Strength in Numbers

Annual Report 2003
Year ended March 31, 2003

Established in 1919, Yamato Transport Co., Ltd. is today a

Profilecomprehensive transportation services group with 51
subsidiaries and six affiliates. Major activities include
domestic and international parcel delivery, information
systems and logistics-related services. Takkyubin (doorto-door parcel delivery) service, which was launched in
1976, is the company’s core business. Covering every
part of Japan, this business handled about one billion
parcels during the past fiscal year. With a steadfast focus
on creating services that meet specific customer needs,
Yamato Transport has introduced such innovations as
Cool Takkyubin, Kuroneko Mail, Takkyubin Time Service anda moving service. Yamato Transport will continue tocontribute to economic and social progress through therefinement of Takkyubin services as a social infrastructure, the provision of even more convenient services andthe development of revolutionary approaches to logistics.

Contents

Consolidated Financial Highlights ................... 1

Management’s Discussion and Analysis ....... 22

Message from the Management ....................... 2

Consolidated Balance Sheets .......................... 28

Interview with the President ............................. 4

Consolidated Statements of Income .............. 30

Strength in Numbers .......................................... 7

Consolidated Statements of Shareholders’

At a Glance ......................................................... 14

Equity ................................................................... 31

Highlights of the Year ....................................... 16

Consolidated Statements of Cash Flows ....... 32

Environment Preservation Activities ............. 18

Notes to Consolidated Financial

Directors and Auditors ..................................... 20

Statements ........................................................ 33

Six-Year Consolidated Financial

Independent Auditors’ Report ......................... 40

Summary ........................................................... 21

Corporate Data ................................................... 41

Forward-Looking Statements
This annual report contains forward-looking statements concerning Yamato Transport’s future plans,
strategies and performance. These statements represent assumptions and beliefs based on information
currently available and are not historical facts. Furthermore, forward-looking statements are subject
to a number of risks and uncertainties that include but are not limited to economic conditions,customer demand, foreign currency exchange rates, tax laws and other regulations. Yamato Transport
therefore cautions readers that actual results may differ materially from these predictions.

Consolidated Financial
Highlights
Years ended March 31

Thousands of
U.S. Dollars

Millions of Yen

Operating revenues
Operating costs
Selling, general andadministrative expenses
Income (Loss) before income taxes
and minority interest
Income taxes
Net income (loss)

2003

2002

2001

2003

¥972,135
896,023¥932,120
861,775¥906,944
838,219$8,087,649
7,454,436

19,294

17,156

16,699160,516

91,06342,53848,502

49,90522,21727,512(3,554)484(4,181)

757,597353,894
403,507

Yen

Per share of common stock:
Net income (loss)
Diluted net income
Cash dividends¥ 104.51
101.63
15.00

¥

59.36
57.38
14.00

U.S. Dollars¥(9.25)
–
14.00

$

0.87
0.85
0.12

Thousands of
U.S. Dollars

Millions of Yen

Working capital¥ 77,514¥ 84,630¥ 93,534$

644,877

Total shareholders’ equity

406,306

364,806

334,2093,380,251

Total assets

655,877

678,939670,2465,456,550

Capital expenditures

42,59140,37937,144354,338

Depreciation and amortization

31,731

31,76429,900263,987

Note: U.S. dollar amounts have been translated, for convenience only, at the rate of ¥120.20 to US$1.

Operating Revenues

Net Income (Loss)Net Income (Loss) per Share(¥ Millions)(¥ Millions)100

40,000800,000(¥)
120

50,0001,000,000

80
30,000600,000

60
20,00040

400,000
10,00020
200,00000

0–10,000

’98

’99

’00

’01

’02

’03

–20

’98

’99

’00

’01

’02

’03

’98

’99

’00

’01

’02

YAMATO TRANSPORT Annual Report 2003

’03

01

Message from the Management

Revenues Continue to Grow Despite Harsh Operating
Environment
Yamato Transport Co., Ltd., again faced extreme adversity in the Takuhaibin (door-to-door
parcel delivery services) market in fiscal 2003, ended March 31, 2003, as the severity of theemployment and wage environments increased amid the prolonged economic slump in
Japan. Under these conditions, we increased the quality of our existing services, rebuilt our
information systems, and continued to open more small delivery centers, resulting in both
higher revenues and earnings. Consolidated operating revenues rose 4.3% to ¥972,135
million (US$8,087.6 million). Cost cutting programs and other measures pushed operating
income up 6.8% to ¥56,818 million (US$472.7 million), while net income jumped 76.3% to¥48,502 million (US$403.5 million).

New Three-Year Plan
We instituted a new three-year plan in April 2002 to meet the challenges of an operating
environment continually characterized by stiff competition and shifts in distribution
modes. The plan calls for further refinements in the Company’s service network to create
new value for society. Rather than positioning our transportation capabilities as a solitary
function, the plan revolves around our comprehensive resources and expertise in distribution, information, and settlement services. The plan also calls for reassessment of ourbusiness practices and policies to create a framework that better facilitates profit growth.
To ensure that these efforts translate into greater operational efficiency, we will create amore focused portfolio with clearly defined business domains. By doing so, we aim toconstruct a system for creating businesses that are capable of operating as stand-alone
units in every area of our operations, with the ultimate goal of enhancing the value of theGroup as a whole.

Better than Expected Progress
The new plan covers the three-year period ending in March 2005. The first priority isapproximately doubling within 10 years the number of our delivery centers, the backboneof our service infrastructure. Through realignments and divisions of existing centers into
smaller ones, we plan to increase the number of centers from 2,600 to 5,000. This will
better position us in the ongoing battle for market share in the door-to-door parcel delivery
market, where volume has peaked at around three billion packages annually. Still, Yamato

Left

Keiji Aritomi
Chairman

Right

Atsushi Yamazaki
President

Transport has much experience in maintaining close links with consumers as the pioneer ofJapan’s parcel delivery industry. We aim to further expand our nationwide logistics network
to provide even denser service coverage and to further differentiate our services from thecompetition. We expect to achieve ahead of schedule the target of increasing the number ofparcel delivery centers as part of a plan to upgrade our infrastructure. Moreover, we established a unit called the Mail Delivery Center specifically to handle the Kuroneko mail business and turned the BIZ-Logistics business, which specializes in transporting items between
companies, into an independent unit to cultivate new customers. We also launched newservices for small and midsize companies. Aimed at contributing to revenues, these services
include the provision of settlement and financing functions at our business locations.
We are confident that the framework and systems constructed in the first year of the
new plan will contribute to earnings in its second year, the fiscal year ending March 31, 2004.
In an external development, Japan Post was inaugurated in April 2003. Although thisorganization has a massive infrastructure and scale of operations, we welcome its arrival
as a competitor that will provide renewed vitality to our markets.
We would like to thank our shareholders and ask for their continued support in taking
up the challenges ahead.

Keiji Aritomi

Atsushi Yamazaki

ChairmanPresident

YAMATO TRANSPORT Annual Report 2003

02,03

Interview with the President

The erosion of barriers separating companies that deliver parcels to individuals andcompanies that handle commercial freight has sparked heated competition as firms
target each others’ markets. Amid these circumstances, Yamato Transport has transcended its traditional logistics function of transporting goods in order to expand intobusiness domains that provide opportunities to leverage its logistics infrastructure,
information systems, and personnel.

Q. Please describe the competitive environment that Yamato
Transport currently faces.
The door-to-door parcel delivery industry, now in its 28th year, has become a mature
market. However, even as the total volume of freight declines, we are still seeing growth in
the volume of door-to-door parcel delivery. Amid the decline in volume of commercial
goods, the barriers between companies that deliver parcels to individuals and handle
commercial freight are disappearing, intensifying the competition for market share. Many
people believe that, because of its huge size alone, the new Japan Post, established in April
2003, represents a formidable competitor to parcel delivery companies. We, however, areconfident of our ability to provide services tailored to the needs of customers and will
respond to this new entrant by continuing to improve our services while keeping our rates
in line with the value we provide. Although the parcel volume of our competitors is also
rising, we are quite different from them in two respects. The first is our profitability. The
second is our ability to achieve differentiation by offering flexible services that address theshift from deliveries to households to handling parcels for specific individuals. We havethe network, the extensive service menu and the expertise in addressing specific customer
requests that are required to benefit from this shift.

Q. Please outline the specific actions
within the scope of the new three-yearplan that will contribute to growth.
Our goal is to increase the value of the Yamato Group as a whole.
To this end, we have established a more effective business formation system, a process that resulted in the creation of five key
business domains. We have also fleshed out a system for providing Group support to these businesses. The five key domains arethe delivery business (centered on door-to-door parcel delivery), BIZ-logistics, E-business, thefinancial business, and the home convenience business. Also included under this structure is
the system for using the resources of the entire Yamato Group to support all these businessactivities. We believe this sharper delineation of business domains will foster greater cohesiveness within the Group. In turn, we think this structure will provide seamless connections
among the individual business groups and generate synergies while promoting growth.
We also plan to increase our network of delivery centers, our core service bases, to
5,000 from the current 2,600 by fiscal 2012. However, this does not mean we will establish
new centers that are the same size as existing ones. Rather, we will segment our network
to avoid higher costs. We will accomplish this by setting up smaller centers with space for
two to three vehicles and two to three employees to reduce leasing and personnel expenses
per center. Previously, an increase in parcel handling volume of 100 million units required
10,000 additional employees. However, we expect the new system will enable us to reduce
the number of back-office staff and handle increased volume by adding only drivers.

Q. What are the Company’s strengths in the field of parcel delivery services and where do you plan to upgrade capabilities?
The parcel delivery service is characterized most of all by the delivery of items to individuals. Consequently, that area offers the greatest prospects for differentiation. Differences inservice quality emerge along with the accumulation of track records in delivery, including
methods for specifying delivery times and the manner in which customer needs are met.
Our first goal is to eliminate stress on the part of the parcel recipient. We strive to minimize the stress associated with waiting for a delivery, late deliveries, and procedures for asecond delivery. To address these problems, we notify customers beforehand of the delivery times (Takkyubin e-mail Notification Service) and have set up a system that enables
customers to communicate directly with sales drivers by mobile phone to arrange times
for delivery of an item following an unsuccessful attempt.
Another strategy is to leverage our strength of coming into direct contact with customers
nearly one billion times every year. Our home convenience business derives value by
helping individuals and households to eliminate tasks that are time consuming andinconvenient. This business originated from merchandise marketing and moving services.
At first, we targeted the sale of heavy or bulky items such as water and toilet paper. The
business subsequently added a service that eliminates the hassle of rearranging furniture
at a new residence following a move. Because the nature of inconveniences differs bygeographic area, we have expanded our menu of services in line with the needs of eachregion of Japan rather than offering a set menu of services nationwide. The delivery ofparcels affords direct contact with customers and thus opportunities to gather information
on what households perceive as inconvenient. We then take this information and offer
services that address specific needs. The graying of Japanese society and the nation’s fallingbirthrate are creating a definite source of demand for these services. We therefore think
this business will be able to stand on its own in a short period of time.

YAMATO TRANSPORT Annual Report 2003

04,05

Q. How are you expanding services for corporate customers?
Until now, our networks and systems have been geared for small-lot deliveries, mainly
parcels. In light of the substantial needs of corporate customers, we have taken steps toutilize our logistics infrastructure in this direction and made strenuous efforts to increasetransactions in this area of the market as the BIZ-logistics business. The competitiveenvironment is very harsh in the commercial goods delivery market; major transportationcompanies already have solid ties with major customers and firm market shares. Even so,
we plan to use our extensive network and deft business maneuvers to capture market sharein services for small and midsize firms and small-offices/home-offices that lack their own
distribution infrastructure. To meet corporate demand, we will further upgrade our commercial-goods logistics capabilities, with an emphasis on Yamato Logistics Corporation (YLC).
Having already acquired infrastructure through our own activities, we are exploring the saleof high-precision, real-time parcel tracking systems to outside parties. We call this the Ebusiness and envision demand coming from small- and medium-sized retailers and chain
stores that are unable to construct their own systems. We are also thinking of ways to conducttransactions with customers in areas other than transportation alone. Towards this end, weare considering the launch of a financial business to provide a service that integrates thesettlement, financing, and credit functions traditionally conducted by wholesalers.

Q. What are your future ambitions for the Company?
The transportation industry plays a vital role in business activities of all kinds. Moreover,parcel delivery, our main product, has taken hold in society as something integral topeople’s everyday lives.
Our business requires a large number of vehicles. We are very aware of our social
responsibilities, including preservation of the environment in the regions we serve, as wellas on a global scale. We have enacted numerous policies aimed at protecting the environment, including the 1991 establishment of the Global Environmental Committee, thecreation of various recycling systems, and the use of low-emission vehicles. We achieved
our target for the deployment of low-emission vehicles eight years ahead of schedule.
We accomplished this through various measures, including the establishment of LPG fuelstations on our own to compensate for the lack of infrastructure in this area.
We aim to increase earnings while stepping up our contribution to society as a company
with the mechanisms to provide high-quality services. In doing so, we will base our activities
on a management philosophy that emphasizes conformance with regulations and playing
a useful role in local communities.
August 2003

Atsushi Yamazaki
PresidentStrengthin
Numbers

YAMATO TRANSPORT Annual Report 2003

06,07

317,595
Number of parcel handling centers

Progress in the Strategy of
Leveraging Network in Logistics
Business
The Yamato Group conducts its business and seeks to grow by leveraging
a distribution network that covers virtually every household in Japan.
The first step in this process is increasing volume without increasing
costs. To do this, the Group is downsizing its delivery centers, the backbone of its entire business, without sacrificing functionality, and establishing a highly visible presence in its collection and delivery areas. At thesame time, the Group has established a system to provide highly convenient parcel delivery services and to respond to the distribution needs ofcorporate customers. One example is supply chain management. The
Group has also constructed a transportation system that covers a largepart of the world. To tap latent demand, the Group instituted Kuroneko
Mail to provide affordable and sophisticated services, including parcel
tracking. In the moving business, the Group has upgraded and added morevalue to its services to differentiate them from those of the competition.
By taking these steps, the Group is now better able to meet the full range ofdelivery and transport needs of individuals, households, and companies.

YAMATO TRANSPORT Annual Report 2003

08,09

983,938,414
Number of parcels delivered annuallyOriginating Businesses from the
Perspective of Customers andCommunities
Delivering nearly one billion parcels annually means that the YamatoGroup has at least that number of contacts with customers. These contacts
allow the Group to identify tasks that customers perceive as inconvenient.
The Group has utilized this information to establish a business aimed ateliminating these inconveniences. The home convenience business offersa menu of services tailored to the needs of specific regions of Japan.
These services include buying goods on behalf of customers and arranging
furniture following a move to a new residence. Similarly, frequent contact
with small- and medium-sized companies led to the establishment of ourE-business business, which assists companies improve their operations.
This business opens up a portion of the Group’s infrastructure to customers
too small to construct their own distribution systems. Utilizing the systems of the Yamato Group enables them to increase efficiency without
incurring additional costs.

YAMATO TRANSPORT Annual Report 2003

10,11

112,948
Number of employees

Bolstering Group Management
to Increase Productivity and
Minimize Costs
One point the new three-year plan emphasizes is bolstering Groupmanagement to increase the value of the Yamato Group as a whole. The
plan contains various actions designed to raise productivity by fully leveraging the Group’s key corporate resource—the combined talents of its
over 100,000 dedicated employees—through the establishment of amore effective system to facilitate business formation. The Group support
business is one example. Responsible for coordinating support activities
that boost the productivity of the five business domains, this division
oversees the consolidation of overlapping operations, promotes greateruse of IT, identifies areas for outsourcing, and otherwise oversees activities aimed at improving service quality and reducing costs. The Group has
also increased productivity per delivery center by converting existing
business offices into smaller delivery centers while consolidating backoffice operations to constrain expense growth. Expansion of the numberof centers has reduced the number of employees per center and clarified
the roles and responsibilities of individual personnel, resulting in higher
efficiency and greater motivation.
YAMATO TRANSPORT Annual Report 2003

12,13

At a Glance
Segment

Domestic Transportation

Takkyubin

MovingKuroneko Mail

Logistics

International
Transportation

Information
Communications

Other Businesses

Business Description
The domestic transportation business is mainly focused on delivery
operations such as Takkyubin, Kuroneko Mail and Moving services. This
comprises the Group’s core business.

Yamato Transport offers next-day delivery of parcels almost anywhere in
Japan. A sophisticated tracking system allows customers to check the
progress of a shipment at key stages of the logistics chain. The Takkyubin
business includes Collect Service, Cool Takkyubin, Golf Takkyubin, Ski
Takkyubin and many other services. A total of 983 million packages werehandled during the past fiscal year.
The moving sector transports household items for families andindividuals. Yamato Transport offers a number of moving-related services
as well, such as house cleaning and home appliance disconnection andinstallation services. There is also an international moving service.

This service delivers materials in letter-size envelopes to eliminate theneed for folding documents. Envelopes are simply placed in each recipient’s
mail box; no signature is required. The status of each packet can betracked at Yamato Transport’s Website. In April 2003, Kuroneko Mail was
significantly upgraded with the introduction of more packet sizes, anext-day delivery option for most areas of Japan and other new services.
Yamato is equipped to handle all aspects of logistics, from the receipt ofmerchandise through its storage, packaging and shipment. This fully
integrated line of support contributes directly to greater productivity atclient companies.

Yamato Transport has its own forwarding business to transport items
to more than 100 cities around the world. A reliable cargo tracking
system and other services mean that the needs of each shipper can be
precisely addressed.

By drawing on the Yamato Group’s knowledge gained through theprovision of transportation services, subsidiary Yamato System
Development performs data processing services on an outsourcing basis
and operates the computer systems of other companies.

This segment covers many types of activities. Major components arepackaging operations offered in conjunction with logistics operations,the sale of boxes and other packaging materials, book sales through theInternet, sales of other merchandise, and the leasing of motor vehicles.

Performance

Sales and Sales Composition

Yamato Transport has worked to further raise the quality ofexisting products such as Takkyubin and Kuroneko Mail, andincrease customer convenience by expanding its distribution
network. This approach and success in winning new customers
led to a year-on-year increase of 2.7% in operating revenues fromdomestic transportation, to ¥856,827 million (US$7,128.3 million).

Sales (¥ millions)

In fiscal 2003, operating revenues increased 2.2% to ¥698,499
million (US$5,811.1 million). Contributing to this growth were
the provision of new Internet services, such as the SD Direct and
Takkyubin mail notification services, and an increase in business from corporate customers.

Sales (¥ millions)

In fiscal 2003, Yamato succeeded in increasing the number ofhousehold moving contracts by enhancing its services. However, a downturn in moving contracts for individuals due tointense competition caused operating revenues to decline 2.6%
to ¥43,864 million (US$364.9 million).

In fiscal 2003, growth in volume from small and midsize companies and measures to bolster the sales and service network led
to a 3.4% increase in operating revenues to ¥62,536 million(US$520.3 million).

In fiscal 2003, operating revenues rose 53.5% to ¥13,925 million(US$115.8 million) because of a large increase in the number oflogistics customers.

’00

761,036’01

802,505’02

834,418’03

856,827

’00

88.1%

622,666’01

658,156’02683,589’03

698,499

Sales (¥ millions)’00

42,284’01

44,202’02

45,041’03

43,864

Sales (¥ millions)’00

50,855’01

57,608’0260,493’03

62,536

Sales (¥ millions)
’00
’01
’02

9,071

’03

13,925In fiscal 2003, the volume of international freight originating inJapan was generally flat. However, Yamato Transport achieved
growth by locating new customers with small to midsize export
volumes and increasing the volume of exports of automotive partsand products to the U.S. and Asia. The result was a 21.1% increasein operating revenues to ¥74,117 million (US$616.6 million).

Sales (¥ millions)

In fiscal 2003, facilities were added at logistics centers in theTokyo, Kanagawa and Nagoya areas and emphasis was placed on
capturing orders involving logistics data processing systems. In
addition, aggressive marketing activities were conducted that
included sales of software for logistics systems and seminars fore-business ventures. These activities resulted in a 2.5% increasein operating revenues to ¥18,888 million (US$157.1 million).

Sales (¥ millions)

In fiscal 2003, sales of books increased due to growth in ecommerce orders from customers using PCs and mobile
phones. Results were also boosted by the inclusion of eighthome service companies in consolidated results for the firsttime. Due to these factors, operating revenues increased 23.3%
to ¥22,303 million (US$185.6 million).

Sales (¥ millions)

’00

7.6%

20,085’01

67,568’02

61,189’03

74,1172.0%’00

18,059’01

19,425’02

18,431’03

18,888

’00
’01
’02
’03

2.3%
13,175
17,44618,082
22,303

YAMATO TRANSPORT Annual Report 2003

14,15

Highlights of the Year

Improving the Kuroneko@payment Credit Card Service
The Kuroneko@payment Credit Card Service facilitates the simple collection of amounts due by credit card
at the time a product or gift is delivered. Acting as intermediary, Yamato Transport collects amounts
due from purchasers, who can use any major credit card, and submits payments to the seller. Everyone
benefits. Buyers are billed after delivery, enabling them to place orders with no concerns about receiptof the merchandise. Sellers, on the other hand, avoid the need to deal with numerous credit cardcompanies and send out individual invoices. Amounts due are paid quickly and reliably. To make thisservice even more appealing, Yamato Transport has started offering installment and revolving credit
and reduced fees.

PC Takkyubin Offers Quick and Safe Handling of IT Equipment
Widespread PC ownership and the popularity of Internet
auctions are generating growing demand for the reliabletransport of computers and peripherals, which require delicate handling from start to finish. Yamato Transport’s new PC
Takkyubin service is designed specifically for this market.
Sales-drivers (SD) pick up equipment at each customer’shome, supplying specialized packaging materials for fourtypes of equipment: notebook PCs, desktop PCs, monitors, andprinters and other peripherals. This comprehensive service
maximizes convenience for customers while ensuring speedy
packaging and a safe journey.

SD Direct Speeds up Responses to Customer Requests
With SD Direct, all sales-drivers have a mobile phone so they cantalk directly with customers, immediately responding to any
requests. Prior to this system, customers had to call the local
office or a call center with pick-up or delivery requests and othermatters. Information was then passed on to each SD. This system
made it difficult to respond to a customer requests on short
notice. By providing direct access to drivers, Yamato Transport
can offer Takkyubin services that even more closely match theneeds of each customer.

Takkyubin Return Service to Be Launched
In October 2002, Yamato Transport rolled out its Takkyubin Return Service, which simplifies proceduresfor the return of a product. These returns can be due to such varied reasons as the end of a trial-use
period for a PC, the need to repair a game console, or the completion of a lease on a computer peripheral. In each instance, the customer merely contacts the manufacturer or retailer, which then asks
Yamato Transport to pick up the item. Customers no longer need to take items to a post office. This
service significantly improves the quality of after-sales support, providing faster responses that canlead to greater customer satisfaction.

New Kuroneko Mail Makes This Popular Service Even Better
In April 2003, Yamato Transport expanded the service
menu of New Kuroneko Mail, which offers shippers areliable way to deliver pamphlets and brochures quickly
and efficiently. Companies, for example, can use thisservice to supply large numbers of pamphlets on products and services to individuals who submit requests.
Schools can send brochures to prospective students.
There are two more sizes of New Kuroneko Mail
envelopes: up to 50 grams or up to 100 grams. Materials
printed on A4 (letter-size) paper can be sent without folding. Specialized automated sorters have been
installed at major logistics centers to ensure next-day delivery almost anywhere in Japan. A highly
accurate tracking system confirms the time of receipt of an envelope, delivery truck departure andfinal delivery.

YAMATO TRANSPORT Annual Report 2003

16,17

Environment Preservation
Activities
Since beginning its Takkyubin business, Yamato Transport has handled
more than 10 billion packages in its mainstay parcel delivery business,always acknowledging that the Company’s very existence depends on
infrastructure that belongs to society. Aware of its significant social
responsibilities, Yamato has formulated and enacted various policies
aimed at minimizing the burden its parcel delivery business puts on the
global environment and at preserving nature. In this section, we would
like to introduce you to some of those activities.

Yamato and Air Pollution
There are concerns that emissions from diesel engines pose a threat to the health ofpeople in urban areas. Yamato, a company that must operate a large fleet of vehicles,
views consideration for living environments as a serious issue. Yamato bases its selectionof vehicles on a comprehensive list of factors, including functionality, durability, cost, fuelconsumption, and the availability of fuel. To date, overall consideration of these factors has
led us to use diesel-powered vehicles. Although diesel engines are superior to gasoline
engines in terms of reducing CO2 emissions, they still emit atmospheric pollutants such as
particulate matter (PM), NOX and SOX. As such, Yamato is committed to enacting measuresthat reduce these emissions.

Introduction of Low-Emission
Vehicles(Units)3,000

Yamato’s Solution: Low-Emission Vehicles
Low-emission vehicles have a lower impact on the environment by emitting
less atmospheric pollutants, such as PM, NOX and CO2 and less greenhousegases than conventional diesel and gas vehicles or emit no pollutants at all.
Yamato is introducing LPG vehicles as replacements for its diesel vehicles

2,000

in light of their growing popularity as alternative-fuel vehicles and ease ofuse. Yamato has put 200 of these vehicles into service each year since 1998
and had planned to have a fleet of 2,400 LPG-powered vehicles by 2010. Yet,

1,000

we achieved this goal in 2002, eight years ahead of schedule, as a result of
more aggressive efforts to enact measures that reduce pollution. Currently,
out of a total fleet of 2,657 trucks, 7.0% are low-emission vehicles. Going

0
’99

’00

’01

’02

’03

forward, the Company plans to steadily increase this percentage.

Yamato and Global Warming
Global warming caused by the greenhouse effect has become a global issue in recent years.
Atmospheric levels of CO2 are on the rise amid the emission of greenhouse gases generated
by industrial activity. Because of the great impact that this has on the global environment,
reducing emissions of CO2 has become an important task. Yamato reduces greenhouse gas
emissions through specific measures such as operating satellite centers where hand-carts
can be used instead of trucks to gather and deliver parcels, requiring drivers to turn off
motors when vehicles are stopped, and the use of low-emission vehicles.

Yamato’s Solution: Development of Hybrid Vehicles (2-ton delivery vehicles)
In recent years, Yamato has been working with automobile manufacturers to develop
hybrid vehicles, which are an extremely effective means of reducing emissions of greenhouse gases and atmospheric pollutants. A prototype vehicle has been completed andseveral are now undergoing tests. Studies are proceeding rapidly with the goal of making
these vehicles part of the Yamato fleet as soon as possible.

YAMATO TRANSPORT Annual Report 2003

18,19

Directors and Auditors

Chairman
Keiji Aritomi

President
Atsushi Yamazaki

Senior Managing Directors
Seiichi Jinbo
Michio Abe

Managing Director
Kazushi Watanabe

Directors
Yoshiyuki Takeda

Yuji Uenuma

Kaoru Seto

Hiroshi Kawada

Koji Ogura

Kenji Shibazaki

Kiyoshi Ikari

Etsuo Ogawa

Toshio Nakatsuka

Nobuyuki Yamauchi

Mikio Hijikata

Standing Corporate Auditors
Kotaro Ueno

Osamu Sato

Hideo Endo

Noriaki Kinoshita(As of June 27, 2003)

Six-year Consolidated
Financial Summary
Thousands of
U.S. Dollars

Millions of Yen

2003

2002

2001

2000

1999

1998

Operating revenues¥972,135 ¥932,120 ¥906,944 ¥812,355 ¥767,656 ¥751,357
Operating costs
896,023 861,775 838,219 753,674 713,789 698,782
Selling, general andadministrative expenses
19,294
17,156
16,69914,431
13,99014,556
Operating income
56,81853,18952,02644,25039,87738,019
Income (Loss) before income
taxes and minority interest
91,06349,905(3,554) 37,339
36,78336,274
Income taxes
42,53822,217484
16,876
19,49020,046
Net income (loss)
48,502
27,512(4,181) 20,418
17,275
16,2082003$8,087,649
7,454,436
160,516
472,697
757,597353,894
403,507

Yen

Per share of common stock:
Net income (loss)
Diluted net income
Cash dividends¥ 104.51 ¥101.6315.00

59.36 ¥ (9.25) ¥
57.38
–
14.00
14.00

U.S. Dollars

46.11 ¥
43.63
14.00

41.13 ¥
37.49
14.00

41.00
35.72
14.00

0.87
0.85
0.12

Thousands of
U.S. Dollars

Millions of Yen

Working capital¥ 77,514 ¥ 84,630 ¥ 93,534 ¥ 75,199 ¥ 92,940 ¥ 63,362
Total shareholders’ equity
406,306 364,806 344,209 338,295 306,372 268,177
Total assets
655,877 678,939 670,246 642,477 610,217 578,987
Capital expenditures
42,59140,37937,14432,76144,33339,944
Depreciation and amortization 31,731
31,76429,90028,91729,93527,990Net cash provided byoperating activities
86,03569,72455,24960,887––
Number of employees
Operating income margin (%)
Return on revenues (%)
Return on assets (%)
Return on equity (%)
Current ratio (%)
Equity ratio (%)
Assets turnover (Times)
Interest coverage ratio(Times)Shareholders’ equity
per share (Yen)$$644,877
3,380,251
5,456,550
354,338
263,987715,769

112,948
5.84
4.99
7.27
12.58
145.4461.95
1.46

108,700
5.71
2.95
4.08
7.76
147.9453.73
1.38

101,784
5.74(0.46)(0.64)(1.23)
154.3451.36
1.38

93,425
5.45
2.51
3.26
6.33
150.4452.65
1.30

83,577
5.19
2.25
2.91
6.01
167.9650.21
1.29

83,090
5.06
2.16
2.87
6.66
142.71
46.32
1.33

–
–
–
–
–
–
–
–

36.68

24.99

20.55

13.55

11.19

9.13

–

875.08790.58746.21759.46707.98658.61

7.28

YAMATO TRANSPORT Annual Report 2003

20,21

Note: U.S. dollar amounts have been translated, for convenience only, at the rate of ¥120.20 to US$1.

Management’s Discussion
and Analysis
Scope of Consolidation
Yamato’s consolidated financial statements include 27 consolidated subsidiaries and three
affiliates accounted for by the equity method.

Results of Operations
In the fiscal year ended March 31, 2003, the Japanese economy saw improvement in someindices, including those for exports and production. These trends temporarily heightened
expectations for a recovery. Subsequently, however, the economy remained in a general
slump as capital spending and exports were dampened by lower stock prices andeconomic deceleration, mainly in the United States.
Under these conditions, in April 2002 the Yamato Group embarked on a new three-yearplan aimed at increasing the quality of existing services, including Takkyubin and Kuroneko
Mail. Simultaneously, the Group radically rebuilt its information systems, increased thenumber of delivery centers, and implemented other policies to enhance customer convenience. The Group also took steps to boost transactions with new customers in every
business area. These efforts produced a 4.3% rise in consolidated operating revenues to¥972,135 million (US$8,087.6 million). Results by segment are presented below.
Domestic Transportation Industry
The domestic transportation industry continued to experience a harsh business environment,with price competition escalating amid a slump in demand for both ground transportation
and air transportation. The Yamato Group still fared generally well under these conditions,
thanks to efforts to increase transactions with corporate customers and the provision of avariety of Internet-based services, including the SD direct communication system in
October 2002.
Sales in the Takkyubin business are greatly affected by delivery volume and average unit
prices. Handling volume increased 10.1% to 58 million units, with the collect service
posting the highest growth rate. Also contributing to growth was Cool Takkyubin, wherevolume increased 3.3% to 115 million units. Consequently, overall delivery volume in theparcel delivery business climbed 3.8% to 983 million units. The average unit price perparcel fell ¥11 from ¥721 to ¥710 (US$5.9) because of a greater number of transactions withcorporate customers.
In the moving business, orders received for moves by families increased year on year.
However, there was a downturn in orders for moves by single people because of intensecompetition. Kuroneko Mail registered solid volume as a result of efforts to increase transactions with small- and medium-sized companies. Domestic airfreight volume rose
year-on-year, buoyed by efforts to acquire new customers and a recovery in volume in thewake of a downturn caused by the imposition of strict regulations governing the loading of
freight in response to the terrorist attacks in the United States. Altogether, operating
revenues in the domestic transportation business rose 2.7% to ¥856,827 million (US$7,128.3
million), accounting for 88.1% of consolidated operating revenues, down 1.4 percentage
points from 89.5% in the previous fiscal year.

International Transportation Industry
In the international transportation industry, the dockworkers’ strike on the West Coast of
the United States caused many sea shipments to be shifted to air transportation, resulting
in an increase in volume for that mode of transport. Even so, volume was generally weak,reflecting mainly downturns in economies overseas, principally in the United States.
Under these conditions, we sought to acquire new small- and medium-sized export
customers. This, combined with higher export volume to Asia by automobile-related
customers, and the inclusion of three additional consolidated subsidiaries, resulted in a
21.1% rise in operating revenues to ¥74,117 million (US$616.6 million), accounting for 7.6%of consolidated operating revenues, up 1.0 percentage point from 6.6% in the previous
fiscal year.
Information Communications Industry
The information communications industry continued to perform poorly, continuing a
trend from the second half of the previous fiscal year. The main factors behind this situation were a lack of willingness to invest on the part of users and stiffer competition fromindustry rivals, manifested in lower order prices. Amid this environment, the IT businessestablished new distribution centers in Tokyo, Kanagawa Prefecture and the Nagoya
district, proactively negotiated with customers about the purchase of logistics information
systems, and held seminars to support E-business and foster logistics system softwaresales. As a result of these efforts to generate new business, segment operating revenuesrose 2.5% to ¥18,888 million (US$157.1 million), accounting for 2.0% of consolidated operating revenues, unchanged from the previous fiscal year.

Operating Income/Operating Income Growth Rate(¥ Millions)
60,000Operating Revenue
by Segment

Operating Revenue from Takkyubin/
Takkyubin Delivery Volume(%)(¥ Millions)24

50,00020

40,00016

30,00012

20,000

8

(%)

2.3%
2.0%
7.6%

88.1%

10,0004

0

0’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03
Operating Income
Operating Income Growth Rate

Domestic Transportation Industry
International Transportation Industry
Information Communication Industry
Other Industry(10 thousand parcels)

700,000

140,000

600,000

120,000

500,000

100,000

400,000

80,000300,000

60,000200,000

40,000100,000

20,0000

0’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03
Operating Revenue from Takkyubin
Takkyubin Delivery Volume

YAMATO TRANSPOR T Ann ual Report 2003

22,23

Other Industry
In this segment, sales of books were strong, thanks to an increase in orders placed from
PCs and cellular phones via the Internet. This, combined with sales in the packaging
business and the addition of eight consolidated subsidiaries, resulted in a 23.3% increasein operating revenues to ¥22,303 million (US$185.6 million), accounting for 2.3% of consolidated operating revenues, up 0.4 percentage point from 1.9% in the previous fiscal year.

Financial Review
Operating Revenues
In the fiscal year ended March 31, 2003, Yamato Transport recorded consolidated operating
revenues of ¥972,135 million (US$8,087.6 million), up 4.3% from the previous fiscal year.
Looking at sales by segment, although the domestic transportation industry registered a slight decline in revenues in the moving businesses, revenues in other businesses
were strong. Revenues in the logistics business jumped 53.5% as a result of efforts by
Yamato Logistics Corporation (YLC) to expand its corporate business. Consequently,
overall operating revenues in the domestic transportation industry climbed 2.7% to¥856,827 million (US$7,128.3 million).
In the international transportation industry, higher export volume and the addition of
three companies to the scope of consolidation resulted in higher profits in both the sea
transport and air transport businesses. Consequently, operating revenues in the international transportation business rose 21.1% to ¥74,117 million (US$616.6 million).
In the information communications industry, sales of information equipment fell 10.9%.
Altogether, segment operating revenues increased 2.5% to ¥18,888 million (US$157.1 million).
In other industry, the addition of eight consolidated subsidiaries lifted sales in themarketing business 119.2%. This, combined with sales in the packaging business andother businesses, resulted in a 23.3% rise in segment operating revenues to ¥22,303
million (US$185.6 million).

Cool Takkyubin Delivery
VolumeCollect Service Delivery
Volume(Millions of parcels handled)

Total Assets(Millions of parcels handled)

120

60

100

50

80

40

60

30

40

20

20

10

(¥ Millions)
800,000

600,000

400,000

200,000

0

0

’98

’99

’00

’01

’02

’03

0

’98

’99

’00

’01

’02

’03

’98

’99

’00

’01

’02

’03

Operating Income
Operating income rose 6.8% to ¥56,818 million (US$472.7 million) as thorough cost cutting
more than offset higher expenses due to the rebuilding of information systems and a
51.4% increase in expenses for retirement benefits. The number of employees (total of fulltime and part-time personnel) rose 3.9% to 112,948, but the ratio of personnel expenses tooperating revenues declined 1.3 percentage point to 46.0%, also contributing to the rise inoperating income.
Net Income
Regarding other expenses (income), interest expense declined ¥590 million. Also, gain on
release of future responsibility for contributed national pension plan resulted in a gain of¥45,703 million (US$380.2 million), while loss on valuation of land from merger anddemerger totaled ¥8,697 million (US$72.4 million). Meanwhile, the Company recorded aloss on bond redemption of ¥1,103 million (US$9.2 million). Consequently, income before
income taxes and minority interest jumped 82.5% to ¥91,063 million (US$757.6 million).
The result was a 76.3% increase in net income to ¥48,502 million (US$403.5 million).
As a result of these factors, net income per share amounted to ¥104.51 (US$0.87), andreturn on equity was 12.6%.
Cash Flows(Operating Activities)
Net cash provided by operating activities totaled ¥86,035 million (US$715.8 million), an
increase of ¥16,311 million from the previous fiscal year. Income before income taxes andminority interest totaled ¥91,063 million (US$757.6 million), boosted by a gain on release of
future responsibility for contributed national pension plan. Provisions for employees’
retirement benefits declined ¥25,605 million (US$213.0 million), while loss on valuation ofland from merger and demerger totaled ¥8,697 million (US$72.4 million), and notes andaccounts payable rose to ¥7,150 million (US$59.5 million).
(Investing Activities)
Net cash used in investing activities totaled ¥39,375 million (US$327.6 million), a decline of¥7,093 million (US$59.0 million) from the previous fiscal year. Purchases of property, plant,
and equipment declined ¥6,496 million (US$54.0 million), as measures to reduce capital
expenditures offset costs associated with the ongoing introduction of low-emission vehicles. Purchases of marketable and investment securities declined ¥1,371 million (US$11.4
million) as a result of a reduction in bond purchases compared with the previous fiscal
year. Reflecting the need for cash to redeem corporate bonds, proceeds from sales ofmarketable and investment securities rose ¥622 million (US$5.2 million).
(Financing Activities)
Net cash used in financing activities totaled ¥73,595 million (US$612.3 million), an increaseof ¥46,648 million (US$388.1 million) from the previous fiscal year. Repayments of long-term
YAMATO TRANSPOR T Ann ual Report 2003

24,25

debt rose ¥33,657 million (US$280.0 million), reflecting the repayment of ¥16,141 million(US$134.3 million) in borrowings from financial institutions as part of efforts to reduce
interest-bearing debt to strengthen the Company’s financial position. Redemption of corporate bonds totaled ¥41,324 million (US$343.8 million), ¥26,324 million (US$219.0 million)
more than in the previous fiscal year. This rise was due to the redemption of corporate
bonds and the assumption of debt. Stock repurchases totaled ¥10,685 million (US$88.9
million), ¥10,452 million (US$87.0 million) more than in the previous fiscal year, reflecting
the buyback of 4.5 million shares of the Company’s stock (based on resolution approved byshareholders). Dividend payments totaled ¥6,694 million (US$55.7 million).
As a result of the above actions, cash and cash equivalents at the end of the fiscal year
totaled ¥132,393 million (US$1,101.4 million), down ¥22,910 million (US$190.6 million) fromthe end of the previous fiscal year.

Financial Position
Total assets declined 3.4% to ¥655,877 million (US$5,456.6 million).
Current assets were down 5.0% to ¥248,108 million (US$2,064.1 million). The principal
reason was that cash decreased ¥20,543 million (US$170.9 million) as a result of ¥40,000
million (US$332.8 million) used to redeem bonds and ¥9,405 million (US$78.2 million) used
to repurchase stock.
Net property, plant, and equipment declined 0.5% to ¥318,794 million (US$2,652.2
million), reflecting ¥4,030 million (US$33.5 million) in construction in progress for thecomputer center of Yamato System Development Co., Ltd. and ¥8,697 million (US$72.4
million) in land valuation losses. Under investments and other assets, deferred tax assets
fell ¥8,932 million (US$74.3 million) to ¥20,777 million (US$172.9 million) as a result oftransfers to the reserve for retirement benefits and other factors.
Total current liabilities fell 3.4% to ¥170,594 million (US$1,419.3 million). There was a¥5,186 million (US$43.1 million) decline in short-term bank loans and the current portion

Total Shareholders’ Equity

Equity Ratio

ROA(¥ Millions)(%)
70

500,000(%)
8

60
400,000

650

300,000

4

40

30

200,000

2

20
100,000

0
10

0

0

’98

’99

’00

’01

’02

’03

–2

’98

’99

’00

’01

’02

’03

’98

’99

’00

’01

’02

’03

of long-term debt declined because of the redemption of ¥15,200 million (US$126.5 million)
in bonds. Offsetting this, however, were increases in accounts payable, income taxes
payable, and notes payable related to the purchase of plant, property, and equipment.
Total long-term liabilities fell 42.3% to ¥78,528 million (US$653.3 million). The principal
factors were the redemption of ¥25,000 million (US$208.0 million) of straight bonds prior tomaturity, the conversion to stock of ¥8,516 million (US$70.8 million) of convertible bonds,
and the repayment of ¥6,499 million (US$54.1 million) of long-term debt. Another factor
was that liabilities for employees’ retirement benefits fell ¥25,131 million (US$209.1 million) to ¥47,724 million (US$397.0 million) as a result of the net effect of an increase due totransfers to the reserve for retirement benefits and a decrease due to reserve reversals andgain on release of future responsibility for contributed national pension plan.
Total shareholders’ equity rose 11.4% to ¥406,306 million (US$3,380.3 million). The
principal factors were the addition of ¥4,248 million (US$35.3 million) to both the common
stock and additional paid-in capital accounts as a result of the conversion of convertible
bonds. Another factor was a ¥10,685 million (US$88.9 million) increase in treasury stock
associated with the repurchase of 4.5 million shares of the Company’s stock. The shareholders’ equity ratio rose 8.2 percentage points to 61.9%.
Interest-bearing debt (the sum of short-term bank loans, the current portion of longterm debt and long-term debt) fell 67.6% from ¥95,046 million (US$790.7 million) to ¥30,839
million (US$256.6 million), corresponding to a decline of ¥64,207 million (US$534.2 million).
The interest coverage ratio (operating income plus interest and dividend income
divided by interest expense) improved sharply, rising from 24.99 times to 36.68 times. The
debt payback period (interesting-bearing debt/operating cash flows) improved from 1.4
year to 0.4 years.

ROE

Capital Expenditures/Depreciation and Amortization(%)(¥ Millions)
50,00015

Interest Coverage Ratio

Capital Expenditures
Depreciation and Amortization(Times)40

40,000
1030

30,000520
20,0000

10
10,000

–5

0

’98

’99

’00

’01

’02

’03

0

’00

’01

’02

’03

’98

’99

’00

YAMATO TRANSPOR T Ann ual Report 2003

’01

’02

’03

26,27

Consolidated Balance Sheets
March 31, 2003 and 2002

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

ASSETS
CURRENT ASSETS:
Cash (Note 2.c)Time deposits (Note 2.c)Marketable securities (Note 3)
Notes and accounts receivable:
Trade
Allowance for doubtful accounts
Inventories
Deferred tax assets (Note 7)
Prepaid expenses and other current assets
Total current assets

PROPERTY, PLANT AND EQUIPMENT—At cost:
Land
Buildings and structures
VehiclesMachinery and equipment
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment

INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 3 and 4)
Investments in and advances to non-consolidated
subsidiaries and affiliates, net of valuation allowanceof ¥150 million ($1,248 thousand) in 2003 and¥500 million in 2002
Long-term loans
Lease deposits
Deferred tax assets (Note 7)
Other assets
Total investments and other assets
TOTAL
See notes to consolidated financial statements.

2003

2002

2003

¥ 132,320
241
6,512

¥ 152,863
2,763
6,334

$ 1,100,833
2,003
54,17485,170(438)
3,287
10,771
10,24580,924
(436)
3,618
7,775
7,333

708,567(3,646)27,35089,612
85,238248,108

261,174

2,064,131

150,101
208,866
147,624
89,875
6,087

158,413201,735
141,773
91,1462,363

1,248,758
1,737,659
1,228,151
747,71150,644

602,553(283,759)

595,430(275,095)

5,012,923(2,360,724)

318,794

320,335

2,652,199

19,403

18,269161,421

3,689
3,771
28,667
20,777
12,6684,745
4,200
29,67429,70910,83330,691
31,372
238,493
172,850
105,393

88,97597,430740,220¥ 655,877¥ 678,939$ 5,456,550

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

LIABILITIES AND SHAREHOLDERS’ EQUITYCURRENT LIABILITIES:
Short-term bank loans (Note 4)
Current portion of long-term debt (Note 4)
Notes and accounts payable:
Trade
Construction
Income taxes payable
Employees’ savings deposits
Accrued expenses
Other current liabilities
Total current liabilities
LONG-TERM LIABILITIES:Long-term debt (Note 4)
Liability for employees’ retirement benefits (Note 5)
Deferred tax liabilities (Note 7)
Other long-term liabilities
Total long-term liabilities
MINORITY INTERESTS

2003
¥

414

2002
¥

5,600
27,522

2003
$

3,442

76,427
12,006
22,664
3,897
39,692
15,494

66,113
5,644
16,582
3,948
38,464
12,671

635,833
99,881
188,550
32,422
330,219
128,907

170,594

176,544

1,419,254

30,42547,72465
314

61,92472,855
1,031
259

253,120
397,035
541
2,612

78,528136,069

653,308

449

1,520

3,737

120,548
133,340
163,483248(383)

116,300
129,092
118,895
896(132)

1,002,893
1,109,321
1,360,093
2,060(3,186)417,236

365,051

3,471,181

CONTINGENT LIABILITIES (Note 9)
SHAREHOLDERS’ EQUITY (Notes 4, 6 and 12):
Common stock—authorized, 530,000,000 shares;
issued, 469,475,456 shares in 2003 and461,549,549 shares in 2002
Capital surplus—additional paid-in capital
Retained earnings
Unrealized gain on available-for-sale securities
Foreign currency translation adjustments
Total
Treasury stock—at cost, 5,344,579 shares in 2003 and
106,451 shares in 2002
Total shareholders’ equity
TOTAL(10,930)(245)(90,930)

406,306

364,806

3,380,251¥655,877¥678,939$5,456,550

YAMATO TRANSPOR T Ann ual Report 2003

28,29

Consolidated Statementsof IncomeYears Ended March 31, 2003 and 2002

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

2003

2002

2003

OPERATING REVENUES¥972,135¥932,120$8,087,649

OPERATING COSTS AND EXPENSES:
Operating costs
Selling, general and administrative

896,023
19,294

861,775
17,156

7,454,436
160,516

Total operating costs and expenses

915,317878,9317,614,952

Operating income

56,81853,189472,697

(548)
1,564
(1)
1,650
8
(722)

(650)
2,154
74
858
3
(800)

(4,557)13,012(7)
13,72871(6,009)(45,703)
8,697
810

1,645

(380,226)
72,351
6,737(34,245)3,284(284,900)

INCOME BEFORE INCOME TAXES AND MINORITY INTERESTS

91,06349,905757,597

INCOME TAXES (Note 7):
Current
Deferred

36,904
5,634

27,582(5,365)

307,02246,872

42,53822,217353,894

OTHER (INCOME) EXPENSES:Interest and dividend income
Interest expense(Gain) loss on sales of marketable and investment securities
Loss on disposal of property, plant and equipment
Bond issuance costs
Equity in earnings of affiliated companies
Gain on exemption from future pension obligation of thegovernmental program (Note 2.h)Loss on devaluation of land
Other—net
Other (income) expenses—net

Total
MINORITY INTERESTS IN EARNINGS OFCONSOLIDATED SUBSIDIARIES

23

176

196

NET INCOME¥ 48,502¥ 27,512$ 403,507

PER SHARE OF COMMON STOCK (Notes 2.n and 10):
Basic net income
Diluted net income
Cash dividends applicable to the year

¥ 104.51
101.6315.00¥$

See notes to consolidated financial statements.

59.36
57.38
14.00

0.87
0.85
0.12

Consolidated Statements ofShareholders’ Equity
Years Ended March 31, 2003 and 2002

Thousands
IssuedNumber of
Shares ofCommon Stock

BALANCE, APRIL 1, 2001
Net income
Cash dividends, ¥14 per share
Bonuses to directors andcorporate auditors
Increase in treasury stock(106,222 shares)
Shares issued on conversion of
convertible debt
Net decrease in unrealized gain
on available-for-sale securities
Foreign currency translation
adjustments
BALANCE, MARCH 31, 2002
Adjustment of retained earnings
for newly consolidated
subsidiaries
Net income
Cash dividends, ¥14 per share
Bonuses to directors andcorporate auditors
Increase in treasury stock(5,238,128 shares)
Shares issued on conversion of
convertible debt
Net decrease in unrealized gain
on available-for-sale securities
Foreign currency translation
adjustments
BALANCE, MARCH 31, 2003

461,278

CommonStock¥116,155 ¥CapitalSurplus128,947 ¥Millions of Yen
Unrealized
Gain onForeign
AvailableCurrency
Retainedfor-saleTranslation
Earnings
Securities Adjustments

97,982 ¥ 1,511 ¥
27,512(6,458)(385) ¥

Treasury
Stock

(1)

(141)
(244)
272

145

145
(615)

461,550

116,300

129,092

118,895

896

253
(132)

(245)

2,713
48,502(6,483)(144)(10,685)
7,925

4,248

4,248
(648)

469,475¥

120,548 ¥ 133,340 ¥CommonStock

163,483 ¥(251)
248 ¥ (383) ¥(10,930)

Thousands of U.S. Dollars (Note 1)
Unrealized
Gain onForeign
AvailableCurrency
CapitalRetainedfor-saleTranslation
Surplus
Earnings
Securities Adjustments

Treasury
Stock

BALANCE, MARCH 31, 2002
$ 967,556 $ 1,073,984 $ 989,138 $ 7,450 $ (1,098) $ (2,039)
Adjustment of retained earnings for newly
consolidated subsidiaries
22,576
Net income
403,507
Cash dividends, $0.12 per share(53,937)
Bonuses to directors and corporate auditors(1,191)
Increase in treasury stock (5,238,128 shares)(88,891)
Shares issued on conversion of convertible debt
35,33735,337
Net decrease in unrealized gain on
available-for-sale securities(5,390)Foreign currency translation adjustments(2,088)BALANCE, MARCH 31, 2003
$1,002,893 $1,109,321 $1,360,093 $ 2,060 $(3,186) $(90,930)
See notes to consolidated financial statements.

YAMATO TRANSPOR T Ann ual Report 2003

30,31

Consolidated Statementsof Cash Flows
Years Ended March 31, 2003 and 2002

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

OPERATING ACTIVITIES:
Income before income taxes and minority interests
Adjustments for:
Income taxes—paidDepreciation and amortization
Loss on disposal of property, plant and equipment
Loss on devaluation of land
(Gain) loss on sales of marketable and investment securities
Equity in earnings of affiliated companies
Changes in assets and liabilities, net of effects from newly
consolidated subsidiaries:
Increase in notes and accounts receivable
Decrease (increase) in inventories
Increase in notes and accounts payable
Increase (decrease) in liability for employees’ retirement benefits
Other—net
Total adjustments

2003

2002

2003

¥ 91,063¥ 49,905$ 757,597(31,064)
31,731
1,650
8,697
(1)
(722)

(27,728)
31,764
858
74
(800)

(258,438)
263,987
13,72872,351(7)(6,009)(1,668)513
7,150(25,605)
4,291(5,028)(152)(1,428)
966
9,610
6,655
19,819(13,878)
4,266
59,486(213,022)
35,708(41,828)

86,03569,724

715,769759(32,939)6,399(10,742)772(39,435)
5,777(12,113)6,313(274,032)
53,234(89,366)(1,128)3,033(2,582)(2,175)426
2,538(1,312)(3,121)(9,389)25,234(21,478)(18,096)(39,375)(46,468)(327,580)

77(5,821)
5(51,644)(6,694)(10,685)
1,167(3,930)2,227(17,987)(6,470)
(233)
(554)

640
(48,424)41(429,649)(55,691)(88,892)
9,707(73,595)(26,947)(612,268)

Net cash provided by operating activities
INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment
Purchases of property, plant and equipment
Proceeds from sales of marketable and investment securities
Purchases of marketable and investment securities
Decrease (increase) in investments in and advances tonon-consolidated subsidiaries and affiliates
Cash collected from long-term loans
Cash advanced for long-term loans
Other
Net cash used in investing activities
FINANCING ACTIVITIES:
Proceeds from short-term bank loans
Repayments of short-term bank loans
Proceeds from long-term debt
Repayments of long-term debt
Dividends paid
Treasury stocks
Other
Net cash used in financing activities
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS ON CASH
AND CASH EQUIVALENTS
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS OF NEWLY CONSOLIDATEDSUBSIDIARIES, BEGINNING OF YEAR
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR

(93)
(27,028)95(3,596)(778)(224,857)

4,118
155,303

158,899

34,261
1,292,037

CASH AND CASH EQUIVALENTS, END OF YEAR

¥132,393¥155,303$1,101,441

NONCASH FINANCING ACTIVITIES:
Proceeds from issuance of common stock upon
conversion of convertible debt

¥

¥

$

See notes to consolidated financial statements.

8,496

290

70,674

Notes to Consolidated
Financial Statements
Years Ended March 31, 2003 and 2002

1. BASIS OF PRESENTING CONSOLIDATED FINANCIAL
STATEMENTS
The accompanying consolidated financial statements have been
prepared in accordance with the provisions set forth in the Japanese
Securities and Exchange Law and its related accounting regulations,and in conformity with accounting principles and practices generally
accepted in Japan, which are different in certain respects as toapplication and disclosure requirements of International Financial
Reporting Standards. The consolidated financial statements are notintended to present the financial position, results of operations andcash flows in accordance with accounting principles and practices
generally accepted in countries and jurisdictions other than Japan.
In preparing these consolidated financial statements, certain
reclassifications and rearrangements have been made to the consolidated financial statements issued domestically in order to present
them in a form which is more familiar to readers outside Japan.
The consolidated financial statements are stated in Japanese yen,
the currency of the country in which Yamato Transport Co., Ltd.
(the “Company”) is incorporated and operates. The translations ofJapanese yen amounts into U.S. dollar amounts are included solely
for the convenience of readers outside Japan and have been made at
the rate of ¥120.20 to $1, the approximate rate of exchange at March
31, 2003. Such translations should not be construed as representations that the Japanese yen amounts could be converted into U.S.
dollars at that or any other rate.
Certain reclassifications and rearrangements have been made in
the 2002 financial statements to conform to classifications andpresentations used in 2003.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESa. Consolidation—The consolidated financial statements include theaccounts of the Company and its 27 significant subsidiaries (together,
the “Group”).
Under the control or influence concept, those companies inwhich the Parent, directly or indirectly, is able to exercise control over
operations are fully consolidated, and those companies over which
the Group has the ability to exercise significant influence areaccounted for by the equity method.
The remaining non-consolidated subsidiaries, whose combined
assets, net sales, net income and retained earnings in the aggregate
are not significant to the consolidated financial statements, have notbeen consolidated with the Company.
Investments in 3 affiliates are accounted for by the equity method.
Investments in the remaining non-consolidated subsidiaries andaffiliates are stated at cost less a valuation allowance representing
possible losses on the investments that is deemed to be other than
temporary. If the equity method of accounting had been applied tothe investments in such companies, the effect on the accompanying
consolidated financial statements would not be material.
The excess of the costs over the underlying net equity ofinvestments in consolidated subsidiaries is allocated to identifiable
assets, and the remaining amount is recognized as goodwill andamortized on a straight-line basis over a five-year period, with the
exception of minor amounts which are charged or credited to incomein the period of acquisition.
All significant intercompany balances and transactions have been
eliminated in consolidation. All material unrealized profit included in
assets resulting from transactions within the Group is eliminated.
b. Recognition of Operating Revenues—The Group recognizes freightcharge income as operating revenues at the time when freight has
been received from the shipping customer for transportation.
c. Cash Equivalents—Cash equivalents are short-term investmentsthat are readily convertible into cash and that are exposed toinsignificant risk of changes in value. Cash equivalents include time
deposits, certificate of deposits and mutual funds investing in bondsthat represent short-term investments, all of which mature or
become due within three months of the date of acquisition.

The difference between cash and time deposits in the accompanying consolidated balance sheets and cash and cash equivalents inthe accompanying consolidated statements of cash flows is asfollows:
Thousands of
U.S. Dollars

Millions of Yen

2003

2002

2003

Cash
¥132,320 ¥152,863
Time deposits
241
2,763
Total
132,561
155,626
Time deposits due beyond
three months(323)
Bank overdraft included in cash
(168)
Cash and cash equivalents¥132,393 ¥155,303$1,100,833
2,003
1,102,836(1,395)$1,101,441

d. Inventories—Inventories which mainly consist of supplies arestated at cost as determined by the first-in, first-out method.
e. Marketable and Investment Securities—Marketable and investment
securities are classified and accounted for, depending on management’s
intent, as follows: (1) trading securities, which are held for the
purpose of earning capital gains in near term are reported at fairvalue, and the related unrealized gains and losses are included in theearnings, (2) held-to-maturity debt securities, which are expected tobe held to maturity with the positive intent and ability to hold tomaturity are reported at amortized cost and (3) available-for-salesecurities, which are not classified as either of the aforementioned
securities, are reported at fair value, with unrealized gains andlosses, net of applicable taxes, reported in a separate component ofshareholders’ equity. The Group has no such trading securities.
Non-marketable available-for-sale securities are stated at cost
determined by the moving-average method.
For other than temporary declines in fair value, investment
securities are reduced to net realizable value by a charge to income.
f. Property, Plant and Equipment—Property, plant and equipment arestated at cost. Depreciation of property, plant and equipment of theCompany and its consolidated domestic subsidiaries is computed by
the declining-balance method at rates based on the estimated useful
lives of the assets, while the straight-line method is applied to thebuildings acquired after April 1, 1998, and to the equipment used forrefrigerated delivery service. The depreciation of property, plant andequipment of foreign consolidated subsidiaries is computed on thestraight-line method over the estimated useful lives of the assets.
The range of useful lives is principally as follows:
Buildings and structures
VehiclesMachinery and equipment

7—60 years
2— 7 years
2—20 years

Maintenance and repairs including minor renewals and improvements are charged to income as incurred.
g. Other Assets—Amortization of intangible assets is computed on thestraight-line method over the period specified by the JapaneseCommercial Code (the “Code”).
Bond discounts are deferred as other assets and amortized on
the straight-line method over the lives of the bonds.
Bond issuance costs are deferred as other assets and amortizedon the straight-line method over a three-year period.
h. Retirement and Pension Plan—The Company and certain consolidated subsidiaries have a contributory trusteed pension plan and an
unfunded retirement benefits plan which cover 35% and 65%,
respectively, of retirement benefits. One consolidated subsidiary has
a non-contributory trusteed pension plan to cover the retirement
benefits for employees who retire at 55 years or more with at least 10
years of service. The foreign subsidiaries also have a defined
contribution retirement plan which covers employees who haveworked over 1 year, subject to certain limitations. Other consolidated
subsidiaries have an unfunded retirement benefits plan.

YAMATO TRANSPOR T Ann ual Report 2003

32,33

The contributory funded defined benefit pension plan, which isestablished under the Japanese Welfare Pension Insurance Law,covers a substitutional portion of the governmental pension program
managed by the Company on behalf of the government and acorporate portion established at the discretion of the Company.
According to the enactment of the Defined Benefit Pension Plan Law
in April 2002, the Company applied for an exemption from obligation
to pay benefits for future employee services related to the substitutional portion which would result in the transfer of the pension
obligations and related assets to the government by anothersubsequent application. The Company obtained an approval of
exemption from future obligation by the Ministry of Health, Labourand Welfare on December 16, 2002.
As a result of this exemption, the Company and certain subsidiaries recognized a gain on exemption from future pension obligationof the governmental program in the amount of ¥45,703 million inaccordance with a transitional measurement of the accounting
standard for employees’ retirement benefits for the year ended
March 31, 2003.
The substitutional portion of the plan assets which will betransferred to the government in the subsequent year is measured tobe approximately ¥111,902 million ($930,967 thousand) as at March
31, 2003.
Directors and corporate auditors are not covered by the retirement and pension plans described above. Benefits paid to such
persons are charged to income as paid. Any amounts payable todirectors and corporate auditors upon retirement are subject toapproval of the shareholders.

n. Per Share Information—Basic net income per share is computed by
dividing net income available to common shareholders, by theweighted-average number of common shares outstanding for theperiod, retroactively adjusted for stock splits.
Diluted net income per share reflects the potential dilution that
could occur if securities were exercised or converted into common
stock. Diluted net income per share of common stock assumes fullconversion of the outstanding convertible notes and bonds at the
beginning of the year (or at the time of issuance) with an applicableadjustment for related interest expense, net of tax, and full exerciseof outstanding warrants.
Cash dividends per share presented in the accompanying consolidated statements of income are dividends applicable to the respective years including dividends to be paid after the end of the year.

i. Leases—All leases are accounted for as operating leases. Under
Japanese accounting standards for leases, finance leases that deemto transfer ownership of the leased property to the lessee are to becapitalized, while other finance leases are permitted to be accounted
for as operating lease transactions if certain “as if capitalized” information is disclosed in the notes to the lessee’s financial statements.

Non-current:
Marketable equity securities
Non-marketable equity
securities
Government and corporate
bonds
Other
Total

j. Income Taxes—The provision for income taxes is computed basedon the pretax income included in the consolidated statements ofincome. The asset and liability approach is used to recognize deferred
tax assets and liabilities for the expected future tax consequences of
temporary differences between the carrying amounts and the tax
bases of assets and liabilities. Deferred taxes are measured byapplying currently enacted tax laws to the temporary differences.

3. MARKETABLE AND INVESTMENT SECURITIESMarketable and investment securities as of March 31, 2003 and 2002
consisted of the following:

Current:
Government and corporate
bonds
Other
Total

2003

2002

2003

¥ 6,011501¥ 6,512¥ 2,531
3,803¥ 6,334$ 50,005
4,169$ 54,174¥ 7,409¥10,219$ 61,637

1,560

676

12,9804,704
5,730¥19,403

6,212
1,162
¥18,269

39,13147,673$161,421

Information regarding each category of the securities classified
as available-for-sale and held-to-maturity at March 31, 2003 and 2002
was as follows:
Millions of Yen

2003

k. Appropriations of Retained Earnings—Appropriations of retained
earnings at each year end are reflected in the consolidated financial
statements for the following year upon shareholders’ approval.
l. Foreign Currency Transactions—All short-term and long-termmonetary receivables and payables denominated in foreign currencies
are translated into Japanese yen at the exchange rates at the balance
sheet date.

Thousands of
U.S. Dollars

Millions of Yen

Cost

Securities classified as:
Available-for-sale—equity securities
Held-to-maturity

¥

6,988
15,819Unrealized
Gains

Unrealized
Losses

¥

¥ 403
5

824
3

Fair
Value

¥

7,409
15,817

Millions of Yen

m. Foreign Currency Financial Statements—The balance sheet accountsof the consolidated foreign subsidiaries are translated into Japanese
yen at the current exchange rate as of the balance sheet date except
for shareholders’ equity, which is translated at the historical rate.
Differences arising from such translation were shown as “Foreign
currency translation adjustments” in a separate component ofshareholders’ equity.
Revenue and expense accounts of the consolidated foreignsubsidiaries are translated into Japanese yen at the current exchange
rates as of the balance sheet date.

2002

Securities classified as:
Available-for-sale—equity securities
Held-to-maturity

¥

Cost

Unrealized
Gains

Unrealized
Losses

8,700
12,546¥ 1,733
14

¥

214
8

Fair
Value

¥ 10,219
12,552Thousands of U.S. Dollars

2003

Securities classified as:
Available-for-sale—equity securities
Held-to-maturity

Cost

Unrealized
Gains

Unrealized
LossesFair
Value$ 58,134
131,607$6,85624$3,35346$ 61,637
131,585

The majority of available-for-sale securities whose fair value is
not readily determinable as of March 31, 2003 and 2002 was asfollows:
Carrying AmountMillions of Yen

Available-for-sale:
Equity securities
Preferred shares

Thousands of
U.S. Dollars

2003

2002

2003

¥1,560
1,000

¥ 676
1,000

$12,980
8,319

Proceeds from sales of available-for-sale securities for the years
ended March 31, 2003 and 2002 were ¥9 million ($72 thousand) and¥369 million, respectively. Gross realized gains and losses on thesesales, computed on the moving average cost basis, were ¥1 million($7 thousand) and ¥0 million ($0 thousand), respectively, for the year
ended March 31, 2002 and ¥1 million and ¥72 million, respectively, forthe year ended March 31, 2002.
The carrying values of debt securities by contractual maturities
for securities classified as held-to-maturity at March 31, 2003 wereas follows:
Millions of Yen

Thousands of
U.S. Dollars

Held to Maturity

Held to Maturity¥ 6,5129,307¥15,819$ 54,174
77,433$131,607

Due in one year or lessDue after one year through five years
Total

4. BANK LOANS AND LONG-TERM DEBT
Short-term bank loans at March 31, 2003 and 2002 consisted of notes to banks and bank overdrafts. The annual interest rates applicable to thebank loans ranged from 0.05% to 6% and 0.4% to 1.375% at March 31, 2003 and 2002, respectively.
Long-term debt at March 31, 2003 and 2002 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

1.49% to 3.2% loans from Japanese banks, and other financial institutions due 2009
Secured 3.0% bonds due in August 2002
Unsecured 2.2% bonds due in November 2002
Unsecured 2.6% bonds due in July 2004
Unsecured 1.975% bonds due in July 2005
Unsecured 1.65% bonds due in December 2005
Unsecured 0.8% bonds due in December 2004
Unsecured 1.7% convertible debentures, convertible into common stock at¥1,071.80 per share, due in September 2002
Unsecured 1.2% convertible debentures, convertible into common stock at¥1,211.80 per share, due in September 2009
Total
Less current portion
Total
Based on debt assumption agreements with financial institutions,the Company has transferred the debt repayment obligation for certain
bonds to such financial institutions and provided such financial
institutions with cash for the payment of principal and interest on
these bonds. As a result of such transactions, the balance of suchbonds derecognized amounted to ¥25,000 million ($207,987 thousand)as of March 31, 2003 (see Note 9).
Annual maturities of long-term debt at March 31, 2003 wereas follows:Year Ending March 31

2005
2010
Total

Millions of Yen

Thousands of
U.S. Dollars¥17,000
13,425¥30,425$141,431
111,689$253,120

Investment securities with a carrying amount of ¥21 million ($178
thousand) were deposited as security for dealings at March 31, 2003.
All outstanding convertible debentures of the Company at March
31, 2003, were convertible into 11 thousand shares of common stockof the Company. The conversion prices are subject to adjustments toreflect stock splits and certain other events.

2003

2002

2003

¥15,000¥ 10,305200
15,00015,00010,00015,0002,000$124,792

2,000

16,6398,516
13,42530,425

13,42589,446(27,522)¥ 61,924¥30,425

111,689
253,120$253,120

5. RETIREMENT AND PENSION PLANS
The Company and its consolidated subsidiaries have severance
payment plans for employees.
Under most circumstances, employees terminating theiremployment are entitled to retirement benefits determined based on
the rate of pay at the time of termination, years of service andcertain other factors. Such retirement benefits are made in the formof a lump-sum severance payment from the Company or from theconsolidated subsidiaries and annuity payments from a trustee.
Employees are entitled to larger payments if the termination is
involuntary, by retirement at the mandatory retirement age, by death,or by voluntary retirement at certain specific ages prior to the mandatory retirement age. The retirement benefits for directors and corporate
auditors are paid subject to the approval of the shareholders.
The liability for employees’ retirement benefits at March 31, 2003
and 2002 consisted of the following:Thousands of
U.S. Dollars

Millions of Yen

2003
Projected benefit obligation
Fair value of plan assets
Unrecognized actuarial loss
Net liability

2002

2003

¥126,763 ¥ 285,399(28,457) (149,414)(50,582)(63,130)¥ 47,724 ¥ 72,855

YAMATO TRANSPOR T Ann ual Report 2003

$1,054,599(236,746)(420,818)$ 397,035

34,35

The components of net periodic benefit costs for the years ended
March 31, 2003 and 2002 are as follows:
Millions of Yen

Service cost
Interest cost
Expected return on plan assets
Recognized actuarial loss
Net periodic benefit costs
Amortization of prior service
cost
Gain on exemption from future
pension obligation of thegovernmental program
Total benefit costs—net

Thousands of
U.S. Dollars

2003

2002

2003

¥ 11,336
6,316¥11,120
7,887(3,641)
11,62526,991$ 94,314
52,547

15,33732,989127,593
274,454(5,222)(45,703)¥(12,714)¥21,769

7. INCOME TAXESThe Company and its domestic subsidiaries are subject to Japanesenational and local income taxes which, in the aggregate, resulted in anormal effective statutory tax rate of approximately 41% for theyears ended March 31, 2003 and 2002.
Tax effects of significant temporary differences which resulted
in deferred tax assets and liabilities at March 31, 2003 and 2002 wereas follows:(380,226)$(105,772)

Assumptions used for the years ended March 31, 2003 and 2002
are set forth as follows:

Discount rate
Expected rate of return on plan assets
Amortization period of prior service cost
Recognition period of actuarial gain/loss:
Company
Consolidated subsidiaries

Dividends are approved by the shareholders at a meeting held
subsequent to the fiscal year to which the dividends are applicable.
Semiannual interim dividends may also be paid upon resolution of
the Board of Directors, subject to certain limitations imposed by
the Code.

2003

2002

2.0%
0.0%
1 year2.8%
2.5%
1 year

7 years
5 years

7 years
5 years

6. SHAREHOLDERS’ EQUITY
Japanese companies are subject to the Code to which certain
amendments became effective from October 1, 2001.
The Code was revised whereby common stock par value waseliminated resulting in all shares being recorded with no par value
and at least 50% of the issue price of new shares is required to berecorded as common stock and the remaining net proceeds asadditional paid-in capital, which is included in capital surplus. The
Code permits Japanese companies, upon approval of the Board of
Directors, to issue shares to existing shareholders without consideration as a stock split. Such issuance of shares generally does not giverise to changes within the shareholders’ accounts.
The revised Code also provides that an amount at least equal to
10% of the aggregate amount of cash dividends and certain otherappropriations of retained earnings associated with cash outlays
applicable to each period shall be appropriated as a legal reserve (acomponent of retained earnings) until such reserve and additional
paid-in capital equals 25% of common stock. The amount of total
additional paid-in capital and legal reserve that exceeds 25% of thecommon stock may be available for dividends by resolution of theshareholders. In addition, the Code permits the transfer of a portionof additional paid-in capital and legal reserve to the common stockby resolution of the Board of Directors.
The revised Code eliminated restrictions on the repurchase anduse of treasury stock allowing Japanese companies to repurchasetreasury stock by a resolution of the shareholders at the generalshareholders meeting and dispose of such treasury stock by resolution of the Board of Directors beginning April 1, 2002. The repurchased amount of treasury stock cannot exceed the amount available
for future dividend plus amount of common stock, additional paid-in
capital or legal reserve to be reduced in the case where such
reduction was resolved at the general shareholders meeting.
The amount of retained earnings available for dividends under
the Code was ¥94,194 million ($783,644 thousand) as of March 31,
2003, based on the amount recorded in the parent company’s generalbooks of account. In addition to the provision that requires anappropriation for a legal reserve in connection with the cash
payment, the Code imposes certain limitations on the amount ofretained earnings available for dividends.

Thousands of
U.S. Dollars

Millions of Yen

Deferred tax assets:
Current:
Accrued expenses
Enterprise tax
Other
Deferred tax assets—current
Non-current:
Liability for employees’
retirement benefits
Investment securities
Loss on devaluation of land
Unrealized profit
Other
Less valuation allowance
Deferred tax assets—
non-current
Deferred tax liabilities:
Property, plant and equipment
Revaluation of fixed assets
in accordance with special
tax measures
Other
Deferred tax liabilities

2003

2002

2003

¥ 7,875
2,086
810¥10,771¥ 6,2361,484
55¥ 7,775$ 65,513
17,357
6,742$ 89,612¥18,105
2,536
2,722
460
(324)
(2,722)¥28,066
1,779$150,622
21,102
22,6493,826(2,700)(22,649)¥20,777¥29,709

432
(568)

¥
¥
¥

414
(349)
65

$172,850

990$

41¥ 1,0313,444(2,903)$541

A reconciliation between the normal effective statutory tax rate
for the years ended March 31, 2003 and 2002 and the actual effective
tax rates reflected in the accompanying consolidated statements ofincome was as follows:

Normal effective statutory tax rate
Per capita levy of local taxes
Differences from tax rates of foreign
consolidated subsidiaries
Valuation allowance
Other—net
Actual effective tax rate

2003

2002

41.0%
1.8

41.0%
3.2

0.1
3.0
0.8
46.7%

0.3

44.5%

On March 31, 2003, a tax reform law was enacted in Japan whichchanged the normal effective statutory tax rate from 41.0% to 40.0%,
effective for years beginning on or after April 1, 2004. The effect of
this change on deferred taxes in the consolidated statements ofincome for the year ended March 31, 2003 was a decrease of approximately ¥422 million ($3,511 thousand).

8. LEASES

9. CONTINGENT LIABILITIES

Total lease payments under finance lease arrangements that do nottransfer ownership of the leased property to the lessee were ¥3,035
million ($25,253 thousand) and ¥2,660 million for the years ended
March 31, 2003 and 2002, respectively.
Pro forma information of leased property such as acquisition
cost, accumulated depreciation and obligations under finance leases
that do not transfer ownership of the leased property to the lessee on
an “as if capitalized” basis for the years ended March 31, 2003 and2002 was as follows:

Contingent liabilities for guarantees and items of a similar nature atMarch 31, 2003 amounted to ¥335 million ($2,787 thousand) representing guarantees of loans of an unaffiliated company jointly andseverally by the Company and 18 other unaffiliated companies and¥137 million ($1,140 thousand) as guarantees of loans of nonconsolidated subsidiaries.
Based on debt assumption agreements with financial institutions,the Company has transferred the debt repayment obligation forcertain bonds to such financial institutions. At March 31, 2003, theCompany had contingent obligations of ¥25,000 million ($207,987
thousand) in respect of these bonds.

Millions of Yen

2003

Acquisition cost
Accumulated
depreciation
Net leased property

Buildings
andStructures

¥ 5
2
¥ 3

10. NET INCOME PER SHARE

VehiclesMachineryandEquipment

Other
Assets

Total

¥ 72

¥ 14,772¥ 97¥ 14,946

34
¥ 38

¥

7,661
7,111

64
¥ 33

¥

7,761
7,185
Year Ended March 31, 2003

Thousands of U.S. Dollars

2003

Acquisition cost
Accumulated
depreciation
Net leased property

Reconciliation of the differences between basic and diluted net
income per share (“EPS”) for the years ended March 31, 2003 and 2002
is as follows:

Buildings
andStructures

VehiclesMachineryandEquipment

Other
Assets

Total

$41

$598

$122,892$811$124,342

18
$23

285
$313

63,730$ 59,162

534$277

64,567$ 59,775

Basic EPS—Net income
available to commonshareholders
Effect of dilutive
securities—
Convertible bonds
Diluted EPS—Net income
for computation

Millions of Yen

2002

Acquisition cost
Accumulated depreciation
Net leased property

Year Ended March 31, 2002

Buildings
andStructures

VehiclesMachineryandEquipment

Total

¥5
2
¥3

¥75
54
¥21

¥12,581
5,952¥ 6,629¥12,661
6,008¥ 6,653

Obligations under finance leases which included the imputed
interest expense portion, and noncancelable operating leases as ofMarch 31, 2003 and 2002 were as follows:
Millions of Yen

2003

Due within one year
Due after one year
Total

Basic EPS—Net income
available to commonshareholders
Effect of dilutive
securities—
Convertible bonds
Diluted EPS—Net income
for computation

Millionsof YenThousandsof Shares

Net
IncomeWeighted-average
Shares¥48,346462,607106

14,145¥48,452

U.S.
Dollars

Yen
EPS¥104.51$0.87

476,752¥101.63$0.85

Millionsof YenThousandsof Shares

Yen

Net
IncomeWeighted-average
Shares

EPS¥27,383

461,320¥59.36

189

19,220¥27,572

480,540¥57.38

Thousands of
U.S. Dollars

2003

Finance
Lease

Operating
Lease

Finance
Lease

OperatingLease¥2,861
4,324¥7,185

¥ 328
475
¥ 803

$23,799
35,976$59,775$2,7303,954$6,684

Millions of Yen

2002

Due within one year
Due after one year
Total

Finance
Lease

OperatingLease¥2,411
4,242¥6,653¥ 642
1,448¥2,090

YAMATO TRANSPOR T Ann ual Report 2003

36,37

11. SEGMENT INFORMATION
Information about industry segments, geographic segments and operating revenues to foreign customers of the Company and consolidated
subsidiaries for the years ended March 31, 2003 and 2002 is as follows:(1) Industry Segments
Millions of Yen

2003

a. Operating revenues and operating income:Operating revenues to customers
Intersegment operating revenues

Domestic
Transportation

International
Transportation

Information
Communications

Other¥ 856,827
3,644¥ 74,117479¥ 18,888
11,106¥ 22,303
26,831

860,471810,016

74,59672,89729,99428,305

49,13445,092

Total operating revenues
Operating costs and expenses
Operating incomeb. Assets, depreciation and capital expenditures:
AssetsDepreciation
Capital expenditures¥

50,455¥ 424,029
25,23333,026¥

1,699¥ 24,671
642
701

¥

1,689

¥

¥ 20,776
581
4,522

4,042

¥ 35,740
5,090
4,285

Eliminations
or Corporate

Consolidated¥¥(42,060)(40,993)¥

972,135(42,060)(1,067)972,135
915,317¥56,818¥ 150,661
185
57¥ 655,877
31,731
42,591

Consolidated

Thousands of U.S. Dollars

2003
Domestic
Transportation

International
Transportation

Information
Communications

Other

Eliminations
or Corporate

a. Operating revenues and operating income:Operating revenues to customers
Intersegment operating revenues$7,128,347
30,311$616,616
3,984$157,139
92,398$185,547
223,226$ (349,919)

Total operating revenues
Operating costs and expenses

7,158,658
6,738,901

620,600
606,465

249,537
235,486

408,773375,139(349,919)(341,039)

8,087,649
7,614,952

Operating income$ 419,757$ 14,135$ 14,051$ 33,634$(8,880)$ 472,697

b. Assets, depreciation and capital expenditures:
AssetsDepreciation
Capital expenditures$3,527,698
209,922274,759$205,247
5,342
5,830

$172,848
4,836
37,621$297,336
42,34335,653$1,253,421
1,544
475

$5,456,550
263,987354,338

Eliminations
or Corporate

Consolidated$8,087,649

Millions of Yen

2002
Domestic
Transportation

a. Operating revenues and operating income:Operating revenues to customers
Intersegment operating revenues¥

Total operating revenues
Operating costs and expenses
Operating incomeb. Assets, depreciation and capital expenditures:
AssetsDepreciation
Capital expenditures

International
Transportation

Information
Communications

Other834,418
3,375¥ 61,189
202¥ 18,431
10,513¥ 18,082
13,388

837,793
789,809

61,391
60,12728,94427,09331,47028,574¥47,984

¥

1,264

¥

413,700
25,64832,123¥ 27,780
571
450

¥

1,851

¥ 15,803
390
2,876

¥

¥
¥

932,120(27,478)(27,478)(26,672)

932,120878,931

2,896

¥

(806)

¥

53,189¥ 31,827
4,964
4,840

¥

189,829191
90¥

678,939
31,76440,379(2) Geographic Segments
The geographic segments of the Company and consolidated subsidiaries for the years ended March 31, 2003 and 2002 are summarized asfollows:
Millions of Yen

2003

Operating revenues:
Outside customers
InterareaJapan

U.S.A.

EuropeAsia¥ 950,980
4,443¥ 12,661
2,726¥ 3,573
1,197¥ 4,9212,475

955,423

15,387

4,770

7,396

Total operating revenues
Operating costs and expenses

899,115

15,141

Operating income (loss)¥

56,308¥

246

Assets¥ 495,914

¥

3,132

4,822
¥

Eliminations
or Corporate¥ 972,135¥¥¥ 2,003310¥ 2,688(10,841)(10,841)

7,086

(52)

Consolidated

972,135(10,847)¥

6

915,317¥56,818¥ 152,140¥ 655,877

Eliminations
or Corporate

Consolidated

Thousands of U.S. Dollars

2003

Operating revenues:
Outside customers
Interarea
Total operating revenues

Japan

U.S.A.

EuropeAsia$7,911,646
36,961$105,335
22,678$29,726
9,957$40,942
20,591

7,948,607

128,013

39,683

61,533Operating costs and expenses

7,480,151

Operating income (loss)$ 468,456$

125,964

Assets$4,125,741$ 26,054

2,049$8,087,649$(90,187)

40,11458,958(431)$ 2,575$$16,668$22,366$(90,187)
8,087,649(90,235)

7,614,952

48$ 472,697$1,265,721$5,456,550

Eliminations
or Corporate

Consolidated

Millions of Yen

2002

Operating revenues:
Outside customers
Interarea
Total operating revenues
Operating costs and expenses

Japan

U.S.A.

Other¥ 915,279
3,628¥ 12,873
2,543¥ 3,968
958

918,907

15,416

4,926

866,045

15,102

Operating income¥ 52,862¥

314

Assets¥ 482,685¥ 3,389¥¥(7,129)4,815¥

932,120(7,129)932,120(7,031)

878,931

111

¥

(98)

¥

53,189¥ 1,802¥

191,063¥

678,939

Operating revenues and assets are summarized by geographic area based on the countries where subsidiaries are located.
(3) Operating Revenues to Foreign Customers
Operating revenues to foreign customers for the years ended March 31, 2003 and 2002 amounted to ¥24,402 million ($203,011 thousand) and¥20,845 million, respectively.

12. SUBSEQUENT EVENTS
a. Appropriations of Retained Earnings
The following appropriations of retained earnings at March 31, 2003
were approved at the Company’s shareholders meeting held on June27, 2003:

Year-end cash dividends,¥8.00 ($0.07) per share
Bonuses to directors andcorporate auditors

Millions of Yen

Thousands of
U.S. Dollars¥3,713$30,891

65

541

b. Purchase of Treasury Stock
The Company is authorized to repurchase up to 7,700 thousand sharesof the Company’s common stock or aggregate amount of ¥10,000 million($83,195 thousand).

YAMATO TRANSPOR T Ann ual Report 2003

38,39

Independent Auditors’ Report

To the Board of Directors of
Yamato Transport Co., Ltd.:We have audited the accompanying consolidated balance sheets of Yamato Transport Co., Ltd. and consolidated
subsidiaries as of March 31, 2003 and 2002, and the related consolidated statements of income, shareholders’equity, and cash flows for the years then ended, all expressed in Japanese yen. These consolidated financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion onthese consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards, procedures and practices generally accepted
and applied in Japan. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Yamato Transport Co., Ltd. and consolidated subsidiaries as of March 31,
2003 and 2002, and the consolidated results of their operations and their cash flows for the years then ended inconformity with accounting principles and practices generally accepted in Japan.

Our audits also comprehended the translation of Japanese yen amounts into U.S. dollar amounts and, in our
opinion, such translation has been made in conformity with the basis stated in Note 1. Such U.S. dollar amounts
are presented solely for the convenience of readers outside Japan.

June 27, 2003

Corporate Data
Head Office
Yamato Transport Co., Ltd.
16-10, Ginza 2-chome, Chuo-ku, Tokyo
104-8125, Japan
Telephone: (03) 3541-3411
Facsimile: (03) 5565-3428

Chubu Yamato Home Service Co., Ltd.*

Taiwan Yamato International

Kansai Yamato Home Service Co., Ltd.*

Logistics, Inc.

Chugoku Yamato Home Service

Yamato Systems U.S.A., Inc.

Co., Ltd.*

Yamato Transport (Canada) Inc.

Shikoku Yamato Home Service Co., Ltd.*

Yamato Travel Hong Kong Ltd.

Kyushu Yamato Home Service Co., Ltd.*

Yamato Transport (M) Sdn. Bhd.

Yamato Parcel Service Co., Ltd.

UPS Yamato Co., Ltd.

Miyagi Green Liner Co., Ltd.

UPS Yamato Express Co., Ltd.

Iwate Green Liner Co., Ltd.

Yamato Unyu (Thailand) Co., Ltd.

Domestic Offices

Saitama Green Liner Co., Ltd.

3,279

Kanagawa Green Liner Co., Ltd.

*Consolidated subsidiaries

Niigata Green Liner Co., Ltd.

Major Subsidiaries

Kanazawa Green Liner Co., Ltd.

Common Stockand Affiliates

Aichi Green Liner Co., Ltd.

Authorized: 530,000,000 shares

Yamato System Development Co., Ltd.*
Chiyoda Packaging Industry Co., Ltd.*
Konan Industry Co., Ltd.*
Kyushu Yamato Transport Co., Ltd.*
Shikoku Yamato Transport Co., Ltd.*
Okinawa Yamato Transport Co., Ltd.*
Kyoto Yamato Transport Co., Ltd.*
Kobe Yamato Transport Co., Ltd.
Yamato Collect Service Co., Ltd.*
Yamato Lease Co., Ltd.*
Yamato Shoji Co., Ltd.*
Book Service Co., Ltd.*
Yamato Global Freight Co., Ltd.*
Yamato Logistics Produce Co., Ltd.*
Yamato Home Service Co., Ltd.*
Tohoku Yamato Home Service Co., Ltd.*
Hokushinetsu Yamato Home Service

Chugoku Green Liner Co., Ltd.

Issued: 469,475,456 shares

Okayama Green Liner Co., Ltd.
Fukuoka Green Liner Co., Ltd.
Kagoshima Green Liner Co., Ltd.
Yamato Staff Supply Co., Ltd.

Stock Exchange Listing
Tokyo Stock Exchange

Swan Co., Ltd.
Swan Net Co., Ltd.

Transfer Agent and Registrar

Minami Kyushu Green Co., Ltd.

Mizuho Trust & Banking Co., Ltd.

Shikoku Yamato Distribution Service
Co., Ltd.

Annual Meeting

Shikoku-Yamato Logitem Co., Ltd.

The annual meeting of shareholders is

Yamato Career Service Co., Ltd.

normally held in June in Tokyo, Japan.

Yamato Transport U.S.A., Inc.*
Yamato Transport (U.K.) Ltd.*
Yamato Transport Europe B.V.*
Yamato Transport (Hong Kong) Ltd.*
Yamato Transport (S) Pte. Ltd.*

Auditors
Deloitte Touche Tohmatsu(by Tohmatsu & Co., the Japanese
member of Deloitte Touche Tohmatsu)

Co., Ltd.*Principal Shareholders

Stock Price Range
Percentage of total
shares outstanding(Tokyo Stock Exchange)

(Yen)

High

Low

First quarter

2,540

2,020

Second quarter

2,310

1,794

Third quarter

1,858

1,503

Fourth quarter

1,740

1,295

Japan Trustee Services Bank, Ltd. (Trust Account)

9.09%

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

5.70%

Mizuho Bank, Ltd.

3.76%

The Meiji Life Insurance Co.

2.76%

Yamato Employees’ Shareholding Association

2.71%

The Yasuda Mutual Life Insurance Co.

2.67%

Resona Bank, Limited

2.08%

The Sumitomo Life Insurance Co.

1.84%

Financial Institutions

Yamato Trading-Partner Shareholding Association

1.75%

Securities Companies

0.9%

UFJ Trust Bank Ltd. (Trust Account A)

1.74%

Other Institutions

8.1%

Total

34.1%

Foreign Investors

18.1%

Individuals and Others

16.6%

Total

100.0%

Distribution of Shareholders
56.3%(As of March 31, 2003)

YAMATO TRANSPORT Annual Report 2003

40,41

Printed in Japan on recycled paper