2008
Annual Report
For the year ended March 31, 2008

TONAMI TRANSPORTATION CO., LTD.

Tonami Transportation is a leader in total logistics solutions that span
all aspects from design and development of distribution channels tofreight haulage and all related information management functions.
Tonami has pioneered computerized distribution services in Japan, integrating physical transport with information management to provide
advanced systematized distribution services
The Tonami Group offers a fully integrated distribution network inJapan and overseas, based on distribution centers in 111 locations
around the country linked by an advanced information network.
Tonami Group distribution services add value to industry and enhance
the lifestyles of individuals.

Strategic Logistics Solutions
Contents
1 Consolidated Financial Highlights
2 To Our Shareholders and Investors
5 Corporate Governance
8 Corporate Social Responsibility Activities
9 Financial Section
50 Consolidated Subsidiaries
51 Board of Directors and Statutory Auditors
51 Corporate Data

Forward-Looking Statements
This annual report includes forward-looking statements that represent Tonami’s assumptions and expectations in light of currently available
information. These statements reflect industry trends, clients’ situations and other factors, and involve risks and uncertainties which may
cause actual performance results to differ from those discussed in the forward-looking statements in accordance with changes in thebusiness environment.

Consolidated Financial Highlights
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIES
Years ended March 31, 2008 and 2007
Thousands of
U.S. dollars(Note 1)Millions of yen
2008
2007

2008

FOR THE YEAR:
Operating revenues¥130,188¥130,020$1,299,411

Logistics

117,614118,010

1,173,909

Information processing

2,446

2,445

24,414

Others10,1289,565

101,088

Operating income

1,887

2,019

18,834

Net income (loss)

(911)

1,889

(9,093)¥ (10.03)¥ 20.77$ (0.1001)

—

19.34

—

6.00

6.00

0.0599¥112,511¥119,341$1,122,977

45,962

48,323458,749

PER SHARE (Yen and U.S. dollars):
Net income (loss), basic
Net income, diluted
Cash dividends

AT YEAR-END:
Total assets
Total net assets

Notes: 1. U.S. dollar amounts presented herein are included solely for convenience. The rate of ¥100.19 = U.S.$1, prevailing on March 31,
2008, has been used for the translation into U.S. dollar amounts.
2. The computation of net income (loss) per share of common stock is based on the weighted average number of shares outstanding(which represents the number of issued shares less treasury stock.) during each financial year.

Operating Revenues by
Business Segment
150(Billions of yen)

Operating Income

3

Net Income (Loss) and
Net Income (Loss) per Share, basic(Billions of yen)

3.0

(Billions of yen)

(Yen)

30

100

2

1.5

15

50

1

0

0

0

’04

’05

’06

’07

’08

0

’04

’05

’06

’07

’08

-10.0

’04

’05

’06

’07

’08

-100

Net Income (Loss) (Left scale)
Net Income (Loss) per Share, basic (Right scale)

Logistics
Information processing
Others01

To Our Shareholders and Investors

Chairman, Yoshihiro Minami

President, Katsusuke Watanuki

Operating Environment and Business Results

During the fiscal year ended March 31, 2008, the Japanese economy remained on a moderate
recovery track supported by increasing capital investment and robust personal consumption.
However, economic prospects became more uncertain in view of the turmoil in the world economy
triggered by the subprime mortgage crisis in the United States and soaring prices of crude oil andother raw materials.
In the distribution industry, the business environment continued to be challenging. While thedownward trend of domestic freight transport volumes persisted from the previous year, diesel oil
prices hovered at a high level and competition among companies intensified.
In these circumstances, the Tonami Group moved forward in the final year of its 17th mediumterm business plan. In keeping with the spirit of this three-year plan’s slogan, “Committed to
Corporate Innovation,” in June 2007 we reconfigured the organizational structure: the 3PL BusinessGroup was established to promote strategic business, the Corporate Planning Group was established to strengthen strategic planning, and a divisional system consisting eight divisions was introduced to reinforce business operations.
Specifically, we endeavored to strengthen and expand the highly profitable third-party logistics(3PL) business by integrating comprehensive physical distribution services that combine businessprocesses, including existing transport, storage, distribution processing, inventory management,delivery, and information processing with consulting capabilities while strengthening sales power
characterized by improved logistics. Also, we worked to reinforce group management in order toboost profitability.
Despite a decrease in revenues from the mainstay road haulage operations, consolidated operating revenues for the year under review edged up 0.1% or ¥168 million from the previous year to¥130,188 million, as a result of the efforts to expand the 3PL business and other logistics-related
businesses.
On the other hand, operating income decreased 6.5% or ¥132 million from the previous year to¥1,887 million. Despite efforts to improve the efficiency of long-distance transport operations andreduce fixed costs, the Group could not fully offset the cost burden attributable to the record-highfuel prices and the impact of lower revenues from the road haulage operations.
The reporting of a loss on impairment of fixed assets as an extraordinary loss and reversal ofdeferred tax assets resulted in a net loss of ¥911 million.
Total annual dividends for the year ended March 2008 amount to ¥6 per share, including theinterim dividend of ¥3 per share.
Regarding the results by business segment, operating revenues from logistics-related businesses
were ¥117,614 million, a decrease of 0.3% or ¥396 million from the previous year, reflecting slug02

gish demand for freight transport related to construction and materials despite higher unit freightcharges in the road haulage operations. While the road haulage operations experienced lackluster
domestic freight transport volumes, handling of freight by the harbor transport operations was
brisk. Also, the Group emphasized the 3PL business by offering logistics solutions and enhancing
logistics quality.
Operating revenues from the information processing operations amounted to ¥2,446 million, aslight increase of 0.1% or ¥1 million from the previous year. Operating revenues from other businesses, which include automobile repair and merchandising, were ¥10,128 million, an increase of
5.9% or ¥563 million yen from the previous year.
Outlook for the Year Ending March 2009

The business environment is expected to remain challenging in view of the slackening tempo of
economic activity in Japan in line with the slowdown of the U.S. economy, uncertainties regarding
the already sky-high prices of crude oil and other raw materials, and intensifying competition.
In this tough business environment, the Group launched the 18th medium-term business plan in
April 2008 covering the three years to March 2011. In order to enhance group management, theGroup plans to shift to a holding company system. Eyeing possibilities of M&A and business partnerships, we intend to expand the 3PL business in order to develop into a highly profitable concern
and thus enhance the Group’s enterprise value. In these endeavors, we will adhere to our fundamental policy of providing our customers with high-quality services that are highly valued andinspire their trust in the Tonami Transportation Group.
For the fiscal year ending March 2009, on a consolidated basis we forecast operating revenues of¥133.6 billion (a 2.6% increase compared with the previous year), operating income of ¥2.2 billion(a 16.6% increase), and net income of ¥1,360 million.
We will continue to strive to improve business performance so as to meet the expectations of ourshareholders. We request your continued support of our endeavors.
June 2008

Yoshihiro Minami
Chairman and Representative Director

Katsusuke Watanuki
President and Representative Director

03

Tonami’s Transport Network and Distribution Centers
Total number of distribution centers: 48
Tonami’s major licensed routes
Routes provided by alliance partners

Chugoku region: 2
Hokuriku region: 12

Niigata

Kanazawa

Hiroshima

Shinetsu region: 3

Toyama

Fukui

Osaka

NagoyaKanto region: 10

Kansai region: 16
ShizuokaTokyo

Tokai region: 5

Tonami Logistics Solutions

Physical distribution
consulting functions

Physical distribution
network functions

Procurement logistics

Production logistics

Raw materials (Parts etc.)
manufacturers

Factories

Environmental
logistics

Consumers

Goods returned, repairs,
waste, etc.

In-house logistics

Warehouses, distribution
centers

Sales logistics
Destinations in Japan

Wholesalers, retailers
Overseas suppliers

ExportImportDestinations overseas

International logistics
Systematized distribution (3PL), information sharing
Supply chain management (SCM)

Information systemdevelopment functions

Operational functions04

Corporate Governance

At a meeting of the Board of Directors held on May 8, 2006, the Company passed a resolution concerning abasic policy for internal control systems in accordance with the Company Law, which went into effect on May
1, 2006. The Company, with the Internal Control Committee in a central role, is constructing sound internal
control systems on the basis of the policy with the aim of increasing the corporate value of the Tonami
Transportation Group.

Description of Management Organization and State of Development of Internal Control Systems

1) Basic Explanation of the Management Organization
The Board of Directors of the Company is the organization responsible for important matters concerning business policy and business strategy. In accordance with the Board of Directors Regulations,
the Board of Directors convenes, in principle, once a month and convenes for extraordinary meetings
as necessary so that the directors attain mutual understanding and engage in mutual supervision of
the execution of business and employ the services of outside experts as necessary to prevent violations of the law or the Articles of Incorporation. The Management Council deliberates and decides
matters related to business execution. Meetings of the Management Council are held, in principle,
twice a month and attended by all directors and the standing corporate auditors.
The Company employs a corporate auditor system as part of its internal control framework. The
Board of Corporate Auditors consists of five corporate auditors (two standing corporate auditors andthree outside corporate auditors). The corporate auditors audit the legality of the directors’ actions
by attending meetings of the Board of Directors and other important meetings, by offering theiropinions, and by other means.
The corporate auditors, including the outside corporate auditors, audit the execution of businessby the directors in accordance with the auditing policy and task assignments decided by the Board of
Corporate Auditors. In the event that a director discovers a violation of the law or the Articles ofIncorporation on the part of another director, the director is required to promptly report the violation to the Board of Corporate Auditors and the Board of Directors and a remedy will be sought. The
Company’s Internal Audit Office, an organization independent of the business units, is an internal
auditing unit. The Company employs an executive officer system and separates responsibility of
directors for business supervision from that of executive officers for the execution of business.
Furthermore, the Company is constructing internal control systems as an aspect of the development of an internal control structure. The Company has established the Internal Control Committee,
which is chaired by the president, and its subordinate organizations: the Compliance Committee, acompliance control organization, and the Business Risk Management Committee, the cornerstone of
the risk management structure.
With regard to subsidiary management, the Management Council Regulations specify matters forparent company approval and reporting and subsidiaries are managed in accordance with theSubsidiary Management Regulations.

052) The Relationship between the Management Organization and Internal Control
General Meeting of Shareholders
Auditing

Board of Directors(Representative directors)(Directors)
Attorney

Board of Corporate Auditors(Corporate auditors)(Outside corporate auditors)

Internal Audit Office
Independent auditors

Supervision
Opinions

Auditing

Business Execution
Management Council(Representative directors)(Directors)

Internal control Committee
ReportingCompliance Committee
Internal
ControlCommittee

Internal
auditing

Business Risk Management
CommitteePlanformulation,
reporting

Policypresentation,plan approval

Divisions, blocks, group companies, branches, sales offices, centers3) Description of Management Organization and State of Development of Internal Control Systems
In constructing its internal control systems, the Company has established a basic policy concerningbusiness risk management for the Tonami Transportation Group and is working to appropriately
respond to various types of risk that might have an effect on the operation of the business, to stabilize the fundamentals of the Group and, should a business risk materialize, to minimize the impact
and as far as possible ensure that neither a business loss nor a social loss is incurred.
The Company recognizes the importance of legal compliance and has established the Compliance
Committee to ensure compliance. The Company has appointed compliance promotion officers toinculcate corporate ethics and compliance among the officers and employees of Tonami
Transportation Group companies based on the Tonami Transportation Group Employee Code of
Conduct, and engages in education and holds briefings concerning compliance.
To promote the detection of potential violations in business activities and prevent their occurrence, the Company is establishing a compliance structure to ensure reporting on the state of compliance implementation, swift correction of any violations that occur and the devising of measures toprevent their recurrence.
The Company has adopted an executive officer system in order to separate management supervision and business execution and clearly define authority and responsibility. The executive officers
attend meetings of the Management Council, an organization that deliberates on important mattersrelated to business execution, strive to promptly execute business based on the basic policy decided
by the Board of Directors, and as necessary obtain and refer to advice from certified public accountants, attorneys, and other specialists concerning compliance matters.
The Company has division managers, block managers, and directors of Group companies attend
meetings of the Management Council and other important meetings as necessary, maintains a structure for rapidly responding to changes in the business environment, and strives to ensure management soundness.
06

The Internal Audit Office conducts internal audits to verify whether business is executed appropriately and efficiently and reports to the Management Council and the corporate auditors.

4) State of Internal Auditing and Auditing by Corporate Auditors
The Internal Audit Office (four personnel) of the Company is an internal auditing unit independentof the business units and its staff assists with the work of the corporate auditors. As a means of
ensuring the Internal Audit Office’s independence from the Board of Directors, Internal Audit Office
staff changes are decided by the Board of Directors after being approved by the Board of Corporate
Auditors. The Internal Audit Office conducts periodic and unscheduled internal audits of theCompany’s business, reports to the Management Council and corporate auditors, and requests
improvements.
The Company’s corporate auditors exchange information with the independent auditors, cooperate with the Internal Audit Office, conduct appropriate audits, and hold periodic meetings of theBoard of Corporate Auditors.
State of Development of Risk Management Structure

In accordance with the Tonami Transportation Business Risk Management Regulations, the president
serves as the Chief Risk Management Officer, risk management officers are appointed for each typeof risk, and a risk management structure is established. In the event of unforeseen circumstances, inaccordance with the Tonami Transportation Group Large-Scale Disaster Response Regulations andthe Tonami Transportation Group Large-Scale Emergency Response Regulations, the Company will
establish an Emergency Response Headquarters run by the president, mount a rapid and appropriate
response in accordance with the regulations, and put in place a structure to prevent the spread ofdamage and minimize damage.
To ensure the propriety of business at Group companies, the Company has established the Tonami
Transportation Group’s Employee Code of Conduct, conduct guidelines that apply to all group companies. Group companies are establishing regulations on the basis of the code of conduct.
With regard to subsidiary management, matters requiring parent company approval and reportingare specified in the Management Council Regulations and subsidiaries are managed in accordancewith the Subsidiary Management Regulations. In the event that a director discovers a violation of thelaw or another important matter related to compliance in a group company, the director is required
to report the matter to a corporate auditor. In the event that a subsidiary finds that the business
management or management instructions from the Company violate the law or notices another compliance-related problem, the subsidiary is required to report the matter to the Internal Audit Officeor the Compliance Office. The Internal Audit Office or the Compliance Office promptly reports thematter to a corporate auditor so that the corporate auditor can express an opinion and request
improvement measures.
The Company has established the Tonami Transportation Group Internal Reporting Regulations as
a group-wide internal reporting system concerning violations of the law and other matters related tocompliance.
The Company will have no relationships with antisocial forces. The Company will take resoluteaction against any undue claims or actions by antisocial forces on the basis of cross-organizational
cooperation in close collaboration with police and other external specialist organizations and will
never provide any benefit to antisocial forces.

07Corporate Social Responsibility Activities

Basic Policy on Corporate Social Responsibility Activities

Grounded in the Company’s corporate philosophy and management creed, the Tonami
Transportation Group Employee Code of Conduct indicates proper conduct based on the spirit ofcompliance with the law and corporate ethics and stipulates that no business activity may be in violation of social norms or have an adverse effect on society or the natural environment.
Without development and growth in business activities, a company cannot earn reasonable profitsand contribute to society. The Code of Conduct indicates in the form of conduct guidelines mattersthat each individual employee of the Tonami Transportation Group must observe for the Tonami
Transportation Group to discharge its social responsibility as a good corporate citizen.
Principal CSR Initiatives and State of Implementation
Environmental Protection Activities

Annual social andenvironmental report

The Company has established the Environmental Division and is working to contribute to thecreation of a recycling society by engaging in efficient, wide-area recycling activities; this takes
the form of implementing activities centered on the theme “Society and the Environment,”
including promotion of the Eco-Lock System, which supports locally self-sufficient recycling, andthe Ministry of the Environment’s wide-area certification system. Furthermore, Tonami engages
in an environmental solutions business involving the proposal of optimal recycling routes withthe aim of achieving zero emissions.
Specific environmental protection activities include the following: 1) the introduction of environmentally friendly vehicles; 2) the practice of environmentally friendly driving; 3) the creationof eco-friendly distribution systems through greater efficiency in
distribution; and 4) resource conservation and energy conservation
efforts. In addition, Tonami issues an annual social and environmental report and has acquired ISO 14001 certification.
This truck runs on natural gas

Social Contributions

Tonami believes that it is vital for a company to increase corporate value by continuing, sustainable activities and fulfill its social responsibility to stakeholders and considers a sense of mission
and responsible activities to be essential elements of corporate social contribution.
Specific social contribution activities at Tonami include clean-up activities under an environmental beautification agreement with Takaoka City in Toyama Prefecture and the donation ofvehicles to social welfare facilities through the establishment of the Tonami Shozyukai
foundation. Tonami transports relief supplies when a natural disaster occurs, and the
Tonami badminton club offers badminton instruction classes as a local sports promotion activity.

Encouraging local people to take up
badminton

A clean-up in progress08

Financial Section

10

Consolidated Five-Year Summary

11

Consolidated Financial Review

14

Consolidated Balance Sheets

16

Consolidated Statements of Operations

17

Consolidated Statements of Changes in Net Assets

18

Consolidated Statements of Cash Flows

19

Notes to the Consolidated Financial Statements

33

Independent Auditors’ Report

34

Non-Consolidated Balance Sheets

36

Non-Consolidated Statements of Operations

37

Non-Consolidated Statements of Changes in Net Assets

39

Notes to the Non-Consolidated Financial Statements

48

Independent Auditors’ Report49

Non-Consolidated Five-Year Summary09

Consolidated Five-Year Summary
TONAMI TRANSPORTATION CO., LTD
AND CONSOLIDATED SUBSIDIARIES
Years ended March 31

2007

2008

Thousands of
U.S. dollars
2008

2004

2005

Millions of yen
2006

Operating revenues¥126,713¥129,068¥129,098¥130,020¥130,188$1,299,411

Operating cost

117,860

119,722

120,924

122,065

121,875

1,216,439

Selling, general and administrative expenses

5,994

6,363

6,117

5,936

6,426

64,138Operating income

2,859

2,983

2,057

2,019

1,887

18,834

Net income (loss)

1,429

2,173

(5,050)

1,889

(911)

(9,093)

Depreciation expenses

2,610

2,689

2,508

2,650

2,594

25,891¥ 14.50¥ 22.94

8.00

6.00

6.00

6.00

6.00

0.0599¥ 43,596¥ 42,447¥ 40,682¥ 40,425¥ 36,017$ 359,487

Net property and equipment

71,502

71,79064,45062,75862,194

620,761

Total assets

128,293

127,909

121,577

119,341

112,511

1,122,977

Total current liabilities

39,01837,01036,00434,50936,991

369,209

Long-term liabilities, excluding of current portion thereof

37,83237,75937,99536,50929,558295,019

Total net assets

50,73552,49647,02948,32345,962458,749

7,320

7,289

7,278

7,129

7,092

RESULTS OF OPERATIONS:PER SHARE (yen and U.S. dollars):
Net income (loss)
Cash dividends¥ (56.02) ¥ 20.77¥ (10.03) $ (0.1001)

YEAR-END FINANCIAL POSITION:
Total current assets

OTHER YEAR-END DATA:
Number of employees

10Consolidated Financial Review

Forward-looking statements in the text below represent the best judgment of the Tonami Transportation
Group (the Company and its consolidated subsidiaries) as of the end of the fiscal year under review.

Significant Accounting Policies and Estimates
The consolidated financial statements of the Tonami Transportation Group have been prepared in accordancewith corporate accounting standards generally recognized as fair and appropriate in Japan. Estimates used in
the preparation of the consolidated financial statements that may affect the reported amounts of assets and liabilities on the closing date and the reported revenues and expenses for the reporting period are principallydeferred tax assets, the allowance for doubtful accounts, the reserve for retirement allowance, and income
taxes. These estimates are subject to continuous, reasonable assessment.
Estimates, judgments, and assessments are made on the basis of factors that are deemed reasonable in lightof past performance and conditions. However, since estimates invariably involve uncertainties, actual results
may differ from the estimates.

Analysis of Consolidated Operating Results for the Year Ended March 31, 2008
Overview

During the fiscal year ended March 31, 2008, amid a continuing decline in domestic freight transport volumes, erosion of unit freight charges persisted owing to customer demands for greater efficiency in physicaldistribution and the intensification of competition. At the same time, the cost burden increased owing torecord-high fuel prices. As a result, operating income decreased.
Operating Revenues

Operating revenues edged up 0.1% from the previous fiscal year to ¥130,188 million. Unit freight charges in
the mainstay road haulage operations and the freight forwarding operations were higher than in the previous
year and the Group worked to expand the 3PL business and other businesses to offset the negative impact ofsluggish demand for freight transport related to construction and materials.
The road haulage operations and freight forwarding operations accounted for 67.5% of operating revenues,
the warehousing operations 17.1%, the harbor transport operations 5.7%, the information processing business 1.9%, and other businesses 7.8%.
Operating Cost

Operating cost decreased ¥189 million from the previous year thanks to enhanced efficiency of long-distancetransport and reduced fixed costs despite higher diesel oil costs due to a spike in crude oil prices and anincrease in payments to freight companies. The ratio of operating cost to operating revenues decreased 0.3
percentage points from the previous year.
Selling, General and Administrative Expenses

Selling, general and administrative expenses increased ¥490 million year on year as a result of increased
expenses reflecting an increase in the number of consolidated subsidiaries during the fiscal year under review.
Sales of Logistics

Operating Revenues

150(Billions of yen)

150

Sales of Information
Processing(Billions of yen)

3

100

100

2

50

50

1

0

’04

’05

’06

’07

’08

0

’04

11

’05

’06

’07

’08

0

(Billions of yen)

’04

’05

’06

’07

’08

Operating Income

Operating income decreased ¥132 million year on year to ¥1,887 million. The rate of increase in the aggregate
amount of operating cost and selling, general and administrative expenses was 0.2% and the rate of increase inoperating revenues was 0.1%, resulting in a decrease of 0.2 percentage points in the ratio of operating income
to operating revenues to 1.4%.
Net Loss

Net loss amounted to ¥911 million, a large decline from the net income recorded for the previous year. The
principal reason for this decline was the recording of a loss on impairment of fixed assets amounting to ¥971
million as an extraordinary loss and reversal of deferred tax assets.

Factors with a Significant Effect on Operating Results
The business environment in which the Tonami Transportation Group operates entails the risk of difficulty inabsorbing cost increases due to such factors as further increases in the price of crude oil and interest rateincreases that exceed expectations. There is also risk of difficulty in absorbing cost increases due to the further
strengthening of environmental regulations, such as regulations on diesel engine vehicle emissions. In addition,
the ability to recoup investment may be impeded because of factors such as deteriorating business conditions
experienced by customers or the suspension of business transactions with customers.
Should any serious problems occur, such as a vehicle accident, there is a risk of loss of customer confidence
and public trust that could have an adverse impact on the Tonami Transportation Group’s business activities
and business results.
In the event that the retention, development and recruitment of human resources indispensable for businessexpansion do not progress as envisaged in the growth strategy, strategic tie-ups including acquisition and capital partnerships do not develop as planned, or that social risks materialize with respect to the Group’s overseas
business expansion, there may be an adverse impact on the Group’s business activities and business results.
In the event that impairment becomes necessary in accordance with the impairment accounting applicableto fixed assets for business use or there is a great change in the estimates for future taxable income, reversal ofdeferred tax assets will be required, and, as a result, there may be an adverse impact on the Group’s businessresults and financial position.

Strategic Position and Outlook
The business environment is expected to remain challenging in view of the slackening tempo of economic
activity in Japan in line with the slowdown of the U.S. economy, uncertainties regarding the already sky-highprices of crude oil and other raw materials, and intensifying competition.
In this tough business environment, the Group launched the 18th medium-term business plan in April
2008 covering the three years to March 2011. In order to enhance group management, the Group plans to shift
to a holding company system on October 1, 2008. Eyeing possibilities of M&A and business partnerships, we
intend to expand the 3PL business in order to develop into a highly profitable concern and thus enhance theGroup’s enterprise value. In these endeavors, we will adhere to our fundamental policy of providing our cusSales of Others

15

Net Income (Loss)

Operating Cost andOperating Income(Billions of yen)

150

(Billions of yen)

3

3.0

10

100

2

1.5

5

50

1

0

0

-10.0

0

’04

’05

’06

’07

’08

0

’04

’05

’06

’07

Operating cost (Left scale)Operating income (Right scale)

12

’08

(Billions of yen)

’04

’05

’06

’07

’08

tomers with high-quality services that are highly valued and inspire their trust in the Tonami Transportation
Group.

Analysis of Sources of Capital and Liquidity
Cash and cash equivalents at March 31, 2008 stood at ¥11,638 million (a decrease of ¥2,745 million year onyear).
Cash flows from operating activities

Net cash provided by operating activities totaled ¥3,909 million (an increase in net cash of ¥2,375 million year
on year). Principal factors were net income before income taxes and minority interests of ¥1,006 million,
depreciation and amortization of ¥2,594 million, impairment losses of ¥971 million, and a ¥776 million
decrease in accounts payable, as well as a ¥1,259 million decrease in employees’ severance and retirement benefits.
Cash flows from investing activities

Net cash used in investing activities totaled ¥1,530 million (a decrease in net cash of ¥15 million year on year).
The principal factor was payments of ¥2,231 million for the purchase of property and equipment, while proceeds from sales of property and equipment amounted to ¥567 million.
Cash flows from financing activities

Net cash used in financing activities totaled ¥5,124 million (a decrease in net cash of ¥5,454 million year onyear). The principal factors were a ¥4,480 million net decrease in short-term loans and dividends paid
amounting to ¥545 million.

Management’s Assessment of Issues and Future Policies
The business environment for road haulage operations entails many issues, including intensifying competition
among companies, rising fuel costs, and higher costs associated with the strengthening of environmental andtransportation safety measures.
Consolidation in the distribution industry is expected to accelerate through ongoing M&A, globalizationand tie-ups. There is an urgent need to strengthen the foundation of operations by precisely responding tochanges in the business environment.
By shifting to the holding company system, the Group intends to strengthen corporate governance throughseparation of supervision and execution. At the same time, responsibilities and authority of operating companies will be clarified so as to accelerate strategic decision-making. The aim is to achieve speedy management
and flexible execution of efficient operations.
Also, the Group intends to streamline common functions by promoting restructuring of operating companies within the Group, enhance operating efficiency through the optimum allocation of resources, and expand
business in each field by pursuing the business strategy with the aim of boosting competitiveness of the Group
as a whole and maximizing the Group’s enterprise value.

Net Cash Used in Investing
Activities

Net Cash Provided byOperating Activities
6(Billions of yen)

0(Billions of yen)

Total Assets andNet Assets
150

4

-2

100

2

-4

50

0

’04

’05

’06

’07

’08

-6

’04

’05

’06

’07

’08

0

(Billions of yen)

’04

’05

Total assets
Net assets

13

’06

’07

’08

Consolidated Balance Sheets
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2008 and 2007ASSETS

Thousands of
U.S. dollars(Note 1)
2008

Millions of yen
2008
2007

Current assets:
Cash and time deposits
Marketable securities (Note 4)¥ 11,686¥ 13,606$ 116,638

20

999

200

21,16922,698211,288

(51)

(42)

(509)

542

512

5,410

Trade receivables:
Notes and accounts (Note 15)
Less: allowance for doubtful accounts
Inventories
Deferred tax assets (Note 11)

544

606

5,430

2,107

2,046

21,03036,01740,425359,487Land

37,29137,790372,203

Buildings and structures

21,00821,368

209,682

Machinery and vehicles

2,684

2,957

26,789Construction in progress

592

—

5,909

Other

619

643

6,178

62,19462,758620,761

7,594

9,114

75,796

Deferred tax assets (Note 11)

917

1,568

9,153

Goodwill

476

82

4,751

Other

5,313

5,394

53,029Other current assets
Total current assets

Property and equipment (Notes 5 and 6):

Total property and equipment

Investments and other assets:
Investments in securities (Note 4)

Total investments and other assets
Total assets
The accompanying Notes are an integral part of these statements.

14

14,30016,158142,729¥112,511¥119,341$1,122,977

LIABILITIES AND NET ASSETS

Thousands of
U.S. dollars(Note 1)
2008

Millions of yen
2008
2007

Current liabilities:
Short-term bank loans (Note 6)¥ 9,508¥ 15,764

Current portion of long-term debt (Note 6)

1,213

727

12,107

Current portion of bonds (Note 6)

7,000

—

69,867

Trade notes and accounts payable

12,188

10,816

121,649

Income taxes payable

599

385

5,979

Other current liabilities

6,483

6,817

64,70736,991

34,509369,209

Long-term debt, less current portion thereof (Note 6)

6,141

12,016

61,293

Deferred tax liabilities from revaluation reserve for land (Note 16)

5,455

5,605

54,447

Employees’ severance and retirement benefits (Note 10)

16,542

17,766

165,106

214

—

2,136

7

175

70

1,199

947

11,967

Total long-term liabilities

29,55836,509295,019

Total liabilities

66,54971,018664,228

14,183

14,183

141,561

Capital surplus

12,22912,502122,058

Retained earnings

14,14815,163

141,212(2,001)(1,981)(19,972)

38,55939,867

384,859

Unrealized gain on securities

1,020

1,919

10,181

Revaluation reserve for land (Note 16)

5,787

5,956

57,760

6,807

7,875

67,941

596

581

5,949

Total current liabilities$

94,900Long-term liabilities:

Retirement benefits for directors and corporate auditors (Note 3)
Negative goodwill
Other long-term liabilities

Net assets
Shareholders’ equity (Note 17):
Common stock:
Authorized: 299,200,000 shares in 2008
299,200,000 shares in 2007
Issued:97,610,118 shares in 2008
97,610,118 shares in 2007

Treasury stock, at cost: 6,765,163 shares in 2008
6,701,913 shares in 2007
Total shareholders’ equity
Valuation and translation adjustments:

Total valuation and translation adjustments
Minority interests:
Minority interests
Total net assets
Total liabilities and net assets
15

45,962

48,323458,749¥112,511¥119,341$1,122,977

Consolidated Statements of Operations
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2008 and 2007
Thousands of
U.S. dollars(Note 1)
2008

Millions of yen
2008
2007

Operating revenues:
Operating revenues¥130,188¥130,020$1,299,411

130,188

130,020

1,299,411

121,875

122,065

1,216,439

6,426

5,936

64,138

128,301

128,001

1,280,577

1,887

2,019

18,834

Interest and dividend income

326

283

3,254

Equity in earnings of unconsolidated subsidiaries and affiliates

42

117

419

(Loss) income on sale of property and equipment, net

(104)

431

(1,038)Interest expenses

(278)

(215)

(2,775)

Impairment losses (Note 8)

(971)

—

(9,691)Other, net

104

451

1,038

(881)

1,067

(8,793)

1,006

3,086

10,041

Current

676

576

6,747

Deferred

1,216

579

12,137

1,892

1,155

18,884

25

42

250

(911)

¥ 1,889

Operating costs and selling, general and administrative expenses:
Operating cost (Note 18)
Selling, general and administrative expenses (Note 18)
Operating income
Other income and expenses:

Income before income taxes and minority interests
Income taxes (Note 11):

Minority interests
Net (loss) income¥

The accompanying Notes are an integral part of these statements.

16$(9,093)

Consolidated Statements of Changes in Net Assets
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2008 and 2007

Millions of yen
Shares ofcommonstock(thousands)

Balance as at March 31, 2006

Cash dividends applicable tothe year (¥6.00 per share)
Transfer to retained earnings
Bonuses to directors andstatutory auditors
Net income
Transfer from capital surplus
Revaluation reserve for land
Treasury stock
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2007

Cash dividends applicable tothe year (¥6.00 per share)
Transfer to retained earnings
Bonuses to directors andstatutory auditors
Net loss
Transfer from capital surplus
Revaluation reserve for land
Treasury stock
Portion of treasury stock of newly consolidated
subsidiaries assumed by the Company
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2008

Commonstock

CapitalsurplusRetainedearnings

97,610 ¥14,183 ¥14,687 ¥11,393

Treasury
stock

Total
Total
Unrealized Revaluation valuation andshareholders’ gain on
reservetranslation Minority
equitysecurities
for land adjustments interests¥(1,964) ¥38,299¥8,730¥549 ¥47,578(546)(1,639)——(546)(1,639)

(47)
1,889
1,639
289
(17)

—
—
—
—
—

(47)
1,889
1,639
289
(17)

—
¥(1,981) ¥39,867

(566)
(289)
(855)
¥1,919 ¥5,956 ¥7,875

32
(823)
¥581 ¥48,323

(546)
—

—
—

(546)
—

(15)

—
(911)
—
169
(15)

—
—
—
—
—

—
(911)
—
169
(15)

(5)

(5)

—

(5)

—
97,610 ¥14,183 ¥12,229 ¥14,148 ¥(2,001) ¥38,559(899)(169) (1,068)¥1,020 ¥5,787 ¥6,807

15 (1,053)¥596 ¥45,962(546)(1,639)
(47)
1,889
1,639
289

97,610 ¥14,183 ¥12,502 ¥15,163
(273)

(17)

(273)

(911)
169

¥2,485¥6,245Total
net assets

Thousands of U.S. dollars (Note 1)
Commonstock

Balance as at March 31, 2006

Cash dividends applicable tothe year ($0.0599 per share)
Transfer to retained earnings
Bonuses to directors andstatutory auditors
Net income
Transfer from capital surplus
Revaluation reserve for land
Treasury stock
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2007

Cash dividends applicable tothe year ($0.0599 per share)
Transfer to retained earnings
Bonuses to directors andstatutory auditors
Net loss
Transfer from capital surplus
Revaluation reserve for land
Treasury stock
Portion of treasury stock of newly consolidated
subsidiaries assumed by the Company
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2008

CapitalsurplusRetainedearnings

Treasury
stock

Total
Total
Unrealized Revaluation valuation andshareholders’ gain on
reservetranslation Minority
equitysecurities
for land adjustments interests$141,561 $146,591 $113,714 $(19,602) $382,264 $24,803 $62,332 $87,135(5,450)(16,358)(469)
18,854
16,3582,885

Total
net assets$5,480 $474,879(5,450)(16,358)——(5,450)(16,358)(469)
18,854
16,358
2,885
(170)
(170)

—
—
—
—
—

(469)
18,854
16,3582,885(170)— (5,649) (2,885) (8,534)
319 (8,215)$141,561 $124,783 $151,342 $(19,772) $397,914 $19,154 $59,447 $78,601 $5,799 $482,314(2,725)(2,725)(5,450)———(5,450)—(150)—(9,093)
—
1,688
(150)

—
—
—
—
—

—
(9,093)
—
1,688
(150)

(50)

(50)

—

(50)

(9,093)
1,688— (8,973) (1,687) (10,660)
150 (10,510)$141,561 $122,058 $141,212 $(19,972) $384,859 $10,181 $57,760 $67,941 $5,949 $458,749

The accompanying Notes are an integral part of these statements.

17

Consolidated Statements of Cash FlowsTONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2008 and 2007

Millions of yen
2008
2007

Cash flows from operating activities:
Net income before income taxes and minority interests
Depreciation and amortization
Impairment losses
Loss (gain) on disposal of property and equipment
Gain on sales of investments in securities
Loss on devaluation of investments in securities
Loss on devaluation of golf club memberships
Amortization of goodwill
Equity in earnings of unconsolidated subsidiaries and affiliates(Decrease) increase in allowance for doubtful accounts
Decrease in employees’ severance and retirement benefits
Increase in directors’ and corporate auditors’ retirement benefits(Decrease) increase in accrued bonuses to employees
Interest and dividend income
Interest expenses
Decrease in trade receivables
Increase in inventories
Increase (decrease) in accounts payable(Decrease) increase in accrued consumption taxes
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities

Thousands of
U.S. dollars(Note 1)2008¥ 1,006
2,594
971
104
(0)
7
0
(119)
(42)
(101)
(1,259)
197
(117)
(326)
278
131
(16)
776
(43)
237
4,278
326
(204)
(491)
3,909

¥ 3,086
2,650
—
(431)
(19)
—
—
(142)
(117)
59
(950)
—
105
(283)
215
406
(9)
(975)
22
(1,930)
1,687
283
(215)
(221)
1,534

$ 10,041
25,891
9,691
1,038
(0)
70
0
(1,188)(419)(1,008)(12,566)
1,966(1,168)(3,254)
2,775
1,308
(160)
7,745
(429)
2,366
42,6993,254(2,036)(4,901)39,016

Cash flows from investing activities:
Purchase of time deposits
Proceeds from redemption of time deposits
Purchase of property and equipment
Proceeds from sales of property and equipment
Purchase of investments in securities
Proceeds from sales of investments in securities
Payments for acquisition of subsidiaries resulting in changes in scope of consolidation
Investments in loans receivable
Proceeds from collection of loans receivable
Other, net
Net cash used in investing activities

(34)
258
(2,231)
567
(121)
0
(52)
(7)
27
63
(1,530)(212)
199(2,027)
1,285
(126)
69
—
(5)
28
(726)
(1,515)

(339)
2,575
(22,268)
5,659(1,208)
0
(519)
(70)
270
629
(15,271)

Cash flows from financing activities:
Net decrease in short-term loans
Proceeds from long-term debt
Repayment of long-term debt
Purchase of treasury stock
Dividends paid
Dividends paid to minority interests
Net cash (used in) provided by financing activities(4,480)987(1,063)
(15)
(545)
(8)
(5,124)

(176)
1,742
(668)
(17)
(546)
(5)
330

(44,715)
9,851(10,610)(150)(5,439)(80)(51,143)

Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year

(2,745)
14,383¥11,638

349
14,034¥14,383(27,398)
143,557$116,159

The accompanying Notes are an integral part of these statements.

18

Notes to the Consolidated Financial Statements
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIES

1 Basis of presenting financial statements
The accompanying consolidated financial statements have been prepared based on the accounts maintained by
Tonami Transportation Co., Ltd. (the “Company”) and consolidated subsidiaries in accordance with accounting
principles generally accepted in Japan, which differ in certain respects as to the application and disclosure
requirements of International Financial Reporting Standards. In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the Company’s consolidated financial
statements issued domestically in order to present them in a format which is more familiar to readers outside
Japan.
U.S. dollar amounts presented in the financial statements are included solely for convenience and should not
be construed as representations that Japanese yen amounts have been or could in the future be converted into
U.S. dollars. The rate of ¥100.19 = U.S.$1, prevailing on March 31, 2008, has been used for the translation
into U.S. dollar amounts in the financial statements.

2 Summary of significant accounting policies(a) Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its 31 significant majority-owned subsidiaries for the year ended March 31, 2008 (28 for 2007).
All significant intercompany accounts and transactions have been eliminated in consolidation.
Seven of the investments in unconsolidated subsidiaries or affiliates (8 for 2007) are accounted for by theequity method.
Differences between the acquisition cost and the underlying net equity of subsidiaries at the time of acquisition are amortized on the straight-line basis over the period of five or 20 years.
When those amounts are not significant, however, the differences are fully charged or credited to income at
the dates of acquisition.
(b) Marketable securities and investments in securities

Securities, except for investments in unconsolidated subsidiaries and affiliates, are classified as trading securities, held-to-maturity securities or other securities. Trading securities are carried at fair value. Held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fairvalue with any unrealized gain or loss reported as a separate component of net assets, net of taxes.
Non-marketable securities classified as other securities are carried at cost determined by the moving-averagemethod.
Cost of securities sold is determined principally by the moving average method.
(c) Derivatives

Derivative financial instruments are stated at fair value.
(d) Inventories

Inventories are stated at cost, cost being determined principally by the last purchase price method. The specificidentification cost method is used for certain inventories.
(e) Allowance for doubtful accounts

Allowance for doubtful accounts is provided in an amount sufficient to cover possible losses on collection.
Said amount is computed by applying the rate of actual losses on collection experienced in the past withrespect to general trade receivables and by individually reviewing their collectibility with respect to certain
doubtful receivables.
(f) Property and equipment and intangible assets

Property and equipment are stated at cost. However, under Japanese tax law, capital gains arisen from disposals
and other similar transactions are deducted from the cost of the property and equipment acquired in substitution.
Depreciation of property and equipment is computed by the declining balance method over the useful life of
the assets as determined by law, except for buildings and structures, which are depreciated by the straight-line
method.

19

The ranges of useful lives of principal property and equipment are as follows:
Buildings and structures . . 2-50 years
Machinery and vehicles . . . 2-15 years
Amortization of intangible assets is principally computed using the straight-line method on the presumptionof having no salvage value.
(g) Leases

Finance leases other than those which are deemed to transfer the ownership of the leased assets to lessee areaccounted for by the method similar to that applicable to ordinary operating leases.
(h) Employees’ severance and retirement benefits

Full-time employees of the Company and its consolidated subsidiaries are entitled to a lump-sum payment
upon retirement or severance of employment. In order to provide for the employees’ severance and retirement
benefits, the Company and its consolidated subsidiaries assume a liability for severance and retirement benefits,
which is included in the liability section of the consolidated balance sheet, based on the estimated amounts ofprojected benefit obligation and plan assets at the balance sheet dates.
Past service costs are recognized in expenses using the straight-line method over 11 years (a period notexceeding the employees average remaining service lives) commencing with the year incurred.
Actuarial gains and losses are recognized in expenses using the straight-line method over 11 years (a period
not exceeding the employees’ average remaining service lives) commencing with the year following their occurrence.
(i) Retirement benefits for directors and corporate auditors

Some consolidated subsidiaries provide necessary payments to directors and corporate auditors at the end of
the fiscal year determined according to internal company rules to a reserve for retirement benefits for directors
and corporate auditors.
(j) Income taxes

Income taxes consist of corporation, enterprise, and inhabitant taxes.
The Company and its consolidated subsidiaries recognize tax effects of temporary differences between the
carrying amounts of assets and liabilities for tax and financial reporting.
(k) Statements of cash flows

Cash and cash equivalents include cash on hand, deposits placed with banks on demand, and highly liquid
investments with insignificant risk of changes in value which have maturities of three months or less when purchased.
(l) Foreign currency translation

All monetary assets and liabilities denominated in foreign currencies are translated into yen at the current
exchange rates at the balance sheet date, and any gain or loss on translation is credited or charged to income.
(m)Net income per share

Basic income per share is computed using the weighted-average number of shares of common stock outstanding, which represents the number of issued shares less treasury stock, during each year.

3 Accounting changes(a) Accounting Standard for Presentation of Net Assets in the Balance Sheet, etc.

Effective the year ended March 31, 2007, the Group adopted a new accounting standard for the presentation of
net assets in the balance sheet and the related implementation guidance. In addition, effective the year ended
March 31, 2007, the Group is required to prepare consolidated statements of changes in net assets instead of
consolidated statements of shareholders’ equity.
In this connection, previously reported consolidated financial statements have been restated to conform to
the revised rules for presentation of financial statements.
(b) Change of Accounting Category for Selling, General, and Administrative Expenses and Cost of Sales

In view of the increased importance of the Company’s information processing operations, beginning with thefiscal year ended March 31, 2007, the Company has changed the information processing operations to a divisional structure, as is the case with its other business operations.
Previously, expenses incurred in the conduct of information processing operations were recorded as selling,
general, and administrative expenses. Beginning with the fiscal year ended March 31, 2007, in order to more
appropriately present gross operating income the Company has included information processing business
expenses in operating cost so that they directly correspond to operating revenues.

20As a result of this change, as compared to the previous accounting treatment, operating cost for the year
ended March 31, 2007 increased ¥441 million (US$4,402 thousand), and gross operating income and selling,
general, and administrative expenses for the year ended March 31, 2007 decreased by the same amount. Thechange, therefore, has had no effect on operating income, income before taxes and minority interests, or net
income for the year ended March 31, 2007.
(c) Retirement benefits for directors and corporate auditors

Certain consolidated subsidiaries previously expensed retirement benefit payments to directors and corporate
auditors as incurred. Commencing with the fiscal year ended March 2008, however, the Company has adopted
the accounting method given by “Treatment of reserves under the Special Taxation Measures and Special laws
and auditing treatment of reserves and reserve for retirement benefits, etc. for directors and corporate auditors(Japan Institute of Certified Public Accountants, Report No. 42 of the Auditing and Assurance PracticeCommittee, March 13, 2007). Under the new accounting method, the consolidated subsidiaries have accrued
expected retirement benefit payments to directors and corporate auditors as a reserve for retirement benefits.
As a result of this change, as compared to the previous accounting treatment, operating income decreased¥30 million (US$299 thousand), and income before income taxes and minority interests increased 205 million(US$2,046 thousand). For the effect on business segments, see the Segment Information section.

4 Fair value of securities
No trading securities or held-to-maturity securities were held at March 31, 2008 or 2007. Securities classified
as other securities are included in “marketable securities” and “investments in securities” in the accompanying
consolidated balance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities at March 31,
2008 are summarized as follows:—

Unrealized gain:
StocksBonds:
Corporate bonds
Other
Other
Unrealized loss:
StocksBonds:
Corporate bonds
Other (Note)
Other
Total

Acquisition
costs

Millions of yen
2008
Carrying
value¥2,138¥3,949¥1,811

—
—
—

—
—
—

—
—
—

589

454

(135)

20
100
100
¥2,94720
36
99¥4,558—(64)(1)¥1,611

Unrealized
gain (loss)(Note)For the fiscal year ending March 2008, the Company assessed the fair market value of its compound financial
instruments and charged an unrealized loss of ¥42 million (US$419 thousand) to income. In addition, theCompany recorded the primary acquisition cost in the “Acquisition costs” column.
The components of unrealized gain or loss on marketable securities classified as other securities at March 31,
2007 are summarized as follows:—

Unrealized gain:
StocksBonds:
Corporate bonds
Other
Other
Unrealized loss:
StocksBonds:
Corporate bonds
Other (Note)
Other
Total

Acquisition
costs

Millions of yen
2007
Carrying
value¥2,522¥5,768¥3,246

20
—
—

21
—
—

1
—
—

76

61

(15)

—
100
100
¥2,818—78
99¥6,027—(22)(1)¥3,209Unrealized
gain (loss)(Note)
Composite financial instruments. The difference of ¥22 million (US$220 thousand) was charged as a loss in thefiscal year ended March 2007.
21

The components of unrealized gain or loss on marketable securities classified as other securities at March 31,
2008 are summarized as follows:—
Thousands of U.S. dollars
2008
Acquisition
Carrying
Unrealized
costs
value
gain (loss)

Unrealized gain:
StocksBonds:
Corporate bonds
Other
Other
Unrealized loss:
StocksBonds:
Corporate bonds
Other
Other
Total

$21,339$39,415$18,076

—
—
—

—
—
—

—
—
—

5,879

4,532

(1,347)

200
998
998
$29,414

200
359
988
$45,494

—
(639)
(10)
$16,080

Non-marketable securities classified as other securities at March 31, 2008 and 2007 amounted to ¥3,053 million ($30,472 thousand) and ¥4,088 million ($40,802 thousand), respectively.
Proceeds from sales of securities classified as other securities amounted to ¥0 million ($0 thousand) and ¥69
million ($609 thousand) for the years ended March 31, 2008 and 2007, respectively.
The aggregate gain realized on those sales totaled ¥0 million ($0 thousand) and ¥19 million ($190 thousand)for the years ended March 31, 2008 and 2007, respectively.
The redemption schedule at March 31, 2008 for bonds with maturity dates is summarized as follows:—
Millions of yen

Corporate bonds
Other
Total

Due in one
year or lessDue after one
year throughfive years

Due after five
years throughten years

¥19
—
¥19

¥ —
136
¥136

¥—
—
¥—

Due in one
year or lessCorporate bonds
Other
Total

$190
—
$190

Thousands of U.S. dollars
Due after one Due after five
year through years throughfive years
ten years

$ —
1,357
$1,357$——$—

Due after
ten years¥——¥—

Due after
ten years$——$—

5 Property and equipment
Depreciable property is stated at the net book value in the consolidated balance sheets. The amounts of accumulated depreciation were ¥49,154 ($490,608 thousand) million and ¥47,820 million ($477,293 thousand)on March 31, 2008 and 2007, respectively.
Capital gains resulting from disposals and other similar transactions are deducted from the cost of property
and equipment acquired in substitution. The amounts deducted from the cost of property and equipment was¥195 million ($1,946 thousand) and ¥197 million ($1,966 thousand) on March 31, 2008 and 2007, respectively.

6 Short-term bank loans and long-term debt(a) Short-term bank loans

Short-term bank loans as at March 31, 2008 and 2007 were as follows:—
Millions of yen
2008
2007

SecuredUnsecured¥ 2,720
6,788Interest rates range from 1.100% to 2.550%.

22¥ 2,875
12,889Thousands of
U.S. dollars
2008$ 27,149
67,751

(b) Long-term debt

Long-term debt as at March 31, 2008 and 2007 was as follows:—
Millions of yen
2008
2007

0.89% ¥6.4 billion unsecured straight bonds due 2008
0.52% ¥0.6 billion unsecured straight bonds due 2008
0.00% ¥2.5 billion unsecured convertible bond type-bonds
with stock acquisition rights due 2009
1.000%-3.550% loans from financial institutions due 2009 to 2013
and thereafter
SecuredUnsecured
Total
Less: amount due within one year

Thousands of
U.S. dollars
2008¥ 6,400600¥ 6,400
600$ 63,879
5,988

2,500

2,500

24,952

1,635
3,219
14,3548,213¥ 6,141

1,070
2,173
12,743727¥12,016

16,31932,129143,267
81,974$ 61,293

The maturity date of the ¥6.4 billion 0.89% unsecured straight bonds, issued in June 2003 is June 30, 2008.
The maturity date of the ¥0.6 billion 0.52% unsecured straight bonds, issued in June 2003 is June 30, 2008.
The maturity date of the ¥2.5 billion 0.00% unsecured convertible bond type- bonds, issued in July 2004 is
September 30, 2009.
The annual maturities of long-term debt outstanding as at March 31, 2008 are as follows:—
Year ending March 31,

Millions ofyen

Thousands of
U.S. dollars

2009
2010
2011
2012
2013 and thereafter¥3,639
966
543
300
693

$36,321
9,641
5,420
2,994
6,917

(c) Pledged assets

Property and equipment having a net value of ¥14,518 million ($144,905 thousand) was pledged as collateralfor short-term bank loans and long-term debt as at March 31, 2008.

7 Overdraft facility and credit line commitment agreements
The Company has entered into overdraft facility and credit line commitment agreements with ten banks for the
purpose of efficient procurement of working capital.
Outstanding balance of unused credit concerning overdraft facility and credit line commitment agreements
at March 31, 2008, was as follows:
Maximum credit line of overdraft facility and commitment agreement
Used credit
Total

Millions ofyen

Thousands of
U.S. dollars¥3,000—¥3,000$29,943—$29,943

8 Impairment losses
During the fiscal year ended March 31, 2008, the Group recorded impairment losses concerning the following
asset groupings.

Tonami Transportation

Usage

Type

Location

Haulage andwarehouse facilities

Land andbuildings

5 sites, including
Nishikasugai Ward,
Aichi prefecture

Impairment losses Impairment losses(millions of(thousands ofyen)
U.S. dollars)¥971$9,691The Company is a comprehensive logistics enterprise including the road haulage operation. Organizations
belonging to operations implement management accounting.
Business facilities in various locations are bases for providing the Company’s comprehensive distribution
solution services to customers. In many cases, organizations of operations are located at these business facilities
and deal with their customers.
Organizations of operations have complementary relationships. Business facilities constitute the unit for generating cash flows. The aggregate assets of organizations located at each business facility constitute an asset
grouping.
At consolidated subsidiaries, decision-making on investment is done by each business unit. Accordingly, theaggregate assets of organizations belonging to a business unit constitute an asset grouping.
23

Regarding the asset groupings for which impairment losses were recorded, future cash flow losses were projected partly to be short owing to sharp increase fuel costs reflecting high oil prices and increase in cost of payment to sub contractors. Thus, the carrying values of the asset groupings were reduced by the unrecoverable
values and an impairment loss amounting to ¥971 million (US$9,691 thousand) was recorded as an extraordinary loss.
The breakdown of the impairment losses is as follows:¥548 million (US$5,469 thousand) concerning land and ¥423 million (US$4,222 thousand) concerningbuildings.
In regard to asset groupings, recoverable value of land and buildings is measured based on the net sales
value. Net sales value is assessed based mainly on appraisal value provided by real-estate appraisers. Immaterial
assets are assessed based on carrying value.

9 Retirement benefits for directors and statutory auditors
At the annual general meeting of shareholders held on June 28, 2007, it was decided to abolish the Company’ssystem for retirement benefits for directors and corporate auditors.

10 Employees’ severance and retirement benefits
Employees who terminate their service with the Company and consolidated subsidiaries are, in most cases,
entitled to pension annuity payments or to a lump-sum severance payment determined by reference to thebasic rate of pay, length of service and the conditions under which the termination occurs.
The Company and certain consolidated subsidiaries have defined benefit plans, including a lump-sum payment plan and a contributory welfare pension plan and an approved retirement annuity plan. The Company
revised its pension plans and shifted them to a cash balance plan (money market-interest-rate linked type) on
June 1, 2004.
The projected benefit obligation and the funded status of the plans summarized as follows:—
Millions of yen
2008
2007

Projected benefit obligation
Plan assets
Net unrecognized amountPrepaid pension and severance costs
Accrued pension and severance costs¥(20,401)
3,175
684
—
¥(16,542)¥(21,815)
3,568
481
—
¥(17,766)

Thousands of
U.S. dollars
2008$(203,623)
31,6906,827—$(165,106)

The net unrecognized amounts were as follows:—
Millions of yen
2008
2007

Unrecognized benefit obligation:
Adjustment for actuarial assumptions
Past service cost
Net unrecognized amounts¥3,688(3,004)¥ 684¥ 3,894(3,413)¥ 481Thousands of
U.S. dollars
2008$36,810(29,983)$ 6,827

The components of net periodic pension and severance costs excluding the employees’ contributory portion
were as follows:—
Millions of yen
2008
2007

Service cost
Interest cost on projected benefit obligation
Expected return on plan assets
Amortization of adjustment for actuarial assumptions
Amortization of past service cost
Net periodic pension and severance costs¥ 852
519
(39)
577
(410)
¥1,499¥ 919
524
(74)
563
(410)
¥1,522

2008

2007

2.5%
2.5%

2.5%
2.5%

The assumptions used were as follows:—
Discount rates
Expected rates of return on plan assets

24

Thousands of
U.S. dollars
2008$ 8,504
5,180
(389)
5,759
(4,092)$14,962

11 Income taxes
As described in Note 2(j), the Company and its consolidated subsidiaries recognizes tax effects of temporary
differences between the carrying amounts of assets and liabilities for tax and financial reporting.
Significant components of deferred tax assets and liabilities are as follows:—
Millions of yen
2008
2007

Deferred tax assets:
Excess bonuses accrued
Excess employees’ severance and retirement benefits accrued
Excess loss on impairment of tangible fixed assets (except for leased assets)
Accumulated loss on impairment of leased assets
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gain on securities
Reserve under Special Taxation Measures Law
Total deferred tax liabilities
Net deferred tax assets

Thousands of
U.S. dollars
2008¥ 307
6,512
1,393
264
4,084
12,560(4,856)7,704¥ 365
6,937
1,111
282
3,685
12,380(3,362)9,018$ 3,064
64,996
13,904
2,635
40,763125,362(48,468)
76,894(654)(5,589)(6,243)¥1,461(1,307)(5,537)(6,844)¥ 2,174(6,528)(55,784)(62,312)$14,582

Income taxes applicable to the Company consist of corporation, enterprise, and inhabitant taxes.
Significant differences between the statutory tax rate and the Company’s effective tax rate after applying thedeferred tax accounting for the years ended March 31, 2008 and 2007 were as follows:—

Statutory tax rate
Increase (reduction) in tax resulting from:
Nondeductible expenses including entertainment, etc.
Nontaxable income including dividends received deduction, etc.
Per capita portion of inhabitant taxes
Equity in earnings of affiliates
Change in valuation allowance related to deferred tax assets
Other
Effective tax rate

2008

2007

41.53%

41.52%

3.58(10.39)21.26(1.73)
136.54(2.68)
188.11%

1.20(2.91)
6.35(1.57)—(7.15)
37.44%

12 Derivative transactions
The Group utilizes composite financial instruments with embedded derivatives for the purpose of utilizing
excess funds, but does not enter into such transactions for highly speculative purpose.
The Group is exposed to equity market price risk and credit risk in the event of nonperformance by thecounterparties to the derivative transactions, but any such loss would not be material because the Group enters
into transactions only with financial institutions with high credit ratings.
The Group enters into these transactions within pre-determined limit and “Ringi” pre-approval process isrequired for execution.
The finance department is responsible for execution and controls.

13 Cash flow statements(a) Reconciliation of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents shown in the consolidated statements of cash flows as at March 31, 2008 and 2007 are as follows:—
Millions of yen
2008
2007

Cash and time deposits
Time deposits with maturities exceeding three months
Cash equivalents included in marketable securities
Bonds with maturities exceeding three months
Cash and cash equivalents

25¥11,686(48)——¥11,638¥13,606(222)
999—¥14,383

Thousands of
U.S. dollars
2008$116,638(479)——$116,159

(b) Major assets and liabilities of newly acquired consolidated companies
The Company newly consolidated Anan Transportation Co., Ltd., and Nationwide Shirobo JSE CourierCo., Ltd. based on the acquisition of their shares in the fiscal year under review. The assets and liabilities of
the two companies acquired and the acquisition cost of the shares and acquisition expenses (net) were as
follows.
Millions of yen
2008
2007

Current assets
Property, plant and equipment
Goodwill
Current liabilities
Long-term liabilities
Acquisition cost of shares
Cash and cash equivalents acquired
Disbursements for acquisition of shares of newly consolidated subsidiaries

¥—
—
—
—
—
—
—
¥—

¥ 992
1,599
441
(868)
(1,746)
418
(366)
¥ 52

Thousands of
U.S. dollars
2008$ 9,901
15,960
4,402(8,664)(17,427)
4,172(3,653)$ 51914 Finance leases(a) Finance leases other than those which are deemed to transfer the ownership of the leased assets to lessee
The following are the acquisition costs, accumulated depreciation, accumulated impairment losses andnet book value of leased property as of March 31, 2008 and 2007 for finance leases accounted for as operating leases:—Millions of yen
2008
2007

Acquisition costs:
Machinery and tools
Other assets
Accumulated depreciation:
Machinery and tools
Other assets
Accumulated impairment losses:
Machinery and tools
Other assets¥15,759
5,866¥21,625¥16,321
5,906¥22,227$157,291
58,549$215,840¥ 8,643
1,269¥ 9,912¥ 9,618
1,056¥10,674$ 86,266
12,666$ 98,932

¥

¥

$

¥
Net book value:
Machinery and tools
Other assets

Thousands of
U.S. dollars
2008

—
756
756

¥ 7,116
3,841¥10,957

—
756
756

—
7,546
$ 7,546¥ 6,703
4,094¥10,797$ 71,025
38,337$109,362¥Amounts of depreciation expense equivalents and interest expense equivalents for the years ended March 31,
2008 and 2007 are as follows:—
Millions of yen
2008
2007

Depreciation expense
Interest expense¥2,567315¥2,601
258

Thousands of
U.S. dollars
2008$25,621
3,144

Lease payments relating to finance leases accounted for as operating leases amounted to ¥2,934 million($29,284 thousands) and ¥2,939 million ($29,334 thousand), which were equal to the depreciation expense of
the leased assets computed by the straight-line method over the lease terms, for the years ended March 31,
2008 and 2007, respectively.
In the year ended March 31, 2006, impairment losses on leased assets amounting to ¥756 million ($7,546
thousand) were recorded. Since these leased assets are off-balance-sheet, the equivalent amount is included in“Other long-term liabilities”. Impairment losses on leased assets is realized over the lease term. In the fiscal year
ended March 31, 2008 and 2007, reversal of impairment losses on leased assets amounting to ¥42 million26

($419 thousand) was recorded.
Future minimum lease payments (including the interest portion thereon) and the balance of impairment
losses on leased assets as at March 31, 2008 and 2007 for finance leases accounted for as operating leases are
summarized as follows:—
Thousands of
U.S. dollars
2008

Millions of yen
2008
2007

Due within one year
Due over one yearTotal

¥ 2,525
9,074¥11,599¥ 2,531
8,832¥11,363

Impairment losses on leased assets¥ 630¥ 672$ 25,202
90,568$115,770$ 6,288(b) Operating leases
Thousands of
U.S. dollars
2008

Millions of yen
2008
2007

Due within one year
Due over one year
Total

¥

274
4,121
¥ 4,395

¥

273
4,395
¥ 4,668$ 2,735
41,132$43,867

Millions ofyen

Thousands of
U.S. dollars

¥ 93
745

$ 9287,436

15 Contingent liabilities
As at March 31, 2008, the Company was contingently liable as follows:—
Notes endorsed
Others16 Revaluation reserve for land
In accordance with the Law concerning Revaluation of Land enacted on March 31, 1998, the Company has
revaluated its owned land used for business operations as at March 31, 2000 and reported a revaluation reserve
for land in net assets section.
The revaluated book value of land was determined based on the value of land registered on the cadastres ortheir supplementary records, which are provided by the Local Tax Law under the Law Concerning Revaluationof Land, after making reasonable adjustments.
Difference between the fair market value of revalued land at March 31, 2008
and the revalued book value

Millions ofyen

Thousands of
U.S. dollars¥9,230$92,125

17 Net assets
The Company Law provides that an amount equal to at least 10% of the aggregate amount to be distributed as
cash dividends or cash appropriations must be transferred to the legal reserve until the additional paid-in capital, which is part of the capital surplus account, and the legal reserve, which is part of retained earnings, equals
25% of the common stock account. Transfers from the legal reserve to common stock, additional paid-in capital, and other reserves may be made by resolution of the shareholders. Under the Company Law, distributionsof reserves to shareholders may be made at any time by resolution of the shareholders. The Company’s Articles
of Incorporation also provide that the Board of Directors may make distributions to shareholders based on a
resolution of the Board of Directors, provided that such distributions are limited to once per fiscal year.
(a) Information concerning changes in net assets

Treasury stock
Class of shares

Common stock (shares)

At March 31, 2007

Increase

Decrease

At March 31, 2008

6,701,913

63,250—6,765,163

Reason for the change:
Portion of treasury stock of newly consolidated subsidiaries assumed by Company:
The increase attributable to the purchase of shares amounting to less than one unit:

27

21,424 shares
41,826 shares

Stock acquisition rights
Number of shares to be issued or transferred upon exercise of stock acquisition rights

Company name

TonamiStock acquisition
Transportation rights grantedCo., Ltd.
in 2004

Class of shares to beissued or transferred
upon exercise of stockacquisition rights

Commonstock

At March
31, 2007

Increase

8,012,820

Decrease——

At March
31, 2008

Balance at
March 31, 2008
(millions of yen)

8,012,820

The number of shares to be issued or transferred upon exercise of stock acquisition rights is the number of
exercisable stock acquisition rights.
Stock acquisition rights granted in 2004 pertain to yen-denominated convertible bond type-bonds withstock acquisition rights.
(b) Stock options(1) Details of the stock options
Company nameDate of resolution
Category and number of individuals to whom
stock options were granted*2

Class of shares and number of stock options
granted (shares)*1 and 2
Grant dateConditions for vesting
Eligible service period
Exercisable period

Tonami Transportation Co., Ltd.
June 29, 2005
Directors of the Company: 12
Corporate auditors of the Company: 5
Executive officers of the Company: 11
Chairmen and presidents of consolidated subsidiaries who weredeemed eligible by the directors of the Company: 22
Common stock: 1,340,000
August 9, 2005
Not definedNot defined
From July 1, 2007, to June 30, 2010

Notes:.
1. The number is converted to the number of shares for presentation.
2. Individuals to whom stock options were granted and the number of stock options granted are those at thetime of resolution.
(2) Scale of stock options and changes
1) Number of stock options
Company nameDate of resolution
Prior to vesting
At beginning (shares)
Granted (shares)
Expired (shares)
Vested (shares)
Unvested (shares)
After vesting
At beginning (shares)
Vested (shares)
Exercised (shares)
Expired (shares)
Unexercised (shares)

Tonami Transportation Co., Ltd.
June 29, 2005
—
—
—
—
—
1,220,000——
90,0001,130,000

2) Unit priceCompany nameDate of resolution
Exercise price (yen)Average stock price upon exercise (yen)Fair value on the grant date (yen)Tonami Transportation Co., Ltd.
June 29, 2005
393
—
—

28

—

18 Supplementary income information
Supplementary income information for the years ended March 31, 2008 and 2007 is as follows:—
Millions of yen
2008
2007

Depreciation expenses
Lease and rental

Thousands of
U.S. dollars
2008¥2,6506,149¥2,594
6,312$25,891
63,00019 Amounts per share
Amounts per share of common stock for the years ended March 31, 2008 and 2007 were as follows:—
Yen

Net (loss) income per share:
Basic
DilutedCash dividends
Net assets per share:

2008

2007

¥(10.03)—
6.00¥499.38¥ 20.77
19.34
6.00¥525.17

U.S. dollars
2008$(0.1001)—
0.0599$4.9843

Although dilutive securities were outstanding, diluted net income per share for the year ended March 31, 2008
was not disclosed because of the net loss in this year.
Cash dividends per share represent the cash dividends paid during the respective years together with theinterim cash dividends paid.
Basis for the calculation of net assets per share for the years ended March 31, 2008 and 2007 were as follows:—
Millions of yen
2008
2007

Total net assets as reported on the consolidated balance sheets
Deduction:
Adjusted net assets allocated in common stock
Minority interests
Number of shares of common stock issued
Number of shares of common stock in treasury
Number of shares of common stock outstanding at the end ofyear on which net assets per share is calculated

Thousands of
U.S. dollars
2008¥48,323$458,749

45,36647,742596
581
Shares97,610,118 97,610,118
6,765,163
6,701,913

452,800
5,949¥45,962

90,844,955

90,908,205

Basis for the calculation of basic and diluted net (loss) income per share for the years ended March 31, 2008
and 2007 was as follows:—
Millions of yen
2008
2007

Net (loss) income available to shareholders of common stock:
Net (loss) income
Net (loss) income not available to shareholders of common stock(of which appropriation of bonuses to directors
and corporate auditors)
Net (loss) income available to shareholders of common stock
Weighted-average number of shares of common stock outstanding (shares)
Diluted net income available to shareholders of common stock:
Adjustments to net income:(of which commission for bonds)
Incremental number of shares of common stock(of which stock acquisition rights)
Common stock equivalents not included in calculation ofdiluted net income per share due to their non-dilutive effect29

Thousands of
U.S. dollars
2008¥1,889—($9,093)
—

(—)
(—)
(911)
1,889
90,881,929 90,939,740(—)(9,093)—(—)
6,738,544(6,738,544)—(—)¥(911)
—

—
(—)
—
(—)
(Stock option)
Stock options approved at theannual shareholders’ meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,130.)(Convertible bond-typebonds with stock acquisitionrights)Yen-denominated convertiblebond-type bond with stockacquisition rights due Sep 30,
2009(face amount: ¥2,500 million(US$ 24,953 thousand))(Stock option)
Stock options approved at theannual shareholders’ meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,220.)

20 Subsequent event(a) Bond issue

Based on a resolution past in a board of directors meeting on May 7, 2008, the Company issued a domestic
unsecured straight bond. Details are as follows.
Name:

Tonami Transportation No. 4 Secured Bond
(Special condition attached exclusive to the order of the Company’s bonds)
Issue amount:¥30 million (US$299 thousand)Issue price:
Par valueInterest rate:
2.11% per annum
Settlement date:June 5, 2008
Redemption amount: Par value
Maturity date:June 5, 2013
Allocation of funds: Redemption of bonds(b) Cash dividends

The annual shareholders’ meeting of the Company, which was held on June 27, 2008, duly approved the payment of dividends as followed:—
Cash dividends (¥3.00 per share)

Millions ofyen

Thousands of
U.S. dollars¥273$2,725

21 Segment information
The Company’s business segments consist of logistics related services classified as Logistics, information processing operations classified as Information processing, and other services classified as Others.
A summary of segment information by industry segment for the years ended March 31, 2008 and 2007 was
as follows:—
For the year ended March 31, 2008

Millions of yen
Logistics

Information
processing¥117,614
54
117,668
116,831¥
837¥2,446
262
2,708
2,284
¥ 424

Eliminations(Notes 1 and 2)

Consolidated¥130,188
7,866
138,054
136,044¥ 2,010¥
—(7,866)(7,866)(7,743)¥ (123)¥130,188—
130,188
128,301¥ 1,887¥111,376¥ 2,604¥
971¥ 2,203¥1,135
¥ 10
¥
—
¥
8

¥112,511¥ 2,594¥
971¥ 2,211

Eliminations(Notes 1 and 2)

Consolidated

OthersTotal¥10,128
7,550
17,67816,929¥ 749Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets¥ 89,297¥1,252¥20,827
Depreciation¥ 2,307¥ 163¥ 134
Impairment losses
¥
955
¥ —
¥
16
Capital expenditures¥ 2,054
¥ 77
¥
72

Net Sales:
Outside customers
Inter segment sales
Total
Costs and expenses
Operating income

For the year ended March 31, 2007

Millions of yen

Net Sales:
Outside customers
Inter segment sales
Total
Costs and expenses
Operating income

Logistics

OthersTotal¥118,010
18
118,028
117,126¥
902¥12,010
7,692
19,702
18,519¥ 1,183¥130,020
7,710
137,730
135,645¥ 2,085¥ —(7,710)(7,710)(7,644)¥ (66)¥130,020—
130,020
128,001¥ 2,019¥25,859¥ 317¥—¥ 197¥117,274¥ 2,661¥—¥ 1,748¥ 2,067
¥ 11
¥ —
¥
3

¥119,341¥ 2,650¥—¥ 1,751

Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets¥ 91,415
Depreciation¥ 2,344
Impairment losses¥—Capital expenditures¥ 1,551

30

For the year ended March 31, 2008

Net Sales:
Outside customers
Inter segment sales
Total
Costs and expenses
Operating income

Thousands of U.S. dollars
Logistics

Information
processing$1,173,909
539
1,174,448
1,166,094$
8,354$24,414
2,615
27,02922,797$ 4,232

OthersTotal

Eliminations(Notes 1 and 2)$101,088 $1,299,411
75,35778,511
176,445 1,377,922
168,969 1,357,860$ 7,476 $ 20,062

Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets$ 891,277$12,496$207,875
Depreciation$ 23,026$ 1,627$ 1,338
Impairment losses
$
9,532
$
—
$
159
Capital expenditures$ 20,501$ 768$
719

Consolidated$— $1,299,411(78,511)—(78,511) 1,299,411(77,283) 1,280,577$ (1,228) $ 18,834$1,111,648$ 25,991$
9,691$ 21,988$11,329$ 100$—$80$1,122,977$ 25,891$
9,691$ 22,068

Note 1. Operating cost and expenses included in the column “Eliminations” mainly consist of those charged by
the general affairs and finance divisions of the Company, amounting to ¥182 million ($1,817 thousand) and ¥129 million ($1,288 thousand) for the years ended March 31, 2008 and 2007, respectively.
Note 2. Corporate assets included in the column “Eliminations” mainly consist of surplus working funds (cashand marketable securities), long-term investment funds (investments in securities), and other assets
which belong to the administrative department, amounting to ¥24,816 million ($247,689 thousand) and¥27,813 million ($277,603 thousand) for the years ended March, 2008 and 2007, respectively.
Note 3. Change in accounting method
Retirement benefits for directors and corporate auditors
As indicated in the previous section on “Accounting Changes,” some consolidated subsidiaries has
accrued expected retirement benefit payments to directors and corporate auditors at the end of the fiscal year as a reserve for retirement benefits, commencing with the fiscal year ended March 31, 2008.
The effect of this change on business segments is immaterial.
Note 4. Previously, the Company’s operations were classified into two segments, namely, Logistics and Others.
However, in order to ensure that segments reflect the actual situation of the Company’s operations,effective for the year ended March 31, 2008, the information processing operations, which were previously included in the Others segment, are classified as a separate segment in view of the information
processing operations’ increased importance, and, as a result, the Company’s operations are classified
into three segment.
A summary of segment information by business segment according to the previous segment classification is as follows:
For the year ended March 31, 2008

Millions of yen
Eliminations(Notes 1 and 2)

Consolidated¥130,188
7,810
137,998
135,986¥ 2,012¥
—(7,810)(7,810)(7,685)¥ (125)¥130,188—
130,188
128,301¥ 1,887¥111,376¥ 2,604¥
971¥ 2,203¥ 1,135
¥ 10
¥
—
¥
8

¥112,511¥ 2,594¥
971¥ 2,211

Logistics

OthersTotal¥117,614
54
117,668
116,831¥
837¥12,574
7,756
20,33019,155¥ 1,175

Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets¥ 89,297¥22,079
Depreciation¥ 2,307¥ 297
Impairment losses
¥
955
¥
16
Capital expenditures¥ 2,054¥ 149Net sales:
Outside customers
Inter segment sales
Total
Costs and expenses
Operating income31For the year ended March 31, 2008

Thousands of U.S. dollars
Eliminations
Others
Total(Notes 1 and 2)

Logistics

Net sales:
Outside customers
Inter segment sales
Total
Costs and expenses
Operating income$1,173,909
539
1,174,448
1,166,094$
8,354$125,502 $1,299,411
77,413
77,952
202,915
1,377,363
191,187
1,357,281$ 11,728 $ 20,082

Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets$ 891,277$220,371
Depreciation$ 23,026$ 2,965
Impairment losses
$
9,532
$
159
Capital expenditures$ 20,501$ 1,487$1,111,648$ 25,991$
9,691$ 21,988

Consolidated$— $1,299,411(77,952)—(77,952)
1,299,411(76,704)
1,280,577$ (1,248) $ 18,834$11,329$ 100$—$80$1,122,977$ 25,891$
9,691$ 22,068

The three business segments mainly consist of the following services:
Logistics . . .

Road haulage, freight forwarding, warehousing, and harbor transport and customs
services

Information processing . . .
Others...

Information processing

Vehicle maintenance, casualty insurance, merchandising and commissioned sales andpurchases, leasing, travel services, mail order services, travel inn, and other businesses

Neither geographical segment information nor overseas sales have been presented because none of theCompany’s consolidated subsidiaries are domiciled outside Japan, and the Company and its consolidated subsidiaries had no overseas sales for the years ended March 31, 2008 and 2007.

32

Independent Auditors’ Report

The Board of Directors
Tonami Transportation Co., Ltd.
We have audited the accompanying consolidated balance sheets of Tonami Transportation Co., Ltd. and consolidated subsidiaries as of March 31, 2008 and 2007, and the related consolidated statements of operations,changes in net assets and cash flows for the years then ended, all expressed in yen. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on thesefinancial statements based on our audits.
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 theamounts 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tonami Transportation Co., Ltd. and consolidated subsidiaries at March 31, 2008 and2007, and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in Japan.
Supplemental Information
As described in the note 20 to the consolidated financial statements, the Company issued a domestic unsecured straight bond.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2008 are presented solely for convenience. Our audit also included the translation of yen amounts
into U.S. dollar amounts and, in our opinion, such translation has been made on the basis described in Note 1.

June 27, 200833

Non-Consolidated Balance Sheets
TONAMI TRANSPORTATION CO., LTD
As of March 31, 2008 and 2007ASSETS

Thousands of
U.S. dollars(Note 1)
2008

Millions of yen
2008
2007

Current assets:
Cash and time deposits¥ 9,353¥ 9,621

20

999

199

18,09018,991

180,557

(36)

(26)

(359)

Inventories

168

136

1,677

Deferred tax assets (Note 9)

450

502

4,491

8,272

8,910

82,56336,317

39,133362,481Land

32,25833,212321,968

Buildings and structures

41,54942,210414,702

Machinery and tools

6,377

6,320

63,649Vehicles

9,905

11,89098,862

564

—

5,630

(39,030)(40,049)(389,560)

51,62353,583515,251

Investments in securities

5,945

7,442

59,337

Investments in subsidiaries and affiliates

3,585

3,182

35,782

4

5

40

975

1,501

9,732

3,812

4,037

38,04814,321

16,167

142,939¥102,261¥108,883$1,020,671

Marketable securities$

93,353

Trade receivables:
Notes and accounts (Note 10)
Less: allowance for doubtful accounts

Other current assets
Total current assets

Property and equipment (Notes 4 and 5):

Construction in progress
Less: accumulated depreciation
Net property and equipment

Investments and other assets:

Loans to employees
Deferred tax assets (Note 9)
OthersTotal investments and other assets
Total assets
The accompanying Notes are an integral part of these statements.

34

LIABILITIES AND NET ASSETS

Millions of yen
2008
2007

Current liabilities:
Trade notes payable
Short-term bank loans (Note 5)
Current portion of long-term debt (Note 5)
Current portion of bonds (Note 5)
Trade accounts payable (Note 10)
Deposits from employees
Income taxes payable
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion thereof (Note 5)
Deferred tax liabilities from revaluation reserve for land (Note 13)
Employees’ severance and retirement benefits
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity (Note 14):
Common stock:
Authorized: 299,200,000 shares in 2008
299,200,000 shares in 2007
Issued:97,610,118 shares in 2008
97,610,118 shares in 2007
Capital surplus:
Capital reserve
Other capital surplus
Total capital surplus
Retained earnings:
Other retained earnings:
Reserve for deferred gain on fixed assets
Reserve for retirement benefits
Retained earnings carried forward
Total retained earnings
Treasury stock, at cost: 6,726,159 shares in 2008
6,684,333 shares in 2007
Total shareholders' equity
Valuation and translation adjustments:
Unrealized gain on securities
Revaluation reserve for land (Note 13)
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
35

¥

615
8,170
552
7,000
15,389
361
464
5,694
38,245¥

505
11,530552—
15,399
381
143
4,919
33,429Thousands of
U.S. dollars(Note 1)
2008

$

6,139
81,545
5,510
69,867
153,598
3,603
4,631
56,832
381,725

3,918
5,455
15,463941
25,77764,022

11,4695,605
16,384730
34,18867,617

39,10654,446
154,337
9,392
257,281
639,006

14,183

14,183

141,561

3,546
8,683
12,2293,546
8,956
12,50235,39386,665122,058

7,598
—
(565)
7,033

7,722
270
735
8,727

75,836—(5,639)70,197(1,994)
31,451(1,981)33,431(19,902)
313,914

1,001
5,787
6,788
38,239¥102,261

1,879
5,956
7,835
41,266¥108,883

9,991
57,76067,751
381,665$1,020,671

Non-Consolidated Statements of Operations
TONAMI TRANSPORTATION CO., LTD.
For the years ended March 31, 2008 and 2007
Thousands of
U.S. dollars(Note 1)
2008

Millions of yen
2008
2007

Operating revenues (Note 10)¥97,691¥99,082$975,057

Operating cost (Notes 10 and 15)

94,75596,452

945,753

Selling, general and administrative expenses (Notes 10 and 15)

2,334

2,040

23,296

97,08998,492

969,049

602

590

6,008

Interest and dividend income (Note 10)

534

466

5,330

(Loss) income on sale of property and equipment, net

(118)

435

(1,178)Interest expenses

(221)

(171)

(2,206)

Impairment losses (Note 7)

(971)

—

(9,691)

65

315

649

(711)

1,045

(7,096)

(109)

1,635

(1,088)Current

413

246

4,122

Deferred

1,068

553

10,660Net (loss) income¥(1,590)

Operating costs and selling, general and administrative expenses:

Operating income
Other income and expenses:

Other, net
Income (loss) before income taxes
Income taxes (Note 9):

1,481
The accompanying Notes are an integral part of these statements.

36

¥

799

14,782836$(15,870)

Non-Consolidated Statements of Changes in Net Assets
TONAMI TRANSPORTATION CO., LTD.
For the years ended March 31, 2008 and 2007
Millions of yen
Capital surplus

Shares ofcommonstock(thousands)

Balance as at March 31, 2006
Cash dividends applicable to the year(¥6.00 per share)
Transfer to retained earnings
Net income
Transfer from other capital surplus
Reversal of reserve for deferred gain on
fixed assets
Transfer to reserve for deferred gain on
fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2007
Cash dividends applicable to the year(¥6.00 per share)
Transfer to retained earnings
Net loss
Transfer from other capital surplus
Reversal of reserve for deferred gain on
fixed assets
Transfer to reserve for deferred gain on
fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other thanshareholders’ equity

Balance as at March 31, 2008

Commonstock

Capitalreserve

Other
capitalsurplusTotal
capitalsurplus97,610 ¥14,183 ¥ 3,546 ¥11,141 ¥14,687(546)(1,639)Total
shareholders’equity¥(1,964) ¥32,869(546)(1,639)
836
1,639
—
—
—
289
(17)
(17)
—
¥(1,981) ¥33,431(546)—(1,590)
—
—
—
—
169
(13)
(13)
—
¥(1,994) ¥31,451

Balance as at March 31, 2006
Cash dividends applicable to the year (¥6.00 per share)
Transfer to retained earnings
Net income
Transfer from other capital surplus
Reversal of reserve for deferred gain on fixed assets
Transfer to reserve for deferred gain on fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than shareholders’ equity
Balance as at March 31, 2007
Cash dividends applicable to the year (¥6.00 per share)
Transfer to retained earnings
Net loss
Transfer from other capital surplus
Reversal of reserve for deferred gain on fixed assets
Transfer to reserve for deferred gain on fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than shareholders’ equity

Balance as at March 31, 2008
The accompanying Notes are an integral part of these statements.

37

Other
retainedearnings¥¥5,963 ¥ 5,963

—

836
1,639

Total
retainedearnings

—
—
836
1,639

—

—

—
—
—
—

—
—
289
—

289

¥

—
— ¥ 8,727 ¥ 8,727

(273)
—
—
—

(273)
(1,590)(273)—(1,590)
—

—

—

—
—
—
—

—
—
169
—

—
97,610 ¥14,183 ¥ 3,546 ¥ 8,683 ¥12,229

Treasury
stock

Legal
reserve(546)(1,639)———97,610 ¥14,183 ¥ 3,546 ¥ 8,956 ¥12,502(273)

Retained earnings

169

¥

—
— ¥ 7,033 ¥ 7,033

Millions of yen
Valuation and translation adjustments
Unrealized
Revaluation Total valuation
gain onreserveand translation
securities
for landadjustments¥2,444¥6,245(565)¥1,879(289)¥5,956(878)¥1,001(169)¥5,787Total
net assets¥8,689 ¥41,558
—
(546)
—
(1,639)
—
836
—
1,639
—
—
—
—
—
—
—
289
—
(17)
(854)
(854)
¥7,835 ¥41,266(546)—(1,590)
—
—
—
—
169
(13)
(1,047) (1,047)¥6,788 ¥38,239

Commonstock

Balance as at March 31, 2006
Cash dividends applicable to the year($0.0599 per share)
Transfer to retained earnings
Net income
Transfer from other capital surplus
Reversal of reserve for deferred gain on fixed assets
Transfer to reserve for deferred gain on fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than shareholders’ equity
Balance as at March 31, 2007
Cash dividends applicable to the year($0.0599 per share)
Transfer to retained earnings
Net loss
Transfer from other capital surplus
Reversal of reserve for deferred gain on fixed assets
Transfer to reserve for deferred gain on fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than shareholders’ equity
Balance as at March 31, 2008

CapitalreserveThousands of U.S. dollars (Note 1)
Capital surplus
Retained earnings
Other
Total
Other
Total
capitalcapitalLegalretainedretained
surplussurplusreserveearnings
earnings$141,561$35,393 $111,198 $146,591$141,561(5,450) (5,450)(16,358) (16,358)
—
—
—
—
—
—
—
—
$35,393 $ 89,390 $124,783(2,725)(2,725)
—
—
—
—
—
—
—
—
—
$141,561 $35,393 $ 86,665 $122,058

Treasurystock$—$59,517

8,344
16,3582,885$—$87,104$59,517——
8,344
16,358
—
—
—
2,885
—
—
$87,104(2,725)(2,725)—(15,870) (15,870)
—
—
—
—
1,688
1,688
—
—
$ — $70,197 $70,197

Thousands of U.S. dollars (Note 1)
Valuation and translation adjustments
Total
Unrealized
Revaluation Total valuation
shareholders’gain onreserveand translation
equitysecurities
for landadjustments

Total
net assets$(19,602) $328,067 $24,393 $62,332 $86,725 $414,792(5,450)—(5,450)(16,358)— (16,358)
8,344
—
8,344
16,358—16,358
—
—
—
—
—
—
—
—
—
2,885
—
2,885
(170)
(170)
—
(170)
—
(5,639) (2,885) (8,524) (8,524)$(19,772) $333,676 $18,754 $59,447 $78,201 $411,877(5,450)—(5,450)———(15,870)— (15,870)
—
—
—
—
—
—
—
—
—
—
—
—
1,688
—
1,688
(130)
(130)
—
(130)
—
(8,763) (1,687) (10,450) (10,450)$(19,902)$313,914 $ 9,991 $57,760 $67,751 $381,665

Balance as at March 31, 2006
Cash dividends applicable to the year ($0.0599 per share)
Transfer to retained earnings
Net income
Transfer from other capital surplus
Reversal of reserve for deferred gain on fixed assets
Transfer to reserve for deferred gain on fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than shareholders’ equity
Balance as at March 31, 2007
Cash dividends applicable to the year ($0.0599 per share)
Transfer to retained earnings
Net loss
Transfer from other capital surplus
Reversal of reserve for deferred gain on fixed assets
Transfer to reserve for deferred gain on fixed assets
Reversal of reserve for various purposes
Reversal of revaluation reserve for land
Purchase of treasury stock
Net changes in items other than shareholders’ equity
Balance as at March 31, 2008
The accompanying Notes are an integral part of these statements.

38

Notes to the Non-Consolidated Financial Statements
TONAMI TRANSPORTATION CO., LTD.

1 Basis of presenting financial statements
The accompanying non-consolidated financial statements have been prepared based on the accounts maintained by Tonami Transportation Co., Ltd. (the “Company”) in accordance with accounting principles generally
accepted in Japan, which differ in certain respects as to the application and disclosure requirements ofInternational Financial Reporting Standards. In preparing these non-consolidated financial statements, certain
reclassifications and rearrangements have been made to the Company’s non-consolidated financial statements
issued domestically in order to present them in a format which is more familiar to readers outside Japan.
Furthermore, accounting principles generally accepted in Japan permit companies which disclose certain
information in the consolidated financial statements and the notes thereto to omit such information from their
non-consolidated financial statements and the notes thereto. Accordingly, the Company has omitted the notes
for employees’ severance and retirement benefits and certain other information from the accompanying nonconsolidated financial statements and the notes thereto. Refer to the consolidated financial statements and thenotes thereto for this information.
U.S. dollar amounts presented in the financial statements are included solely for convenience and should not
be construed as representations that Japanese yen amounts have been or could in the future be converted into
U.S. dollars. The rate of ¥100.19 = U.S.$1, prevailing on March 31, 2008, has been used for the translation
into U.S. dollar amounts in the financial statements.

2 Summary of significant accounting policies(a) Non-consolidation

The accompanying non-consolidated financial statements include only the accounts of the Company.
Investments in subsidiaries and affiliates are stated at cost.
(b) Marketable securities and investments in securities

Securities, except for investments in unconsolidated subsidiaries and affiliates, are classified as trading securities, held-to-maturity securities or other securities. Trading securities are carried at fair value. Held-to-maturity
securities are carried at amortized cost. Marketable securities classified as other securities are carried at fairvalue with any unrealized gain or loss reported as a separate component of stockholders’ equity, net of taxes.
Non-marketable securities classified as other securities are carried at cost.
Cost of securities sold is determined principally by the moving average method.
(c) Derivatives

Derivative financial instruments are stated at fair value.
(d) Inventories

Inventories are stated at cost, cost being determined principally by the last purchase price method.
(e) Allowance for doubtful accounts

Allowance for doubtful accounts is provided in an amount sufficient to cover possible losses on collection.
Said amount is computed by applying the rate of actual losses on collection experienced in the past withrespect to general trade receivables and by individually reviewing their collectibility with respect to certain
doubtful receivables.
(f) Property and equipment and intangible assets

Property and equipment are stated at cost. However, under Japanese tax law, capital gains arisen from disposals
and other similar transactions are deducted from the cost of the property and equipment acquired in substitution.
Depreciation of property and equipment is computed by the declining-balance method over the useful life of
the assets as determined by law, except for buildings and structures, which are depreciated by the straight-line
method.
The ranges of useful lives of principal property and equipment are as follows:
Buildings and structures . . 2-50 years
Machinery and vehicles  . . 2-15 years
Amortization of intangible assets is principally computed using the straight-line method on the presumptionof having no salvage value.
39

(g) Leases

Finance leases other than those which are deemed to transfer the ownership of the leased assets to lessee areaccounted for by the method similar to that applicable to ordinary operating leases.
(h) Employees’ severance and retirement benefits

Full-time employees of the Company are entitled to a lump-sum payment upon retirement or severance of
employment. In order to provide for the employees’ severance and retirement benefits, the Company assumes aliability for severance and retirement benefits, which is included in the liability section of the non-consolidatedbalance sheets, based on the estimated amounts of projected benefit obligation and plan assets at the balance
sheet dates.
Past service costs are recognized in expenses using the straight-line method over 11 years (a period notexceeding the employees average remaining service lives) commencing with the year incurred.
Actuarial gains and losses are recognized in expenses using the straight-line method over 11 years (a period
not exceeding the employees’ average remaining service lives) commencing with the year following their occurrence.
The Company has defined benefit plans, including a lump-sum payment plan and a contributory welfare
pension plan. The Company revised its pension plans and shifted them to a cash balance plan (money marketinterest-rate linked type) on June 1, 2004.
(i) Income taxes

Income taxes consist of corporation, enterprise, and inhabitant taxes.
The Company recognizes tax effects of temporary differences between the carrying amounts of assets and liabilities for tax and financial reporting.
(j) Net income per share

Basic income per share is computed using the weighted-average number of shares of common stock outstanding, which represents the number of issued shares less treasury stock, during each year.

3 Accounting changes(a) Accounting Standard for Presentation of Net Assets in the Balance Sheet, etc.

Effective the year ended March 31, 2007, the Company adopted a new accounting standard for the presentation of net assets in the balance sheet and the related implementation guidance. In addition, effective the year
ended March 31, 2007, the Company is required to prepare consolidated statements of changes in net assets
instead of consolidated statements of shareholders’ equity.
In this connection, previously reported non-consolidated financial statements have been restated to conformto the revised rules for presentation of financial statements.
(b) Change of Accounting Category for Selling, General, and Administrative Expenses and Cost of Sales

In view of the increased importance of the Company’s information processing operations, beginning with thefiscal year ended March 31, 2007, the Company has changed the information processing operations to a divisional structure, as is the case with its other business operations.
Previously, expenses incurred in the conduct of information processing operations were recorded as selling,
general, and administrative expenses. Beginning with the fiscal year ended March 31, 2007, in order to more
appropriately present gross operating income the Company has included information processing business
expenses in operating cost so that they directly correspond to operating revenues.
As a result of this change, as compared to the previous accounting treatment, operating cost increased ¥526
million (US$5,250 thousand) , and gross operating income decreased by the same amount.
As selling, general, and administrative expenses decreased by the same amount, the change has had no effecton operating income, income before taxes and minority interests, or net income.

4 Property and equipment
As stated above, capital gains resulting from disposals and other similar transactions are deducted from the costof property and equipment acquired in substitution.
The amounts deducted from the cost of property and equipment was ¥195 million ($1,946 thousand) and¥197 million ($1,966 thousand) as at March 31, 2008 and 2007, respectively.

40

5 Short-term bank loans and long-term debt(a) Short-term bank loans

Short-term bank loans as at March 31, 2008 and 2007 were as follows:—
Millions of yen
2008
2007

SecuredUnsecured¥2,7205,450¥2,7208,810

Thousands of
U.S. dollars
2008$27,148
54,397

Interest rates range from 1.270% to 1.479%.
(b) Long-term debt

Long-term debt as at March 31, 2008 and 2007 was as follows:—
Millions of yen
2008
2007

0.89% ¥6.4 billion unsecured straight bonds due 2008
¥ 6,400
0.52% ¥0.6 billion unsecured straight bonds due 2008
600
0.00% ¥2.5 billion unsecured convertible bond typebonds with stock acquisition rights due 2009
2,500
1.570%-2.100% loans from financial institutions due 2009 to 2013 and thereafter
Secured799
Unsecured
1,171
Total
11,470Less: amount due within one year
7,552
¥ 3,918

Thousands of
U.S. dollars
2008¥ 6,400
600$63,879
5,988

2,500

24,953976
1,545
12,021
552¥11,469

7,975
11,688114,483
75,377$39,106

The maturity date of the ¥6.4 billion 0.89% unsecured straight bonds, issued in June 2003 is June 30, 2008.
The maturity date of the ¥0.6 billion 0.52% unsecured straight bonds, issued in June 2003 is June 30, 2008.
The maturity date of the ¥2.5 billion 0.00% unsecured convertible bond type- bonds, issued in July 2004 is
September 30, 2009.
The annual maturities of long-term debt outstanding as at March 31, 2008 were as follows:—
Year ending March 31,

Millions ofyen

Thousands of
U.S. dollars

2009
2010
2011
2012
2013 and thereafter¥3,050
454
159
74
181

$30,442
4,531
1,587
739
1,807

(c) Pledged assets

As at March 31, 2008, Property and equipment having a net value of ¥12,943 million ($129,185 thousand) was
pledged as collateral for short-term bank loans and long-term debt (including current portion of long-term debt).

6 Overdraft facility and credit line commitment agreements
The Company has entered into overdraft facility and credit line commitment agreements with ten banks for the
purpose of efficient procurement of working capital.
Outstanding balance of unused credit concerning overdraft facility and credit line commitment agreements at
March 31, 2008, was as follows:
Maximum credit line of overdraft facility and commitment agreement
Used credit
Total

Millions ofyen

Thousands of
U.S. dollars¥3,000—¥3,000$29,943—$29,943

7 Impairment losses
During the fiscal year ended March 31, 2008, the Company recorded impairment losses concerning the following asset groupings.

Usage

Type

Location

Haulage andwarehouse facilities

Land and buildings

5 sites, including Nishikasugai
Ward, Aichi prefecture

Impairment losses Impairment losses(millions of(thousands ofyen)
U.S. dollars)¥971$9,691The Company is a comprehensive logistics enterprise including the road haulage operation. Organizations
belonging to operations implement management accounting.
41

Business facilities in various locations are bases for providing the Company’s comprehensive distribution
solution services to customers. In many cases, organizations of operations are located at these business facilities
and deal with their customers.
Organizations of operations have complementary relationships. Business facilities constitute the unit for generating cash flows. The aggregate assets of organizations located at each business facility constitute an asset
grouping.
Regarding the asset groupings for which impairment losses were recorded, future cash flow losses were projected partly to be short owing to sharp increase fuel costs reflecting high oil prices and increase in cost of payment to sub contractors. Thus, the carrying values of the asset groupings were reduced by the unrecoverable
values and an impairment loss amounting to ¥971 million (US$9,691 thousand) was recorded as an extraordinary loss.
The breakdown of the impairment losses is as follows:¥548 million (US$5,469 thousand) concerning land and ¥423 million (US$4,222 thousand) concerningbuildings.
In regard to asset groupings, recoverable value of land and buildings is measured based on the net sales
value. Net sales value is assessed based mainly on appraisal value provided by real-estate appraisers. Immaterial
assets are assessed based on carrying value.

8 Retirement benefits for directors and statutory auditors
At the annual general meeting of shareholders held on June 28, 2007, it was decided to abolish the Company’ssystem for retirement benefits for directors and corporate auditors.

9 Income taxes
As described in Note 2(i), the Company recognizes tax effects of temporary differences between the carrying
amounts of assets and liabilities for tax and financial reporting.
Significant components of deferred tax assets and liabilities are as follows:—
Millions of yen
2008
2007

Deferred tax assets:
Excess bonuses accrued
Excess employees' severance and retirement benefits accrued
Excess loss on impairment of tangible fixed assets (except for leased assets)
Accumulated loss on impairment of leased assets
Other
Gross deferred tax assets
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Unrealized gain on securities
Reserve under Special Taxation Measures Law
Total deferred tax liabilities
Net deferred tax assets

227
6,253
1,356
255
2,570
10,661(3,389)
7,272

¥

2,299
10,557(2,030)8,527$ 2,266
62,412
13,534
2,545
25,651
106,408(33,826)
72,582(688)(5,159)(5,847)¥ 1,425(1,281)(5,243)(6,524)¥ 2,003(6,867)(51,492)(58,359)$14,223

¥

279
6,625

Thousands of
U.S. dollars
2008

1,082
272

Income taxes applicable to the Company consist of corporation, enterprise, and inhabitant taxes.
Significant differences between the statutory tax rate and the Company’s effective tax rate after applying thedeferred tax accounting for the years ended March 31, 2008 and 2007 are as follows:—
Statutory tax rate
Increase (decrease) in tax resulting from:
Nondeductible expenses including entertainment, etc.
Nontaxable income including dividends received deduction, etc.
Per capita portion of inhabitant taxes
Other
Effective tax rate

2008

2007

—

40.44%—

1.89(5.34)
11.74
0.16
48.89%————

No item was listed in the column "2008" on the above table, because the Company recorded a loss before
income taxes in the year ended March 31, 2008.

42

10 Accounts and transactions with subsidiaries and affiliates
As at March 31, 2008, the Company had 31 subsidiaries and 7 affiliates.
Receivables from, payables to, and transactions with these subsidiaries and affiliates are summarized asfollows:—
Millions of yen
2008
2007

Notes and accounts receivable
Loans receivable
Trade accounts payable

¥

163
7,248
10,895

¥

205
7,936
10,921Millions of yen
2008
2007

Operating revenues
Operating cost
Interest income¥ 1,979
11,137210¥ 2,305
10,595
178

Thousands of
U.S. dollars
2008$ 1,627
72,343
108,743
Thousands of
U.S. dollars
2008$ 19,752
111,159
2,096

11 Finance leases(a) Finance leases other than those which are deemed to transfer the ownership of the leased assets tolessee

The following are the acquisition costs, accumulated depreciation, accumulated impairment losses and net
book value of leased property as of March 31, 2008 and 2007 for finance leases accounted for as operating leases:—Millions of yen
2008
2007

Acquisition costs:
Machinery and tools
Other assets
Accumulated depreciation:
Machinery and tools
Other assets
Accumulated impairment losses:
Machinery and tools
Other assets
Net book value:
Machinery and tools
Other assets

Thousands of
U.S. dollars
2008¥12,983
5,834¥18,817¥13,843
5,834¥19,677$129,584
58,229$187,813¥ 7,124
1,241¥ 8,365¥ 8,219995¥ 9,214$ 71,105
12,386$ 83,491

¥

$

¥

—

¥

756
756

¥ 5,859
3,837¥ 9,696

—

—
756
756

7,546
$ 7,546¥ 5,624
4,083¥ 9,707$ 58,479
38,297$ 96,776¥Amounts of depreciation expense equivalents and interest expense equivalents for the years ended March 31,
2008 and 2007 are as follows:—
Millions of yen
2008
2007

Depreciation expense
Interest expense¥2,141271¥2,192
222

Thousands of
U.S. dollars
2008$21,369
2,705

Lease payments relating to finance leases accounted for as operating leases amounted to ¥2,466 million($24,613 thousand) and ¥2,492 million($24,873 thousand), which were equal to the depreciation expense of
the leased assets computed by the straight-line method over the lease terms, for the years ended March 31,
2008 and 2007, respectively.
In the year ended March 31, 2006, impairment losses on leased assets amounting to ¥756 million ($7,546
thousand) were recorded. Since these leased assets are off-balance-sheet, the equivalent amount is included in“Other long-term liabilities”. Impairment losses on leased assets is realized over the lease term. In the fiscal year
ended March 31, 2008 and 2007, reversal of impairment losses on leased assets amounting to ¥42 million($419 thousand) was recorded.

43

Future minimum lease payments (including the interest portion thereon) and the balance of impairment
losses on leased assets at March 31, 2008 and 2007 for finance leases accounted for as operating leases are
summarized as follows:—
Thousands of
U.S. dollars
2008

Millions of yen
2008
2007

Due within one year
Due over one year
Total
Impairment losses on leased assets¥ 2,096
8,256¥10,352¥ 630¥ 2,150
8,119¥10,269¥ 672$ 20,920
82,404$103,324$ 6,288(b) Operating leases
Thousands of
U.S. dollars
2008

Millions of yen
2008
2007

Due within one year
Due over one year
Total

¥ 2744,121¥4,395¥ 2734,395¥4,668$ 2,735
41,132$43,867

Millions ofyen

Thousands of
U.S. dollars¥568$5,669

12 Contingent liabilities
As at March 31, 2007, the Company was contingently liable as follows:—
Others13 Revaluation reserve for land
In accordance with the Law concerning Revaluation of Land enacted on March 31, 1998, the Company has
revaluated its owned land used for business operations as at March 31, 2000 and reported a revaluation reserve
for land in net assets section.
The revaluated book value of land was determined based on the value of land registered on the cadastres ortheir supplementary records, which are provided by the Local Tax Law under the Law Concerning Revaluationof Land, after making reasonable adjustments.
Difference between the fair market value of revaluated land
at March 31, 2008 and the revaluated book value

Millions ofyen

Thousands of
U.S. dollars¥9,230$92,125

14 Net assets
The Company Law provides that an amount equal to at least 10% of the aggregate amount to be distributed as
cash dividends or cash appropriations must be transferred to the legal reserve until the additional paid-in capital, which is part of the capital surplus account, and the legal reserve, which is part of retained earnings, equals
25% of the common stock account. Transfers from the legal reserve to common stock, additional paid-in capital, and other reserves may be made by resolution of the shareholders. Under the Company Law, distributionsof reserves to shareholders may be made at any time by resolution of the shareholders. The Company’s Articles
of Incorporation also provide that the Board of Directors may make distributions to shareholders based on a
resolution of the Board of Directors, provided that such distributions are limited to once per fiscal year.
(a) Information concerning changes in net assets

Treasury stock
Class of shares

Common stock (shares)

At March 31, 2007

Increase

Decrease

At March 31, 2008

6,684,333

41,826—

6,726,159

Reason for the change:
The increase attributable to the purchase of shares amounting to less than one unit:

41,826 shares

15 Supplementary income information
Supplementary income information for the years ended March 31, 2008 and 2007 is as follows:—
Millions of yen
2008
2007

Depreciation expenses
Lease and rental¥1,7554,091

44¥1,816
3,997

Thousands of
U.S. dollars
2008$17,51740,832

16 Amounts per share
Amounts per share of common stock for the years ended March 31, 2008 and 2007 were as follows:—
Yen
2007

2008

Net (loss) income per share:
Basic
DilutedCash dividends
Net assets per share¥(17.49)—
6.00¥420.75

¥

9.19
8.55
6.00
¥453.84

U.S. dollars
2008$(0.1746)—
0.0599$4.1995

Although dilutive securities were outstanding, diluted net income per share for the year ended March 31, 2008
was not disclosed because of the net loss in this year.
Cash dividends per share represent the cash dividends paid during the respective years together with theinterim cash dividends paid.
Basis for the calculation of net assets per share for the years ended March 31, 2008 and 2007 were as
follows:—
Millions of yen
2008
2007

Total net assets as reported on the non-consolidated balance sheets
Net assets allocated in common stock¥38,239¥41,266
38,23941,266
Shares97,610,118 97,610,118
6,726,159 6,684,333

Number of shares of common stock issued
Number of shares of common stock in treasury
Number of shares of common stock outstandingat the end of year on which net assets per share is calculated

Thousands of
U.S. dollars
2008$381,665
381,665

90,883,959 90,925,785

Basis for the calculation of basic and diluted net (loss) income per share for the years ended March 31, 2008
and 2007 was as follows:—
Millions of yen
2008
2007

Thousands of
U.S. dollars
2008

Net (loss) income available to shareholders of common stock:
Net (loss) income¥(1,590)¥ 836$(15,870)
Net (loss) income not available to shareholders of common stock———(of which appropriation of bonuses to directors and corporate auditors)
(—)
(—)
(—)
Net (loss) income available to shareholders of common stock(1,590)836(15,870)
Weighted-average number of shares of common stock outstanding (shares)
90,904,860 90,957,320
Diluted net income available to shareholders of common stock :Adjustments to net income:
—
—
—
(—)
(of which commission for bonds)(—)(—.)
Incremental number of shares of common stock— 6,738,544(of which stock acquisition rights)(—) (6,738,544)(Stock option)(Stock option)
Common stock equivalents not included in calculationof diluted net income per share due to their anti-dilutive effect Stock options approved at the Stock options approved at theannual shareholders' meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,130.)(Convertible bonds with stockacquisition rights)
Yen-denominated convertiblebond-type bond with stock acquisition rights due Sep 30,
2009(face amount: ¥2,500 million(US$ 24,953 thousand))annual shareholders' meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,220.)

17 Subsequent event(a) Conversion to a holding company through a corporate split

In a meeting of the Company’s Board of Directors on April 10, 2008, the decision was taken to convert theCompany to a holding company using a corporate split method. Through the corporate split, the Company will
become a holding company and change its name to Tonami Holdings Co., Ltd., effective October 1, 2008. The
Company plans to remain a listed company.
The Company has obtained approval for the corporate split and the change in company name in a regular
general meeting of shareholders held on June 27, 2008.

45

(1) Purpose of corporate split
The Company expects pace of reorganization of the logistics industry through M&A, internationalization, andbusiness tieups to accelerate. To respond accurately to the changes in its business environment, the Company
believes strengthening its business base is an urgent task.
By converting to a holding company system, the Company will be able to separate its oversight and businessexecution functions, strengthening its corporate governance system. It will also be able to clarify the responsibility and authority of each operating company enabling rapid strategic decision-making. Through these changes the Company is aiming to achieve speedy management and systematic business execution in an efficientmanner.
Overall, the Company will be targeting maximization of corporate worth by reinforcing the competitivenessof the Group and by pursuing a growth strategy. The Company intends to achieve these goals through suchmeasures as increasing the efficiency of sharing functions by pursuing the smooth reorganization of each operating company in the Group and by further increasing management efficiency through optimal allocation ofbusiness resources and expanding its businesses in each business field.
(2) Corporate split schedule
April 10, 2008
April 10, 2008
April 10, 2008
June 27, 2008
October 1, 2008

Corporate split decision by Board of Directors
Absorption merger vehicle company established
Absorption merger agreement concluded
Approval of corporate split and absorption merger bygeneral meeting of shareholders
Corporate split date (Effective Date)(Company)(Absorption merger vehicle company)(Both companies)(Both companies)(Planned by both companies)(3) Corporate split method
The corporate split method used will be the physical corporate split method whereby the Company will spin
off its operations to its wholly owned subsidiary Tonami Transportation Absorption Merger Vehicle Co., Ltd.
The Company has used this corporate split method because it enables business activities to start smoothly
from the Effective Date of the corporate split. The absorption merger vehicle company will obtain the various
approvals required for operations and make necessary preparations beforehand.
(4) Allocation of shares
The Tonami Transportation Absorption Merger Vehicle Co., Ltd., will issue 9,990 common shares, which arescheduled to be allocated 100% to the Company.
(5) Obligations succeeded to by Tonami Transportation Absorption Merger Vehicle Co., Ltd.
As stipulated by the corporate split agreement concluded between the Company and Tonami Transportation
Absorption Merger Vehicle Co., Ltd., on April 10, 2008, Tonami Transportation Absorption Merger Vehicle Co.,
Ltd., will assume all rights and obligations for the Company’s logistics business (road haulage, freight forwarding, warehousing, and harbor transport and customs services) and others business (vehicle maintenance, merchandising, casualty insurance, commissioned sales and purchases, and other businesses). For said businesses,
Tonami Transportation Absorption Merger Vehicle will assume the assets, liabilities and employment contracts,
basic business agreements, real estate lease agreements, business commission agreements, lease agreements,
and all other contractual agreements and all the rights and obligations of all contractual agreements and alllegally transferable rights and obligations, such as licenses, permits, approvals, official filings, and registrations,etc.
(6) Outline of successor company
Company name:
Tonami Transportation Absorption Merger Vehicle Co., Ltd. (See note)
Major business:
Logistics business and others business
Establishment:
April 10, 2008
Head office:2-12, Showa-machi 3-chome, Takaoka, Toyama Prefecture
Title and name of representative: Katsusuke Watanuki
Paid in capital:¥10 million ($100 thousand)Number of shares issued:
10 shares
Net assets:¥10 million ($100 thousand)Total assets:¥10 million ($100 thousand)Fiscal year-end:
March 31
Employees:0Note: The subsidiary plans to change its name to Tonami Transportation Co., Ltd., on October 1, 2008. The
Company plans to change its name to Tonami Holdings Co., Ltd., on the same date.

46

(7) Details of businesses to be spun off
The Company plans to transfer its logistics business (road haulage, freight forwarding, warehousing, and harbor transport and customs services) and others business (vehicle maintenance, merchandising, casualty insurance, commissioned sales and purchases, and other businesses) that it has been operating up until the Effective
Date to its spin off division (Tonami Transportation Absorption Merger Vehicle Co., Ltd.)(8) Business results of spin off division
Tonami Transportation Absorption Merger Vehicle Co., Ltd.
Operating revenues
Operating income¥Millions ofyen

Thousands of
U.S. dollars

97,691
602$975,057
6,008

Note: following the transfer of the Company’s logistics related business and others business to Tonami
Transportation Absorption Merger Vehicle Co., Ltd., the business results of the spin off division (Tonami
Transportation Absorption Merger Vehicle Co., Ltd.) will be the business results of the Company for the fiscal
year ended March 2008.
(b) Bond issue

Based on a resolution past in a board of directors meeting on May 7, 2008, the Company issued a domestic
unsecured straight bond. Details are as follows.
Name:

Tonami Transportation No. 4 Secured Bond
(Special condition attached exclusive to the order of the Company’s bonds)
Issue amount:¥30 million (US$299 thousand)Issue price:
Par valueInterest rate:
2.11% per annum
Settlement date:June 5, 2008
Redemption amount: Par value
Maturity date:June 5, 2013
Allocation of funds: Redemption of bonds(c) Cash dividends

The annual shareholders’ meeting of the Company, which was held on June 28, 2008, duly approved the payment of dividends as follows:—
Cash dividends (¥3.00 per share)

47

Millions ofyen

Thousands of
U.S. dollars¥273$2,725

Independent Auditors’ Report

The Board of Directors
Tonami Transportation Co., Ltd.

We have audited the accompanying non-consolidated balance sheets of Tonami Transportation Co., Ltd. as ofMarch 31, 2008 and 2007, and the related non-consolidated statements of operations, and changes in net
assets for the years then ended, all expressed in yen. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on
our audits.
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 theamounts 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 financial statements referred to above present fairly, in all material respects, the non-consolidated financial position of Tonami Transportation Co., Ltd. at March 31, 2008 and 2007, and the non-consolidated results of its operations for the years then ended in conformity with accounting principles generally
accepted in Japan.
Supplemental Information
As described in the note 17 to the non-consolidated financial statements, (a) the Company issued a domestic
unsecured straight bond and (b) conversion to a holding company through a corporate split are decided andresolved.
The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year
ended March 31, 2008 are presented solely for convenience. Our audit also included the translation of yen
amounts into U.S. dollar amounts and, in our opinion, such translation has been made on the basis describedin Note 1.

June 27, 200848

Non-Consolidated Five-Year Summary
TONAMI TRANSPORTATION CO., LTD
Years ended March 31

2004

2005

2007

2008

Thousands of
U.S. dollars
2008¥ 99,082¥ 97,691$975,057

Millions of yen
2006

RESULTS OF OPERATIONS:
Operating revenues¥100,679¥ 99,504 ¥ 98,978

Operating cost

96,372

95,30895,66096,452

94,755

945,753

Selling, general and administrative expenses

2,800

2,819

2,608

2,040

2,334

23,296

Operating income

1,507

1,377

710

590

602

6,008

Income (loss) before income taxes

1,769

1,813

(6,796)

1,635

(109)

(1,088)Net income (loss)

684

862

(6,026)836(1,590)(15,870)

Capital expenditures

6,684

3,289

1,117

1,049

1,372

13,694

Depreciation expenses

1,796

1,860

1,697

1,816

1,755

17,5179.09 ¥ (66.22) ¥

9.19¥ (17.49)$(0.1746)

6.00

6.00

6.00

6.00

0.0599¥ 39,631 ¥ 39,113¥ 39,133¥ 36,317$362,481

PER SHARE (yen and U.S. dollars):
Net income (loss)
Cash dividends

¥

6.96
8.00

¥

YEAR-END FINANCIAL POSITION:
Total current assets¥ 33,883

Net property and equipment

62,26062,69555,12153,58351,263515,251

Total assets

109,202

116,108

110,876

108,883

102,261

1,020,671

Total current liabilities

30,10934,99334,92633,42938,245

381,725

Long-term liabilities, excluding of current portion thereof

31,61633,142

34,392

34,18825,777257,281

Total net assets

47,47747,972

41,55841,26638,239381,665

Number of share outstanding (thousand)

97,61097,61097,61097,61097,610

Number of employees

5,462

5,429

5,298

5,139

5,075

OTHER YEAR-END DATA:

49

Consolidated Subsidiaries

Location(Prefecture)

Company NameBusiness LineTokyo

Tonami Business Service Co., Ltd.

Financial service

Tonami Air Service Co., Ltd.

Customs clearance service

Ibaragi

Ibaragi Tonami Transportation Co., Ltd.

Road haulage

Kanagawa

Shonan Tonami Transportation Co., Ltd.

Road haulage

Kanagawa Tonami Transportation Co., Ltd.

Road haulage

Tonami Global Logistics Co., Ltd.

Harbor transport service

Kanto Tonami Transportation Co., Ltd.

Road haulage

Saitama Tonami Transportation Co., Ltd.

Road haulage

Niigata

Niigata Tonami Transportation Co., Ltd.

Road haulage

NaganoAnan Transportation Co., Ltd.

Road haulage

Nationwide Shirobo JSE Courier Co., Ltd.

Road haulage

Gosei Tonami Transportation Co., Ltd.

Road haulage

Zento Transportation Co., Ltd.

Road haulage

ATS Co., Ltd.

Road haulage

Tonami Trading Co., Ltd.

Trading Company

Toyo Gomu Hokuriku Hanbai Co., Ltd.

Sale of tires

Toyama Jizake Hanbai Co., Ltd.

Sale of liquor

Toyo Tire Toyama shop Co., Ltd.

Sale of tires

Tonami Staff Support Co., Ltd.

Detached service

Shogawa Kanko Co., Ltd.

Travel inns

Tonami Automobile Technology Research Institute Co., Ltd.

Automobile technology R&D

Ishikawa

Ishikawa Tonami Transportation Co., Ltd.

Road haulage

Fukui

Fukui Tonami Transportation Co., Ltd.

Road haulage

Takefu Transportation Co., Ltd.

Road haulage

Aichi

Chukyo Tonami Transportation Co., Ltd.

Road haulage

Shiga

Kawai Transportation Co., Ltd.

Road haulage

Kyoto

Keishin Warehousing Co., Ltd.

Warehousing

Keishin System Research Co., Ltd.

Development and sale of software

Osaka Tonami Transportation Co., Ltd.

Road haulage

Kansai Tonami Transportation Co., Ltd.

Road haulage

SaitamaToyamaOsaka

50

Board of Directors and Statutory Auditors

Chairman and Representative Director
Yoshihiro Minami
President and Representative Director
Katsusuke Watanuki
Senior Managing Directors
Akiyoshi Kunisada
Kohichi Kishida
Managing Director
Shigeki Sakamoto

Directors
Yasuo Terabayashi
Yoshinobu Watanabe
Toshiyuki Koroku
Shigeyuki Okada
Masayuki Ishimaru
Yoshimi Nagahara
Kazuo Takata
Shinichi Izumi
Standing Corporate Auditors
Mitsuo Matsuda
Masafumi Takebe

Director and Adviser
Yohsuke Konishi

Corporate Auditors
Shinichiro Inushima
Toshio Yaeda
Yohji Ishiguro(As of June 27, 2008)

Corporate Data

Issued and Outstanding Shares		
97,610,118 shares

Head Office2-12, Showa-machi 3-chome, Takaoka,
Toyama Prefecture 933-8566, Japan
Phone: (0766) 21-1073
Fax: (0766) 21-3640
Tokyo Office
3-8, Higashinihonbashi 3-chome, Chuo-ku,
Tokyo 103-0004, Japan
Phone: (03) 3664-5401
Fax: (03) 3664-5405
Date of Established

June 1943

Common Stock¥14,183 million

51

Shareholders

7,598

Employees

5,075

Terminals

81

Warehouses

48

Motor Vehicles

5,496(As of March 31, 2008)

TONAMI TRANSPORTATION CO., LTD.
URL:http://www.tonami.co.jp/

Printed in Japan on recycled paper