2008
Semiannual Report
For the six-month period ended September 30, 2007

TONAMI TRANSPORTATION CO., LTD.

Contents
1 A Message from the President
4 Unaudited Consolidated Balance Sheets
6 Unaudited Consolidated Statements of Operations
7 Unaudited Consolidated Statements of Cash Flows
8 Notes to the Unaudited Consolidated Financial Statements
13 Consolidated Subsidiaries
OBC Board of Directors and Statutory Auditors
OBC Corporate Data

Forward-Looking Statements
This 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.

A

M E S S A G E

F R O MT H E

P R E S I D E N T

Performance

year, customer demands for more efficient
distribution and intensifying competition among
companies as well as an increase in the numberof new contenders in the industry resulted inlittle or no growth in unit freight charges. Also,
crude oil prices, which were already at a highlevel, resumed their upward trend.

I welcome this opportunity to report to ourshareholders on the operating environment andbusiness results for the six-month period ended
September 30, 2007.
During the period under review, the Japanese
economy remained on a moderate recovery
track as capital investment continued to increase
supported by improved corporate earnings andpersonal consumption was robust, despite
uncertainties reflecting a hike in crude oil prices
and concerns about the possibility of anincrease in interest rates.

In these circumstances, inspired by the“Committed to Corporate Innovation” slogan,
the Tonami Group moved ahead in the final
year of its three-year medium-term businessplan. In June 2007, we reshaped ourorganizational structure: the Solutions BusinessGroup was reorganized as a strategic businessorganization and renamed 3PL Business Groupand the Corporate Planning Group was newly
established with the aim of strengtheningorganizations involved in corporate strategy.
Also, we introduced a divisional system withIn the distribution industry, the businessenvironment remained severe. While thedownward trend of domestic freight volumes is
expected to continue throughout the current

UNAUDITED CONSOLIDATED FINANCIAL HIGHLIGHTSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESSix months ended September 30, 2007 and 2006

Millions of yen
2007
2006

For the period:
Operating revenues ................................................................... ¥ 63,128
Logistics ..................................................................................
57,689
Information processing ..........................................................
1,112
Other .......................................................................................
4,327
Operating income ......................................................................
790
Net income (loss) ......................................................................
(1,516)Per share (yen and U.S. dollars):
Net income (loss), basic ........................................................... ¥ (16.68)
Net income, diluted ...................................................................
—Cash dividends ...........................................................................
3.00
At period-end:
Total assets ................................................................................ ¥112,307
Total net assets ..........................................................................
46,259Thousands of
U.S. dollars
2007¥ 64,257
58,426
1,257
4,574
755
615

$ 546,894
499,775
9,633
37,486
6,844(13,134)

¥

$

6.76
6.30
3.00

¥119,986
47,388(0.1445)—0.0260$ 972,945
400,754

Notes: 1. U.S. dollar amounts presented herein are included solely for convenience. The rate of ¥115.43 = U.S.$1, prevailing on
September 30, 2007, 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 period.

1

compared with the previous year in themainstay road haulage operations, the volumeof freight transport handled by the Groupdeclined owing to a selective approach tobusiness. Affected by this decline, operating
revenues from the logistics-related businessdecreased 1.3% or ¥744 million compared withthe same period of the previous year to ¥57,694
million.

eight divisions to strengthen business
operations, emphasizing profitability.
Specifically, we endeavored to strengthen andexpand the highly profitable third-party logistics(3PL) business by integrating comprehensive
physical distribution services that combine
business processes, including existing transport,
storage, distribution processing, inventory
management, delivery, and information
processing with consulting capabilities whilestrengthening sales power characterized by
improved logistics.

Information Processing Business
The information processing business, which waspreviously included in the Other Businesses
segment, is treated as an independent businesssegment starting from the year under review.
Operating revenues from the information
processing business were ¥1,265 million, adecrease of 9.9% or ¥140 million compared withthe same period of the previous year.

However, operating revenues decreased 1.8% or¥1,129 million compared with the same periodof the previous year to ¥63,128 million, because
the Group did not fully make up for the decline
in revenues from the mainstay road haulage
operations. On the other hand, operating
income increased 4.6% or ¥35 million comparedwith the same period of the previous year to¥790 million because of the positive impacts ofimproved efficiency of long-distance transport
operations and reduction in fixed costs, despitea sharp increase in crude oil prices. However,
the reporting of a loss on impairment of fixed
assets amounting to ¥971 million as an
extraordinary loss and reporting of reversal ofdeferred tax assets resulted in a net loss of¥1,516 million.

Other Businesses
Operating revenues from other businesses,
which include automobile repair andmerchandising, were ¥7,861 million, a decreaseof 4.6% or ¥377 million compared with the same
period of the previous year.
With regard to capital expenditures, a
construction project to extend the Kawasaki
Distribution Center (in Kawasaki City, Kanagawa
prefecture) is scheduled for completion andcommencement of operations in fiscal 2008. We
will continue to strategically expand andupgrade our transport network and distribution
facilities.

Results by business segment are described
below.
Logistics-related Business
While domestic freight volumes continued to belackluster, handling of international freight wasbuoyant. Positioning the 3PL business as apriority business, an effort was made to expand
sales through the promotion of the logistics
solutions business and an emphasis on highquality transportation services. As a result,although unit freight charges increased

Full-Year Outlook
Although there are concerns centering on theslowing of the U.S. economy, foreign exchange
rate fluctuations, crude oil prices and materials
prices that are already at high levels, and the2In this business environment, we are working toachieve the six objectives of the 17th mediumterm business plan under the slogan “Aiming fora New Value-Added Corporate GroupCommitted to Corporate Innovation.” Thebusiness plan’s six core objectives are as
follows:
1) Develop the distribution solutions business;
2) Upgrade the quality of distribution services;
3) Strengthen international operations;4) Increase revenues from road haulage
operations;5) Recruit, retain, and develop human resources;and6) Build an internal control structure.
By concentrating on these objectives, we intend
to enhance Group management by increasing
competitive advantage and enhancing theGroup’s value to society through the creation of
additional value in our distribution operations
and the fulfillment of corporate social
responsibility. Specific numerical targets for the
final year of the plan (the year ending March
2008) are operating revenues of ¥142 billion,
operating income of ¥2.7 billion, and an
operating margin of 1.9%. However, in view ofchanges in the business environment, these
initial targets are extremely challenging.

trend of interest rates, the Japanese economy islikely to continue to grow at a modest pace ascorporate earnings are expected to remainbuoyant, thanks in large measure to brisk
exports.
However, the operating environment of the
distribution industry is expected to remainchallenging, partly owing to rising costs
reflecting recent sharp increases in fuel prices.
In this context, in the final year of the 17th
medium-term business plan launched in April
2005, we are stepping up our efforts to achieve
the plan’s goals. By striving to gain an
appropriate level of freight charges and fees, we
intend to secure operating revenues and toenhance the Group’s earning power.
For the full year ending March 31, 2008, we
forecast operating revenues of ¥131.0 billion(100.8% of the previous year), operating incomeof ¥2.3 billion (114.0%), and net loss of ¥200
million (net income of ¥1,889 million for theprevious year).

Issues to Be Addressed

We plan to pay annual dividends of ¥6.0 per
share for the fiscal year ending March 31, 2008,
including the ¥3.0 per share interim dividend.

In the distribution industry, domestic freight
volumes are expected to decline for the eighthconsecutive year, even though the Japanese
economy is expected to remain on a recovery
track. In these circumstances, the Tonami Groupis addressing various issues, including theincrease in fuel costs due to a spike in crude oil
prices, the strengthening of governmental
regulations regarding the environment andsafety, globalization of logistics, and the wider
implementation of information andcommunication technologies in physicaldistribution.

We request your continued support for our
endeavors.

December 2007

Katsusuke Watanuki
President and Representative Director
3

UNAUDITED CONSOLIDATED BALANCE SHEETSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESAs of September 30, 2007 and 2006

Thousands of
U.S. dollars(Note 1)Millions of yen
2007

2006

2007

Cash and time deposits .....................................................................

¥ 10,141¥ 11,956$ 87,854

Marketable securities (Note 3) ..........................................................

—

1,000

—

21,92822,507

189,968

ASSETS
Current assets:

Trade receivables:
Notes and accounts (Note 2) .......................................................
Less: allowance for doubtful accounts .......................................

(35)

(30)

(303)

Inventories .........................................................................................

733

673

6,350

Deferred tax assets ............................................................................

689

667

5,969

Other current assets ..........................................................................

2,511

2,509

21,754

Total current assets .............................................................

35,96739,282

311,592

Land ...................................................................................................

36,91538,293319,804

Property and equipment (Note 4):
Buildings and structures ...................................................................

20,481

21,904

177,432

Machinery and vehicles......................................................................

2,901

3,126

25,132

Construction in progress ....................................................................

553

—

4,791

Other ..................................................................................................

638

711

5,527

Total property and equipment ...........................................

61,48864,034

532,686

Investments in securities (Note 3) ....................................................

8,759

9,275

75,881

Deferred tax assets ............................................................................

723

2,055

6,264

Goodwill ............................................................................................

69

95

598

Investments and other assets:

Other ..................................................................................................

5,301

5,245

45,924

Total investments and other assets ....................................

14,852

16,670128,667

Total assets ..........................................................................

¥112,307¥119,986$972,945

The accompanying Notes are an integral part of these statements.

4

Thousands of
U.S. dollars(Note 1)Millions of yen
2007

2006

2007

LIABILITIESCurrent liabilities:
Short-term bank loans (Note 4) ........................................................
Current portion of long-term debt (Note 4) ....................................
Current portion of bonds (Note 4) ...................................................
Trade notes and accounts payable (Note 2) ....................................
Income taxes payable .......................................................................
Other current liabilities .....................................................................
Total current liabilities ........................................................

¥ 11,820
698
7,000
10,390407
6,889
37,204¥ 14,094
729—
10,895376
7,906
34,000$102,400
6,047
60,64390,011
3,526
59,681
322,308

Long-term liabilities:
Long-term debt, less current portion (Note 4) .................................
Deferred tax liabilities from revaluation reserve for land ................
Employees’ severance and retirement benefits ...............................
Retirement benefits for directors and statutory auditors .................
Negative goodwill .............................................................................
Other long-term liabilities .................................................................
Total long-term liabilities ....................................................
Total liabilities .....................................................................

4,643
5,455
17,242
182
91
1,231
28,844
66,04812,291
5,801
18,278—260
1,968
38,59872,59840,22447,258149,372
1,577
788
10,664
249,883
572,191

14,183
12,502
13,542

14,183
12,775
13,600122,871
108,308
117,318(1,989)38,238(1,972)
38,586(17,231)331,266

Valuation and translation adjustments:
Unrealized gain on securities ...........................................................
Revaluation reserve for land .............................................................
Total valuation and translation adjustments ......................

1,661
5,787
7,448

2,006
6,245
8,251

14,39050,13464,524

Minority interest:
Minority interest ................................................................................
Total net assets .....................................................................
Total liabilities and net assets ................................................

573
46,259¥112,307

551
47,388¥119,986

4,964
400,754$972,945

NET ASSETS
Shareholders’ equity:
Common stock:
Authorised: 299,200,000 shares in 2007
299,200,000 shares in 2006
Issued:97,610,118 shares in 2007
97,610,118 shares in 2006 .......................................
Capital surplus ...................................................................................
Retained earnings ..............................................................................
Treasury stock, at cost: 6,710,391 shares in 2007 and
6,656,403 shares in 2006 ............................
Total shareholders’ equity ..................................................

5

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the six months ended September 30, 2007 and 2006

Thousands of
U.S. dollars(Note 1)Millions of yen
2007

2006

2007

¥63,128¥64,257$546,894

63,12864,257546,894

Operating cost ...................................................................................

59,20360,564

512,891

Selling, general and administrative expenses ..................................

3,135

2,938

27,15962,33863,502

540,050

790

755

6,844

Interest and dividend income ...........................................................

184

154

1,594

Equity in earnings of unconsolidated subsidiaries and affiliates ....

73

69

632

Loss on sells of property and equipment, net .................................

(63)

(72)

(546)

Interest expenses ...............................................................................

(133)

(114)

(1,152)

Impairment losses (Note 6) ..............................................................

(971)

—

(8,412)Other, net (Note 7) ............................................................................

(261)

287

(2,261)(1,171)

324(10,145)

(381)

1,079

(3,301)

Current ...............................................................................................

348

312

3,015

Deferred .............................................................................................

787

140

6,818

1,135

452

9,833

Minority interests ................................................................................

0

12

0

Net income (loss) ................................................................................

¥ (1,516)

615$ (13,134)

Operating revenues:
Operating revenues ...........................................................................

Operating costs and selling, general and administrative expenses:

Operating income ...............................................................................

Other income and expenses:

Income (loss) before income taxes and minority interests .......
Income taxes (Note 8):

The accompanying Notes are an integral part of these statements.

6¥

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWSTONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIESFor the six months ended September 30, 2007 and 2006

Thousands of
U.S. dollars(Note 1)Millions of yen
2007

2006

2007

Cash flows from operating activities:
Income (loss) before income taxes and minority interests .............
Depreciation and amortization .........................................................
Impairment losses .............................................................................
Gain on disposal of property and equipment .................................
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 retirement benefits for directors and statutory auditors ....
(Decrease) increase in accrued bonuses to employees ..................
Interest and dividend income ...........................................................
Interest expenses ...............................................................................
Decrease in trade receivables ...........................................................
Increase in inventories ......................................................................
Decrease in accounts payable ..........................................................
(Decrease) increase in accrued consumption taxes ........................
Other, net ...........................................................................................
Subtotal .........................................................................................
Interest and dividends received .......................................................
Interest paid .......................................................................................
Income taxes paid .............................................................................
Net cash provided by operating activities ..............................

¥ (381)
1,227
971
63
5
1
(71)
(73)
(20)
(525)
182
(12)
(184)
170
808
(221)
(405)
(17)
(517)
1,001
184
(133)
(360)
692

¥ 1,079
1,250
—
73
—
—
(71)
(69)
25
(438)
—
121
(154)
114
607
(171)
(896)
159
(989)
640
155
(114)
(2)
679

$ (3,301)
10,630
8,412
546
43
9
(615)
(632)
(173)
(4,548)1,577(104)(1,594)1,473
7,000(1,915)(3,509)(148)(4,479)8,672
1,594(1,152)(3,119)5,995

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 ............................
Investments in loans receivable .......................................................
Proceeds from collection of loans receivable ..................................
Other, net ...........................................................................................
Net cash used in investing activities .......................................

(28)
124
(966)
489
(74)
—
(4)
13
21
(425)

(117)
99
(1,223)
87
(67)
1
(3)
15
5
(1,203)

(242)
1,074
(8,369)
4,236
(641)
—
(35)
113
182
(3,682)

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 financing activities ......................................

(3,944)
—
(402)
(9)
(273)
(7)
(4,635)(1,846)
1,790
(439)
(8)
(273)
(6)
(782)

(34,168)—(3,483)(78)(2,365)(60)(40,154)

Net decrease in cash and cash equivalents .....................................
Cash and cash equivalents at beginning of period ......................
Cash and cash equivalents at end of period ..................................

(4,368)14,383¥10,015(1,306)
14,034¥ 12,728(37,841)
124,604$ 86,763

The accompanying Notes are an integral part of these statements.

7

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
TONAMI TRANSPORTATION CO., LTD. AND CONSOLIDATED SUBSIDIARIES

1.

Basis of presenting financial statements

The accompanying unaudited consolidated financial statements of Tonami Transportation Co., Ltd. (the “Company”) andconsolidated subsidiaries are prepared on the basis of accounting principles generally accepted in Japan, which are different incertain respects as to the application and disclosure requirements of International Financial Reporting Standards, and are compiled
from the consolidated financial statements prepared by the Company as required by the Securities and Exchange Law of Japan.
U.S. dollar amounts presented in the unaudited 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 rateof ¥115.43 = U.S.$1, prevailing on September 30, 2007, has been used for the translation into U.S. dollar amounts in the unaudited
financial statements.
Change in Important Items that Form the Basis for Preparation of Interim Consolidated Financial Statements(Reserve for retirement benefits for directors and statutory auditors)
Previously, certain consolidated subsidiaries of the Company recorded retirement benefits for directors and statutory auditors
as expenses upon payment. Effective the six months ended September 30, 2007, such subsidiaries have adopted the Auditing
Treatment concerning Reserves Defined under the Special Taxation Measures Law, Allowances and Reserves Defined underSpecial Laws, and Reserve for Directors’ Retirement Benefits (Japanese Institute of Certified Public Accountants (JICPA) Auditing
and Assurance Practice Committee Report No. 42, April 13, 2007) and the estimated amount of retirement benefits required at theend of a first six-month period is recorded as reserve for retirement benefits for directors and statutory auditors.
As a result of this change, operating income decreased ¥15 million (US$130 thousand) and loss before income taxes andminority interests increased ¥190 million (US$1,646 million).
The impact of this change on segment information is described in Segment Information.

2.

Notes due at the end of a first six-month period

Notes due at the end of a first six-month period are treated as if they were settled on the due date. Since the last day of the six
months ended September 30, 2007, was a holiday for financial institutions, the following notes due at the end of the first sixmonth period were treated as if they were settled on the due date and excluded from the balance outstanding at the end of thefirst six-month period.
Notes receivable .......................................................................................................
Notes payable ...........................................................................................................

3.

Thousands of
U.S. dollars$3,777
2,963

Millions of yen
¥436
342

Fair value of securities

No trading securities or held-to-maturity securities were held at September 30, 2007 or 2006. Securities classified as other securities
are included in “marketable securities” and “investments in securities” in the accompanying unaudited consolidated balance sheets.
The components of unrealized gain or loss on marketable securities classified as other securities at September 30, 2007 and2006 are summarized as follows:—

Unrealized gain:
Stocks ....................................................................................................................
Bonds:
Corporate bonds ................................................................................................
Other ...................................................................................................................
Other .....................................................................................................................
Unrealized loss:
Stocks ....................................................................................................................
Bonds:
Corporate bonds ................................................................................................
Other ...................................................................................................................
Other .....................................................................................................................
Total ..........................................................................................................................

Acquisition
costs

Millions of yen
2007
Carrying
value

Unrealizedgain(loss)¥2,405¥5,254¥2,849

20
—
—

21
—
—

1
—
—

319

262

(57)

—
100
100
¥2,944—65
98¥5,700—(35)(2)¥2,756

Note: Compound financial instruments were marked to market during the six months ended September 30, 2007, and a valuationdifference amounting to ¥13 million (US$113 thousand) is recorded as a loss. The figures indicated under “acquisition costs”
are the initial acquisition costs.

Unrealized gain:
Stocks ....................................................................................................................
Bonds:
Corporate bonds ................................................................................................
Other ...................................................................................................................
Other .....................................................................................................................
Unrealized loss:
Stocks ....................................................................................................................
Bonds:
Corporate bonds ................................................................................................
Other ...................................................................................................................
Other .....................................................................................................................
Total ..........................................................................................................................

8

Acquisition
costs

Millions of yen
2006
Carrying
value

Unrealizedgain(loss)¥2,512¥5,912¥3,400

20
—
—

21
—
—

1
—
—

78

62

(16)

101
—
100
¥2,811

94—
98¥6,187(7)—(2)¥3,376

Unrealized gain:
Stocks ....................................................................................................................
Bonds:
Corporate bonds ................................................................................................
Other ...................................................................................................................
Other .....................................................................................................................
Unrealized loss:
Stocks ....................................................................................................................
Bonds:
Corporate bonds ................................................................................................
Other ...................................................................................................................
Other .....................................................................................................................
Total ..........................................................................................................................

Acquisition
costs

Thousands of U.S. dollars
2007
Carrying
value

Unrealizedgain(loss)$20,835$45,517$24,682

173
—
—

182
—
—

9
—
—

2,764

2,270

(494)

—
866
866
$25,504—
563
849$49,381

—
(303)
(17)
$23,877

2006

Thousands of
U.S. dollars
2007¥ 3,255
10,839¥21,094$ 23,564
78,836$102,400

Millions of yen
2007
2006
¥6,400¥ 6,400
600
600

Thousands of
U.S. dollars
2007$55,445
5,198

4. Short-term bank loans and long-term debt(a) Short-term bank loans
Short-term bank loans as at September 30, 2007 and 2006 was as follows:—
Millions of yen
2007
1.3%-2.0% bank loans:
Secured ..................................................................................................................
Unsecured .............................................................................................................
Total ..........................................................................................................................

¥ 2,720
9,100¥11,820(b) Long-term debt
Long-term debt as at September 30, 2007 and 2006 was as follows:—

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 ................................................................
0.8%–3.6% loans from financial institutions due 2008 to 2012 and thereafter
Secured ..............................................................................................................
Unsecured .........................................................................................................
Total .............................................................................................................
Less: amount due within one year .........................................................................

2,500

2,500

21,658956
1,885
12,341
7,698¥4,6431,140
2,380
13,020729¥12,291

8,282
16,331
106,914
66,690$40,224

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 of the ¥2.5 billion 0.00% unsecured convertible bond type-bonds with stock acquisition rights, issued in July
2004, is September 30, 2009.

(c) Pledged assets
Property and equipment having a net value of ¥13,671 million ($118,435 thousand) was pledged as collateral for short-term bankloans and long-term debt.

5.

Overdraft facility agreements and loan commitment

The Company has entered into overdraft facility agreements and loan commitment agreements with ten banks for the purpose of
efficient procurement of working capital. Outstanding balance of unused credit concerning overdraft facility agreements and loan
commitment agreements at the end of the six months ended September 30, 2007, was as follows:
Maximum credit line of overdraft facility and loan commitment ..........................
Used credit ................................................................................................................
Total ........................................................................................................................

9

Millions of yen¥3,0001,500¥1,500Thousands of
U.S. dollars$25,990
12,995$12,995

6.

Impairment losses

During the six months ended September 30, 2007, the Group recorded impairment losses concerning the following asset
groupings.

Tonami Transportation

Usage
Haulage andwarehouse facilities

Type
Land andbuildings

Location
5 sites, including
Nishikasugai Ward,
Aichi prefecture

Impairment losses(millions of
yen)
¥971

Impairment losses(thousands of
U.S. dollars)$8,412The 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 tocustomers. 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, the aggregate assetsof organizations belonging to a business unit constitute an asset grouping.
Regarding the asset groupings for which impairment losses were recorded, future cash flow losses were projected to be
short owing to sharp increases in fuel costs reflecting high oil prices and increases in costs of payment to subcontractors. Thus, thecarrying values of the asset groupings were reduced by the unrecoverable values and an impairment loss amounting to ¥971
million (US$8,412 thousand) was recorded as an extraordinary loss.
The breakdown of the impairment losses is as follows: ¥548 million (US$4,747 thousand) concerning land and ¥423 million(US$3,665 thousand) concerning buildings.
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 oncarrying value.

7.

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’s system for
retirement benefits for directors and statutory auditors and to pay a one-time lump sum.

8.

Income taxes-deferred

Income taxes payable and income taxes-deferred for the six months ended September 30, 2007, are calculated based on theassumption of provision and reversal of reserve for advanced depreciation of fixed assets scheduled for the fiscal year ending
March 31, 2008.

9.

Cash flow statements

Reconciliation of cash and time deposits shown in the unaudited consolidated balance sheets and cash and cash equivalents
shown in the unaudited consolidated statements of cash flows as at September 30, 2007 and 2006 is as follows:—

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 .....................................................................................

Millions of yen
2007
2006
¥10,141¥11,956
(126)
(228)
—
1,000
—
—
¥10,015¥12,728

Thousands of
U.S. dollars
2007$87,854(1,091)——$86,763

10. Amounts per share
Amounts per share of common stock for the six months ended September 30, 2007 and 2006 were as follows:—
2007

Yen
2006

U.S. dollars
2007

Net income (loss) per share:
Basic ......................................................................................................................
Diluted ...................................................................................................................
Cash dividends ........................................................................................................

(¥ 16.68)—
3.00¥ 6.766.30
3.00($0.1445)—
0.0260Net assets per share ................................................................................................

¥502.70¥515.05$4.355010Although dilutive securities were outstanding, diluted net income per share for the six months ended September 30, 2007 was
not disclosed because of the net loss in this period.
Basis for the calculation of net assets per share for the six months ended September 30, 2007 and 2006 was as follows:—

Total net assets as reported on the unaudited 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 ...............................................

Millions of yen
2007
2006
¥46,259¥47,388
45,686
573
Shares97,610,118
6,727,971

97,610,118
6,673,983

90,882,147

90,936,135

Thousands of
U.S. dollars
2007$400,754
395,790
4,964

46,837
551

Basis for the calculation of basic and diluted net (loss) income per share for the six months ended September 30, 2007 and 2006
was as follows:—
Millions of yen
2007
Net (loss) income available to shareholders of common stock:
Net (loss) income .................................................................................................
Net (loss) income not available to shareholders of common stock .................
Net (loss) income available to shareholders of common stock ........................
Weighted-average number of shares of common stock outstanding ...............
Diluted net income available to shareholders of common stock:
Adjustments to net income ..................................................................................
Incremental number of shares of common stock ..............................................
(of which stock acquisition rights) ..................................................................

2006

Thousands of
U.S. dollars
2007(¥1,516)—(1,516)90,899,545

¥615
—
615
90,952,300($13,134)—(13,134)

¥—
—
(—)
—

¥—
6,738,544(6,738,544)$—

Common stock equivalents not included in calculation of diluted net
income per share due to their non-dilutive effect(Stock option)
Stock options (stock acquisitionrights) approved at the annual
shareholders’ meeting of theCompany held on June 29, 2005
(The number of stock acquisition rights was 1,340.)

11. Subsequent event
At a meeting held on November 14, 2007, the board of directors of the Company resolved the following interim cash dividends:—
Millions of yen¥273

Dividends (¥3.00 per share) .....................................................................................

Thousands of
U.S. dollars$2,365

12. Segment information
The Company’s business segments consist of logistics related services classified as Logistics, information processing operationsclassified as Information processing, and other services classified as Others.
A summary of segment information by business segment for the six months ended September 30, 2007 and 2006 was asfollows:—
Logistics
Net Sales:
Outside customers ..........................................................
Inter segment sales .........................................................
Total ...........................................................................
Costs and expenses ...............................................................
Operating income .................................................................

¥57,689
5
57,69457,298¥ 396

11For the six months ended September 30, 2007
Millions of yen
Information
OthersTotal
Eliminations Consolidated
processing(Note 1)
¥1,112
153
1,265
1,083
¥ 182

¥4,327
3,534
7,861
7,573
¥ 288

¥63,128
3,692
66,82065,954¥ 866¥—(3,692)(3,692)(3,616)¥ (76)¥63,128—
63,12862,338¥ 790

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

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

¥58,426
12
58,43857,826¥ 612

For the six months ended September 30, 2006
Millions of yen
OthersTotal
Eliminations(Note 1)
¥5,831
3,804
9,635
9,461
¥ 174

¥64,257
3,816
68,07367,287¥ 786¥—(3,816)(3,816)(3,785)¥(31)

Consolidated¥64,257—
64,25763,502¥ 755

For the six months ended September 30, 2007
Thousands of U.S. dollars
OthersTotal
Eliminations Consolidated(Note 1)

Logistics

Information
processing$499,775
43
499,818
496,388$ 3,430$9,633
1,326
10,959
9,382$1,577$37,486
30,616
68,10265,607$ 2,495$546,894
31,985
578,879
571,377$ 7,502$—(31,985)(31,985)(31,327)$ (658)$546,894—
546,894
540,050$ 6,844

Notes: 1. Operating cost and expenses included in the column “Eliminations” mainly consist of those charged by the generalaffairs and finance divisions of the Company, amounting to ¥89 million ($771 thousand) and ¥64 million ($554 thousand)for the six months ended September 30, 2007 and 2006, respectively.
2. Change in the accounting policy (Reserve for retirement benefits for directors and statutory auditors)
As described in the Basis of presenting financial statements, effective the six months ended September 30, 2007, certain
consolidated subsidiaries of the Company changed the accounting policy for reserve for retirement benefits for directors
and statutory auditors and the estimated amount of retirement benefits required at the end of a first six-month period isrecorded as reserve for retirement benefits for directors and statutory auditors. The impact of this change on the segment
information is negligible.
3. Previously, the Company’s operations were classified into two segments, namely, Logistics and Others. However, inorder to ensure that segments reflect the actual situation of the Company’s operations, effective the six months ended
September 30, 2007, the information processing operations, which were previously included in the Others segment, areclassified 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 segments. A summary of segment information by business segment
according to the previous segment classification is as follows:

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

¥57,689
5
57,69457,298¥ 396

For the six months ended September 30, 2007
Millions of yen
OthersTotal
Eliminations(Note 1)
¥5,439
3,659
9,098
8,627
¥ 471

¥63,128
3,664
66,79265,925¥ 867¥—(3,664)(3,664)(3,587)¥ (77)

Consolidated¥63,128—
63,12862,338¥ 790

The business segments mainly consist of the following services:
Logistics ............................. Road haulage, freight forwarding, warehousing, and harbor transport and customs services
Information processing .... Information processing
Others ................................ Vehicle maintenance, casualty insurance, leasing, merchandising and commissioned sales
and purchases, travel services, mail order services, travel inn, and other businesses
Neither geographical segment information nor overseas sales have been presented because none of the Company’s
consolidated subsidiaries are domiciled outside Japan, and the Company and its consolidated subsidiaries had no overseas
sales for the six months ended September 30, 2007 and 2006.

12

CONSOLIDATED SUBSIDIARIES
Location(Prefecture)

Company NameBusiness LineTokyo

Tonami Business Service Co., Ltd.

Financial service

Tonami Air Service Co., Ltd.

Customs clearance service

Ibaraki

Ibaraki 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

ToyamaGosei 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

SaitamaOsaka

13

BOARD OF DIRECTORS AND STATUTORYAUDITORSCORPORATE DATA

Chairman and Representative Director

Head Office

Yoshihiro Minami

2-12, Showa-machi 3-chome, Takaoka,
Toyama Prefecture 933-8566, Japan
Phone: (0766) 21-1073
Fax: (0766) 21-3640

President and Representative Director
Katsusuke Watanuki

Tokyo Headquarters
Senior Managing Directors
Akiyoshi Kunisada
Kohichi Kishida

Managing Director
Shigeki Sakamoto

3-8, Higashinihonbashi 3-chome, Chuo-ku,
Tokyo 103-0004, Japan
Phone: (03) 3664-5401
Fax: (03) 3664-5405

Date of Establishment
June 1943

Director and Adviser

Common StockYohsuke Konishi¥14,183 million

Directors

Issued and Outstanding Shares

Yasuo Terabayashi
Yoshinobu Watanabe
Toshiyuki Koroku
Shigeyuki Okada
Masayuki Ishimaru
Yoshimi Nagahara
Kazuo Takata
Shinichi Izumi

97,610,118 sharesStanding Statutory Auditors

Warehouses

Makoto Nagai
Nariyuki Aoki

48

Shareholders
7,633

Employees
5,073

Terminals
81

Motor Vehicles
Statutory Auditors
Shinichiro Inushima
Toshio Yaeda
Yohji Ishiguro

5,525(As of September 30, 2007)(As of September 30, 2007)

TONAMI TRANSPORTATION CO., LTD.

URL:http://www.tonami.co.jp/