter Total

Year ending March 31¥ – 4,412 149 114 571 ¥ 5,246

$ – 53,680 1,813 1,387 6,947 $ 63,827


Millions of yen

Note 6: Pledged Assets

Income taxes consist of corporation, inhabitant and enterprise taxes. The statutory tax rate for the years ended March 31,2012 and 2011 is 40.7%. Significant components of the Companies’ deferred tax assets and liabilities as of March 31, 2012 and 2011 are as follows:

The significant difference between the statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended March 31, 2012 and 2011 is as follows:

Deferred tax assets: Operating loss carryforwards Accrued bonuses Allowance for doubtful accounts Accrued retirement benefits to employees Accrued enterprise tax Net unrealized holding losses on available-for- sale securities Other Total Valuation allowance Total deferred tax assets Deferred tax liabilities: Net unrealized holding gains on available-for- sale securities Depreciation and other Total deferred tax liabilities Net deferred tax assets

¥ 109 388

106

875 91

99 512 2,180 (387)

1,793

(89) (387)

(476)

¥ 1,317

¥ 338 390

127

1,075 105

57 460 2,552 (501)

2,051

(32) (402)

(434)

¥ 1,617

$ 1,326 4,721

1,290

10,646 1,107

1,205 6,229 26,524 (4,709)

21,815

(1,083) (4,708)

(5,791)

$ 16,024


2012 2011 2012

Millions of yen

Statutory tax rate Entertainment expenses and other non-deductible permanent differences Dividend income and other non- taxable income Difference of the statutory tax rate among countries other than Japan Effect of elimination of intercompany dividends received Compensable tax loss in subsidiaries Corporate inhabitant tax Valuation allowance on deferred tax Equity in earnings of affiliated companies Provision for U.S. antitrust matter Decrease of deferred tax assets at fiscal year-end due to the change of tax rate Adjustment of Income tax for previous year Other, net Effective tax rate

40.7% 0.9

(0.2)

(10.1)

0.3

(1.0) 1.0 0.0

(0.3) (0.4)

1.6

– 0.5 33.0%

40.7%

1.3

(0.2)

(9.7)

0.5

(1.3) 1.1 (0.8)

(0.5) 3.3

–

1.1 (0.7) 34.8%

2012 2011

Note 8: Income Taxes

The Companies have no contingent liabilities as of March 31, 2012.

Note. Adjustment of deferred tax assets and deferred tax liabilities for enacted changes in tax laws and rates “Act on the Partial Revision of the Income Tax Act for the Establishment of a Taxation System Responding to Structural Transformation of Economy and Society” and “Act on Special Measures for Securing Financial Resources Needed to Implement Measures to Recover From the Great East Japan Earthquake” were issued on December 2, 2011. Based on the amendments, the statutory tax rates utilized for the measurement of deferred tax assets and liabilities expected to be settled or realized from April 1, 2012 to March 31, 2015 and on or after April 1, 2015 are 38.0% and 35.6%, respectively, as of March 31, 2012, whereas 40.7% was utilized for those settled or realized up to March 31, 2012. Due to this change, Deferred tax assets (net of deferred tax liability) decreased by ¥133 million ($1,618 thousand), Deferred income taxes increased by ¥146 million ($1,776 thousand), and Unrealized gain on available-for-sale securities increased by ¥13 million($158 thousand) respectively.

Note 9: Contingent Liabilities

Financial lease transactions which are deemed to transfer ownership of the leased assets to lessees entered into before April 1, 2008 are continuously accounted for by a method similar to that used for operating leases.

Net assets are comprised of three subsections, which are shareholders’ equity, accumulated other comprehensive income and minority interests in consolidated subsidiaries. Under Japanese laws and regulations, the entire amount of payment for new shares is required to be designated as common stock, although, generally, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of the price of the new shares as additional paid-in capital, which is included in capital surplus. Japanese Company Law (the “Law”) became effective on May 1, 2006, and, at the same time, the Japanese Commercial Code (the “Code”) was repealed. Under the Code, companies were required to set aside an amount equal to at least 10% of cash dividends and other cash appropriations as legal earnings reserve until the total of legal earnings reserve and additional paid-in capital equaled 25% of common stock. Under the Law, in cases when dividends are paid, an amount equal to 10% of the dividends or the excess of 25% of common stock over the total of additional paid-in capital and legal earnings reserve, whichever is the smaller, must be set aside as additional paid-in capital or legal earnings reserve. Under the Code, additional paid-in capital and legal earnings reserve were available for distribution by the resolution of the shareholders’ meeting as long as the total amount of legal earnings reserve and additional paid-in capital remained equal to or exceeded 25% of common stock. Under the Law, even when the total amount of additional paid-in capital and legal earnings reserve is less than 25% of common stock, additional paid-in capital and legal earnings reserve may be available for dividends if there are sufficient distributable surplus. Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit by a resolution of the shareholders’ meeting or may be capitalized by a resolution of the Board of Directors. Under the Law, both of those appropriations require a resolution of the shareholders’ meeting. Legal earnings reserve is included in retained earnings in the accompanying consolidated balance sheets. The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated financial statements of the Company in accordance with Japanese laws and regulations.

Note 11: Accounting for Leases

Note 10: Net Assets

Machinery and equipment: Assumed acquisition cost Accumulated depreciation Net book valueOthers (tools, dies, furniture and fixtures): Assumed acquisition cost Accumulated depreciation Net book valueOther intangible assets (Software): Assumed acquisition cost Accumulated depreciation Net book value

¥ 6

(6)¥ –

¥ 232

(178)¥ 54

¥ 66

(59)¥ 7

¥ 6

(5)¥ 1

¥ 480

(353)¥ 127

¥ 160

(126)¥ 34

$ 73

(73)$ –

$ 2,823

(2,166)$ 657

$ 803

(718)$ 85


2012 2011 2012

Millions of yen

(1) A summary of assumed amounts of acquisition cost, accumulated depreciation and net book value for non-capitalized finance leases at March 31, 2012 and 2011 is as follows:

Payments due within one year Payments due after one year

Payments due within one year Payments due after one year

Lease paymentsDepreciation expense portionInterest expense portion

¥ 42

22 ¥ 64

¥ 2,700

3,935 ¥ 6,635

¥ 107 100 3

¥ 104

64 ¥ 168

¥ 2,527

4,338 ¥ 6,865

¥ 167 158 6

$ 511

268 $ 779

$ 32,851

47,877 $ 80,728

$ 1,302 1,217 37




2012

2012

2012

2011

2011

2011

2012

2012

2012

Millions of yen

Millions of yen

Millions of yen

(2) Lease obligations under non-capitalized finance leases, including finance charges at March 31, 2012 and 2011 are as follows:

(3) Lease payments and the amounts corresponding to depreciation and interest expense under such leases for the years ended March 31, 2012 and 2011 are as follows:

In addition, lease obligations under operating leases, including finance charges, at March 31, 2012 and 2011 are as follow:

1. Qualitative information on financial instruments(1) Policies for using financial instruments

The Companies raise funds through bank loans and make short-term deposits for fund management purposes.

The Companies also utilize derivative financial instruments to hedge various risks as described in detail below and do not enter into derivatives for speculative purposes.

(2) Details of financial instruments used and the exposures to risks and policies and processes for managing the risksNotes and accounts receivable-trade are exposed to credit risk of customers. To minimize the credit risk, the Companies perform due date controls and balance controls for each customer in accordance with internal customer credit management rules and regularly screens customers’ credit status.

Investment securities are exposed to stock market fluctuation risk. However, those are primarily the shares of companies with which the Companies have operational relationships, and the Companies are continuously monitoring the investees’ financial condition and the market values. The credit risk of Held-to-maturity debt securities is deemed to be very low because the Companies only invest debt securities with high credit ratings.

Maturities of Notes and accounts payable-trade are mostly within one year. Among loans payable, Short-term debts are primarily for fund raising related to sales transactions, and Long-term debts are primarily for fund raising related to capital investments. Those payables and debts are exposed to liquidity risk at time of settlement. However, the Companies reduce that risk by having each company review its fund-raising plans periodically and by controlling the liquidity position.

Foreign exchange forward contracts as derivative transactions are used in order to avoid the risk of currency exchange associated with assets and liabilities denominated in foreign currencies. Derivative transactions are executed and controlled by the finance section upon request of the overseas settlement section according to the Companies' internal polices.

The credit risk of derivative transactions is deemed to be very low because the Companies only conduct transactions with financial institutions with high credit ratings.

2. Fair value of financial instrumentsThe carrying amounts on the consolidated balance sheets, fair value, and differences as of March 31, 2012 are as follows.

Moreover, financial instruments, for which it is extremely difficult to measure the fair value, are not included.(See Note 2)

Note 12: Financial Instruments


$ 449,495 523,969

633

1,679 26,536 2,251 $ 1,004,563

$ 235,990 108,347 22,192

62,209 $ 428,738 $ 73

$ 449,495 523,969

633

1,679 26,536 2,251 $ 1,004,563

$ 235,990 108,347 22,192

60,992 $ 427,521 $ 73

¥ – –

–

0 – – ¥ 0

¥ – – –

100 ¥ 100 ¥ –

¥ 36,944 43,065

52

138 2,181 185 ¥ 82,565

¥ 19,396 8,905 1,824

5,113 ¥ 35,238 ¥ 6

¥ 36,944 43,065

52

138 2,181 185 ¥ 82,565

¥ 19,396 8,905 1,824

5,013 ¥ 35,138 ¥ 6

Book value Fair value Difference Book value Fair value Difference

$ – –

–

0 – –$ 0

$ – – –

1,217 $ 1,217 $ –

Note 1. Fair value measurement of financial instruments Assets

(1) Cash and time deposits and (2) Notes and accounts receivable-tradeThe relevant book values are used because the settlement periods of the above items are short and their fair valuesare almost the same as their book values.(3) Marketable securities and (4) Investment securitiesThe fair value equals quoted market price or price provided by financial institutions.(5) Long-term loans receivableThe relevant book values are used because their fair values are almost the same as their book values in view of loan collection schedule and condition of interest rates.

Liabilities(6) Notes and accounts payable-trade, (7) Short-term debt and (8) Income taxes payableThe relevant book values are used because the settlement periods of the above items are short and their fair valuesare almost the same as their book values.(9) Long-term debtThe fair value of long-term debt is based on the present value of future cash flows discounted using the currentborrowing rate for similar debt of a comparable maturity.

Derivative transactionsDerivative assets and liabilities are on a net base. Net liabilities are disclosed in brackets.

Assets(1) Cash and time deposits(2) Notes and accounts receivable-trade(3) Marketable securities Held-to-maturity debt securities (government securities) Available-for-sale securities Certificate of deposits Other securities with maturity date (corporate bonds) Other securities with maturity date (government securities)(4) Long-term loans receivable Total


$ – –

1,679

– 146

620 110 $ 2,555

$ 449,495 523,969

–

596 37

– –$ 974,097

¥ – –

–

– – – 176 ¥ 176

¥ – –

138

– 12 51 9 ¥ 210

¥ 36,944 43,065

–

49 3

– – ¥ 80,061

One year or less

One to five years

Over five years

One year or less

One to five years

Over five years

$ – –

–

– –

– 2,141 $ 2,141

Assets:(1) Cash and time deposits (2) Notes and accounts receivable-trade(3) Marketable securities Available-for-sale securities(4) Investment securities Held-to-maturity debt securities Other securities(5) Long-term loans receivable TotalLiabilities:(6) Notes and accounts payable-trade(7) Short-term debt(8) Income taxes payable(9) Long-term debt (including current maturities of long-term debt) TotalDerivative transactions

Fair value is based on information provided by financial institutions at the end of fiscal year.Derivative transactions to which hedge accounting is not applied as of March 31, 2012 are as follows:

Note 13: Derivatives

Over The Counter transactions Foreign currency forward contracts to Selling U.S. dollar Purchase U.S. dollar Purchase euro Purchase pound sterling Purchase Swiss franc Purchase Hong Kong dollar Purchase Swedish krona


$ (0) 0 61 24 0 (12) 0 $ 73

$ 426 2,275 2,555 1,229 110 487 36 $ 7,118

¥ (0) 0 5 2 0 (1) 0 ¥ 6

¥ (0) 0 5 2 0 (1) 0 ¥ 6

¥ 35 187 210 101 9 40 3 ¥ 585

Contracts outstanding

due within one year

Fair valueUnrealized gain

(loss)

Contracts outstanding

due within one year

Fair valueUnrealized gain

(loss)

$ (0) 0 61 24 0 (12) 0 $ 73

Note 2. Unlisted equity securities (carrying amount: ¥2,134 million ($25,967 thousand)) are not included in Assets (4) Investment securities as they do not have a quoted market price in an active market.

Note 3. The redemption schedule for monetary claim and held-to-maturity debt securities with maturity dates subsequent to the consolidated balance sheet date.


Business Combinations in the fiscal year ended March 31, 2012 are as follows:

(a) Acquisition of an additional equity of subsidiary in Thailand1. Name and nature of business subject to transaction, legal

form of business combination, name of company after transaction, and outline and purpose of the transaction(1) Name and nature of business subject to transaction Name of business: TKK Logistics Co., Ltd. Nature of business: International air and sea freight forwarding(2) Legal form of business combination Acquisition of an additional equity (3) Name of company after transaction TKK Logistics Co., Ltd.(4) Outline and purpose of transaction The Companies acquired additional shares of 20% from a minority

shareholder. As a result, the Companies’ controlling share was increased from 80% to 100% in the fiscal year.

2. Outline of the accounting treatment implementedThis transaction was accounted for as a transaction under common control based on “Accounting Standard for Business Combinations” (ASBJ statement No. 21, December 26, 2008) and “Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No.10, December 26, 2008) issued by the Accounting Standard Board of Japan.

3. Acquisition cost The Companies paid cash of ¥280 million ($3,407 thousand ) for this acquisition.

4. Goodwill As a result of elimination of additional shares, an excess of acquisition cost over the minority interest was ¥21 million ($256 thousand), which was accounted for as goodwill.

(b) Consolidation-type merger of subsidiaries in Thailand1. Name and nature of business subject to transaction, legal

form of business combination, name of company after transaction, and outline and purpose of the transaction(1) Name and nature of business subject to transaction Name of business: Kintetsu World Express (Thailand) Co., Ltd. Name of business: TKK Logistics Co., Ltd. Nature of business: International air and sea freight forwarding(2) Legal form of business combination Consolidation-type merger(3) Name of company after transaction KWE-Kintetsu World Express (Thailand) Co., Ltd.(4) Outline and purpose of transaction With a view to making the business in Thailand more efficient, the

Company conducted to merge its subsidiaries in Thailand and establish the new company in accordance with a corporation law in Thailand.

The new company, KWE-Kintetsu World Express (Thailand) Co., Ltd. was established as a consolidation-type of merger between Kintetsu World Express (Thailand) Co., Ltd. and TKK Logistics Co., Ltd.

Kintetsu World Express (Thailand) Co., Ltd. and TKK Logistics Co., Ltd. were liquidated as a result of the merger.

2. Outline of the accounting treatment implementedThis transaction was accounted for as a transaction under common control based on “Accounting Standard for Business Combinations” (ASBJ statement No. 21, December 26, 2008) and “Revised Guidance on Accounting Standard for Business Combinations and Accounting Standard for Business Divestitures” (ASBJ Guidance No.10, December 26, 2008) issued by the Accounting Standard Board of Japan.

Note 14: Business Combinations

(1) Overview of reportable segmentsReportable segments of the Company are components of an entity about which separate financial information is available and such information is evaluated regularly by the board of directors in deciding how to allocate resources and in assessing performance.

The Company has established a Corporate Strategic Headquarters that sets global strategy and controls overall business activities of the Company and subsidiaries.

Under a Corporate Strategic Headquarters, the Company manages business activities of domestic subsidiaries and each regional headquarters manages business activities of overseas subsidiaries. Consolidated subsidiaries both within Japan and overseas are independent business entities and conduct business activities in their particular area under the guidance of either the Company or the respective regional headquarters.

Therefore, the Company and its consolidated subsidiaries consist of 5 regional reportable segments as “Japan”, “The Americas”, “Europe, Middle East & Africa”, “East Asia &

Oceania” and “Southeast Asia.” Each regional segment performs business activities mainly in international freight forwarding, logistics, sea freight forwarding and other (Domestic freight forwarding) services.

(2) Calculation for net sales, segment income or loss, assets and other of reportable segments

Accounting practice for reportable segments is the same as the practice described in “Basis of Presenting the Consolidated Financial Statements.”

Income of reportable segments is based on operating income. Inter-segment sales or transfer are accounted for market price to be used under general business conditions.

(3) Net Sales, segment income or loss, assets and others of reportable segments

The segment information of the Companies for the years ended March 31, 2012 and 2011 is presented below:

Note 15: Segment Information

Year ended March 31, 2012: Net sales to outside customers Inter-segment sales/transfers Total sales

Operating Expenses Segment incomeAt March 31, 2012: Segment assetsYear ended March 31, 2012:Others: Depreciation Amortization of goodwill Investment in affiliates Increase in Property and equipment and other intangible assets

Year ended March 31, 2011:Net sales: Net sales to outside customers Inter-segment sales/Transfers Total sales

Operating expenses Segment income (loss)At March 31, 2011: Segment assetYear ended March 31, 2011:Others : Depreciation Amortization of goodwill Investment in affiliates Increase in Property and equipment and other intangible assets

Millions of yen

Reportable Segments

Adjustment (2)

Consolidated(3)TotalOther (1)Total

Southeast Asia

East Asia &Oceania

Europe, Middle East

& Africa

The Americas

Japan

¥ 264,403 – 264,403

250,578 ¥ 13,825

¥ 125,437

¥ 2,633 62 1,576

1,992

¥ 267,688 – 267,688

255,789 ¥ 11,899

¥ 120,280

¥ 2,976 58 1,407

1,847

¥ – (6,642) (6,642)

(6,556)¥ (86)

¥ (553)

– – –

–

¥ – (6,642) (6,642)

(6,586)¥ (56)

¥ (5,579)

¥ – – –

–

¥ 264,403 6,642 271,045

257,134 ¥ 13,911

¥ 125,990

¥ 2,633 62 1,576

1,992

¥ 267,688 6,642 274,330

262,375 ¥ 11,955

¥ 125,859

¥ 2,976 58 1,407

1,847

¥ 262 1,526 1,788

1,473 ¥ 315

¥ 1,179

¥ 182 – –

68

¥ 297 1,682 1,979

1,682 ¥ 297

¥ 1,232

¥ 179 – –

102

¥ 264,141 5,116 269,257

255,661 ¥ 13,596

¥ 124,811

¥ 2,451 62 1,576

1,924

¥ 267,391 4,960 272,351

260,693 ¥ 11,658

¥ 124,627

¥ 2,797 58 1,407

1,745

¥ 25,141 342 25,483

24,074 ¥ 1,409

¥ 12,416

¥ 279 38 –

193

¥ 24,738 341 25,079

23,557 ¥ 1,522

¥ 11,801

¥ 274 34 –

260

¥ 72,975 741 73,716

68,357 ¥ 5,359

¥ 31,446

¥ 487 9 64

419

¥ 76,782 825 77,607

73,395 ¥ 4,212

¥ 28,795

¥ 386 9 –

292

¥ 25,847 995 26,842

26,300 ¥ 542

¥ 10,451

¥ 230 15 12

177

¥ 23,119 966 24,085

23,406 ¥ 679

¥ 11,236

¥ 319 15 14

141

¥ 31,018 1,570 32,588

30,461 ¥ 2,127

¥ 12,344

¥ 178 – –

514

¥ 31,148 1,707 32,855

30,528 ¥ 2,327

¥ 11,994

¥ 162 – –

358

¥ 109,160 1,468 110,628

106,469 ¥ 4,159

¥ 58,154

¥ 1,277 – 1,500

621

¥ 111,604 1,121 112,725

109,807 ¥ 2,918

¥ 60,801

¥ 1,656 – 1,393

694

Year ended March 31, 2012Net sales: Net sales to outside customers Inter-segment sales/transfers Total sales

Operating expenses Segment incomeAt March 31, 2012: Segment assetsYear ended March 31, 2012Others: Depreciation Amortization of goodwill Investment in affiliates Increase in Property and equipment and other intangible assets


Reportable Segments

Adjustment ConsolidatedTotalOtherTotalSoutheast

Asia East Asia &

Oceania

Europe, Middle East

& Africa

The Americas

Japan

$ 3,216,973 – 3,216,973

3,048,765 $ 168,208

$ 1,526,183

$ 32,036 754 19,175

24,236

$ – (80,812) (80,812)

(79,767)$ (1,045)

$ (6,729)

$ – – –

–

$ 3,216,973 80,812 3,297,785

3,128,532 $ 169,253

$ 1,532,912

$ 32,036 754 19,175

24,236

$ 3,187 18,567 21,754

17,922 $ 3,832

$ 14,345

$ 2,215 – –

827

$ 3,213,786 62,245 3,276,031

3,110,610 $ 165,421

$ 1,518,567

$ 29,821 754 19,175

23,409

$ 305,889 4,161 310,050

292,907 $ 17,143

$ 151,065

$ 3,395 462 –

2,348

$ 887,882 9,015 896,897

831,695 $ 65,202

$ 382,601

$ 5,925 110 779

5,098

$ 314,479 12,106 326,585

319,990 $ 6,595

$ 127,157

$ 2,798 182 146

2,154

$ 377,394 19,102 396,496

370,617 $ 25,879

$ 150,188

$ 2,166 – –

6,254

$1,328,142 17,861 1,346,003

1,295,401 $ 50,602

$ 707,556

$ 15,537 – 18,250

7,555


Notes: 1.“Other” is segment which is not included in reportable segments and provides incidental logistics related services within the Companies.

2. Amounts in “Adjustment” represents as follows: Segment income of ¥(86) million ($(1,045) thousand) and ¥(56) million for the years ended March 31, 2012 and 2011, respectively represents elimination of inter-segment transactions.

Segment assets of ¥(553) million ($(6,729) thousand) and ¥(5,579) million at March 31, 2012 and 2011 respectively includes elimination of inter-segment transactions and surplus operating fund (cash and time deposit) of the Company which are not allocated to each segments.

3. Segment income is adjusted with operating income in the consolidated statements of income.

(7) Information on Amortization of goodwill and balance of goodwill of reportable segments

Amortization of goodwill and the balance of goodwill by reportable segments for the years ended March 31, 2012 and 2011 are presented below:

Year ended March 31, 2012 Goodwill Amortization of goodwill Balance of goodwill Negative goodwill Amortization of negative goodwill Balance of negative goodwillYear ended March 31, 2011 Goodwill Amortization of goodwill Balance of goodwill Negative goodwill Amortization of negative goodwill Balance of negative goodwill

Year ended March 31, 2012 Goodwill Amortization of goodwill Balance of goodwill Negative goodwill Amortization of negative goodwill Balance of negative goodwill

Millions of yen


Reportable Segments

Reportable Segments

Total

Total

Other

Other

Total

Total

Southeast Asia

Southeast Asia

East Asia &Oceania

East Asia &Oceania

Europe, Middle East

& Africa

Europe, Middle East

& Africa

The Americas

The Americas

Japan

Japan

¥ 62 738

35 402

¥ 58 797

35 441

$ 755

8,979

426

4,891

¥ – –

– –

¥ – –

– –

$ –

–

–

–

¥ 62 738

35 402

¥ 58 797

35 441

$ 755

8,979

426

4,891

¥ 38 402

7 111

¥ 34 436

6 118

$ 462

4,891

85

1,351

¥ 9 136

28 291

¥ 9 145

29 323

$ 110

1,655

341

3,540

¥ 15 200

– –

¥ 15 216

– –

$ 183

2,433

–

–

¥ – –

– –

¥ – –

– –

$ –

–

–

–

¥ – –

– –

¥ – –

– –

$ –

–

–

–

Selling, general and administrative expenses during the years ended March 31, 2012 and 2011 are summarized as follows:

On June 19, 2012, the shareholders of the Company approved the payment of a cash dividend to shareholders of record as of March 31, 2012 of ¥20.00 ($0.24) per share for a total of ¥720 million ($8,760 thousand). Such appropriations have not been accrued in the consolidated financial statements as of March 31, 2012 and will be recognized in the period in which they are approved by the shareholders.

Other, net during the years ended March 31, 2012 and 2011 are summarized as follows:

Labor and payroll cost Provision for accrued bonuses to employeesProvision for accrued retirement benefits to employeesProvision for doubtful accountsOthers

Unrealized gains (losses) on available- for-sale securities Increase (decrease) during the year Reclassification Sub total, before tax Tax (expense) or benefit Sub total, net of tax

Foreign currency translation adjustments Increase (decrease) during the year Reclassification Sub total, before tax Tax (expense) or benefit Sub total, net of tax

Share of other comprehensive income of associates accounted for using equity method Increase (decrease) during the year Reclassification Sub totalTotal other comprehensive income

Loss on sales or disposals of property and equipment, netAmortization of negative goodwillLoss on valuation of golf club membershipSettlement incomeLoss on sales of investment securitiesLoss on EU antitrust matterOther, net

¥ 14,722

1,010

1,333

142 12,453 ¥ 29,660

¥ (32)

35

(24) 66

(3)

(68) 263 ¥ 237

¥ 14,255

955

1,120

99 12,514 ¥ 28,943

¥ 28 164 192 (57) 135

(1,898) 140 (1,758) (6) (1,764)

0 (33) (33)¥ (1,662)

¥ (61)

35

(8) –

–

– 132 ¥ 98

$ 179,121

12,289

16,218

1,728 151,515 $ 360,871

$ 341 1,995 2,336 (693) 1,643

(23,093) 1,704 (21,389) (73) (21,462)

0 (402) (402)$ (20,221)

$ (389)

426

(292) 803

(37)

(827) 3,199 $ 2,883




2012

2012

2011

2012

2011

2012

2012

2012

Millions of yen

Millions of yen

Millions of yen

Note 16:

Note 19:

Note 17:

Selling, General and Administrative Expenses

Subsequent Events

Other Income (Expenses)

Amounts reclassified to net income in the current period that were recognized in other comprehensive income in the current period and tax effects for each component of other comprehensive income are as follows:

Note 18: Consolidated Statements of Comprehensive Income


Net Sales by Service: Forwarding Logistics Sea freight forwarding Others

Net Sales classified by Country or Geographic area Japan China North America Asia and Oceania Europe Others

Property and equipment classified by Country or Geographic area Japan China North America Asia and Oceania Europe Others

¥ 129,808 57,157 51,242 26,196 ¥ 264,403

¥ 109,160 55,515 31,280 44,839 17,212 6,397 ¥ 264,403

¥ 22,728 1,511 2,842 4,038 270 272 ¥ 31,661

¥ 132,467 52,235 51,285 31,701 ¥ 267,688

¥ 111,604 59,911 31,442 41,612 17,835 5,284 ¥ 267,688

¥ 23,484 1,471 2,700 4,474 268 368 ¥ 32,765

$ 1,579,365 695,425 623,458 318,725 $ 3,216,973

$ 1,328,142 675,447 380,582 545,553 209,417 77,832 $ 3,216,973

$ 276,530 18,384 34,578 49,130 3,285 3,310 $ 385,217




2012

2012

20122011

2011

20112012

2012

2012

Millions of yen

Millions of yen

Millions of yen

(4) Net Sales by ServiceNet Sales by Service for the years ended March 31, 2012 and 2011 are presented below:

(5) Net Sales classified by Country or Geographic areaNet Sales classified by country or geographic area for the years ended March 31, 2012 and 2011 are presented below:

(6) Property and equipment classified by Country or Geographic areaProperty and equipment classified by country or geographic area for the years ended March 31, 2012 and 2011 arepresented below:

Amounts are classified by country or geographic area where service is rendered.


Head Office:

Shinagawa Intercity TowerA-24F

2-15-1 Konan, Minato-ku, Tokyo 108-6024, Japan

Tel: +81-3-6863-6440

Established:

January 1970

Paid-in Capital

¥ 7,216 million

Number of Common Stocks

Authorized 120,000,000 shares

Issued and outstanding 36,000,000 shares

General Annual Meeting:

The annual meeting of shareholders of the Company is held every June in Tokyo, Japan.

Shareholder Register Administrator:

Mitsubishi UFJ Trust and Banking Corporation

Number of Employees:

9,671 (worldwide on a consolidated basis)

Investor Relations:

Shinagawa Intercity TowerA-24F

2-15-1 Konan, Minato-ku, Tokyo 108-6024, Japan

Tel: +81-3-6863-6443

Fax: +81-3-5462-8501

Website Address:

http://www.kwe.com

Major Shareholders

(As of March 31, 2012)

Kintetsu Corporation

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

Mitsui O.S.K. Lines, Ltd.

Japan Trustee Services Bank, Ltd. (Trust Account)

JP Morgan Chase Bank 385174

Hokko Daiwa Taxi Co., Ltd.

Juniper

Okunikko Kogen Hotel

Trust & Custody Services Bank Ltd.

Hakone Kogen Hotel

14,752,900

1,855,200

1,799,500

1,482,600

1,053,692

937,500

695,100

587,500

553,700

537,500

40.98%

5.15%

5.00%

4.12%

2.93%

2.60%

1.93%

1.63%

1.54%

1.49%

Shareholder Number of shares held % of shares held

(As of March 31, 2012)

Kintetsu World Express, Inc. (KWE)

Investor Information


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