Japan Transcity Corporation
Audited Consolidated Financial Statements
March 31, 2003 and 2002

ChuoAoyama Audit Corporation

Report of Independent Auditors

To the Board of Directors and Shareholders ofJapan Transcity Corporation
We have audited the accompanying consolidated balance sheets of Japan Transcity Corporation and its
consolidated subsidiaries as of March 31, 2003 and 2002, and the related consolidated statements ofincome, 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 on these 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 obtainreasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits provide a reasonable basis forour 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, 2003 and 2002, and the consolidated results of their operations and their
cash flows for the years then ended in conformity with accounting principles and practices generally
accepted in Japan (see Note 1).
The amounts expressed in U.S. dollars, which are provided solely for the convenience of the reader,have been translated on the basis set forth in Note 1 to the accompanying consolidated financial
statements.

ChuoAoyama Audit Corporation
Nagoya, Japan
June 27, 2003

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets
March 31, 2003 and 2002
Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
AssetsCurrent assets:
Cash and cash equivalents
Short-term investments (Notes 4 and 5)
Trade receivables:
Notes
Accounts
Allowance for doubtful accounts¥

Inventories (Note 3)
Deferred tax assets (Note 11)
Other current assets
Total current assets

Property and equipment, at cost (Note 5):Land
Buildings and structures
Machinery and equipment
Vehicles and vessels
Construction in progress
Less, accumulated depreciation
Net property and equipment

Investments and other assets:
Investment securities (Notes 4 and 5)
Investments in and long-term loans tounconsolidated subsidiaries and affiliates (Note 4)
Deferred tax assets (Note 11)
Lease deposits
Other assets
Allowance for doubtful accounts
Total investments and other assets¥

10,408912

10,854925$

86,7337,600

1,145
11,528(25)
12,648
2,596
396
1,190
28,1501,618
12,652(30)
14,240
2,595
289
1,269
30,172

9,541
96,067(208)
105,400
21,633
3,300
9,917
234,583

31,30039,639
9,522
9,476
46
89,983(39,223)
50,76031,70737,749
9,445
9,281
62
88,244(38,126)
50,118260,833
330,325
79,35078,967383
749,858(326,858)
423,000

4,455

5,418

37,125

2,393
3,933
930
1,250
(172)
12,78991,699

2,031
3,506
905
1,569
(152)
13,277
93,567

19,942
32,775
7,750
10,416(1,433)
106,575
764,158

See accompanying Notes to Consolidated Financial Statements.

-2-

¥

¥

$

Millions of Yen
2003
2002
Liabilities, Minority Interests and Shareholders' Equity
Current liabilities:
Short-term borrowings (Note 5)¥
Current maturities of long-term debt (Note 5)
Trade payables:
Notes
Accounts

8,101
3,423

¥

8,359
4,046

Thousands of
U.S. Dollars
2003$

67,50828,525

Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities

1,732
5,181
6,913
1,653
734
2,124
22,948

1,978
4,974
6,952
1,703
307
4,153
25,52014,43343,17557,608
13,775
6,117
17,700191,233

Long-term debt (Note 5)
Employee retirement benefit liability (Note 6)
Guarantee deposits received (Note 5)
Deferred tax liabilities for revaluation
Accrued severance indemnities for officers
Other non-current liabilities (Note 11)23,595
8,850
4,584
1,931
371
217

22,379
8,680
4,719
2,154
318
191

196,62573,75038,20016,092
3,092
1,808

Commitments and contingent liabilities(Notes 7 and 8)
Minority interests in consolidated subsidiaries

767

759

6,391

7,792

7,792

64,933

5,908
11,514
2,885

5,908
11,223
3,050

49,233
95,95024,042

522
(11)

858
19

4,350
(91)

(174)
28,436
91,699(3)
28,847
93,567(1,450)236,967
764,158

Shareholders' equity (Note 10):
Common stock, no par valueAuthorized: 240,000,000 shares,
Issued: 63,613,246 shares in 2003 and 2002
Capital surplus
Retained earnings
Land revaluation increment
Net unrealized gains on available-for-salesecurities
Foreign currency translation adjustment
Less, treasury stock, at cost - 786,974 shares in2003 and 12,110 shares in 2002
¥

-3-

¥

$

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Income
For the Years Ended March 31, 2003 and 2002

Millions of Yen
2003
2002
Operating revenues (Note 12)¥

Operating expenses (Notes 6, 8 and 12)
Operating income

69,465

Income tax expenses (Note 11)Less, minority interests in net income of
consolidated subsidiaries
Net income

69,854$

67,906
1,948

564,358
14,517

102
(459)

117
(616)

850
(3,825)

232
(447)
(107)
(679)

209
(150)
(62)
(502)

1,933
(3,725)(892)(5,659)

1,063

1,446

8,858

615

676

5,125

¥

14
434

¥

27
743

$

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

See accompanying Notes to Consolidated Financial Statements.

-4-578,875

67,723
1,742

Other income (expenses) :Interest and dividend income
Interest expenses
Equity in net earnings of unconsolidated
subsidiaries and affiliates
Net loss on sale or devaluation of securities
Other, net
Income before income taxes and minority
interests¥

Thousands of
U.S. Dollars
2003

6.26
5.63
7.00

¥

116
3,617

U.S. Dollars

11.08
9.81
7.00

$

0.05
0.05
0.06

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Years Ended March 31, 2003 and 2002

Number ofcommonshares issued

Balance at March 31, 2001
Net income for the year
Cash dividends
Bonuses to directors and statutory auditors
Revaluation increment on land
Net change in unrealized gains on available-for- salesecurities, net of applicable income taxes
Translation adjustment
Fractional shares acquired, net
Balance at March 31, 2002
Net income for the year
Cash dividends
Bonuses to directors and statutory auditors
Increase in retained earnings for the change of scopeof equity method
Reversal of land revaluation increment
Adjustment for applicable income taxes
Net change in unrealized gains on available-for- salesecurities, net of applicable income taxes
Translation adjustment
Purchase of treasury stock and fractional sharesacquired, net
Balance at March 31, 2003

63,613,246-

Common stock

Capital surplus

¥

¥

7,792
-

5,908
-

Land
revaluation
increment
Millions of Yen

Retainedearnings¥

10,998
743
(477)
(41)
-

¥

3,050

Net unrealized
gains onavailable-for-salesecurities

Foreign currencytranslation
adjustment

¥

¥

1,498
-

(7)
-

Treasury
stock

¥

-

63,613,246
-

7,792
-

5,908
-

11,223
434
(445)
(38)

3,050
-

(640)
858
-

26
19
-

(3)
(3)
-

-

-

-

112
228
-

(228)
63

9

-

-

-

-

-

-

-

(345)
-

(30)

-

63,613,246

7,792

5,908

11,514

2,885

522

(11)

(171)
(174)

¥

¥

¥

¥

¥

¥

¥

Thousands of U.S. Dollars
Balance at March 31, 2002
Net income for the year
Cash dividends
Bonuses to directors and statutory auditors
Increase in retained earnings for the change of scopeof equity method
Reversal of land revaluation increment
Adjustment for applicable income taxes
Net change in unrealized gains on available-for- salesecurities, net of applicable income taxes
Translation adjustment
Purchase of treasury stock and fractional sharesacquired, net
Balance at March 31, 2003$$

64,933-$49,233-$93,525
3,617(3,708)(317)$

25,417
-

$

7,150
-

$

159
-

$

(25)
-

-

-

933
1,900
-

(1,900)
525

75

-

-

-

-

-

-

(2,875)
-

(250)

-

64,933$49,233$

See accompanying Notes to Consolidated Financial Statements.

-5-95,950$24,042

$

4,350

$

(91)

$

(1,425)(1,450)Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended March 31, 2003 and 2002

Millions of Yen
2003
2002
Cash flows from operating activities:
Income before income taxes and minority interests
Adjustments for:
Depreciation
Net provision for employee retirement benefit liability
Net loss on sale or devaluation of securities
Decrease in trade receivables(Increase) decrease in inventories(Decrease) increase in trade payables
Other, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

¥

1,063

¥

1,446

Thousands of
U.S. Dollars
2003
$

8,858

2,713
170
447
1,563
(3)
(15)
92
6,030
138
(507)
(626)
5,035

2,837
33
150
662
218
43
(294)
5,095
143
(619)
(1,053)3,566

22,6081,417(3,725)13,025
(25)
(125)
767
50,2501,150(4,225)(5,217)
41,958Cash flows from investing activities:
Increase in property and equipment and intangible assets
Acquisition, net of cash acquired
Decrease in short-term investments
Other, net
Net cash used in investing activities(5,761)(1)
13
554(5,195)(2,663)
(75)
254
302
(2,182)(48,008)
(8)
108
4,616
(43,292)

Cash flows from financing activities:
Increase in long-term debt
Repayment of long-term debt
Decrease in short-term borrowings
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 year

4,286
(3,693)
(257)
(445)
(173)
(282)
(4)
(446)
10,854
10,4089,637(9,718)(1,120)(477)(7)(1,685)16(285)
11,13910,85435,717(30,775)(2,142)(3,708)(1,442)(2,350)(33)(3,717)90,45086,733¥¥$

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(a) Basis of presenting the 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 Commercial Code of Japan and the
Securities and Exchange Law of Japan, and in conformity with accounting principles and practices
generally accepted in Japan, which are different in certain respects from the application and disclosure
requirements of International Accounting Standards. Certain items presented in the original
consolidated financial statements in Japanese submitted to the Director of Kanto Finance Bureau in
Japan have been reclassified in these accounts for the convenience of readers outside Japan.
The consolidated financial statements are not intended to present the consolidated financial position,
results of operations and cash flows in accordance with accounting principles and practices generally
accepted in countries and jurisdictions other than Japan.
(b) U.S. dollar amounts
The Company maintains its accounting records in Japanese Yen. The U.S. dollar amounts included in
the accompanying consolidated financial statements and notes thereto represent the arithmetic resultsof translating Japanese Yen into U.S. dollars at a rate of ¥120 to $1, the approximate rate of exchange
at March 31, 2003. The inclusion of such dollar amounts is solely for the convenience of the readers
and is not intended to imply that Yen and the assets and liabilities originating in Yen have been or
could be readily converted, realized or settled in dollars at ¥120 to $1 or at any other rate.
(c) Reclassification
Certain comparative figures have been reclassified to conform to the current year’s presentation.

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 fair value
at the time of acquisition are principally deferred and amortized over five years.
The number of consolidated subsidiaries, unconsolidated subsidiaries and affiliates for the years ended
March 31, 2003 and 2002 was as follows:

Consolidated subsidiaries
Unconsolidated subsidiaries and affiliates,
accounted for by the equity method
Unconsolidated subsidiaries, stated at cost
Affiliates, stated at cost

-7-

2003

2002

23

23

8
10
3

6
11
4

All intercompany accounts and transactions have been eliminated on consolidation.
The accompanying consolidated financial statements included the account of one overseas consolidated
subsidiary. Such an overseas consolidated subsidiary closes its book at December 31 every year, threemonths earlier than the Company and other domestic consolidated subsidiaries. The Company
consolidated such subsidiary’s financial statements as of its year-end. Significant transactions for theperiod between subsidiary’s year-end and the Company’s year-end are adjusted on consolidation.
An overseas consolidated subsidiary adopts accounting principles generally accepted in its country, andno adjustments to conform with accounting principles generally accepted in Japan have been made totheir financial statements on consolidation as allowed under accounting principles and practices
generally accepted in Japan.
(b) Cash equivalents
The Japan Transcity Group considers cash equivalents to be highly liquid debt instruments purchasedwith an original maturity of three months or less.
(c) 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”, whose classification determines the respective
accounting method as stipulated by the accounting standard for financial instruments.
Held-to-maturity securities are stated at amortized cost. Marketable securities with market quotations
for available-for-sale securities are stated at fair value and net unrealized gains or losses on thesesecurities are reported as a separate component of shareholders’ equity, net of applicable income taxes.
Gains and losses on disposition of available-for-sale securities are computed based on themoving-average method.
Nonmarketable securities without available market quotations foravailable-for-sale securities are carried at cost determined by the moving-average method.
Adjustments in carrying values of individual securities are charged to income through write-downs,
when a decline in value is deemed other than temporary.
(d) Accounting for derivatives
Derivatives are valued at fair value, if hedging accounting is not appropriate or where there is no
hedging designation, and the gains or losses on derivatives are recognized in the current earnings.
Certain transactions classified as hedging transactions are accounted for under a deferral method,whereby unrealized gains or losses on hedging instruments are carried as assets or liabilities on thebalance sheet until the gains and losses on the hedged items are realized. Foreign exchange forward
contracts are accounted for to translate foreign currency denominated assets and liabilities at suchcontracts rates as an interim measure, if certain hedging criteria are met. According to the special
treatment as permitted by the accounting standard for financial instruments, the hedging interest rate
swap is accounted for on an accrual basis, and recorded net of interest expenses generated fromborrowings, a hedged item, if certain conditions are met.
(e) Inventories
Real estate held for sale is stated at cost determined by the specific identification method (see also Note2(l)). Other inventories are stated at moving-average cost.
(f) Allowance for doubtful accounts
Allowance for doubtful accounts has been provided for at the aggregate amount of estimated credit loss
based on the individual financial review approach for doubtful or troubled receivables and a generalreserve for other receivables calculated based on the historical loss experience for a certain past period.

-8-

(g) Property and equipment, and depreciation
Property and equipment, including significant renewals and additions, are stated at cost, and have been
depreciated principally by the declining-balance method at rates based on the estimated useful lives of
the assets, except that the buildings acquired on and after April 1, 1998 have been depreciated by thestraight-line method. Property of the cost of not less than ¥100,000 and 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.
(h) Leases
Where financing leases do not transfer ownership of the leased property to the lessee during the term of
the lease, the leased property of the Company and its domestic consolidated subsidiaries is not
capitalized and relating rental and lease expenses are charged to income as incurred.
(i) Employee retirement benefits
Employees who terminate their service with the Japan Transcity Group are entitled to retirement
benefits generally determined by the reference of current basic rates of pay, length of service andconditions under which the termination occurs.
The Company has established a defined benefit pension plan, which covers 100% of retirement benefits
for employees of the Company who terminate at the compulsory retirement age and 70% of otherretirement benefits of the Company. Some of consolidated subsidiaries have similar pension plans.
Unrecognized actuarial differences as changes in the projected benefit obligation or pension plan assets
resulting from the experience different from that assumed and from changes in assumptions areamortized on a straight-line basis over ten years as a certain period within remaining service lives of
employees from the next year in which they arise. Unrecognized prior service cost is amortized using
the straight-line method over ten years from the year in which they occur.
(j) Accrued severance indemnities for officers
The Japan Transcity Group may pay severance indemnities to directors and statutory auditors, which
are subject to the approval of the shareholders. The Japan Transcity Group has provided for at the fullamount of the liabilities of directors' and statutory auditors' severance indemnities at the respectivebalance sheet dates.
(k) Bond issue expenses
Bond issue expenses are charged to income as incurred.
(l) Interest expenses
Interest expenses are charged to income as incurred, except that interest incurred in connection with thedevelopment of the real estate held for sale is capitalized as a part of the cost of the related real estate
held for sale.
(m) Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the carrying amountsof existing assets and liabilities and their respective tax bases and operating loss carryforward.
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.
-9-(n) Translation of foreign currency accounts
Receivables, payables and securities, other than stocks of subsidiaries and certain other securities, aretranslated into Japanese Yen at the exchange rates at the respective fiscal year-ends. Transactions inforeign currencies are recorded based on the prevailing exchange rates on the transaction dates.
Resulting translation gains or losses are included in the current earnings
In respect of the financial statement items of overseas consolidated subsidiary, 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 separate component of shareholders’ equity in the accompanying consolidated balance
sheets.
(o) Appropriation of retained earnings
Cash dividends and bonuses to directors and statutory auditors are recorded in the fiscal year when aproposed appropriation of retained earnings is approved by the Board of Directors and/or shareholdersof the Company.
(p) 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 appropriate adjustments for land shape and otherfactors, based on the values of the municipal property tax bases. According to the Law, the amountequivalent to the tax effect on the excess of the sound reassessed values over original book values isrecorded in the liabilities as deferred tax assets for revaluation account, and the rest of such excess, netof the tax effect, is recorded in the shareholders’ equity as land revaluation increment account in theaccompanying consolidated balance sheets. At March 31, 2003, the difference of the carrying valuesof land used for the banking business after reassessment over the current market value of such land at
the fiscal year-end amounted to ¥2,835 million ($23,625 thousand).
(q) Per share data

Net income per share is computed by dividing income available to common shareholders by theweighted-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 time of issue
unless having anti-dilutive effects. The Japan Transcity Group adopted the new accounting
standard for earnings per share from the current fiscal year. Prior-period per share data has been
restated to conform to the current computation. Cash dividends per share for each fiscal year in theaccompanying consolidated statements of income represent dividends declared as applicable to therespective years.
3.

Inventories
At March 31, 2003 and 2002, inventories consisted of the following:

Millions of Yen
2003
2002
Real estate held for sale
Supplies and other¥¥- 10 -

2,530 ¥
66
2,596 ¥

2,505 $
90
2,595 $

Thousands of
U.S. Dollars
2003
21,083550
21,633

4. Investments
At March 31, 2003 and 2002, short-term investments consisted of time deposits with an original
maturity
of
more
than
three
months.
At March 31, 2003 and 2002, investment securities consisted of the following:Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
Marketable securities:
Equity securities
Bonds
Other

¥

Other nonmarketable securities
¥

3,600
1
41
3,642
813
4,455

¥

4,529 $
1
40
4,570
848
5,418 $¥

30,0008342
30,3506,775
37,125Marketable investment securities classified as available-for-sale are stated at fair value with unrealized
gains and losses excluded from the current earnings and reported as a net amount within theshareholders’ equity account until realized. At March 31, 2003 and 2002, gross unrealized gains andlosses for marketable securities classified as available-for-sale are summarized as follows:

Cost

Available-for-sale securities at March 31, 2003:
Equity securities
¥
Bonds
Other
¥

2,665
1
40
2,706

Available-for-sale securities at March 31, 2002:
Equity securities
¥
Bonds
Other
¥

3,001
1
40
3,042

Gross
Gross
unrealized
unrealized
gains
lossesMillions of Yen

Fair andcarrying
value

¥

(119)
(119)

¥

(118)
(118)

¥

¥

¥

¥

1,054
0
1
1,055

1,646
1,646

¥

¥

¥

¥

¥

¥

3,600
1
41
3,642

4,529
1
40
4,570

Thousands of U.S. Dollars
Available-for-sale securities at March 31, 2003:
Equity securities
$
Bonds
Other
$

22,2088334
22,550

$

$

8,784
0
8
8,792

$

$

992
992

$ 30,000
8342$ 30,350

During the years ended March 31, 2003 and 2002, the Japan Transcity Group recorded a loss ondevaluation of marketable investment securities due to a permanent diminution in value in theamounts of ¥462 million ($3,850 thousand) and ¥263 million, respectively.

- 11 -

At March 31, 2003 and 2002, investments in and long-term loans to unconsolidated subsidiaries andaffiliates consisted of the following:Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
Investments, accounted for by the equity method
for significant unconsolidated subsidiaries andaffiliates, and stated at cost for others
Interest bearing long-term loans

¥

2,359
34
2,393

¥

5.

¥

2,031
2,031

¥

$
$

19,659283
19,942

Short-term Borrowings and Long-term Debt
At March 31, 2003 and 2002, short-term borrowings consisted of the following:Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
Short-term bank loans or bank overdrafts withinterest rates ranging from 0.55% to 2.40% perannum at March 31, 2003:
Collateralized¥
Unsecured¥

4,765 ¥
3,336
8,101 ¥

3,570 $
4,789
8,359 $

39,70827,80067,508At March 31, 2003 and 2002, long-term debt consisted of the following:

Millions of Yen
2003
2002
1.89% non-guaranteed bonds due May 2002¥
0.85% convertible bonds due September 2005
1.47% non-guaranteed bonds due July 2008
1.41% non-guaranteed bonds due July 2008
1.76% non-guaranteed bonds due September 2008
Long-term loans from banks and other financial
institutions due through 2022 with interest rates
ranging from 0.05% to 2.7% per annum at March
31, 2003:
Collateralized
UnsecuredLess, current maturities
¥

7,459
2,500
1,500
4,000

5,672
5,887
27,018(3,423)
23,595

¥

¥

2,000
7,459
2,500
1,500
4,000

Thousands of
U.S. Dollars
2003$

62,15820,833
12,50033,333

4,630
4,336
26,425(4,046)
22,379 $47,26749,059225,150(28,525)
196,625

At March 31, 2003, the current conversion price of the 0.85% convertible bonds due September 2005 is¥534 per share and is subject to adjustment under certain circumstances, including stock splits. At
March 31, 2003, the number of shares of common stock necessary for conversion of all convertible
bonds outstanding was approximately 14 million.
The aggregate annual maturities of long-term debt at March 31, 2003 was as follows:- 12 -

Millions of
Yen

Years ending March 31,
2004
2005
2006
2007
2008
2009 and thereafter¥¥

3,423 $
1,860
7,795
891
264
12,78527,018 $Thousands of
U.S. Dollars
28,525
15,50064,9587,425
2,200
106,542
225,150

At March 31, 2003, the following assets were pledged as collateral for short-term borrowing, long-term
debt and employees’ savings deposits:
Millions ofYenTime deposits included in short-term investments
Land
Buildings and structures
Machinery and equipment, and other property
Investment securities and other assets

¥

861 $
8,064
2,183
196
31

Thousands of
U.S. Dollars
7,175
67,20018,192
1,633
258

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 under such 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 theright, as indebtedness matures or becomes due prematurely by reason of default thereon, to offset
deposits at the banks against indebtedness due to the banks.
Guarantee deposits that were received from members of a golf club operated by a certain consolidated
subsidiary bear no interest and are refundable only when members withdraw from the golf club for theperiod subsequent to the first ten years.

6.

Employee Retirement Benefits
The Japan Transcity Group has defined benefit retirement plans covering substantially all employees.
Certain portions of the benefits under the plans are covered by a pension plan, which is governed by
the regulations of the Japanese Welfare Pension Insurance Law. Some of the consolidated
subsidiaries have similar retirement benefit plans.
The following table reconciles the benefit liability and net periodic retirement benefit expense as at orfor the years ended March 31, 2003 and 2002:- 13 -

Millions of Yen
2003
2002
Reconciliation of benefit liability:
Projected benefit obligationLess, fair value of pension plan assets at end of year
Less, unrecognized actuarial differences (loss)
Unrecognized prior service cost of retroactive
benefits granted by the pension plan amendment
Net amounts of employee retirement benefit
liability recognized on the consolidatedbalance sheets¥

28,091(12,158)
15,933(7,263)

¥

180

¥

8,850

26,545(13,648)
12,897(4,417)

Thousands ofU.S Dollars
2003

$

200

¥

8,680

234,092(101,317)
132,775(60,525)
1,500$

73,750Note: 1. The table above includes the amounts related to the portion subject to the Japanese Welfare
Pension Insurance Law.
2. Projected benefit obligation of consolidated subsidiaries was calculated using
simplified calculation method as permitted by the accounting standard for employee
retirement benefits.
3. The above table excluded the amounts for the assets not separately allocatable to someof the domestic consolidated subsidiaries in certain pension funds organized by others
together with the consolidated subsidiaries or effectively restricted so that they cannot
be used by the employees for other purpose, which amounted to ¥232 million ($1,933
thousand) and ¥195 million at March 31, 2003 and 2002, respectively
Millions of Yen
2003
2002
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
Net periodic retirement benefit expense

¥

¥

801
744
(392)
460
(20)
1,593

¥

800
817
(491)
181
(3)
¥ 1,304

Thousands ofU.S Dollars
2003

$

$

6,675
6,200
(3,267)
3,833(166)
13,275Major assumptions used in calculation of the above information for the years ended March 31, 2003
and 2002 were as follows:
2003
2002
Method attributing the projected benefits toperiods of services
Straight-line method
Straight-line method
Discount rate
2.5%
3.0%
Expected rate of return on pension plan assets
2.5%
3.0%
Amortization of actuarial differences
10 years
10 years
Amortization of prior service cost
10 years
10 years

7.

Contingent Liabilities
At March 31, 2003 and 2002, the Japan Transcity Group was contingently liable for guarantees ofindebtedness principally of affiliates in amounts of ¥2,983 million ($24,858 thousand) and ¥3,726
million, respectively.

- 14 -

8.

Lease Commitments
The Japan Transcity Group leases land and buildings to be used for office spaces and warehouses
principally under long-term cancelable or noncancelable operating lease agreements, and also computerequipment, other equipment and vehicles which are not generally cancelable for mainly four-to-ten
year contract terms as lessee.
Total rental and lease expenses including cancelable and noncancelable leases for the years ended
March 31, 2003 and 2002 were ¥6,345 million ($52,875 thousand) and ¥7,178 million, respectively.
For the years ended March 31, 2003 and 2002, the lease expenses for noncancelable lease agreements
which were categorized as financing leases amounted to ¥167 million ($1,392 thousand) and ¥179
million, respectively.
The aggregate future minimum payments for noncancelable operating leases and financing leases,
including the imputed interest, at March 31, 2003 and 2002 were as follows:
Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
Operating leases:
Due within one year
Due after one year

¥

966
6,590
7,556

¥
Financing leases:
Due within one year
Due after one year

¥

223
1,722
1,945

¥

¥
¥
¥
¥

959
7,150
8,109
101
67
168

$
$
$
$

8,050
54,91762,967
1,858
14,35016,208

9. Derivative Instruments
The Japan Transcity Group is a party to derivative instruments such as foreign currency forward
exchange contracts or interest rate swap contracts in the normal course of business to reduce its own
exposure to fluctuations in exchange rates or interest rates for the hedge purposes. As disclosed in
Note 2(d), hedge accounting is qualified and all derivative instruments outstanding at March 31, 2003
and 2002 were accounted for by the hedge accounting. The Japan Transcity Group is exposed tocredit loss in the event of nonperformance by the other parties. However, the Japan Transcity Group
does not expect nonperformance by the counterparties.

10. Shareholders' Equity
The authorized number of shares of no par value common stock is 240 million at March 31, 2003,
unless there may be a reduction due to a cancellation of treasury stock acquired.
Pursuant to the Commercial Code of Japan and the resolution by shareholders at the annual general
meeting on June 27, 2003, the Company can purchase the treasury stock of the Company up to
5,000,000 shares in maximum consideration for ¥1,200 million ($10,000 thousand) for the period
through the date of its next annual shareholders’ general meeting.

At March 31, 2003 and 2002, capital surplus consisted of additional paid-in capital, respectively.
In addition, retained earnings included legal reserve of the Company in the amount of ¥1,200
million ($10,000 thousand) at March 31, 2003 and 2002, respectively. The Commercial Code ofJapan provides that an amount equivalent to at least 10% of cash payments as an appropriation ofretained earnings shall be appropriated as a legal reserve until a total amount of additional paid-in
capital and such legal reserve equals 25% of common stock. Such a legal reserve is not available for- 15 -

dividend distribution, but may be used to reduce a deficit or may be transferred to common stock byproper actions of the Board of Directors and/or shareholders of the Company.
Shareholders of the Company approved the appropriation of retained earnings at the annual general
meeting of shareholders on June 27, 2003 as follows:

Cash dividends
Bonuses to directors and statutory auditors

Millions of Yen

Thousands of
U.S. Dollars

¥

$

251
36

2,092
300

11. Income Taxes
Income tax expenses for the years ended March 31, 2003 and 2002 consisted of the following:Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
Income tax expenses:
Current
Deferred¥

1,055 ¥
(440)
615 ¥

¥

632
44
676

$

8,792
(3,667)
5,125$

The tax effects on temporary differences that give rise to a significant portion of deferred tax assets
and liabilities at March 31, 2003 and 2002 were as follows:

Millions of Yen
2003
2002
Deferred tax assets:
Enterprise tax accruals
Accrued bonuses to employees
Loss on devaluation of inventories
Employee retirement benefit liability
Accrued severance indemnities for officers
Intercompany capital gains
Net operating loss carryforward
Other

¥

Less, valuation allowance
Deferred tax assets
Deferred tax liabilities:
Deferred capital gain
Accelerated depreciation
Unrealized gains on available-for-sale securities
Other
Deferred tax liabilities
Net deferred tax assets
¥

63
387
296
4,288
149
498
237
408
6,326
(606)
5,720

577
68
378
372
1,395
4,325

¥

¥

23
322
321
4,246
132
500
213
278
6,035
(594)
5,441

547
87
633
382
1,649
3,792

At March 31, 2003 and 2002, deferred tax assets and liabilities were as follows:- 16 -

Thousands of
U.S. Dollars
2003
$

$

525
3,225
2,467
35,733
1,242
4,150
1,975
3,400
52,717(5,050)47,667

4,808
567
3,150
3,100
11,62536,042

Thousands of
U.S. Dollars
2003

Millions of Yen
2003
2002
Deferred tax assets:
Current
Non-current
Deferred tax liabilities:
Non-current

¥

396
3,933

¥

289
3,506

4

$

3,300
32,7753

33

In assessing the realizability of deferred tax assets, management of the Japan Transcity Groupconsiders whether it is more likely than not that some portion or all of the deferred tax assets will not
be realized. The ultimate 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, 2003 and 2002, a valuation allowance was provided to reduce the deferred tax assets tothe extent that the management believes that the amount of the deferred tax assets is expected to berealizable.
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 ofincome for the years ended March 31,2003 and 2002 was as follows:
Percentage of pre-tax income
2003
2002
Japanese statutory effective tax rate
Increase (decrease) due to:Permanently non-deductible expenses
Tax exempt income
Local minimum taxes per capita levy
Income from the trust for retirement benefit plan
Equity in net earnings of unconsolidated
subsidiaries and affiliates
Elimination of intercompany dividend
Adjustments due to a change in tax rate
Other
Actual effective income tax rate

41.4

%

41.4

7.2
(2.4)
3.4
0.9

5.9
(2.8)
2.5
1.9

(9.0)
2.6
10.6
3.1
57.8

(6.0)
3.9
46.8

%

%

%

With the implementation of the ‘Revision of the Local Tax Law’ on March 31, 2003, the Japanese
statutory effective tax rate used in the calculation of deferred tax assets or liabilities effective from thefiscal year beginning on April 1, 2004 has been changed from 41.4% to 40.1%. As a result, deferredincome tax expenses increased by ¥112 million ($933 thousand) for the year ended March 31, 2003.

- 17 -

12.

Segment Information
The Japan Transcity Group's operations are classified into two major segments: Integrated logistics services and other services.
industry segment for the years ended March 31, 2003 and 2002 was summarized as follows:Integrated logistics
services
For the year 2003:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating expenses
Operating income (Loss)
Identifiable assets
Depreciation
Capital expenditures
For the year 2002:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating expenses
Operating income
Identifiable assets
Depreciation
Capital expenditures¥

Others

67,062
4
67,06665,335
1,731¥¥

84,296
2,288
3,413

¥

66,294
11
66,30564,621
1,684

¥

¥
¥

85,418
2,432
9,223

Total
Millions of Yen

2,403
1,852
4,255
4,264
(9)

¥

¥

9,700
425
78

¥

3,560
1,618
5,178
4,951
227

¥

¥
¥

10,648405
263

Elimination

69,465
1,856
71,321
69,5991,722¥¥

93,996
2,713
3,491

¥

¥

¥
¥

Information by

Consolidated(1,856)(1,856)(1,876)20¥¥(2,297)-¥

91,6992,713
3,491

69,854
1,629
71,48369,572
1,911¥(1,629)(1,629)(1,666)37¥

69,85469,854
67,906
1,948

96,066
2,837
9,486

¥

¥

¥

¥

¥

69,46569,46567,723
1,742(2,499)-¥93,567
2,837
9,486(15,467)(15,467)(15,634)
167$

578,875
578,875
564,358
14,517(19,142)-$

Thousands of U.S. Dollars
For the year 2003:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating expenses
Operating income (Loss)
Identifiable assets
Depreciation
Capital expenditures$$$

558,85033
558,883
544,458
14,425$

702,467
19,06728,442$$

20,025
15,43435,45935,534(75)$

80,833
3,541
650

$

$

578,875
15,467594,342579,992
14,350$783,300
22,60829,092$$

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

$

764,158
22,60829,092

Information for overseas sales is

Note: Capital expenditures for the year ended March 31, 2002 included the increment of carrying values of land used for the Company’sbusiness in the amount of ¥5,204 million due to the revaluation of land. (See Note 2(p))- 18 -

13. Financial Information of Japan Transcity Corporation (Parent)
Presented below are the non-consolidated balance sheets, non-consolidated statements of operations andshareholders’ equity of Japan Transcity Corporation, the parent company, for the years ended March 31,
2003 and 2002.
Non-Consolidated Balance Sheets
Japan Transcity Corporation (Parent)
March 31, 2003 and 2002
Millions of Yen
2003
2002
AssetsCurrent 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 andaffiliates
Deferred tax assets
Lease deposits
Other assets
Allowance for doubtful accounts
Total investments and other assets¥¥
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings
Current maturities of long-term debt
Trade payables
Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities
Long-term debt
Employee retirement benefit liability
Deferred tax liabilities for revaluation
Accrued severance indemnities for officers
Other non-current liabilities
Shareholders' equity:
Common stock
Capital surplus
Retained earnings
Land revaluation increment
Net unrealized gains on available-for-sale securities
Less, treasury stock, at cost
Total shareholders' equity¥¥- 19 -

7,183
867

¥

7,600
872

Thousands of
U.S. Dollars
2003$

59,8587,225

12,05513
178
1,028
21,32464,255(26,342)
37,913

13,42010
175
1,096
23,17364,265(25,572)
38,693

100,458
109
1,483
8,567
177,700
535,458(219,517)
315,941

4,107

5,045

34,225

3,014
3,136
899
1,206
(171)
12,191
71,428

2,915
2,754
876
1,464
(151)
12,90374,76925,117
26,133
7,492
10,050(1,425)
101,592595,233

4,325
2,460
6,922
870
527
1,836
16,94018,004
7,649
1,931
330
180
7,792
5,908
9,531
2,885
452
(174)
26,39471,428

¥

¥

¥

4,395
3,340
6,699
899
206
1,922
17,461
20,009
7,526
2,154
289
182
7,792
5,908
9,621
3,050
780
(3)
27,14874,769$$$36,042
20,50057,683
7,250
4,392
15,300141,167
150,033
63,741
16,0922,750
1,500
64,93349,23379,42524,042
3,767(1,450)219,950595,233

Non-Consolidated Statements of Operations
Japan Transcity Corporation (Parent)
For the Years Ended March 31, 2003 and 2002

Operating revenues¥

Operating expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Net loss on sale or devaluation of securities
Miscellaneous, net
Income before income taxes
Income tax expenses:
Current
Deferred
Total income tax expenses
Net income¥

Millions of Yen
2003
2002

Thousands of
U.S. Dollars
2003

64,444$¥

63,27663,0991,345

61,8801,396

525,825
11,208

158
(320)
(434)
(123)
(719)
626

145
(508)
(149)
(7)
(519)
877

1,317
(2,666)(3,617)(1,025)(5,991)
5,217

760
(298)
462
164

446
(0)
446
431

6,333
(2,483)
3,850
1,367

¥

$

Yen
Per share:
Net income:- Basic- Diluted
Cash dividends¥¥- 20 -

537,033

2.01
2.01
7.00

¥
¥

U.S. Dollars

6.20
5.71
7.00

$
$

0.02
0.02
0.06

Non-Consolidated Statements of Shareholders' Equity
Japan Transcity Corporation (Parent)
For the Years Ended March 31, 2003 and 2002

Commonstock

Balance at March 31, 2001
Net income for the year
Cash dividends
Bonuses to directors and statutory
auditors
Revaluation increment on land
Net change in unrealized gains onavailable-for-sale securities, net of
applicable income taxes
Fractional shares acquired, net
Balance at March 31, 2002
Net income for the year
Cash dividends
Bonuses to directors and statutory
auditors
Reversal of land revaluation
increment
Adjustment for applicable income
taxes
Net change in unrealized gains onavailable-for-sale securities, net of
applicable income taxes
Purchase of treasury stock andfractional shares acquired, net
Balance at March 31, 2003

¥

¥

Land
Retainedrevaluation
earnings
increment
Millions of Yen

Capitalsurplus

7,792
-

¥

5,908
-

¥

9,708
431
(477)

¥

-

Net unrealized
gains onavailable-for- salesecurities

¥

1,415
-

Treasury
stock

¥

-

-

-

(41)
-

3,050

-

-

7,792
-

5,908
-

9,621
164
(445)

3,050
-

(635)
780
-

(3)
(3)
-

-

-

(37)

-

-

-

-

-

228

(228)

-

-

-

-

-

63

9

-

-

-

-

-

(337)

-

7,792

¥

5,908

¥

9,531

¥

2,885

¥

452

¥

$

6,500

$

(171)
(174)

Thousand of U.S. Dollars
Balance at March 31, 2002
Net income for the year
Cash dividends
Bonuses to directors and statutory
auditors
Reversal of land revaluation
increment
Adjustment for applicable income
taxes
Net change in unrealized gains onavailable-for-sale securities, net of
applicable income taxes
Purchase of treasury stock andfractional shares acquired, net
Balance at March 31, 2003$$

64,933-$49,233-$80,175
1,367(3,708)$25,417
-

-

(25)
-

-

-

(309)

-

-

-

-

-

1,900

(1,900)

-

-

-

-

-

525

75

-

-

-

-

-

(2,808)-64,933$49,233$79,425$24,042$

3,767- 21 -$(1,425)(1,450)