Japan Transcity Corporation
Consolidated Financial Statements
March 31, 2008 and 2007

Independent Auditors’ Report

To the Board of Directors of Japan Transcity Corporation,

We have audited the accompanying consolidated balance sheets of Japan Transcity Corporationand its consolidated subsidiaries as of March 31, 2008, and the related consolidated statements ofincome, changes in net assets, and cash flows for the year then ended, all expressed in Japaneseyen. These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to independently express an opinion on these consolidated
financial statements based on our audits. The consolidated financial statements of the Company
as of March 31, 2007 were audited by other auditors, whose report dated June 28, 2007,
expressed an unqualified opinion on those statements.
We conducted our audits in accordance with auditing standards generally accepted 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 Japan Transcity Corporation and its consolidated
subsidiaries as of March 31, 2008, and the consolidated results of their operations and their cash
flows for the year then ended, in conformity with accounting principles generally accepted in Japan.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to theyear ended March 31, 2008 are presented solely for convenience. Our audit also included thetranslation of yen amounts into U.S. dollar amounts and, in our opinion, such translation has been
made on the basis described in Note 1 to the consolidated financial statements.

KPMG AZSA & Co.
Nagoya, Japan
June 27, 2008

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2008 and 2007

Millions of Yen
2008
2007
Current assets:
Cash and cash equivalents
Short-term investments (Notes 3 and 4)
Trade receivables:
Notes
Accounts
Allowance for doubtful accounts¥

Inventories
Deferred tax assets (Note 10)
Other current assets
Total current assets

Property and equipment (Note 4):Land
Buildings and structures
Machinery and equipment
Vehicles and vessels
Construction in progress
Total property and equipment
Less, accumulated depreciation
Net property and equipment

Investments and other assets:
Investment securities (Note 3)
Investments in unconsolidated subsidiaries andaffiliates
Deferred tax assets (Note 10)
Lease deposits
Other assets
Allowance for doubtful accounts
Total investments and other assets

Total assets¥

11,143429

12,946703$

111,430
4,290

814
13,080(18)
13,87681
500
1,639
27,668974
13,673(19)
14,62891
236
1,529
30,1338,140
130,800(180)
138,760
810
5,000
16,390276,680

29,00344,292
10,4307,252
505
91,482(42,905)
48,577

27,762
42,143
10,765
7,482
1,563
89,715(42,125)
47,590290,030
442,920
104,300
72,5205,050
914,820(429,050)
485,770

7,415

10,23674,150

3,231
609
991
1,760
(23)
13,983

2,976
505
935
1,527
(50)
16,12932,3106,090
9,910
17,600(230)
139,830

90,228See accompanying Notes to Consolidated Financial Statements.

-2-¥

Thousands of
U.S. Dollars
2008¥

93,852$902,280

Millions of Yen
2008
2007
Current liabilities:
Short-term borrowings (Note 4)
Current maturities of long-term debt (Note 4)
Trade payables:
Notes
Accounts¥

Accrued expenses
Income taxes payable
Deferred tax liabilities (Note 10)
Other current liabilities
Total current liabilities
Long-term debt (Note 4)
Employee retirement benefit liability (Note 5)
Guarantee deposits received
Deferred tax liabilities for revaluation
Deferred tax liabilities (Note 10)
Accrued severance indemnities for directors andcorporate auditors
Other long-term liabilities
Total liabilities
Commitments and contingent liabilities (Notes 7 and 8)
Net assets (Note 6):
Shareholders’ equity:
Common stock: 240,000,000 shares authorized
and 67,142,417 shares issued
Capital surplus
Retained earnings
Less, treasury stock, at cost: 1,319,830 shares in2008 and 275,911 shares in 2007
Total shareholders' equity
Accumulated (losses) gains from valuation andtranslation adjustment
Minority interests
Total net assets
Total liabilities and net assets

¥

-3-

2,675
10,235

¥

2,710
1,136

Thousands of
U.S. Dollars
2008$

26,750102,350

1,473
6,695
8,168
1,707
355
2,116
25,256

1,454
6,476
7,930
1,759
463
203
2,507
16,70814,73066,95081,68017,0703,550
21,160252,560

15,578
2,746
4,247
5,281
1,035

25,634
3,872
4,381
5,281
1,107

155,780
27,46042,47052,81010,350394
169
54,706489
121
57,5933,940
1,690
547,060

8,428
6,738
19,978

8,428
6,738
18,25384,28067,380199,780(645)
34,499(138)
33,281(6,450)344,990(95)
1,118
35,522

1,628
1,350
36,259(950)
11,180355,220

90,228¥93,852$902,280

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
For the Years Ended March 31, 2008 and 2007

Operating revenue (Note 11)¥

Operating costs and expenses(Notes 5, 8 and 11)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in net earnings of unconsolidated
subsidiaries and affiliates
Loss on sale or disposal of property andequipment
Impairment loss on fixed assets (Note 2(j))
Other, net
Income before income taxes andminority interests
Income taxes:
Current
Deferred
Total income taxes
Less, minority interests in net income of
consolidated subsidiaries
Net income¥

Millions of Yen
2008
2007

Thousands of
U.S. Dollars
2008

86,461$¥

83,33382,454
4,007

78,6904,643

824,540
40,070

241
(438)

170
(409)

2,410
(4,380)

271

188

2,710

(65)
(31)
(66)
(88)

(139)
78
(112)

(650)
(310)
(660)
(880)

3,919

4,531

39,190

1,005
540
1,545

1,312
465
1,777

10,0505,400
15,450

69

143

690

2,305

¥

2,611

Yen
Per share:
Net income:-Basic-Diluted
Cash dividends

¥

34.68
32.87
8.50

See accompanying Notes to Consolidated Financial Statements.

-4-864,610¥$

23,050U.S. Dollars

39.08
37.05
8.50

$

0.35
0.33
0.09

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Changes in Net Assets
For the Years Ended March 31, 2008 and 2007
Accumulated (losses) gains from valuationand translation adjustment

Shareholders' equity
Number ofshares ofcommonstock issued

Balance at March 31, 2006
Net income for the year
Cash dividends
Bonuses to directors and corporate auditors
Conversion of convertible bonds
Purchase of treasury stock and fractional shares, net
Net changes other than shareholders’ equity
Balance at March 31, 2007
Net income for the year
Cash dividends
Decrease in retained earnings upon changes inscope of consolidation
Purchase of treasury stock and fractional shares, net
Net changes other than shareholders’ equity
Balance at March 31, 2008

67,019,610
122,807
67,142,417
67,142,417

Total
gains onTreasury shareholders’ available-forequity
stock
sale securities
Millions of Yen

Landrevaluation
decrement

Foreigncurrencytranslation
adjustment

¥

¥

¥

Net unrealized

Common
stock

¥

¥

8,411
17
8,428
8,428

Capitalsurplus

¥

¥

6,720
18
6,738
6,738

Retainedearnings¥¥

16,256
2,611
(568)
(46)
18,253
2,305
(566)
(14)
19,978

¥

(28)
(110)
(138)
(507)
(645)

¥

¥

31,359
2,611
(568)
(46)
35
(110)
33,281
2,305
(566)
(14)
(507)
34,499

¥

¥

4,467
(878)
3,589
(1,750)1,839¥(2,018)(2,018)(2,018)

¥

(9)
66
57
27
84

Total
accumulated(losses) gains
from valuationand translation
adjustment

¥

¥

2,440
(812)
1,628
(1,723)(95)

Minority
interests

¥

¥

1,201
149
1,350
-

Total net
assets¥35,000
2,611
(568)
(46)
35
(110)
(663)
36,259
2,305
(566)

(232)
1,118

(14)
(507)
(1,955)35,522¥

13,500-$ 362,590
23,050(5,660)(2,320)11,180(140)(5,070)(19,550)$ 355,220

Thousands of U.S. Dollars
Balance at March 31, 2007
Net income for the year
Cash dividends
Decrease in retained earnings upon changes inscope of consolidation
Purchase of treasury stock and fractional shares, net
Net changes other than shareholders’ equity
Balance at March 31, 2008$$

84,28084,280$$67,380-$ 182,530
23,050(5,660)67,380(140)$ 199,780$$

See accompanying Notes to Consolidated Financial Statements.

-5-(1,380)-$ 332,810
23,050(5,660)$35,890-$ (20,180)-(5,070)(6,450)(140)(5,070)$ 344,990(17,500)$ 18,390$ (20,180)

$

$

570
-

$

16,280-270
840(17,230)
$
(950)

$

$

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2008 and 2007

Millions of Yen
2008
2007
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation
Net reversal for employee retirement benefit liability
Loss on sale or disposal of property and equipment
Impairment loss on fixed assets
Decrease (increase) in trade receivables
Decrease in inventories
Increase (decrease) in trade payables
Increase in prepaid pension cost
Other, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

¥

3,919

¥

4,531

Thousands of
U.S. Dollars
2008$

39,1902,981(1,124)
65
31
707
5
279
(315)
(510)
6,038
281
(435)
(1,119)
4,765

2,755
(943)
139
(503)
16
(123)
(43)
236
6,065
210
(403)
(2,246)
3,626

29,810(11,240)
650
310
7,070
50
2,790
(3,150)(5,100)60,3802,810(4,350)(11,190)
47,650Cash flows from investing activities:
Increase in property and equipment and intangible assets
Decrease in property and equipment and intangible assets
Increase in investments in subsidiaries
Increase in short-term investments
Other, net
Net cash used in investing activities(4,465)
238
(261)
285
(257)
(4,460)(2,555)
76
(3)
(427)
(25)
(2,934)(44,650)2,380(2,610)2,850(2,570)(44,600)

Cash flows from financing activities:
Increase in long-term debt
Repayment of long-term debt
Decrease in short-term borrowings
Purchase of treasury stock and fractional shares, net
Dividends paid
Other, net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year12
(1,017)
(35)
(507)
(566)
(6)
(2,119)11(1,803)
12,946
11,143253(1,211)
(499)
(110)
(568)
(2,135)57(1,386)
14,332
12,946120(10,170)(350)(5,070)(5,660)(60)(21,190)110(18,030)
129,460
111,430¥¥

See accompanying Notes to Consolidated Financial Statements.

-6-$

Japan Transcity Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements

1. Basis of Consolidated Financial Statements
The accompanying consolidated financial statements of Japan Transcity Corporation (the"Company") and its consolidated subsidiaries (together with the Company, the “Japan Transcity
Group”) have been prepared in accordance with the provisions set forth in the Financial Instrumentand Exchange Law of Japan and its related accounting regulations, and in conformity withaccounting principles generally accepted in Japan (“Japanese GAAP”), which are different incertain respects as to application and disclosure requirements from International Financial
Reporting Standards.
The accounts of the Company’s overseas subsidiaries are based on their accounting records
maintained in conformity with generally accepted accounting principles prevailing in therespective countries of domicile. The accompanying consolidated financial statements have been
restructured and translated into English from the consolidated financial statements of the Company
prepared in accordance with Japanese GAAP and filed with the appropriate Local Finance Bureauof the Ministry of Finance as required by the Financial Instrument and Exchange Law of Japan.
Certain supplementary information included in the statutory Japanese language consolidated
financial statements, but not required for fair presentation, is not presented in the accompanying
consolidated financial statements.
Comparative figures have been reclassified to conform to the current year’s presentation.
The translation of the Japanese yen amounts into U.S. dollars is included solely for theconvenience of readers outside Japan, using the prevailing approximate exchange rate at March 31,
2008, which was ¥100 to U.S. $1.00. The translation should not be construed as a representationthat the Japanese yen amounts have been, could have been or could in the future be converted into
U.S. dollars at this or any other rate of exchange.

2. Summary of Significant Accounting Policies(a) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries. Investments in significant unconsolidated subsidiaries and affiliates areaccounted for by the equity method. Investments in unconsolidated subsidiaries and affiliates notaccounted for by the equity method are stated at cost. Differences between acquisition cost ofinvestments in subsidiaries and the underlying equity in their net assets adjusted based on the fairvalue at the time of acquisition are principally deferred as goodwill or negative goodwill andamortized over five years.
The number of consolidated subsidiaries, unconsolidated subsidiaries and affiliates for the years
ended March 31, 2008 and 2007was as follows:
2008
2007
Consolidated subsidiaries:
Domestic
23
24
Overseas33
Unconsolidated subsidiaries and affiliates, accounted forby the equity method
55Unconsolidated subsidiaries, stated at cost
14
13
Affiliates, stated at cost
5
4

-7-

All inter-company accounts and transactions have been eliminated on consolidation.
The accompanying consolidated financial statements included the accounts of overseas
consolidated subsidiaries (three subsidiaries in 2008 and 2007). Such overseas consolidated
subsidiaries close their books at December 31, three months earlier than the Company and otherdomestic consolidated subsidiaries. The Company consolidated the subsidiaries’ financial
statements as of their year-end. Significant transactions for the period between subsidiaries’
year-end and the Company’s year-end are adjusted on consolidation.
Overseas consolidated subsidiaries adopt accounting principles generally accepted in theircountries, and no adjustments to conform to accounting principles generally accepted in Japan
have been made to their financial statements on consolidation, as allowed under accounting
principles generally accepted in Japan.
(b) Accounting standard for presentation of net assets in the balance sheet
Effective from the year ended March 31, 2007, the Japan Transicty Group adopted the new
accounting standard, “Accounting Standard for Presentation of Net Assets in the Balance Sheet”(Statement No. 5 issued by the Accounting Standards Board of Japan (“ASBJ”)), and theimplementation guidance for the accounting standard for presentation of net assets in the balance
sheet (ASBJ Guidance No. 8).
The consolidated balance sheets prepared in accordance with the new standards comprise three
sections, which are the assets, liabilities and net assets sections. The consolidated balance sheet
reported pursuant to the previous presentation rules comprises the assets, liabilities, minority
interests and shareholders’ equity sections. Under the new standards, the following items arepresented differently from the previous reporting. Under the previous presentation rules,
companies were required to present minority interests between the non-current liabilities and theshareholders’ equity sections. If the previous accounting method had been applied for the
consolidated balance sheet at March 31, 2007, shareholders’ equity would have amounted to¥34,908 million.
(c) Cash equivalents
The Japan Transcity Group considers cash equivalents to be highly liquid debt instrumentspurchased with an original maturity of three months or less.
(d) Investments and marketable securities
The Japan Transcity Group classifies certain investments in debt and equity securities as“held-to-maturity,” “trading” or “available-for-sale,” the classification of which determines therespective accounting method as stipulated by the accounting standard for financial instruments.
Marketable securities with available market quotations for available-for-sale securities are stated atfair value and net unrealized gains or losses on these securities are reported as a component of net
assets, net of applicable income taxes. Gains and losses on the disposition of available-for-salesecurities are computed based on the moving-average method. Non-marketable securities
without available market quotations for available-for-sale securities are carried at cost determinedby the moving-average method. Adjustments in carrying values of individual securities arecharged to income through write-downs, when a decline in value is deemed other than temporary.
(e) Accounting for derivatives
Derivatives are valued at fair value, if hedge accounting is not appropriate or where there is no
hedging designation, and the gains or losses on the derivatives are recognized in current earnings.

-8-

According to the special treatment permitted by the accounting standard for financial instruments,
hedging interest rate swaps are accounted for on an accrual basis and recorded net of interest
expenses generated from the hedged borrowings if certain conditions are met.
(f) Inventories
Inventories consisted of supplies and other.
method.

Supplies are stated at cost, using the moving-average(g) Allowance for doubtful accounts
An allowance for doubtful accounts is provided at the aggregate amount of estimated credit loss
based on an individual financial review of certain doubtful or troubled receivables and a generalreserve for other receivables calculated based on historical loss experience for a certain past
period.
(h) Property and equipment, and depreciation
Property and equipment, including significant renewals and additions, are stated at cost, anddepreciated principally by the declining-balance method at rates based on the estimated useful lifeof the asset. Buildings acquired on and after April 1, 1998 are depreciated by the straight-line
method. Property with the cost of not less than ¥100,000 but below ¥200,000 each is capitalized
and depreciated over three years on a straight-line basis.
Expenditures on maintenance and repairs are charged to operating income as incurred.
(Change in depreciation method)
In accordance with the amendment of the Corporation Tax Law of Japan, effective April 1, 2007,
the Company and its domestic consolidated subsidiaries changed the depreciation method forproperty and equipment acquired on and after April 1, 2007 to the method pursuant to theamended Corporation Tax Law of Japan. As a result, operating income decreased by ¥105
million ($1,050 thousand) and income before income taxes and minority interests decreased by¥106 million ($1,060 thousand) for the year ended March 31, 2008, respectively, as comparedwith the previous accounting method.
(Additional information)
As for property and equipment acquired before April 1, 2007, from the year ended March 31,
2008, the residual value is depreciated over five years using the straight-line method from thefiscal year following the year in which the depreciable limit (5% of the acquisition cost) isreached. As a result, this change resulted in decreases in operating income by ¥107 million($1,070 thousand) and income before income taxes and minority interests by ¥116 million($1,160 thousand), respectively, for the year ended March 31, 2008.
(i) Leases
Where financing leases do not transfer ownership of the leased property to the lessee during theterm of the lease, the leased property of the Company and its domestic consolidated subsidiaries is
not capitalized and the related rental and lease expenses are charged to income as incurred, as
permitted by the "Opinion Concerning Accounting Standard for Leases" issued by the BusinessAccounting Council of Japan (“BACJ”) and the related practical guideline issued by the JapaneseInstitute of Certified Public Accountants (“JICPA”).
(j) Accounting standard for impairment of fixed assets
The Company and its domestic consolidated subsidiaries adopted the "Accounting Standard for-9-Impairment of Fixed Assets" issued by BACJ and the related practical guidance issued by ASBJ.
The standard requires that fixed assets be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not be recoverable. Impairment
loss is to be recognized in the income statement by reducing the carrying amount of impaired asset
or group of assets to the recoverable amount, measured as the higher of the asset’s net selling priceor value in use. Fixed assets include land, buildings and other forms of property, as well as
intangible assets, and are to be grouped at the lowest level for which there are identifiable cash
flows. For the purpose of recognition and measurement of impairment loss, fixed assets are
principally grouped into cash-generating units, such as regional business divisions, other than idle
or unused property. For the year ended March 31, 2008, the Japan Transcity Group recognizedimpairment loss as follows:
Millions ofYen
Machinery and equipment to be disposed¥

31

Thousands of
U.S. Dollars$

310(k) Revaluation of land
In accordance with the Law Concerning Revaluation of Land (“Law”), the Company elected the
one-time revaluation to restate the cost of land used for the Company’s business at values
rationally reassessed effective on March 31, 2002, reflecting adjustments for land shape and otherfactors and based on municipal property tax bases. According to the Law, an amount equivalent
to the tax effect on the difference between the original book value and the reassessed value isrecorded as deferred tax liabilities for revaluation account. The rest of the difference, net of thetax effect and minority interests portion, is recorded as a component of the net assets section in theland revaluation decrement account in the accompanying consolidated balance sheets. At March
31, 2008 and 2007, the difference of the carrying values of land used for the Company’s businessafter reassessment over the current market value at the fiscal year-ends amounted to ¥7,412 million($74,120 thousand) and ¥7,240 million, respectively.
(l) Employee retirement benefits
Employees who terminate their service with the Japan Transcity Group are entitled to retirement
benefits generally determined by current basic rates of pay, length of service and conditions underwhich the termination occurs.
In accordance with the accounting standard for employee retirement benefits, the Japan Transcity
Group recognizes retirement benefits for employees, including pension cost and related liability,
based on actuarial present value of projected benefit obligation using actuarial appraisal approachand the value of pension plan assets available for benefits at the fiscal year-ends. Unrecognizedactuarial differences as changes in the projected benefit obligation or pension plan assets resulting
from the experience different from that assumed and from changes in the assumptions areamortized on a straight-line basis over ten years, a period within the remaining service years of theemployees, from the year after which they arise. Unrecognized prior service cost is amortizedusing the straight-line method over ten years from the year in which it occurs.
(m) Accrued severance indemnities for directors and corporate auditors
The Japan Transcity Group may pay severance indemnities to directors and corporate auditors,
which are subject to the approval of the shareholders. The Japan Transcity Group has provided
for the full amount of the liabilities for directors' and corporate auditors' severance indemnities at
the respective balance sheet dates.
(n) Translation of foreign currency accounts- 10 -

Receivables, payables and securities, other than stocks of subsidiaries and certain other securities,
are translated into Japanese yen at the year-end exchange rates. Transactions in foreign
currencies are recorded at the prevailing exchange rates on the transaction dates. Resulting
translation gains or losses are included in the current earnings.
For the financial statement items of overseas consolidated subsidiaries, all asset and liability
accounts are translated into Japanese yen by applying the exchange rates in effect at the fiscal
year-ends. All income and expense accounts are translated at the average rates of exchange
prevailing during the respective fiscal years. Translation differences are reported as foreign
currency translation adjustment in a component of net assets in the accompanying consolidatedbalance sheets.
(o) Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets andliabilities are recognized for the future tax consequences attributable to differences between the
carrying amounts of existing assets and liabilities and their respective tax bases and operating loss
carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in the period that includes the enactment date.
(p) Enterprise taxes
The Japan Transcity Group records enterprise taxes based on the “added value” and “capital”
amounts when levied as size-based corporate taxes for local government enterprise taxes, which
are included in selling, general and administrative expenses.
(q) Accounting standard for directors’ bonus
From the year ended March 31, 2007, the Japan Transcity Group adopted “Accounting Standard
for Directors’ Bonus (ASBJ Statement No. 4)” issued by ASBJ on November 29, 2005. The
standard requires that the directors’ bonuses, including those for corporate auditors, shall be
accounted for as an expense of the accounting period in which such bonuses are accrued. Until
the year ended March 31, 2006, bonuses to directors and corporate auditors were recorded as a partof the appropriation of retained earnings in the fiscal year when a proposed appropriation ofretained earnings for directors and corporate auditors’ bonuses was approved by the Board of
Directors and/or shareholders.
(r) Appropriations of retained earnings
Cash dividends are recorded in the fiscal year when a proposed appropriation of retained earnings
is approved by the Board of Directors and/or shareholders. See Note 2(q) for the accounting forbonuses to directors and corporate auditors.
(s) Per share data
Basic net income per share is computed by dividing income available to common shareholders by
the weighted-average number of shares of common stock outstanding during the fiscal year.
Diluted net income per share is computed assuming convertible bonds were converted at the timeof issue unless having anti-dilutive effects. Cash dividends per share for each fiscal year in theaccompanying consolidated statements of income represent dividends declared by the Company asapplicable to the respective years.

- 11 -

3.

Investments
At March 31, 2008 and 2007, short-term investments consisted of time deposits with an original
maturity of more than three months.
At March 31, 2008 and 2007, investment securities consisted of the following:Thousands of
U.S. Dollars
2008

Millions of Yen
2008
2007
Marketable securities:
Equity securities
Other

¥

Other non-marketable securities
¥

6,579
9
6,588
827
7,415

¥

¥

9,400 $
11
9,411
825
10,236 $65,79090
65,8808,270
74,150Marketable investment securities classified as available-for-sale are stated at fair value withunrealized gains and losses excluded from the current earnings and reported as a net amount within
the net assets account until realized. At March 31, 2008 and 2007, gross unrealized gains andlosses for marketable securities classified as available-for-sale were as follows:

Cost

Available-for-sale securities at March 31, 2008:
Equity securities
¥
3,398
Other
10
¥
3,408
Available-for-sale securities at March 31, 2007:
Equity securities
¥
3,268
Other
10
¥
3,278

Gross
Gross
unrealized
unrealized
gains
lossesMillions of Yen

Fair andcarrying
value

¥

(98)
(1)
(99)

¥

(18)
(18)

¥

¥

¥
¥

3,279
3,279

6,150
1
6,151

¥
¥

¥
¥

¥

¥

6,579
9
6,588

9,400
11
9,411

Thousands of U.S. Dollars
Available-for-sale securities at March 31, 2008:
Equity securities$
33,980Other
100$
34,080- 12 -$$

32,79032,790

$
$

(980)
(10)
(990)

$ 65,790
90$ 65,880

4.

Short-term Borrowings and Long-term Debt
At March 31, 2008 and 2007, short-term borrowings consisted of the following:

Millions of Yen
2008
2007
Short-term bank loans or bank overdrafts withinterest rates ranging from 1.19 % to 1.97 %per annum at March 31, 2008:
Collateralized¥
Unsecured
¥

10 ¥
2,665
2,675 ¥

Thousands of
U.S. Dollars
2008

30 $
2,680
2,710 $

100
26,65026,750At March 31, 2008 and 2007, long-term debt consisted of the following:Thousands of
U.S. Dollars
2008

Millions of Yen
2008
2007
1.47% unsecured bonds due July 2008
1.41% unsecured bonds due July 2008
1.76% unsecured bonds due September 2008
Zero coupon unsecured convertible bonds due
September 2009
Long-term loans from banks and other financial
institutions due through 2022 with interest rates
ranging from 0.65% to 6.97% per annum at
March 31, 2008:
Collateralized
UnsecuredLess, current maturities
¥

2,500
1,500
4,000

2,500
1,500
4,000

25,00015,00040,000

1,500

1,500

15,000439
15,87425,813(10,235)
15,578470
16,80026,770(1,136)25,634

4,390
158,740
258,130(102,350)
155,780¥$

At March 31, 2008, the current conversion price of zero coupon convertible bonds due September
2009 was ¥410 per share, all of which are subject to adjustment under certain circumstances,including stock splits. At March 31, 2008, the number of shares of common stock necessary forconversion of all convertible bonds outstanding was approximately 4 million.
The aggregate annual maturities of long-term debt at March 31, 2008 ware as follows:
Millions of
Yen

Year ending March 31,
2009
2010
2011
2012
2013
2014 and thereafter¥Thousands of
U.S. Dollars

10,235
3,181
3,131
413
7,339
1,514
25,813 $102,350
31,81031,3104,130
73,39015,140258,130

At March 31, 2008 and 2007, the following assets were pledged as collateral for short-termborrowing and long-term liabilities:- 13 -

Thousands of
U.S. Dollars
2008

Millions of Yen
2008
2007
Time deposits included in short-term
investments
Buildings and structures

¥

32
802

¥

41 $
850

320
8,020

As is customary in Japan, substantially all loans from banks (including short-term loans) are madeunder general agreements which provide that, at the request of the relevant bank, the Japan
Transcity Group is required to provide collateral or guarantors (or additional collateral or
guarantors, as appropriate) with respect to the loans and that all assets pledged as collateral undersuch agreements will be applicable to all present and future indebtedness to the bank concerned.
The Japan Transcity Group has not received such requests. The general agreements further
provide that the banks have the right, as indebtedness matures or becomes due prematurely byreason of default thereon, to offset deposits at the banks against indebtedness due to the banks.
5.

Employee Retirement Benefits
The Company has defined benefit retirement plans, which covers 100% of the retirement benefits
for the employees of the Company who terminate at the compulsory retirement age and 70 % ofother retirement benefits of the Company. Some of the consolidated subsidiaries have similar
retirement benefit plans. In addition, two consolidated subsidiaries have a defined contribution
pension plan in certain pension funds organized by others.
The following table reconciles the benefit liability and net periodic retirement benefit expense asat or for the years ended March 31, 2008 and 2007:

Reconciliation of benefit liability:
Projected benefit obligationLess, fair value of pension plan assets at endof yearUnrecognized actuarial differences (loss)
Unrecognized prior service cost of
retroactive benefits granted by the pension
plan amendment
Accrued retirement and severance benefits
Prepaid pension cost
Net amount of employee retirement
benefit liability recognized on the
consolidated balance sheets
Note:

¥

¥

Millions of Yen
2008
2007

Thousands ofU.S Dollars
2008

13,622$¥

14,828136,220(10,857)
2,765
(661)

(13,161)
1,667
1,836

(108,570)
27,650(6,610)

284
2,388
358

326
3,829
43

2,840
23,880
3,580

2,746

¥

3,872

$

27,460

Projected benefit obligation of the consolidated subsidiaries was calculated using thesimplified calculation method as permitted by the accounting standard for employee
retirement benefits.

- 14 -

Thousands ofU.S Dollars
2008

Millions of Yen
2008
2007
Components of net periodic retirement benefit expense:¥
Service cost
Interest cost
Expected return on pension plan assets
Amortization of actuarial differences
Amortization of prior service cost
Premiums to defined contribution plan
Net periodic retirement benefit expense
¥

603 ¥
256
(245)
(88)
(42)
484 ¥

560
257
(232)
(99)
(42)
14
458

$

$

6,030
2,560
(2,450)
(880)
(420)
4,840

Major assumptions used in the calculation of the above information for the years ended March 31,
2008 and 2007 were as follows:

Method to attribute the projected benefits tothe periods of service
Discount rate
Expected rate of return on pension plan assets
Amortization of actuarial differences
Amortization of prior service cost

6.

2008

2007

Straight-line method
2.0%
2.0%
10 years
10 years

Straight-line method
2.0%
2.0%
10 years
10 years

Net Assets
The Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the former
Japanese Commercial Code. The Law is generally applicable to events and transactions
occurring after April 30, 2006 and for fiscal years ending after that date.
Under Japanese laws and regulations, the entire amount paid for new shares is required to be
designated as common stock. However, a company may, by a resolution of the Board of
Directors, designate an amount not exceeding one-half of the price of the new shares as additional
paid-in capital, which is included in capital surplus.
Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amountequal to 10% of the dividend or the excess, if any, of 25% of common stock over the total of
additional paid-in capital and legal earnings reserve must be set aside as additional paid-in capitalor legal earnings reserve. Legal earnings reserve is included in retained earnings in theaccompanying consolidated balance sheets.
Under the Law, legal earnings reserve and additional paid-in capital can be used to eliminate or
reduce a deficit by a resolution of the shareholders' meeting. Additional paid-in capital and legal
earnings reserve may not be distributed as dividends. All additional paid-in-capital and all legal
earnings reserve may be transferred to other capital surplus and retained earnings, respectively,
which are potentially available for dividends.
At March 31, 2008 and 2007, respectively, capital surplus principally consisted of additional
paid-in capital. In addition, retained earnings included legal earnings reserve of the Company inthe amount of ¥1,200 million ($12,000 thousand) at March 31, 2008 and 2007, respectively.
The maximum amount that the Company can distribute as dividends is calculated based on the- 15 -

non-consolidated financial statements of the Company in accordance with Japanese laws andregulations.
During the year ended March 31, 2008, the Company paid interim dividends of ¥4.00 per share.
In addition, at the annual shareholders’ meeting held on June 27, 2008, the shareholders approved
cash dividends of ¥4.50 per share amounting to ¥296 million ($2,960 thousand). These
appropriations have not been accrued in the consolidated financial statements as of March 31, 2008
as such appropriations are recognized in the period in which they are approved by the shareholders.

7.

Contingent Liabilities
At March 31, 2008 and 2007, the Japan Transcity Group was contingently liable for guarantees ofindebtedness of others in the amounts of ¥1,072 million ($10,720 thousand) and ¥1,349 million,
respectively. Such amounts included the guarantees of indebtedness of a certain 50%-ownded
affiliate in the amount of ¥1.406 million ($14,060 thousand) and ¥1,331 million at March 31, 2008
and 2007, respectively.

8.

Lease Commitments
The Japan Transcity Group leases, as lessee, land and buildings to be used for office spaces andwarehouses principally under long-term cancelable or non-cancelable operating lease agreements.
The Japan Transcity Group also leases computer equipment, other equipment and vehicles underleases which are not generally cancelable.
Total rental and lease expenses, including cancelable and non-cancelable leases, for the years
ended March 31, 2008 and 2007 were ¥6,541 million ($65,410 thousand) and ¥6,409 million,
respectively. For the years ended March 31, 2008 and 2007, the lease expenses for
non-cancelable lease agreements which were categorized as financing leases amounted to ¥473
million ($4,730 thousand) and ¥454 million, respectively.
The aggregate future minimum payments for non-cancelable operating leases and financing leases,
including the imputed interest, at March 31, 2008 and 2007 were as follows:

Millions of Yen
2008
2007
Operating leases:
Due within one year
Due after one year¥¥

Financing leases:
Due within one year
Due after one year

¥
¥

580
3,362
3,942
504
2,352
2,856

¥
¥
¥
¥

546
3,654
4,200
451
2,513
2,964

Thousands of
U.S. Dollars
2008
$
$
$
$

5,800
33,62039,4205,040
23,52028,5609. Derivative Instruments
The Japan Transcity Group is a party to derivative instruments such as interest rate swap contracts
in the normal course of business to reduce its own exposure to fluctuations in interest rates for thehedge purposes. In addition, during the year ended March 31, 2007, the Company entered into a- 16 -

derivative contract relating to earthquakes for hedging purposes. The outstanding contract
amount was ¥300 million ($3,000 thousand) at March 31, 2008 and 2007, respectively. As thefair value for such a contract is not considered determinable, that derivative contract has not beenaccounted for at fair value. All other derivative instrument contracts qualify for hedge
accounting. The Japan Transcity Group is exposed to credit loss in the event of nonperformanceby other parties. However, the Japan Transcity Group does not expect nonperformance by thecounterparties, as the counterparties of the derivative transactions are limited to major banks withrelatively high credit ratings.

10. Income Taxes
The tax effects of temporary differences that give rise to a significant portion of the deferred tax
assets and liabilities at March 31, 2008 and 2007 were as follows:

Millions of Yen
2008
2007
Deferred tax assets:
Enterprise tax accruals¥
Accrued bonuses to employees
Employee retirement benefit liability
Accrued severance indemnities for directors andcorporate auditors
Inter-company capital gains
Net operating loss carryforwards
Impairment loss on fixed assets
Other
Less, valuation allowance
Deferred tax assets
Deferred tax liabilities:
Deferred capital gain
Unrealized gains on available-for-salesecurities
Other
Deferred tax liabilities
Net deferred tax assets/(liabilities)

¥

38
459
1,950

¥

40
458
2,489

Thousands of
U.S. Dollars
2008
$

380
4,590
19,500

159
333
168
1,200
357
4,664
(1,568)
3,096

197
339
182
1,187
345
5,237
(1,581)
3,656

1,590
3,330
1,680
12,0003,570
46,640(15,680)
30,960

1,314

1,364

13,140

1,280
428
3,022
74

2,465
396
4,225
(569)

12,8004,280
30,220740¥$

At March 31, 2008 and 2007, deferred tax assets and liabilities were as follows:

Millions of Yen
2008
2007
Deferred tax assets:
Current
Non-current
Deferred tax liabilities:
Current
Non-current

¥

500
609
1,035

¥

236
505
203
1,107

Thousands of
U.S. Dollars
2008
$

5,000
6,090
10,350In assessing the realizability of deferred tax assets, management of the Japan Transcity Groupconsiders whether some portion or all of the deferred tax assets will not be realized. The ultimate- 17 -

realization of deferred tax assets is dependent upon the generation of the future taxable income
during the periods in which those temporary differences become deductible. At March 31, 2008
and 2007, a valuation allowance was provided to reduce the deferred tax assets to the extent thatmanagement believes that the deferred tax assets were realizable.
A reconciliation of the difference between the Japanese statutory effective tax rate and the actual
effective income tax rate on pre-tax income reflected in the accompanying consolidated statements
of income for the year ended March 31, 2008 and 2007 were not disclosed as such differenceswere not material.

- 18 -

11.

Segment Information
The Japan Transcity Group's operations are classified into two major segments: “Integrated logistics services” and “Other services.” “Other
services” segment includes the operations for the real estate trading and golf club operations and other services.
Information by industry
segment for the years ended March 31, 2008 and 2007 was summarized as follows:Integrated logistics
services
For the year 2008:
Operating revenue:
External customers
Inter-segment sales
Total operating revenue
Operating costs and expenses
Operating income
Identifiable assets
Depreciation
Impairment loss on fixed assets
Capital expenditures
For the year 2007:
Operating revenue:
External customers
Inter-segment sales
Total operating revenue
Operating costs and expenses
Operating income
Identifiable assets
Depreciation
Capital expenditures¥

Others85,03728
85,065
81,2503,815¥¥

91,843
2,813
4,198

¥

¥

¥
¥

Total
Millions of Yen

1,424
1,285
2,709
2,551
158

¥

¥

1,901
168
31
20

81,803
28
81,831
77,432
4,399¥

95,845
2,544
3,299

¥

¥

¥

Elimination

86,461
1,313
87,77483,801
3,973¥¥

93,744
2,981
31
4,218

1,530
1,484
3,014
2,737
277

¥

2,503
211
56

¥

¥

¥

Consolidated(1,313)(1,313)(1,347)34¥¥(3,516)-¥90,228
2,981
31
4,218

83,333
1,512
84,84580,1694,676¥(1,512)(1,512)(1,479)(33)¥

83,333
83,33378,6904,643

98,348
2,755
3,355

¥

¥

¥

¥

¥

86,461
86,46182,454
4,007(4,496)-¥

93,852
2,755
3,355(13,130)(13,130)(13,470)340$

864,610864,610824,540
40,070Thousands of U.S. Dollars
For the year 2008:
Operating revenue:
External customers
Inter-segment sales
Total operating revenue
Operating costs and expenses
Operating income
Identifiable assets
Depreciation
Impairment loss on fixed assets
Capital expenditures$$$

850,370280
850,650
812,500
38,150918,430
28,13041,980$$$14,24012,85027,09025,5101,580
19,010
1,680
310
200

$

$
$

864,610
13,130877,740
838,010
39,730937,440
29,810310
42,180$$$(35,160)-$$

902,280
29,810310
42,180(Change in depreciation method)
As disclosed in Note 2(h), the Company and its domestic consolidated subsidiaries changed the depreciation method of property andequipment acquired on and after April 1, 2007 to the method pursuant to the amended Corporation Tax Law of Japan. As a result, forthe year ended March 31, 2008, the depreciation expenses increased, and operating income for the "Integrated logistics services" segment
and for the "Others" segment decreased by ¥103 million ($1,030 thousand) and ¥2 million ($20 thousand), respectively, as compared withthe previous accounting method.

- 19 -

(Additional information)
As also described in Note 2(h), as for the property and equipment acquired before April 1, 2007, from the current year ended March 31,
2008, the residual value is depreciated over five years using the straight-line method from the fiscal year following the year in which thedepreciable limit is reached. As a result, for the year ended March 31, 2008, operating income for the "Integrated logistics services"segment and for the "Others" segment decreased by ¥93 million ($930 thousand) and ¥14 million ($140 thousand), respectively, as
compared with previous accounting method.

Geographic segment information is not shown, as operating revenue of the overseas subsidiaries was not material.
sales is not disclosed, as such sales were not material.

- 20 -

Information for overseas

12. Condensed Financial Statements of Japan Transcity Corporation (Parent)
Presented below are the condensed non-consolidated balance sheets, non-consolidated statements
of income and changes in net assets of Japan Transcity Corporation, the parent company.
Non-Consolidated Balance Sheets
Japan Transcity Corporation (Parent)

Millions of Yen
2008
2007
Current assets:
Cash and cash equivalents
Short-term investments
Trade receivables, net of allowance for
doubtful accounts
Inventories
Deferred tax assets
Other current assets
Total current assets
Property and equipment, at costLess, accumulated depreciation
Net property and equipment
Investments and other assets:
Investment securities
Investments in and long-term loans to
subsidiaries and affiliates
Lease deposits
Other assets
Allowance for doubtful accounts
Total investments and other assets
Total assets¥¥- 21 -

8,918
34

¥

10,51038

Thousands of
U.S. Dollars
2008$

89,180340

13,10118
277
1,484
23,832
68,884(29,611)
39,273

13,86626
1,981
26,421
66,131(28,439)
37,692131,010180
2,770
14,840238,320
688,840(296,110)
392,730

6,919

9,557

69,190

3,728
949
1,727
(22)
13,301
76,406

3,499
891
1,442
(50)
15,33979,45237,2809,490
17,270(220)
133,010764,060¥$

Millions of Yen
2008
Current liabilities:
Short-term borrowings
Current maturities of long-term debt
Trade payables
Accrued expenses
Income taxes payable
Deferred tax liabilities
Other current liabilities
Total current liabilities
Long-term debt
Employee retirement benefit liability
Deferred tax liabilities for revaluation
Deferred tax liabilities
Accrued severance indemnities for directors
and corporate auditors
Other long-term liabilities
Total liabilities
Net assets:
Common stock
Capital surplus
Retained earnings
Less, treasury stock, at cost
Total shareholders' equity
Accumulated (losses) gains from valuation
adjustment
Total net assets
Total liabilities and net assets¥¥- 22 -

4,793
9,873
8,566
878
177
1,961
26,248
11,180
1,625
5,281
964

Thousands of
U.S. Dollars

2007

¥

4,547
713
8,350
862
173
203
2,174
17,022
20,827
2,770
5,281
1,078

2008

$

47,93098,73085,6608,780
1,770
19,610262,480
111,800
16,25052,810
9,640

340
246
45,884434
288
47,7003,400
2,460
458,840

8,428
6,738
16,293(645)
30,814

8,428
6,738
15,355(138)
30,38384,28067,380162,930(6,450)308,140(292)
30,522
76,406

1,369
31,75279,452(2,920)305,220764,060¥$

Non-Consolidated Statements of Income (Unaudited)Japan Transcity Corporation (Parent)
For the Years Ended March 31, 2008 and 2007¥

Operating revenue
Operating costs and expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Miscellaneous, net
Income before income taxes
Income taxes:
Current
Deferred
Total income taxes
Net income¥

Millions of Yen
2008
2007

Thousands of
U.S. Dollars
2008

80,431$¥

77,64977,673
2,758

74,624
3,025

776,730
27,580

329
(335)
(160)
(166)
2,592

257
(299)
(30)
(72)
2,953

3,290
(3,350)(1,600)(1,660)25,920

570
518
1,088

791
464
1,255

5,700
5,180
10,880

1,504

¥

1,698

Yen
Per share:
Net income:-Basic-Diluted
Cash dividends¥- 23 -

804,310

22.61
21.43
8.50

¥

$

15,040U.S. Dollars

25.41
24.09
8.50

$

0.23
0.21
0.09

Non-Consolidated Statements of Changes in Net Assets
Japan Transcity Corporation (Parent)
For the Years Ended March 31, 2008 and 2007

Shareholders’ equity

Common stock

Balance at March 31, 2006
Net income for the year
Cash dividends
Bonuses to directors and corporate auditors
Conversion of convertible bonds
Purchase of treasury stock and fractional shares, net
Net changes other than shareholders’ equity
Balance at March 31, 2007
Net income for the year
Cash dividends
Purchase of treasury stock and fractional shares, net
Net changes other than shareholders’ equity
Balance at March 31, 2008

¥

¥

8,411
17
8,428
8,428

¥

¥

6,720
18
6,738
6,738

Total
shareholders’
Treasury stock
equityMillions of Yen

Retained
Earnings

Capital surplus¥¥

14,271
1,698
(568)
(46)
15,355
1,504(566)
16,293

Accumulated (losses) gains from valuation adjustment
Total
Net unrealized
accumulated(losses) gains
gains onLand
available-forfrom valuation
revaluation
sale securities
decrement
adjustment

¥

¥

(28)
(110)
(138)
(507)
(645)

¥

¥

29,374
1,698
(568)
(46)
35
(110)
30,383
1,504
(566)
(507)
30,814

¥

¥

4,208
(821)
3,387
(1,661)
1,726

¥

¥

(2,018)(2,018)(2,018)

¥

¥

2,190
(821)
1,369
(1,661)
(292)

Total
net assets¥¥

31,564
1,698
(568)
(46)
35
(110)
(821)
31,752
1,504
(566)
(507)
(1,661)
30,522Thousands of U.S. Dollars
Balance at March 31, 2007
Net income for the year
Cash dividends
Purchase of treasury stock and fractional shares, net
Net changes other than shareholders’ equity
Balance at March 31, 2008$$

84,28084,280$$67,38067,380$$

153,550
15,040(5,660)162,930$$- 24 -(1,380)(5,070)(6,450)$$303,830
15,040(5,660)(5,070)308,140$$

33,870(16,610)
17,260$$(20,180)(20,180)$$

13,690(16,610)(2,920)$$317,520
15,040(5,660)(5,070)(16,610)305,220