Japan Transcity Corporation
Semi-Annual
Consolidated Financial Statements(Unaudited)

September 30, 2005

ChuoAoyama PricewaterhouseCoopersJapan Transcity Corporation and Consolidated Subsidiaries
Consolidated Balance Sheets

AssetsCurrent assets:
Cash and cash equivalents
Short-term investments
Trade receivables:
Notes
Accounts
Allowance for doubtful accounts

Millions of Yen
September 30,
March 31,2005
2005(Unaudited)Thousands ofU.S. Dollars
September 30,
2005(Unaudited)¥$Inventories
Deferred tax assets
Other current assets
Total current assets

Property and equipment, at cost:
Land
Buildings and structures
OtherLess, accumulated depreciation
Net property and equipment

Investments and other assets:
Investment securities
Investments in unconsolidated subsidiaries andaffiliates
Deferred tax assets
Lease deposits
Other assets
Allowance for doubtful Accounts
Total investments and other assets¥

See accompanying Notes to Consolidated Financial Statements.

-1-

10,958281¥

11,219323

96,973
2,487

957
12,498(19)
13,436
709
476
2,090
27,950886
11,991(20)
12,857
554
439
1,374
26,766

8,469
110,602(168)
118,903
6,274
4,212
18,496247,345

29,07540,95520,09890,128(41,702)48,426

31,94739,88919,42091,256(40,992)
50,264257,301
362,434
177,858
797,593(369,044)
428,549

9,715

7,414

85,974

2,810
591
921
1,367
(54)
15,35091,726

2,631
1,426
888
1,212
(76)
13,49590,52524,8675,230
8,151
12,097(478)135,841
811,735¥$

Millions of Yen
September 30,March 31,2005
2005(Unaudited)
Liabilities, Minority Interests and Shareholders' Equity
Current liabilities:
Short-term borrowings¥
Current maturities of long-term debt
Trade payables:
Notes
Accounts

3,463
725

¥

4,151
8,076

Thousands ofU.S. Dollars
September 30,2005(Unaudited)$30,646
6,416

Accrued expenses
Income taxes payable
Other current liabilities
Total current liabilities

1,629
5,804
7,433
1,624
814
2,776
16,835

1,856
6,009
7,865
1,628
296
1,622
23,63814,41651,36365,77914,372
7,203
24,566
148,982Long-term debt
Employee retirement benefit liability
Guarantee deposits received
Deferred tax liabilities for revaluation
Accrued severance indemnities for officers
Other long-term liabilities

26,817
5,038
4,536
5,791
408
233

18,957
5,372
4,608
1,819
403
47

237,318
44,584
40,142
51,248
3,611
2,062

1,110

1,039

9,823

8,411
6,720
13,767(1,256)
3,381
(46)
(19)
30,95891,726

7,884
6,193
15,731
2,717
2,188
(58)
(13)
34,642
90,52574,434
59,469
121,832(11,115)
29,920(407)(168)
273,965
811,735

Contingent liabilities (Note 3)
Minority interests in consolidated subsidiaries

Shareholders' equity (Note 4):
Common stock
Capital surplus
Retained earnings
Land revaluation (decrement) increment
Net unrealized gains on available-for-sale securities
Foreign currency translation adjustment
Less, treasury stock, at cost
Total shareholders' equity
¥-2-¥

$

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Operations (Unaudited)
For the Six Months Ended September 30, 2005 and 2004

Operating revenues (Note 5)¥

Operating expenses (Note 5)
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Equity in net earnings of unconsolidated
subsidiaries and affiliates
Impairment loss on fixed assets
Other, net(Loss) income before income taxes andminority interests
Income taxes:
Current
Deferred
Total income taxes
Less, minority interests in net income of consolidated
subsidiaries
Net (loss) income¥

Millions of Yen
2005
2004

Thousands ofU.S. Dollars
2005

40,153$¥38,551

38,0282,125

36,927
1,624

336,53118,80569(189)

60
(214)

611
(1,673)127(2,879)118(2,754)

105
60
11

1,124(25,478)
1,045(24,371)

(629)

1,635

(5,566)784165949619
21640

6,938
1,460
8,398

55

24487(1,633)

¥971

$

Yen
Per share:
Net (loss) income:-Basic-Diluted
Cash dividends¥See accompanying Notes to Consolidated Financial Statements.

-3-355,336(24.82)
3.50¥(14,451)

U.S. Dollars

15.93
12.34
3.00

$

(0.22)
0.03

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Shareholders' Equity (Unaudited)
For the Six Months Ended September 30, 2005 and 2004
Number ofcommonshares issued

Balance at March 31, 2004
Net income for the period
Cash dividends
Bonuses to directors and statutory auditors
Increase in retained earnings for the change in scopeof consolidation
Reversal of land revaluation increment
Net change in unrealized gains on available-for-salesecurities, net of applicable income taxes
Translation adjustment
Conversion of convertible bonds
Fractional shares acquired, net
Balance at September 30, 2004

63,613,246-

Balance at March 31, 2005
Net loss for the period
Cash dividends
Bonuses to directors and statutory auditors
Adjustments for deferred taxes
Net change in unrealized gains on available-for-salesecurities, net of applicable income taxes
Translation adjustment
Conversion of convertible bonds
Fractional shares acquired, net
Balance at September 30, 2005

64,262,367-

Common stock

Capital surplus

¥

¥

7,792
-

5,908
-

Land
revaluation
Net unrealized gains(decrement)
on available-for-saleincrement
securities
Millions of Yen

Retainedearnings¥

12,292
971
(244)
(39)

¥2,842
-

¥

2,164
-

Foreign currencytranslation
adjustment

¥

(35)
-

Treasury
stock

¥

(601)
----

62
(10)

10-

-

-

63,613,246

7,792

51
5,959

-

2,852

(371)
1,793

(10)(45)

155
(6)
(452)

2,757,243
67,019,610

¥
¥

¥

7,884
527
8,411

¥
¥

¥

6,193
527
6,720

¥
¥¥

13,032
15,731(1,633)(289)(42)
13,767

¥
¥

¥

2,717
(3,973)(1,256)

¥¥

¥

2,188
1,193
3,381

¥
¥

¥

(58)
12(46)

¥¥

¥

(13)
(6)
(19)

Thousands of U.S. Dollars
Balance at March 31, 2005
Net loss for the period
Cash dividends
Bonuses to directors and statutory auditors
Adjustments for deferred taxes
Net change in unrealized gains on available-for-salesecurities, net of applicable income taxes
Translation adjustment
Conversion of convertible bonds
Fractional shares acquired, net
Balance at September 30, 2005$$

69,7704,664
74,434$$54,805
4,664
59,469$$139,213(14,451)(2,558)(372)
121,832$$

Note: The number of authorized common shares at March 31, 2005 and September 30, 2005 was 240,000,000 shares, respectively.
The number of shares of treasury stock at March 31, 2005 and September 30, 2005 was 52,261 shares and 64,207 shares, respectively.
See accompanying Notes to Consolidated Financial Statements.

-4-24,044(35,159)(11,115)$$

19,363
10,55729,920

$

$

(513)
106
(407)

$$

(115)
(53)
(168)

Japan Transcity Corporation and Consolidated Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended September 30, 2005 and 2004
Thousands ofU.S. Dollars
2005

Millions of Yen
2005
2004
Cash flows from operating activities:(Loss) income before income taxes and minority interests ¥Adjustments for:
Depreciation
Net reversal for employee retirement benefit liability(Increase) decrease in trade receivables(Increase) decrease in inventories(Decrease) increase in trade payables
Impairment loss on fixed assets
Other, net
Sub-totalInterest and dividend received
Interest paid
Income taxes paid
Net cash provided by operating activities

1,225
(335)
(552)
(154)
(455)
2,879
(377)
1,602
119(181)
(235)
1,305

1,214
(75)
390
78
228
(276)
3,194
94(210)
(677)
2,401

10,841(2,965)(4,885)(1,363)(4,027)25,478(3,336)
14,1771,053(1,602)(2,080)
11,548Cash flows from investing activities:
Increase in property and equipment and intangibles
Increase in short-term investments
Other, net
Net cash used in investing activities(1,629)(203)(328)(2,160)

(978)
(66)
(176)
(1,220)(14,416)(1,796)(2,903)(19,115)

8,776(7,213)
(694)
(289)
(7)
573

2,504
(1,385)
(356)
(244)
(9)
510

77,664(63,832)(6,142)(2,558)
(61)
5,071

21(2)

186

(261)

1,689

(2,310)11,21911,752

99,283

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 provided by financing activities
Effect of exchange rate changes on cash andcash equivalents
Net (decrease) increase in cash and cash
equivalents
Cash and cash equivalents at beginning ofperiod
Increase in cash and cash equivalents upon
inclusion of additional subsidiary on
consolidation
Cash and cash equivalents at end of period

See accompanying Notes to Consolidated Financial Statements.

-5-¥

(629)

10,958

¥¥

1,635

149
13,590$$(5,566)

96,973

Japan Transcity Corporation and Consolidated Subsidiaries
Notes to Consolidated Financial Statements
Information for the six months ended September 30, 2005 and 2004 was unaudited.
1.

Basis of Presentation(a) Basis of presenting 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 Securities and Exchange Law of Japan, andon the basis of accounting principles generally accepted in Japan for interim reporting, which aredifferent in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards. These consolidated financial statements are compiled from the original
consolidated financial statements in Japanese prepared by the Company as required by theSecurities and Exchange Law of Japan and submitted to the Director of Kanto Finance Bureau ofJapan.

(b) Principles of consolidation
The accompanying consolidated financial statements include the accounts of the Company and its
significant subsidiaries. Investment in significant unconsolidated subsidiaries and affiliates isaccounted for by the equity method. Investment in unconsolidated subsidiaries and affiliates notaccounted for by the equity method is stated at cost. The number of consolidated subsidiaries,
unconsolidated subsidiaries and affiliates for the six months ended September 30, 2005 and 2004 was
as follows:

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

2005

2004

2727

51246123

Accounting policies

These unaudited semi-annual consolidated financial statements should be read in conjunction
with the audited consolidated financial statements for the year ended March 31, 2005. There
were no changes in accounting policies that were applied in the accompanying consolidated
financial statements for the six months ended September 30, 2005 from those for the year ended
March 31, 2005, except for the following paragraph.
(Accounting standard for impairment of fixed assets)
On August 9, 2002, the Business Accounting Council of Japan issued "Accounting Standard for
Impairment of Fixed Assets", which is effective for the fiscal years beginning April 1, 2005, withearlier adoption permitted. The Company and its domestic subsidiaries have adopted this standard
from the six months ended September 30, 2005. The standard requires that fixed assets be reviewed
for impairment whenever events or changes in circumstances indicate that the carrying amount of anasset may not be recoverable. An impairment loss shall be recognized in the income statement by
reducing the carrying amount of impaired assets or a group of assets to the recoverable amount to bemeasured as the higher of the asset’s net selling price and 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 from other groups of assets. For the purpose ofrecognition and measurement of an impairment loss, fixed assets are principally grouped into
cash-generating units, such as regional business divisions, other than idle or unused property.
-6-

Recoverable amounts of the assets were measured based on value in use calculated using discounted
future cash flows for Golf club courses or their net selling prices primarily for municipal property tax
bases for idle or unused property. This accounting change resulted in a record of impairment lossof ¥2,879 million ($25,478 thousand) on the accompanying consolidated statements ofoperations.

2.

U.S. Dollar Amounts
The Japan Transcity Group 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 results of translating Japanese Yen into U.S. dollars at a rate of ¥113 to $1, theapproximate rate of exchange at September 30, 2005. The inclusion of such dollar amounts is solelyfor 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 ¥113 to $1
or any other rate.

3.

Contingent Liabilities
At September 30, 2005 and March 31, 2005, the Japan Transcity Group was contingently liable forguarantees of indebtedness principally of affiliates in the amounts of ¥1,884 million ($16,673
thousand) and ¥2,035million, respectively.

4.

Subsequent Events(a)On November 15, 2005, the Board of Directors of the Company declared interim cash dividends of¥3.5 per share to shareholders of record as of September 30, 2005, which amounted to ¥234 million($2,071 thousand) in aggregate.

(b)

On December 7, 2005, the Board of Directors of the Company resolved the assignment of theproperty under a scrap-and-build policy in the Company’s Medium-term Management Strategy Plan.
The property consisted of land and buildings with an aggregate carrying value of ¥1,416 million($12,531 thousand) at September 30, 2005, and is planned to be assigned to HASEKO Corporation forthe consideration of ¥3,004 million ($26,584 thousand) by the end of March 2006.

-7-5. Segment Information
The Japan Transcity Group’s operations are classified into two major segments: Integrated logistics services and other services.
Information by industry segment for the six months ended September 30, 2005 and 2004 were as follows:Integrated logistics
services
For the six months ended September 30, 2005:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating expenses
Operating income

For the six months ended September 30, 2004:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating expenses
Operating income¥

¥

¥

¥

39,225
14
39,23937,217
2,022

37,071
14
37,08535,564
1,521

Others

¥

¥

¥

¥

928
1,623
2,551
2,453
98

1,480
896
2,376
2,293
83

Total
Millions of Yen¥

¥

¥

¥

40,153
1,637
41,79039,6702,120

38,551910
39,46137,857
1,604

Elimination

¥

¥

¥

¥

(1,637)(1,637)(1,642)5(910)
(910)
(930)
20

Consolidated¥

¥

¥

¥

40,15340,15338,0282,125

38,551
38,551
36,927
1,624

Thousands of U.S. Dollars
For the six months ended September 30, 2005:
Operating revenues:
Outside customers
Inter-segment sales
Total operating revenues
Operating expenses
Operating income$$

347,124
124
347,248
329,354
17,894$$

8,212
14,363
22,57521,708867$$

355,336
14,487369,823
351,062
18,761$$

Geographic segment information is not shown, as operating revenues of overseas consolidated subsidiaries was not material.
Information for overseas sales is not disclosed, as such sales were not material.

-8-(14,487)(14,487)(14,531)44$$355,336
355,336
336,53118,805

6. Condensed Financial Statements of Japan Transcity Corporation (Parent)
Presented below are the condensed non-consolidated balance sheets, non-consolidated statements ofincome and shareholders’ equity of Japan Transcity Corporation, the parent company.
Non-Consolidated Balance Sheets
Japan Transcity Corporation (Parent)

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 tosubsidiaries and affiliates
Deferred tax assets
Lease deposits
Other assets
Allowance for doubtful accounts
Total investments and other assets

Millions of Yen
September 30,
March 31,2005
2005
(unaudited)Thousands ofU.S. Dollars
September 30,
2005(unaudited)¥$¥
Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings
Current maturities of long-term debt
Trade payables
Accrued expenses
Income taxes payableOther current liabilities
Total current liabilities
Long-term debt
Employee retirement benefit liability
Deferred tax liabilities for revaluation
Accrued severance indemnities for officers
Other long-term liabilities
Shareholders' equity:
Common stock
Capital surplus
Retained earnings
Land revaluation (decrement) increment
Net unrealized gains on available-for-salesecurities
Less, treasury stock, at cost
Total shareholders' equity¥

¥

-9-

8,402
38

¥

8,512
79

74,354336

12,92613
267
2,377
24,02365,847(27,718)
38,12912,34312227
2,032
23,20565,026(27,224)
37,802

114,389
115
2,363
21,036
212,593582,717(245,292)
337,425

9,062

6,886

80,195

4,108
885
1,323
(52)
15,32677,478

4,003
664
851
1,189
(75)
13,51874,52536,354
7,832
11,707(460)
135,628
685,646

4,942
423
7,778
810
573
1,330
15,85622,181
3,854
5,791
371
464

¥

¥

5,453
7,812
7,835
835
16
1,408
23,35914,408
4,195
1,819
364
225

$

$

43,735
3,743
68,832
7,168
5,071
11,770140,319
196,292
34,106
51,2483,283
4,106

8,411
6,720
11,919(1,256)

7,884
6,193
11,332
2,717

74,434
59,469105,477(11,115)

3,186
(19)
28,961
77,4782,042(13)
30,15574,52528,195(168)
256,292
685,646¥$

Non-Consolidated Statements of Operations (Unaudited)Japan Transcity Corporation (Parent)
For the Six Months Ended September 30, 2005 and 2004¥

Operating revenues
Operating expenses
Operating income
Other income (expenses):
Interest and dividend income
Interest expenses
Miscellaneous, net
Income before income taxes
Income taxes:
Current
DeferredTotal income taxes
Net income¥Millions of Yen2005
2004

Thousands ofU.S. Dollars
2005

37,606$¥35,63936,2701,336

34,695944

320,973
11,823

154(142)
147
159
1,495

119(143)
(27)
(51)
893

1,363
(1,257)
1,301
1,407
13,230

538
39
577
918

370
8
378
515

4,761
345
5,106
8,124

¥

$

Yen
Per share:
Net income :-Basic-Diluted
Cash dividends¥- 10 -

332,796

13.95
11.60
3.50

¥

U.S. Dollars

8.44
6.65
3.00

$

0.12
0.10
0.03

Non-Consolidated Statements of Shareholders' Equity (Unaudited)Japan Transcity Corporation (Parent)
For the Six Months Ended September 30, 2005 and 2004

Commonstock

Balance at March 31, 2004
Net income for the period
Cash dividends
Bonuses to directors and statutory auditors
Reversal of land revaluation increment
Net change in unrealized gains on available-for-salesecurities, net of applicable income taxes
Conversion of convertible bonds
Fractional shares acquired, net
Balance at September 30, 2004
Balance at March 31, 2005
Net income for the period
Cash dividends
Bonuses to directors and statutory auditors
Adjustments for deferred taxes
Net change in unrealized gains on available-for-salesecurities, net of applicable income taxes
Conversion of convertible bonds
Fractional shares acquired, net
Balance at September 30, 2005

¥

¥
¥

¥

7,792
7,792
7,884
527
8,411

Retainedearnings

Capital surplus

¥

¥
¥

¥

5,908
51
5,959
6,193
527
6,720

Land
Net unrealized gains onrevaluation
available-for- sale(decrement)
securities
increment
Millions of Yen¥

¥
¥

¥

9,699
515
(244)
(39)
(10)
9,921
11,332
918
(289)
(42)
11,919

¥

¥
¥

¥

2,842
10
2,852
2,717
(3,973)(1,256)

¥

¥
¥

¥

2,029
(366)
1,663
2,042
1,144
3,186

Treasurystock¥

¥
¥

¥

(601)
155
(6)
(452)
(13)
(6)
(19)

Thousands of U.S. Dollars
Balance at March 31, 2005
Net income for the period
Cash dividends
Bonuses to directors and statutory auditors
Adjustments for deferred taxes
Net change in unrealized gains on available-for-salesecurities, net of applicable income taxes
Conversion of convertible bonds
Fractional shares acquired, net
Balance at September 30, 2005$$

69,7704,664
74,434$$54,805
4,664
59,469$$100,283
8,124(2,558)(372)105,477- 11 -$$

24,044(35,159)(11,115)$$

18,071
10,12428,195

$

$

(115)
(53)
(168)