2007
Annual Report
For the year ended March 31, 2007

TONAMI TRANSPORTATION CO., LTD.

TONAMI TRANSPORTATION CO., LTD.

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

Printed in Japan on recycled paper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 123 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
47 Consolidated Subsidiaries
48 Board of Directors and Statutory Auditors
48 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, 2007 and 2006
Thousands of
U.S. dollars(Note 1)
2007

Millions of yen
2007
2006

FOR THE YEAR:
Operating revenues¥130,020¥129,098$1,101,398

Logistics

118,010

117,151

999,662

Others12,01011,947

101,736

Operating income

2,019

2,057

17,103

Net income (loss)

1,889(5,050)16,00220.77¥ (56.02) $0.1759Net income, diluted

19.34

—

0.1638Cash dividends

6.00

6.00

0.0508¥119,341¥121,577$1,010,936

48,32347,029409,343

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

AT YEAR-END:
Total assets
Total net assets

Notes: 1. U.S. dollar amounts presented herein are included solely for convenience. The rate of ¥118.05 = U.S.$1, prevailing on March 31,
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 financial year.

Operating Revenues by
Business Segment

Operating Income

Net Income (Loss) and
Net Income (Loss) per Share, basic(Billions of yen)(Billions of yen)(Billions of yen)
3

150

2

100

50

1

0

0
’03

’04

’05

’06

’07

(Yen)

5

50

4

40

3

30

2

20

1

10

0

0

-10
’03

’04

’05

’06

’07

-100
’03

’04

’05

’06

’07

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

Logistics
Others01

To Our Shareholders and Investors

Chairman, Yoshihiro Minami

President, Katsusuke Watanuki

Operating Environment and Business Results

During the fiscal year ended March 31, 2007, the Japanese economy remained on a moderate recovery trajectory owing to an increase in capital investment fueled by buoyant corporate earnings, andimprovement in the employment situation, despite uncertainties reflecting a sharp increase in crude
oil prices and higher interest rates.
In the distribution industry, the business environment remained severe. Amid a continued decline
in domestic freight volumes, customer demands for greater distribution efficiency and intensificationof competition among companies as well as an increase in the number of new contenders in theindustry resulted in a continuation of the downturn in unit freight charges, but the rate of decline isdecreasing. Although crude oil prices were on a downward trend after peaking in the summer, there
is a concern about a possible resumption of price increases.
In these circumstances, the Tonami Group moved ahead with the 17th medium-term businessplan, a three-year plan launched in April 2005 with the slogan “Committed to Corporate
Innovation.” Specifically, we worked to expand highly profitable businesses by integrating ourunique systematized distribution (third-party logistics) — the provision of comprehensive physicaldistribution services that combine business processes including existing transport, storage, distribution processing, inventory management, delivery, and information processing — with consulting
capabilities and strengthening sales power by deploying a distribution solutions business characterized by improved logistics.
As a result, operating revenues were ¥130,020 million, up 0.7% from the previous year.
Information processing operations, which previously were included in road haulage operations andwarehousing operations, are now treated as an independent business and included in the Other
Businesses segment starting from the year under review.
Regarding profitability, we made a group-wide effort to increase operating efficiency through productivity enhancement as well as to cut operating costs through improved fuel efficiency and othermeans. Nevertheless, operating income decreased 1.8% year on year to ¥2,019 million. Net income
was ¥1,889 million.
Total annual dividends for fiscal 2007 amount to ¥6 per share, including the interim dividend of¥3 per share.
In the results by business segment, operating revenues from logistics-related businesses increased
0.7% from the previous year to ¥118,010 million. In road haulage operations, amid sluggish growthin the volume of domestic freight transport and continued erosion of unit freight charges, theTonami Group strove to provide distribution services that deliver customer satisfaction by promoting a solutions business centered on systematized distribution (third-party logistics) and increasing
logistics quality.
02

Operating revenues from other businesses, which include automobile repair and merchandising,edged up 0.5% to ¥12,010 million.
With regard to capital expenditures during the year under review, we commenced operations at
the Minami-Osaka Branch and Minami-Osaka Distribution Center (in Sakai City, Osaka prefecture)
in February 2007. We will continue to strategically expand and upgrade our transport network anddistribution facilities.
Outlook for the Year Ending March 2008

Although the Japanese economy is expected to continue to perform solidly, it will be necessary tocarefully watch protracted high crude oil prices, signs of rising interest rates, and destabilizing factors in the international situation, notably with regard to the United States and China. Also, as previously mentioned, the distribution industry faces a number of issues, and the operating environment
is likely to remain challenging.
In this context, having completed the second year of the 17th medium-term business plan
launched in April 2005, we are redoubling our efforts to achieve the plan’s goals in its final year soas to secure operating revenues and to enhance the earning power.
For fiscal 2008, we forecast full-year operating revenues of ¥131.5 billion (101.1% of the previous year), operating income of ¥2.5 billion (123.8%), and net income of ¥2.1 billion (111.2%).
In the distribution industry, domestic freight volumes are expected to decline for the eighth consecutive year, although the Japanese economy is expected to remain on a recovery track. In thesecircumstances, the Tonami Group is addressing various issues, including the increase in fuel costs
due to a spike in crude oil prices, the strengthening of governmental regulations regarding the environment and safety, globalization of logistics, and the wider implementation of information andcommunication technologies in physical distribution. By recalibrating our marketing strategies sothat they are attuned to the changes in the market environment and strengthening competitivenessthrough cost reduction and enhanced logistics quality, we intend to improve our business performance.
Regarding administrative structures, as well as promoting design and operation of internal control, we are also enhancing corporate governance.
We will continue to strive to improve business performance so as to meet the expectations of ourshareholders. We request your continued support for our endeavors.
June 2007

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: 11

Niigata

Kanazawa

Hiroshima

Shinetsu region: 4

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

In-house logistics

Goods returned, repairs,
waste, etc.

Warehouses, distribution
centers

Sales logistics

Consumers

Destinations in Japan

Wholesalers, retailers
Overseas suppliers

ImportExportDestinations 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 statutory auditors.
The Company employs a statutory auditor system as part of its internal control framework. The
Board of Statutory Auditors consists of five statutory auditors (two standing statutory auditors andthree outside statutory auditors). The statutory auditors audit the legality of the directors’ actions byattending meetings of the Board of Directors and other important meetings, by offering their opinions, and by other means.
The statutory auditors, including the outside statutory auditors, audit the execution of business by
the directors in accordance with the auditing policy and task assignments decided by the Board of
Statutory 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 Statutory 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 Statutory Auditors(Statutory auditors)(Outside statutory auditors)

Internal Audit Office
Independent auditors

Supervision
Opinions

Auditing

Business Execution
Management Council(Representative directors)(Directors)

Internal control
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.

06

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

4) State of Internal Auditing and Auditing by Statutory Auditors
The Internal Audit Office of the Company is an internal auditing unit independent of the business
units and its staff assists with the work of the statutory 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 Statutory Auditors. The
Internal Audit Office conducts periodic and unscheduled internal audits of the Company’s business,reports to the Management Council and statutory auditors, and requests improvements.
The Company’s statutory auditors exchange information with the independent auditors, cooperatewith the Internal Audit Office, conduct appropriate audits, and hold periodic meetings of the Boardof Statutory 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 type ofrisk, 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 statutory 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 Office or
the Compliance Office. The Internal Audit Office or the Compliance Office promptly reports thematter to a statutory auditor so that the statutory 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.

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

31

Independent Auditors’ Report

32

Non-Consolidated Balance Sheets

34

Non-Consolidated Statements of Operations

35

Non-Consolidated Statements of Changes in Net Assets

37

Non-Consolidated Statements of Cash Flows38

Notes to the Non-Consolidated Financial Statements

45

Independent Auditors’ Report46

Non-Consolidated Five-Year Summary09

Consolidated Five-Year Summary
TONAMI TRANSPORTATION CO., LTD
AND CONSOLIDATED SUBSIDIARIES
Years ended March 31
Thousands of
U.S. dollars
2007

2003

2004

Millions of yen
2005

Operating revenues¥116,331¥126,713¥129,068¥129,098¥130,020 $1,101,398

Operating cost

107,928

117,860

119,722

120,924

122,065

1,034,011

Selling, general and administrative expenses

5,630

5,994

6,363

6,117

5,936

50,284

Operating income

2,773

2,859

2,983

2,057

2,019

17,103

Net income (loss)

4,819

1,429

2,173

(5,050)1,889

16,002

Depreciation expenses

2,775

2,610

2,689

2,508

2,650

22,44822.94¥ (56.02) ¥20.77 $

0.17596.00

0.0508

2006

2007

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

¥

48.99

¥

14.50

¥

6.00

8.00

6.00

6.00

¥ 43,692¥ 43,596¥ 42,447¥ 40,682

Net property and equipment

63,25871,502

71,79064,45062,758531,622

Total assets

119,243

128,293

127,909

121,577

119,341

1,010,936

Total current liabilities

41,29839,01837,01036,00434,509292,326

Long-term liabilities, excluding of current portion thereof

26,79937,83237,75937,99536,509309,267

Total net assets

50,50850,73552,49647,02948,323409,343

6,943

7,320

7,289

7,278

7,129

YEAR-END FINANCIAL POSITION:
Total current assets¥ 40,425 $ 342,440

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, 2007
Overview

During the fiscal year ended March 31, 2007, amid a continuing decline in the volume of domestic freighttransport, erosion of unit freight charges persisted owing to customer demands for greater efficiency in physical distribution and the intensification of competition. At the same time, fuel costs and other costs continued
to rise. In these circumstances, the Tonami Transportation Group strove to cut costs and adjust freight charges.
As a result, ordinary income increased somewhat.
Operating Revenues

Operating revenues edged up 0.7% from the previous fiscal year to ¥130,020 million. The Company compensated for lower revenues due to a slump in the volume of freight in the mainstay road haulage operations andfreight forwarding operations by means of higher revenues from the warehousing operations and other businesses. The road haulage operations and freight forwarding operations accounted for 68.2% of operating revenues, the warehousing operations 17.2%, the harbor transport operations 5.4%, and other businesses 9.2%.
Operating Cost

Operating cost increased ¥1,141 million from the previous year. Higher diesel oil costs due to a spike in crude
oil prices, and an increase in facilities charges and payments to freight companies in line with the opening of
new distribution centers could not be fully absorbed by a reduction in expressway tolls and efforts to cut fuelcosts through more efficient use of fuel. Effective from the fiscal year under review, the information processing
operations is separate from the logistics-related businesses and is included in other businesses and expenses
that were previously treated as selling, general and administrative expenses are transferred to operating cost.

Sales of Logistics-Related
Businesses

Operating Revenues

Sales of Other Businesses(Billions of yen)(Billions of yen)(Billions of yen)

150

150

15

100

100

10

50

50

5

0

0
’03

’04

’05

’06

’07

0
’03

11

’04

’05

’06

’07

’03

’04

’05

’06

’07

Eliminating this effect, operating cost would have increased ¥560 million compared with the previous year,
and the ratio of operating cost to operating revenues would have increased only 0.5 percentage points from theprevious year.
Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased ¥181 million year on year due to the transfer of expenses
that were previously treated as selling, general and administrative expenses to operating cost as a result of thechange in presentation of the information processing operations, which is separated from logistics-related businesses and included in other businesses effective from the year under review.
Operating Income

Operating income decreased ¥38 million year on year to ¥2,019 million. The rate of increase in the aggregate
amount of operating cost and selling, general and administrative expenses was 0.8% and the rate of increase inoperating revenues was 0.7%, resulting in a decrease of 1.8 percentage points in the ratio of operating income
to operating revenues to 1.6%.
Net Income

Net income amounted to ¥1,889 million, a large improvement from the net loss recorded for the previous
year. The principal reason for this improvement was that whereas an extraordinary loss of ¥7,678 million wasrecorded for the previous year in line with the application of the accounting standards for impairment of fixed
assets, no such loss was recorded for the year under review.

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.

Strategic Position and Outlook
Amid forecasts of a decrease in the volume of domestic freight transport for the eighth consecutive year andexpected continuation of erosion of unit freight charges owing to customer demands for greater efficiency inphysical distribution and the intensification of competition, the possibility of further increases in fuel costs andother costs is a concern. For these reasons, management expects the challenging business environment to continue.

Operating Cost

Net Income (Loss)

Operating Income(Billions of yen)(Billions of yen)(Billions of yen)
150

5

3

4
100

3

2

2
50

1

1

0
0

-10

0
’03

’04

’05

’06

’07

’03

12

’04

’05

’06

’07

’03

’04

’05

’06

’07

In this environment, the Tonami Transportation Group is striving to secure operating revenues and increase
earning power. For this purpose, we are promoting the offering of solutions centering on third-party logistics(3PL) and enhancing transportation quality to provide distribution services that deliver customer satisfaction.
At the same time, we are stepping up our efforts to achieve the objectives of the 17th medium-term businessplan, which was launched in April 2005 covering a three-year period, in its final year.

Analysis of Sources of Capital and Liquidity
Cash flows from operating activities

Net cash provided by operating activities totaled ¥1,534 million (an increase in net cash of ¥80 million year onyear). Principal factors were net income before income taxes and minority interests of ¥3,086 million, a ¥950
million decrease in employees’ severance and retirement benefits, and a ¥975 million decrease in accounts
payable.
Cash flows from investing activities

Net cash used in investing activities totaled ¥1,515 million (an increase in net cash of ¥1,235 million year onyear). The principal factor was payments of ¥2,027 million for the purchase of property and equipment, while
proceeds from sales of property and equipment amounted to ¥1,285 million.
Cash flows from financing activities

Net cash provided by financing activities totaled ¥330 million (an increase in net cash of ¥1,040 million year
on year). The principal factor was proceeds from long-term debt amounting to ¥1,742 million, while repayment of long-term debt and dividends paid amounted to ¥668 million and ¥546 million, respectively.

Management’s Assessment of Issues and Future Policies
The operating environment for road haulage operations entails many problems, including intensifying competition among companies, rising fuel costs, and higher costs associated with the strengthening of environmental
and transportation safety measures. Nevertheless, the Tonami Transportation Group will work to improvebusiness performance through an increase in transportation quality and greater operating efficiency. Also, wewill strive to expand highly profitable businesses by integrating third-party logistics (3PL) — the provision ofcomprehensive physical distribution services that combine business processes including existing transport,
storage, distribution processing, inventory management, delivery, and information processing — with proposal capabilities while strengthening sales power by deploying a distribution solutions business characterized by
improved logistics.

Net Cash (Used in) Provided
by Investing Activities

Net Cash Provided byOperating Activities

Total Assets andNet Assets(Billions of yen)(Billions of yen)(Billions of yen)
150

2

8

0
100

4
-2

50

2
-4

-10

-6

0
’03

’04

’05

’06

’07

’03

’04

’05

’06

’07

’03

’04

Total assets
Net assets

13

’05

’06

’07

Consolidated Balance Sheets
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESAs of March 31, 2007 and 2006ASSETS

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

Millions of yen
2007
2006

Current assets:
Cash and time deposits¥ 13,606¥ 13,244$ 115,256

999

1,000

8,463

22,69823,179192,275

(42)

(44)

(356)

Inventories

512

503

4,337

Deferred tax assets (Note 10)

606

626

5,133

2,046

2,174

17,33240,42540,682

342,440

Land

37,79038,285

320,119

Buildings and structures

21,36822,429181,007

Machinery and vehicles

2,957

3,020

25,049Construction in progress

—

29

—

Other

643

687

5,447

62,75864,450531,622

Investments in securities (Note 5)

9,114

9,948

77,204

Deferred tax assets (Note 10)

1,568

1,909

13,283

Goodwill

82

—

695

Other

5,394

4,588

45,692

16,15816,445

136,874¥119,341¥121,577$1,010,936

Marketable securities (Note 5)
Trade receivables:
Notes and accounts (Note 14)
Less: allowance for doubtful accounts

Other current assets
Total current assets

Property and equipment (Notes 6 and 7):

Total property and equipment

Investments and other assets:

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

14

LIABILITIES AND NET ASSETS

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

Millions of yen
2007
2006

Current liabilities:
Short-term bank loans (Note 7)¥ 15,764¥ 15,940$ 133,537

727

416

6,159

10,816

11,791

91,622

Income taxes payable

385

62

3,261

Other current liabilities

6,817

7,795

57,74734,50936,004292,326

Long-term debt, less current portion thereof (Note 7)

12,016

11,253

101,787

Deferred tax liabilities from revaluation reserve for land (Note 15)

5,605

5,800

47,480

Employees’ severance and retirement benefits (Note 9)17,766

18,716

150,496—

236—

Negative goodwill

175

—

1,482

Other long-term liabilities

947

1,990

8,022

Total long-term liabilities

36,50937,995309,267

Total liabilities

71,01873,999601,593

14,183

14,183

120,144

Capital surplus

12,502

14,687

105,904

Retained earnings

15,163

11,393

128,446(1,981)(1,964)(16,781)

39,86738,299337,713

Unrealized gain on securities

1,919

2,485

16,256

Revaluation reserve for land (Note 15)

5,956

6,245

50,453

7,875

8,730

66,709

581

549

4,921

48,32347,578409,343¥119,341¥121,577$1,010,936

Current portion of long-term debt (Note 7)
Trade notes and accounts payable

Total current liabilities
Long-term liabilities:

Consolidation difference

Net assets
Shareholders’ equity (Note 16):
Common stock:
Authorized: 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

Treasury stock, at cost: 6,701,913 shares in 2007
6,649,249 shares in 2006
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

Consolidated Statements of Operations
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2007 and 2006
Thousands of
U.S. dollars(Note 1)
2007

Millions of yen
2007
2006

Operating revenues:
Operating revenues¥130,020¥129,098$1,101,398

130,020129,098

1,101,398

122,065

120,924

1,034,011

5,936

6,117

50,284

128,001

127,041

1,084,295

2,019

2,057

17,103

Interest and dividend income

283

237

2,397

Equity in earnings of unconsolidated subsidiaries and affiliates

117

167

991

Income (loss) on sale of property and equipment, net

431

(125)

3,651

Interest expenses

(215)

(252)

(1,821)

Impairment losses—(7,678)—Other, net

451

130

3,820

1,067

(7,521)

9,038

3,086

(5,464)

26,141

Current

576

640

4,879

Refund—70—

Deferred579(1,076)

4,905

1,155

(366)

9,784

Minority interests

42

(48)

355

Net (loss) income¥ 1,889¥ (5,050)$ 16,002

Operating costs and selling, general and administrative expenses:
Operating cost (Note 17)
Selling, general and administrative expenses (Note 17)
Operating income
Other income and expenses:

Income (loss) before income taxes and minority interests
Income taxes (Note 10):

The accompanying Notes are an integral part of these statements.

16

Consolidated Statements of Changes in Net Assets
TONAMI TRANSPORTATION CO., LTD.
AND CONSOLIDATED SUBSIDIARIESFor the years ended March 31, 2007 and 2006

Millions of yen
Shares ofcommonstock(thousands)

Balance as at March 31, 2005
Net loss
Cash dividends applicable tothe year (¥6.00 per share)
Revaluation reserve for land
Unrealized gain on securities
Treasury stock
Bonuses to directors andstatutory auditors
Net changes in items other thanshareholders’ equity
Balance as at March 31, 2006
Net income
Cash dividends applicable tothe year (¥6.00 per share)
Transfer to retained earnings
Transfer from capital surplus
Revaluation reserve for land
Unrealized loss on securities
Treasury stock
Bonuses to directors andstatutory auditors
Net changes in items other thanshareholders’ equity
Balance as at March 31, 2007

Commonstock

CapitalsurplusRetainedearnings

Treasury
stock

Total
Total
Unrealized Revaluation valuation andshareholders’ gain on
reservetranslation Minority
equitysecurities
for land adjustments interests

97,610 ¥14,183 ¥14,687 ¥17,479 ¥(1,950) ¥44,399 ¥1,329(5,050)(5,050)¥8,097—¥644 ¥53,140(5,050)

—
(523)
1,156
—

(546)
(929)
1,156
(14)

—

(84)

—
¥8,730—(95)(95)¥549 ¥47,578
1,889

(546)
(1,639)
1,639
289
—
(17)

—
—
—
—
—
—

(546)
(1,639)
1,639
289
—
(17)

(47)

—

(47)

—
97,610 ¥14,183 ¥12,502 ¥15,163 ¥(1,981) ¥39,867

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

32
(823)
¥581 ¥48,323

(546)
(406)
(14)
(84)

(546)
(406)
—
(14)

¥6,768Total
net assets

(523)
1,156

(84)

—
97,610 ¥14,183 ¥14,687 ¥11,393 ¥(1,964) ¥38,299
1,889
1,889
(546)
(1,639)
1,639
289
(17)
(47)

¥2,485¥6,245

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

Balance as at March 31, 2005
Net loss
Cash dividends applicable tothe year ($0.0508 per share)
Revaluation reserve for land
Unrealized gain on securities
Treasury stock
Bonuses to directors andstatutory auditors
Net changes in items other thanshareholders’ equity
Balance as at March 31, 2006
Net income
Cash dividends applicable tothe year ($0.0508 per share)
Transfer to retained earnings
Transfer from capital surplus
Revaluation reserve for land
Unrealized loss on securities
Treasury stock
Bonuses to directors andstatutory auditors
Net changes in items other thanshareholders’ equity
Balance as at March 31, 2007

CapitalsurplusRetainedearnings

Treasury
stock

Total
Total
Unrealized Revaluation valuation andshareholders’ gain on
reservetranslation Minority
equitysecurities
for land adjustments interests$120,144 $124,413 $148,064 $(16,518) $376,103 $ 11,258 $57,332 $68,590(42,778)(42,778)—(4,625)(3,439)$5,455 $450,148(42,778)—(4,431)
9,793—(4,625)(7,870)
9,793
(119)

—

(712)

—
—
$120,144 $124,413 $ 96,510 $(16,637) $324,430 $21,050 $52,901 $73,952
16,002
16,002
—

(805)
(805)
$4,650 $403,032
16,002

(119)
(712)

(4,625)(13,884)(4,625)(3,439)
—
(119)

Total
net assets(712)(4,431)
9,793

13,8842,448(4,625)(13,884)
13,884
2,448
—
(144)
(144)

—
—
—
—
—
—

(4,625)(13,884)
13,884
2,448
—
(144)

(398)

(398)

—

(398)

— (4,794) (2,448) (7,243)
271 (6,972)$120,144 $105,904 $128,446 $(16,781) $337,713 $16,256 $50,453 $66,709 $4,921 $409,343

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, 2007 and 2006

Millions of yen
2007
2006

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

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

¥ (5,464)
2,508
7,678
125
7
7
13
(154)
—
(167)
(135)
(661)
(276)
(237)
252
(406)
44
478
(68)
(740)
2,804
237
(252)
(1,335)
1,454$ 26,141
22,448(1,796)
1,686

(42)
237
(6,150)(12,834)—(3,651)
(161)
—
—
—

(1,203)(991)
500(8,047)890(2,397)
1,821
3,439
(76)
(8,259)186(16,349)
14,291
2,397(1,821)(1,872)
12,995

Cash flows from investing activities:
Purchase of time deposits
Proceeds from redemption of time deposits
Purchase of marketable securities
Proceeds from sales of marketable securities
Purchase of property and equipment
Proceeds from sales of property and equipment
Purchase of investments in securities
Proceeds from sales of investments in securities
Proceeds from 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

(5)
28
(726)
(1,515)

(211)
241
(0)
65
(2,954)
102
(81)
11
50
(4)
34
(3)
(2,750)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 provided by (used in) financing activities

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

(77)
606
(671)
(14)
(546)
(8)
(710)

(1,491)
14,756(5,659)(144)(4,625)
(42)
2,795

349
14,034¥14,383(2,006)
16,040¥14,034

2,956
118,882$121,838

Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying Notes are an integral part of these statements.

18

(212)
199
—
—

(2,027)
1,285
(126)
69
—

—
—

(17,171)
10,885(1,067)584—

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

1 Basis of presenting financial statements
The accompanying 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 in certain respects as to the application and disclosure requirements of International Financial
Reporting Standards, and are complied 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 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 ¥118.05 = U.S.$1, prevailing on March 31, 2007, 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 28 significant majority-owned subsidiaries for the year ended March 31, 2007 (28 for 2006).
All significant intercompany accounts and transactions have been eliminated in consolidation.
Eight of the investments in unconsolidated subsidiaries or affiliates (8 for 2006) 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 their amounts are, however, not significant, 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 stockholders’ equity, net of taxes.
Non-marketable securities classified as other securities are carried at cost. Cost of securities sold is determinedprincipally 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.
Such 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, except for buildings
and structures. The buildings and structures 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.

19

(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

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 isincluded in the liability section of the consolidated balance sheet, 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 certain period
not exceeding the employees average remaining service lives) commencing with the year as occurred.
Actuarial gains and losses are recognized in expenses using the straight-line method over 11 years (a certain
period not exceeding the employees’ average remaining service lives) commencing with the next year as
occurred.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
In computing diluted net income per share, the weighted-average number of shares is increased by the number of shares that would have been outstanding assuming the conversion of all convertible bond type-bonds
with stock acquisition rights at the beginning of each year.

3 Accounting Changes(a) Accounting Standards for impairment of fixed assets

Effective April 1, 2005, the Group adopted a new accounting standard for the impairment of fixed assets. The
Group bases its grouping for assessing such impairment losses on its business segments. However, the Group
determines whether an asset is impaired on an individual asset basis when the asset is deemed idle or if it isscheduled to be disposed of.
The effect of this adoption was to decrease income before income taxes and minority interests by ¥7,678
million for the year ended March 31, 2006. During the year ended March 31, 2007, the Group has not recorded loss on impairment of fixed assets.
(b) 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, the previously reported consolidated balance sheet as of March 31, 2006 and the consolidated statements of shareholders’ equity for the years ended March 31, 2006, have been restated to conform to
the presentation and disclosure of the consolidated financial statements for the year ended March 31, 2007.
(c) 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 increased ¥441
million (US$3,736 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.
(d) Reclassifications and change in the account title

Certain reclassifications and change in the account title of the consolidated financial statements for the year
ended March 31, 2006 have been made to conform them to the presentation for the year ended March 31,
2007.

4 Notes due at the end of the fiscal year
Notes due at the end of the fiscal year are treated as if they were settled on the due date. Since the last day of
the fiscal year, March 31, 2007, was a holiday for financial institutions, the following notes due at the end of
the fiscal year were treated as if they were settled on the due date.
Notes receivable
Notes payable

Millions ofyen

Thousands of
U.S. dollars

¥539
382

$4,566
3,236

5 Fair value of securities
No trading securities or held-to-maturity securities were held at March 31, 2007 or 2006. 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,
2007 are summarized as follows:—

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

The components of unrealized gain or loss on marketable securities classified as other securities at March 31,
2006 are summarized as follows:—

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

21

Acquisition
costs

Millions of yen
2006
Carryingvalue¥2,577¥6,763¥4,186

20
—
—

21
—
—

1
—
—

8

7

(1)

—
—
100
¥2,705——97¥6,888——(3)¥4,183

Unrealized
gain (loss)

The components of unrealized gain or loss on marketable securities classified as other securities at March 31,
2007 are summarized as follows:—
Thousands of U.S. dollars
2007
Acquisition
Carrying
Unrealized
costs
value
gain (loss)

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

$21,364$48,861$27,497

169
—
—

177
—
—

8
—
—

644

517

(127)

—
847
847
$23,871—661
839$51,055

—
(186)
(8)
$27,184

Non-marketable securities classified as other securities at March 31, 2007 and 2006 amounted to ¥4,088 million ($34,629 thousand) and ¥4,059 million ($34,384 thousand), respectively.
Proceeds from sales of securities classified as other securities amounted to ¥69 million ($584 thousand) and¥8 million ($68 thousand) for the years ended March 31, 2007 and 2006, respectively.
The aggregate gain realized on those sales totaled ¥19 million ($161 thousand) and ¥8 million ($68 thousand) for the years ended March 31, 2007 and 2006, respectively.
The redemption schedule at March 31, 2007 for bonds with maturity dates is summarized as follows:—
Due in one
year or lessCorporate bonds
Other
Total

¥—
—
¥—

Due in one
year or lessCorporate bonds
Other
Total

$—
—
$—

Millions of yen
Due after one Due after five
year through years throughfive years
ten years

¥ 20
100
¥120

¥—
—
¥—

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

$ 169
847
$1,016$——$—

Due after
ten years¥——¥—

Due after
ten years$——$—

6 Property and equipment
Depreciable property is stated at the net book value in the consolidated balance sheets. The amounts of accumulated depreciation were ¥47,820 ($405,083 thousand) million and ¥48,540 million ($411,182 thousand)on March 31, 2007 and 2006, 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¥197 million ($1,669 thousand) and ¥269 million ($2,279 thousand) on March 31, 2007 and 2006, respectively.

22

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

Short-term bank loans as at March 31, 2007 and 2006 were as follows:—
Millions of yen
2007
2006

SecuredUnsecured¥ 2,875
12,889¥ 3,660
12,280Thousands of
U.S. dollars
2007$ 24,354
109,183

Interest rates range from 0.600% to 2.625%.
(b) Long-term debt

Long-term debt as at March 31, 2007 and 2006 was as follows:—
Millions of yen
2007
2006

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
0.650%-3.650% loans from financial institutions due 2008 to 2012
and thereafter
SecuredUnsecured
Total
Less: amount due within one year

Thousands of
U.S. dollars
2007¥ 6,400600¥ 6,400600$ 54,214
5,083

2,500

2,500

21,177

1,070
2,173
12,743727¥12,016

1,293
876
11,669416¥11,253

9,064
18,407
107,946
6,159$101,787

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, 2007 are as follows:—
Year ending March 31,

Millions ofyen

Thousands of
U.S. dollars

2008
2009
2010
2011
2012 and thereafter

¥ 679
7,640
3,024
218
455

$ 5,752
64,71825,616
1,847
3,854(c) Pledged assets

Property and equipment having a net value of ¥14,345 million ($121,516 thousand) was pledged as collateralfor short-term bank loans and long-term debt as at March 31, 2007.

8 Impairment losses
During the fiscal year ended March 31, 2006, the Group recorded impairment losses concerning the following
asset groupings.

Usage

Tonami Transportation
Tonami Transportation
Kawai Transportation and3 other companies

Haulage andwarehouse facilities

Location

Koto Ward,
Tokyo and 37
other sites
Warehouse facilities
Noda, Chiba
prefecture
Facilities for lease
Moriyama,
and idle asset
Shiga prefecture,and 3 other sites

Total

Type

Impairment losses Impairment losses(millions of (thousands ofyen)
U.S. dollars)

Land andbuildings¥6,865$58,153

Leased facilities

756

6,404

Land andbuildings

57

483¥7,678$65,040

The Company is a comprehensive logistics enterprise and has six operations 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.

23

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.
Regarding the asset groupings for which impairment losses were recorded, future cash flow losses were projected partly due to a large decline in land prices. Thus, the carrying values of the asset groupings were reducedby the unrecoverable values and an impairment loss amounting to ¥7,678 million (US$65,040 thousand) wasrecorded as an extraordinary loss.
The breakdown of the impairment losses is as follows: ¥3,922 million (US$33,223 thousand) concerningland, ¥3,000 million (US$25,413 thousand) concerning buildings and ¥756 million (US$6,404 thousand) concerning leased facilities.
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. Recoverable value of leased facilities is measured based on the use
value and the present value is calculated based on a 3.6% discount of future cash flows.
No impairment loss was recognized for the fiscal year ended March 31, 2007.

9 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 has two types of defined benefit plans, a lump-sum payment plan and an additional benefit
type of pension plan. The Company revised its pension plans and shifted them to a cash balance plan (moneymarket-interest-rate linked type) on June 1, 2004.
The Company and certain significant domestic consolidated subsidiaries have established contributory
defined benefit pension plans pursuant to the Welfare Pension Insurance Law of Japan, i.e., welfare pension
fund plan (WPFP). The WPFP consists of the governmental welfare pension program (the substitutional portion) and an additional non-contributory pension plan portion.
The projected benefit obligation and the funded status of the plans summarized as follows:—
Millions of yen
2007
2006

Projected benefit obligation
Plan assets
Net unrecognized amountPrepaid pension and severance costs
Accrued pension and severance costs¥(21,815)
3,568
481
—
¥(17,766)¥(22,165)
3,003
446
—
¥(18,716)

Thousands of
U.S. dollars
2007$(184,795)
30,2244,075—$(150,496)

The net unrecognized amounts were as follows:—
Millions of yen
2007
2006

Unrecognized benefit obligation at transition:
Adjustment for actuarial assumptions
Past service cost
Net unrecognized amounts¥ 3,894(3,413)¥ 481¥ 4,269(3,823)¥ 446

Thousands of
U.S. dollars
2007$ 32,986(28,911)$ 4,075

The components of net periodic pension and severance costs excluding the employees’ contributory portion
were as follows:—
Millions of yen
2007
2006

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

¥ 919
524
(74)
563
(410)
¥1,522

¥ 888
549
(98)
611
(410)
¥1,5402007

2006

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

2.5%
2.5%

24

2.5%
2.5%

Thousands of
U.S. dollars
2007$ 7,785
4,439
(627)
4,769
(3,473)$12,89310 Income taxes
As described in Note 2(i), 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
2007
2006

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
2007

¥

365
6,937
1,111
282
3,685
12,380(3,362)
9,018

¥

314
7,013
1,147
292
3,962
12,728(3,245)
9,483$ 3,092
58,7639,411
2,389
31,216
104,871(28,480)
76,391(1,307)(5,537)(6,844)¥ 2,174(1,693)(5,255)(6,948)¥ 2,535(11,071)(46,904)(57,975)$ 18,416

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, 2007 and 2006 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
Other
Effective tax rate

2007

2006

41.52%—

1.20(2.91)
6.35(1.57)(7.15)
37.44%

—
—
—
—
—
—

No item was listed in the column “2006” in the above table, because the Company recorded a loss before
income taxes and minority interests in the year ended March 31, 2006.

11 Derivative Transactions
The Group utilizes financial instruments with embedded derivatives for the purpose of utilizing excess fund,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.

12 Cash flow statements
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, 2007 and 2006 are as follows:—
Millions of yen
2007
2006

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¥13,606(222)
999—¥14,383¥13,244
(210)
1,000
—
¥14,034

Thousands of
U.S. dollars
2007$115,256(1,881)
8,463—$121,838

13 Finance leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation, accumulated
impairment losses and net book value of the leased property as of March 31, 2007 and 2006, which would
have been reflected in the consolidated balance sheets if finance lease accounting had been applied to thefinance leases currently accounted for as operating leases:—Millions of yen
2007
2006

Acquisition costs:
Machinery and tools
Other assets
Accumulated depreciation:
Machinery and tools
Other assets
Accumulated impairment losses:
Machinery and tools
Other assets¥16,3215,906¥22,227¥17,352
1,403¥18,755$138,255
50,030$188,285¥ 9,618
1,056¥10,674¥10,692270¥10,962$081,474
8,945$090,419

¥

¥

$

¥
Net book value:
Machinery and tools
Other assets

Thousands of
U.S. dollars
2007

—
756
756

¥06,703
4,094¥10,797

¥

—
756
756

¥06,660377¥07,037

$

—
6,404
6,404

$056,781
34,680$091,461

Amounts of depreciation expense equivalents and interest expense equivalents for the years ended March 31,
2007 and 2006 are as follows:—
Millions of yen
2007
2006

Depreciation expense
Interest expense¥2,601258¥2,761
191

Thousands of
U.S. dollars
2007$22,033
2,186

Lease payments relating to finance leases accounted for as operating leases amounted to ¥2,939 million($24,896 thousands) and ¥3,072 million ($26,023 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,
2007 and 2006, respectively.
In the year ended March 31, 2006, impairment losses on leased assets amounting to ¥756 million ($6,404
thousand) was 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, 2007 and 2006, reversal of impairment losses on leased assets amounting to ¥42 million($356 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, 2007 and 2006 for finance leases accounted for as operating leases are
summarized as follows:—
Millions of yen
2007
2006

Due within one year
Due over one year
Total

¥ 2,531
8,832¥11,363¥ 672

Impairment losses on leased assets

Thousands of
U.S. dollars
2007¥2,535
5,199¥7,734¥ 714$21,440
74,816$96,256$ 5,693

Millions ofyen

Thousands of
U.S. dollars

¥195
1
76
962

$1,6528644
8,149

14 Contingent liabilities
As at March 31, 2007, the Company was contingently liable as follows:—
Notes discounted with banks
Guarantees of welfare pension housing loans sublet to employees
Notes endorsed
Others26

15 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 shareholders’ equity 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, 2007
and the revalued book value

Millions ofyen

Thousands of
U.S. dollars¥10,005$84,752

16 Net assets
The new Company Law of Japan (the “Law”), which superseded most of the provision of the Commercial Codeof Japan, went into effect on May 1, 2006. The Law provides that an amount equal to 10% of the amount to be
distributed as distributions of capital surplus (other than the capital reserve) and retained earnings (other thanthe legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be madeat any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.
(a) Information concerning changes in net assets

Treasury stock
Class of shares

Common stock (shares)

At March 31, 2006

Increase

Decrease

At March 31, 2007

6,649,249

52,664—

6,701,913

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

52,664 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

At March
31, 2006

Increase

6,738,544

1,274,276

Decrease

At March
31, 2007

Balance at
March 31, 2007
(millions of yen)—

8,012,820—

Commonstock

The number of shares to be issued or transferred upon exercise of stock acquisition rights is the number of
exercisable stock acquisition rights.
Reason for the change in the number of shares to be issued or transferred upon exercise of stock acquisitionrights:
The increase in the number of stock acquisition rights granted in 2004 was attributable to the change in theexercise price.
Stock acquisition rights granted in 2004 pertain to yen-denominated convertible bond type-bonds with stockacquisition 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
Statutory 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.
27

(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
—
—
—
—
—
1,340,000——
120,000
1,220,000

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——

17 Supplementary income information
Supplementary income information for the years ended March 31, 2007 and 2006 is as follows:—
Millions of yen
2007
2006

Depreciation expenses
Lease and rental¥2,650
6,149

Thousands of
U.S. dollars
2007¥2,508
5,987$22,448
52,08818 Amounts per share
Amounts per share of common stock for the years ended March 31, 2007 and 2006 were as follows:—
Yen

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

2007

2006

¥ 20.77
19.34
6.00¥525.17¥(56.02)—
6.00¥516.51

U.S. dollars
2007$0.1759
0.16380.0508$4.4487

Although dilutive securities were outstanding, diluted net income per share for the year ended March 31, 2006
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, 2007 and 2006 were as follows:—
Millions of yen
2007
2006

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

28

Thousands of
U.S. dollars
2007¥48,323¥—$409,343

47,742
581
Shares97,610,118
6,701,913——

404,422
4,921

90,908,205———

Basis for the calculation of basic and diluted net (loss) income per share for the years ended March 31, 2007
and 2006 was as follows:—
Millions of yen
2007
2006

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 statutory auditors)
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:(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 effect¥1,889—Thousands of
U.S. dollars
2007¥(5,050)
46$16,002
—

(—)
(46)
1,889
(5,097)90,939,740 90,981,585(—)
16,002—(—)
6,738,544(6,738,544)(Stock option)
Stock options approved at theannual shareholders’ meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,220.)

—
(—)
—
(—)

—
(—)

(Convertible bond-type bonds
with stock acquisition rights)
Yen-denominated convertiblebond-type bond with stockacquisition rights due Sep 30,
2009(face amount: ¥2,500 million(US$ 21,177 thousand))(Stock option)
Stock options approved at theannual shareholders’ meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,340.)

19 Subsequent event
The annual shareholders’ meeting of the Company, which was held on June 28, 2007, duly approved the payment of dividends as followed:—
Millions ofyen

Thousands of
U.S. dollars¥273$2,313

Cash dividends (¥3.00 per share)

20 Segment Information
The Company’s business segments consist of logistics related services classified as Logistics and non-logistics
services classified as Others.
A summary of segment information by industry segment for the years ended March 31, 2007 and 2006 was
as follows:—
Millions of yen

For the year ended March 31, 2007

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

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

29

Eliminations(Notes 1 and 2) Consolidated

Logistics

Millions of yen

For the year ended March 31, 2006

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

OthersTotal¥117,151
151
117,302
115,881¥ 1,421¥11,947
7,636
19,583
18,848¥ 735¥129,098
7,787
136,885
134,729¥ 2,156¥—(7,787)(7,787)(7,688)¥ (99)¥129,098—
129,098
127,041¥ 2,057¥25,340
¥ 205
¥
92
¥ 913

¥117,546¥ 2,519¥ 7,678¥ 2,755¥ 4,031¥ (11)¥—¥
3¥121,577¥ 2,508¥ 7,678¥ 2,758

Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets¥ 92,206
Depreciation¥ 2,314
Impairment losses¥ 7,586
Capital expenditures¥ 1,842
For the year ended March 31, 2007
Logistics

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

Eliminations(Notes 1 and 2) Consolidated

Logistics$999,662
152
999,814992,173$ 7,641

Thousands of U.S. dollars
Eliminations
Others
Total(Notes 1 and 2) Consolidated$101,736 $1,101,398
65,15965,311
166,895 1,166,709
156,874 1,149,047$ 10,021 $ 17,662

Assets, depreciation, impairment losses and capital expenditures:
Identifiable assets$774,375$219,051
Depreciation$ 19,856$ 2,685
Impairment losses$—$—
Capital expenditures$ 13,138$ 1,669$ 993,426$ 22,541$—$ 14,807$— $1,101,398(65,311)—(65,311) 1,101,398(64,752) 1,084,295$ (559) $ 17,103$ 17,510
$
93
$
—
$
25

$1,010,936$ 22,448$—$ 14,832

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 ¥129 million ($1,093 thousand) and ¥174 million ($1,474 thousand) for the years ended March 31, 2007 and 2006, 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 ¥27,813 million ($235,604 thousand) and¥29,914 million ($253,401 thousand) for the years ended March, 2007 and 2006, respectively.
Note 3. In view of the increased importance of the Company’s information processing operations, theCompany has changed the information processing operations to a divisional structure, as is the casewith its other business operations. In order to classify its businesses in more appropriate business segments that reflect the actual state of the business, beginning with the fiscal year ended March 31,
2007, the Company has transferred information processing operations from the Logistics segment to
the Other segment.
As a result of this change, as compared to the previous accounting treatment, for the fiscal year
ended March 31, 2007, operating revenues from logistics-related businesses decreased ¥832 million(US$7,048 thousand), operating revenues from other businesses increased ¥770 million (US$6,523
thousand), and eliminations increased ¥62 million (US$525 thousand). Operating cost and expensesof logistics-related businesses decreased ¥498 million (US$4,219 thousand), operating cost andexpenses of other businesses increased ¥436 million (US$3,693 thousand), and eliminations increased¥62 million (US$525 thousand). Operating income from logistics-related businesses decreased ¥334
million (US$2,829 thousand), and operating income from other businesses increased ¥334 million(US$2,829 thousand).
The two business segments mainly consist of the following services:
Logistics . . .

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

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

OthersNeither 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, 2007 and 2006.

30

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, 2007 and 2006, 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, 2007 and2006, 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 Note 8 to the consolidated financial statements, the Company and its consolidated subsidiaries, effective the year ended March 31, 2006, adopted the new accounting standards for Impairment of
Fixed Assets.
The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended
March 31, 2007 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 28, 200731

Non-Consolidated Balance Sheets
TONAMI TRANSPORTATION CO., LTD

As of March 31, 2007 and 2006

Millions of yen
2007
2006

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

9,621

9,623

$ 81,499

999

1,000

8,463

18,991

18,719160,873

(26)

(26)

(220)

Inventories

136

141

1,152

Deferred tax assets (Note 8)

502

526

4,252

8,910

9,130

75,476

39,133

39,113

331,495

Land

33,21233,731

281,338

Buildings and structures

45,20345,354382,914

Machinery and tools

6,320

6,612

53,537

Vehicles

11,89013,193

100,720

Less: accumulated depreciation(43,042)(43,769)(364,608)

53,58355,121453,901

Investments in securities

7,442

8,344

63,041

Investments in subsidiaries and affiliates

3,182

3,181

26,9555

7

42

Deferred tax assets (Note 8)

1,501

1,842

12,715

Others

4,037

3,268

34,197

16,167

16,642

136,950¥108,883¥110,876$922,346

ASSETS

Current assets:
Cash¥

Marketable securities¥

Trade receivables:
Notes and accounts (Note 9)
Less: allowance for doubtful accounts

Other current assets
Total current assets

Property and equipment (Notes 5 and 6):

Net property and equipment

Investments and other assets:

Loans to employees

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

32

LIABILITIES AND NET ASSETS

Millions of yen
2007
2006

Current liabilities:
Trade notes payable
Short-term bank loans (Note 6)
Current portion of long-term debt (Note 6)
Trade accounts payable (Note 9)
Deposits from employees
Income taxes payable
Other current liabilities
Total current liabilities
Long-term liabilities:
Long-term debt, less current portion thereof (Note 6)
Deferred tax liabilities from revaluation reserve for land (Note 12)
Employees’ severance and retirement benefits
Other long-term liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders’ equity (Note 13):
Common stock:
Authorized: 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:
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: 6,684,333 shares in 2007
6,631,669 shares in 2006
Total shareholders' equity
Valuation and translation adjustments:
Unrealized gain on securities
Revaluation reserve for land (Note 12)
Total valuation and translation adjustments
Total net assets
Total liabilities and net assets
33

¥

505
11,530552
15,399
381
143
4,919
33,429¥Thousands of
U.S. dollars(Note 1)
2007

517
13,255210
15,395405—
5,144
34,926$

4,278
97,671
4,676
130,445
3,227
1,211
41,669283,177

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

10,4775,800
17,342773
34,392
69,31897,15447,480138,788
6,184
289,606
572,783

14,183

14,183

120,144

3,546
8,956
12,502

3,546
11,141
14,68730,03875,866
105,904

7,722
270
735
8,727

7,449
270
(1,756)
5,963

65,4132,287
6,226
73,926(1,981)33,431(1,964)32,869(16,781)
283,193

1,879
5,956
7,835
41,266¥108,883

2,444
6,245
8,689
41,558¥110,876

15,91750,453
66,370349,563$922,346

Non-Consolidated Statements of Operations
TONAMI TRANSPORTATION CO., LTD.

For the years ended March 31, 2007 and 2006
Thousands of
U.S. dollars(Note 1)
2007

Millions of yen
2007
2006

Operating revenues (Note 9)¥99,082¥98,978$839,322

Operating cost (Notes 9 and 14)

96,452

95,660817,043

Selling, general and administrative expenses (Notes 9 and 14)

2,040

2,608

17,281

98,492

98,268834,324

590

710

4,998

Interest and dividend income (Note 9)

466

347

3,948

Income (loss) on disposal of property and equipment, net

435

(88)

3,685

Interest expenses

(171)

(213)

(1,449)Impairment losses—(7,621)—Other, net

315

69

2,668

1,045

(7,506)

8,852

1,635

(6,796)

13,850Current

246

330

2,084

Refund—70—

Deferred553(1,170)

4,684

799

(770)

6,768

836

¥ (6,026)

Operating costs and expenses:

Operating income
Other income and expenses:

Income (loss) before income taxes
Income taxes (Note 8):

Net (loss) income¥

The accompanying Notes are an integral part of these statements.

34

$

7,082

Non-Consolidated Statements of Changes in Net Assets
TONAMI TRANSPORTATION CO., LTD.

For the years ended March 31, 2007 and 2006
Millions of yen
Capital surplus

Balance as at March 31, 2005
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, 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

Shares ofcommonstock(thousands)

Commonstock

97,610¥14,183

Capitalreserve

Other
capitalsurplus¥12,287 ¥ 2,400(8,741)

8,741

Retained earnings

Total
capitalsurplusLegalreserveOtherretainedearnings

Total
retainedearnings¥14,687¥1,261¥11,714¥12,975(1,261)

(546)
1,261
(6,026)(546)—(6,026)

—
—

(406)

97,610 ¥14,183¥ 3,546 ¥11,141 ¥14,687(546)(1,639)

¥

—

—
—
(406)

(34)
(34)
¥ 5,963 ¥ 5,963(546)(1,639)
836
1,639

836
1,639
—

97,610 ¥14,183¥ 8,727¥ 8,727

Millions of yen
Valuation and translation adjustments
Total
Unrealized
Revaluation Total valuation
shareholders’gain onreserveand translation
equitysecurities
for landadjustments

Total
net assets¥ 3,546 ¥ 8,956 ¥12,502

Treasurystock

Balance as at March 31, 2005
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, 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

289

—
—
289

¥(1,950) ¥39,895(546)—(6,026)
—
—
—
—
(406)
(14)
(14)
(34)
¥(1,964) ¥32,869(546)(1,639)
836
1,639
—
—
—
289
(17)
(17)
—
¥(1,981) ¥33,431

The accompanying Notes are an integral part of these statements.

35¥1,309¥—¥6,768(523)
1,135¥2,444¥6,245(565)¥1,879(289)¥5,956¥8,077¥47,972(546)—(6,026)
—
—
—
—
(523)
(929)
(14)
1,135
1,101
¥8,689 ¥41,558(546)(1,639)
836
1,639
—
—
—
289
(17)
(854)
(854)
¥7,835 ¥41,266

Commonstock

Balance as at March 31, 2005
Cash dividends applicable to the year($0.0508 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, 2006
Cash dividends applicable to the year($0.0508 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

Thousands of U.S. dollars (Note 1)
Capital surplus
Retained earnings
Other
Total
Other
Total
CapitalcapitalcapitalLegalretainedretainedreserve
surplussurplusreserveearnings
earnings$120,144 $104,083$20,330 $124,413———(74,045) 74,045
—
—
—
—
—
—
—
$120,144 $ 30,038 $94,375 $124,413$10,682$99,229 $109,911$(4,625) (4,625)
10,682—(51,047) (51,047)————(3,439) (3,439)
—
(288)
(288)
— $50,512 $ 50,512(4,625) (4,625)(13,884) (13,884)
—
—
—
—
—
—
—
—
$120,144 $ 30,038 $75,866 $105,904 $

—
—
7,082
7,082
13,884
13,884
—
—
—
2,448
2,448
—
—
— $73,926 $ 73,926(10,682)

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

Balance as at March 31, 2005
Cash dividends applicable to the year ($0.0508 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, 2006
Cash dividends applicable to the year ($0.0508 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

Total
net assets$(16,518) $337,950 $11,088 $57,332 $68,420 $406,370(4,625)—(4,625)———(51,047)— (51,047)
—
—
—
—
—
—
—
—
—
—
—
—
(3,439)(4,431) (4,431) (7,870)
(118)
(118)
—
(118)
(288)
9,615
9,615
9,327
$(16,636)$278,433 $20,703 $52,901 $73,604 $352,037(4,625)—(4,625)(13,884)— (13,884)
7,082
—
7,082
13,884—
13,884
—
—
—
—
—
—
—
—
—
2,448
—
2,448
(145)
(145)
—
(145)
—
(4,786) (2,448) (7,234) (7,234)$(16,781)$283,193 $15,917 $50,453 $66,370 $349,563

The accompanying Notes are an integral part of these statements.

36

Non-Consolidated Statements of Cash FlowsTONAMI TRANSPORTATION CO., LTD.

For the years ended March 31, 2007 and 2006

Millions of yen
2007
2006

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

Cash flows from operating activities:
Net income (loss) before income taxes
Depreciation and amortization
Impairment losses(Gain) loss on disposal of property and equipment
Loss on sales of investments in securities
Loss on devaluation of investments in securities
Loss on devaluation of golf club memberships
Increase (decrease) in allowance for doubtful accounts
Decrease in employees’ severance and retirement benefits
Increase (decrease) in accrued bonuses to employees
Interest and dividend income
Interest expenses
Increase in trade receivables
Decrease in inventories(Decrease) increase in accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividends received
Interest paid
Income taxes paid
Net cash provided by operating activities¥ 1,635
1,816
—
(435)
(0)
50
—
36
(958)
98
(466)
167
(311)
5
(7)
4
(923)
711
466
(167)
91
1,101

¥ (6,796)
1,697
7,621
88
(36)
58
8
(67)
(464)
(300)
(347)
213
(271)
3
1,111
(56)
(100)
2,362
347
(213)
(1,047)
1,449$ 13,850
15,383—(3,685)
(0)
424
—
305
(8,115)830(3,948)1,415(2,634)42(59)
34(7,819)6,023
3,948(1,415)771
9,327

Cash flows from investing activities:
Purchase of marketable securities
Proceeds from sales of marketable securities
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——(1,220)
1,159
(169)
99
(23,164)
23,151
(7)
(151)

(0)
65
(1,362)
37(244)
54(21,499)
20,61635(2,298)——(10,335)
9,818(1,432)
839(196,222)
196,112(59)(1,279)Cash flows from financing activities:
Decrease (increase) in short-term loans
Proceeds from long-term loans
Repayments of long-term debt
Purchase of treasury stock
Dividends paid
Net cash used in financing activities(1,725)
1,800
(465)
(17)
(546)
(953)

8
—
(412)
(14)
(546)
(964)

(14,613)
15,248(3,939)(144)(4,625)(8,073)(3)
10,623¥ 10,620(1,813)
12,436¥(10,623(25)
89,987$ 89,962

Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
The accompanying Notes are an integral part of these statements.

37

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

1 Basis of presenting financial statements
The accompanying non-consolidated financial statements of Tonami Transportation Co., Ltd. (the “Company”)
are prepared on the basis of accounting principles generally accepted in Japan, which are different in certain
respects as to the application and disclosure requirements of International Financial Reporting Standards, andare complied from the consolidated financial statements prepared by the Company as required by the Securities
and Exchange Law of 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 suchinformation from their non-consolidated financial statements and the notes thereto. Accordingly, the Company
has omitted the statements of cash flows, the note for related party transactions, the note for accrued pension
and severance costs and certain other information from the accompanying non-consolidated financial statements and the notes thereto. Refer to the consolidated financial statements and the notes 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 ¥118.05 = U.S.$1, prevailing on March 31, 2007, 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 determinedprincipally 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.
Such 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 resulting 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, 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 assuming that theassets have no salvage value.
(g) Leases

Finance leases, except those leases for which the ownership of the leased assets is considered to be transferredto the lessee, are accounted for by the method similar to that applicable to ordinary operating leases.
38

(h) Employees’ severance and retirement benefits

The Company’s employees 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 a liability forseverance and retirement benefits, which is included in the liability section of the non-consolidated balance
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 certain period
not exceeding the employees average remaining service lives) commencing with the year as occurred.
Actuarial gains and losses are recognized in expenses using the straight-line method over 11 years (a certain
period not exceeding the employees’ average remaining service lives) commencing with the next year as
occurred.
The Company has two types of defined benefit plans, a lump-sum payment plan and an additional benefit
type of pension plan. The Company revised its pension plans and shifted them to a money-market-rates linkage
type from June 1, 2004.
The Company has established contributory defined benefit pension plans pursuant to the Welfare Pension
Insurance Law of Japan.
(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) 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 whenpurchased.
(k) 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.
In computing diluted net income per share, the weighted-average number of shares is increased by the number of shares that would have been outstanding assuming the conversion of all convertible bond type-bonds
with stock acquisition rights at the beginning of each year.

3 Accounting Changes(a) Accounting Standards for impairment of fixed assets

Effective April 1, 2005, the Company adopted a new accounting standard for the impairment of fixed assets.
The Company bases its grouping for assessing such impairment losses on its business segments. However, theGroup determines whether an asset is impaired on an individual asset basis when the asset is deemed idle or if
it is scheduled to be disposed of.
The effect of this adoption was to decrease income before income taxes and minority interests by ¥7,621
million for the year ended March 31, 2006. During the year ended March 31, 2007, the Company has notrecorded loss on impairment of fixed assets.
(b) 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, the previously reported consolidated balance sheet as of March 31, 2006 and the consolidated statements of shareholders’ equity for the years ended March 31, 2006, have been restated to conform to
the presentation and disclosure of the consolidated financial statements for the year ended March 31, 2007.
(c) 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$4,456 thousand) , and gross operating income decreased by the same amount.

39

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 Notes due at the end of the fiscal year
Notes due at the end of the fiscal year are treated as if they were settled on the due date. Since the last day of
the fiscal year, March 31, 2007, was a holiday for financial institutions, the following notes due at the end of
the fiscal year were treated as if they were settled on the due date.
Notes receivable
Notes payable

Millions ofyen

Thousands of
U.S. dollars

¥420
153

$3,5581,296

5 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 andequipment was ¥197 million ($1,669 thousand) and ¥269 million ($2,279 thousand) as at March 31, 2007
and 2006, respectively.

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

Short-term bank loans as at March 31, 2007 and 2006 were as follows:—
Millions of yen
2007
2006

SecuredUnsecured¥2,7208,810¥ 3,080
10,175

Thousands of
U.S. dollars
2007$23,041
74,630Interest rates range from 0.630% to 1.207%.
(b) Long-term debt

Long-term debt as at March 31, 2007 and 2006 was as follows:—
Millions of yen
2007
2006

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
0.850%-2.100% loans from financial institutions due 2008 to 2012 and thereafter
Secured976
Unsecured
1,545
Total
12,021
Less:amount due within one year552
¥11,469

Thousands of
U.S. dollars
2007¥ 6,400
600$54,214
5,083

2,500

21,1771,155
32
10,687210¥10,477

8,268
13,088101,830
4,676$97,154

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, 2007 were as follows:—
Year ending March 31,

Millions ofyen

Thousands of
U.S. dollars

2008
2009
2010
2011
2012 and thereafter¥0,552
7,550
2,954
159
254

$04,676
63,95625,023
1,347
2,152(c) Pledged assets

As at March 31, 2007, Property and equipment having a net value of ¥13,647 million ($115,604 thousand) was
pledged as collateral for short-term bank loans and long-term debt (including current portion of long-term debt).

40

7 Impairment losses
During the fiscal year ended March 31, 2006, the Company recorded impairment losses concerning the following asset groupings.
Impairment losses Impairment losses(millions of (thousands ofyen)
U.S. dollars)

Usage

LocationType

Haulage andwarehouse facilities
Warehouse facilities

Koto Ward, Tokyo and 37
other sites
Noda, Chiba prefecture

Land and buildings¥6,865$58,153

Leased facilities

756¥7,621

6,404$64,557

The Company is a comprehensive logistics enterprise and has six operations 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.
Regarding the asset groupings for which impairment losses were recorded, future cash flow losses were projected partly due to a large decline in land prices. Thus, the carrying values of the asset groupings were reducedby the unrecoverable values and an impairment loss amounting to ¥7,621 million (US$64,557 thousand) wasrecorded as an extraordinary loss.
The breakdown of the impairment losses is as follows: ¥3,872 million (US$32,800 thousand) concerningland, ¥2,993 million (US$25,354 thousand) concerning buildings and ¥756 million (US$6,404 thousand) concerning leased facilities.
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. Recoverable value of leased facilities is measured based on the use
value and the present value is calculated based on a 3.6% discount of future cash flows.
No impairment loss was recognized for the fiscal year ended March 31, 2007.

8 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
2007
2006

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

41

¥

239
7,013

Thousands of
U.S. dollars
2007

279
6,625
1,082
272
2,299
10,557(2,030)
8,527

¥

2,352
11,038(2,032)
9,006$ 2,363
56,1209,166
2,304
19,47589,428(17,196)
72,232(1,281)(5,243)(6,524)¥ 2,003(1,659)(4,979)(6,638)¥ 2,368(10,852)(44,413)(55,265)$ 16,967

1,145
289

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, 2007 and 2006 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

2007

2006

40.44%

—

1.89

—
—
—
—
—

(5.34)

11.74
0.16
48.89%

No item was listed in the column "2006" on the above table, because the Company recorded a loss before
income taxes in the year ended March 31, 2006.

9 Accounts and transactions with subsidiaries and affiliates
As at March 31, 2007, the Company had 28 subsidiaries and 8 affiliates.
Receivables from, payables to, and transactions with these subsidiaries and affiliates are summarized asfollows:—
Millions of yen
2007
2006

Notes and accounts receivable
Loans receivable
Trade accounts payable

¥

205
7,936
10,921

¥

251
7,907
11,042Millions of yen
2007
2006

Operating revenues
Operating cost
Interest income¥ 2,305
10,595178¥ 2,448
10,200145

Thousands of
U.S. dollars
2007$ 1,737
67,226
92,512Thousands of
U.S. dollars
2007$19,526
89,750
1,508

10 Finance leases
The following pro forma amounts represent the acquisition costs, accumulated depreciation, accumulated
impairment losses and net book value of the leased property as of March 31, 2007 and 2006, which would
have been reflected in the balance sheets if finance lease accounting had been applied to the finance leases currently accounted for as operating leases:—Millions of yen
2007
2006

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
2007¥13,8435,834¥19,677¥14,966
1,319¥16,285$117,264
49,420$166,684¥ 8,219995¥ 9,214¥ 9,441209¥ 9,650$ 69,623
8,429$ 78,052

¥

—

¥

756
756

¥ 5,624
4,083¥ 9,707

¥
¥

—
756
756

¥ 5,525354¥ 5,879

$

—

$

6,404
6,404

$ 47,641
34,587$ 82,228

Amounts of depreciation expense equivalents and interest expense equivalents for the years ended March 31,
2007 and 2006 are as follows:—
Millions of yen
2007
2006

Depreciation expense
Interest expense¥2,192222¥2,352
156

Thousands of
U.S. dollars
2007$18,568
1,881

Lease payments relating to finance leases accounted for as operating leases amounted to ¥2,492 million($21,110 thousand) and ¥2,625 million($22,236 thousand), which were equal to the depreciation expense of42

the leased assets computed by the straight-line method over the lease terms, for the years ended March 31,
2007 and 2006, respectively.
In the year ended March 31, 2006, impairment losses on leased assets amounting to ¥756 million ($6,404
thousand) was 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, 2007 reversal of impairment losses on leased assets amounting to ¥42 million ($356 thousand) was recorded.
Future minimum lease payments (including the interest portion thereon) and the balance of impairment
losses on leased assets at March 31, 2007 and 2006 for finance leases accounted for as operating leases are
summarized as follows:—
Thousands of
U.S. dollars
2007

Millions of yen
2007
2006

Due within one year
Due over one year
Total
Impairment losses on leased assets¥ 2,150
8,119¥10,269¥ 672¥2,143
4,422¥6,565¥ 714$18,213
68,776$86,989$ 5,693

Millions ofyen

Thousands of
U.S. dollars

¥
1
1,119

$
8
9,479

11 Contingent liabilities
As at March 31, 2007, the Company was contingently liable as follows:—
Guarantees of welfare pension housing loans sublet to employees
Others12 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 shareholders’ equity 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, 2007 and the revaluated book value

Millions ofyen

Thousands of
U.S. dollars¥10,005$84,752

13 Net assets
The new Company Law of Japan (the “Law”), which superseded most of the provision of the Commercial Codeof Japan, went into effect on May 1, 2006. The Law provides that an amount equal to 10% of the amount to be
distributed as distributions of capital surplus (other than the capital reserve) and retained earnings (other thanthe legal reserve) be transferred to the capital reserve and the legal reserve, respectively, until the sum of thecapital reserve and the legal reserve equals 25% of the common stock account. Such distributions can be madeat any time by resolution of the shareholders, or by the Board of Directors if certain conditions are met, but neither the capital reserve nor the legal reserve is available for distributions.
(a) Information concerning changes in net assets

Treasury stock
Class of shares

Common stock (shares)

At March 31, 2006

Increase

Decrease

At March 31, 2007

6,631,669

52,664—

6,684,333

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

52,664 shares

14 Supplementary income information
Supplementary income information for the years ended March 31, 2007 and 2006 is as follows:—
Millions of yen
2007
2006

Depreciation expenses
Lease and rental¥1,8163,997

43¥1,697
3,899

Thousands of
U.S. dollars
2007$15,383
33,859

15 Amounts per share
Amounts per share of common stock for the years ended March 31, 2007 and 2006 were as follows:—
Yen
2007

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

¥

9.19

8.55
6.00
¥453.84

2006¥ (66.22)—
6.00¥ 456.79

U.S. dollars
2007$0.0778

0.07240.0508$3.8445

Although dilutive securities were outstanding, diluted net income per share for the year ended March 31, 2006
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, 2007 and 2006 were as
follows:—
Millions of yen
2007
2006

Total net assets as reported on the non-consolidated balance sheets
Net assets allocated in common stock
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¥41,266¥
41,266
Shares97,610,118
6,684,333——

90,925,785—

Thousands of
U.S. dollars
2007$349,564
349,564——

Basis for the calculation of basic and diluted net (loss) income per share for the years ended March 31, 2007
and 2006 was as follows:—
Millions of yen
2007
2006

Thousands of
U.S. dollars
2007

Net (loss) income available to shareholders of common stock:
Net (loss) income¥ 836¥ (6,026)$7,082
Net (loss) income not available to shareholders of common stock :———(of which appropriation of bonuses to directors and statutory auditors)
(—)
(—.)
(—)
Net (loss) income available to shareholders of common stock :836(6,026)
7,082
Weighted-average number of shares of common stock outstanding
90,957,320 90,999,165
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)(—.)
Common stock equivalents not included in calculation(Stock option)(Convertible bond-type bondsof diluted net income per share due to their anti-dilutive effect Stock options approved at the with stock acquisition rights)
annual shareholders' meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,220.)

Yen-denominated convertiblebond-type bond with stock acquisition rights due Sep 30,
2009(face amount: ¥2,500 million(US$ 21,177 thousand))(Stock option)
Stock options approved at theannual shareholders' meetingof the Company held on June29, 2005(The number of stock acquisition rights was 1,340.)

16 Subsequent event
The annual shareholders’ meeting of the Company, which was held on June 28, 2007, duly approved the payment of dividends as follows:—
Dividends (¥3.00 per share)

44

Millions ofyen

Thousands of
U.S. dollars¥273$2,313

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, 2007 and 2006, and the related non-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 responsibilityof the Company’s management. Our responsibility is to express an opinion on these financial statements basedon 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, 2007 and 2006, and the non-consolidated results of its operations and its cash flows for the years then ended in conformity with accounting
principles generally accepted in Japan.
Supplemental Information
As described in Note 7 to the non-consolidated financial statements, the Company, effective the year ended
March 31, 2006, adopted the new accounting standards for Impairment of Fixed Assets.
The U.S. dollar amounts in the accompanying non-consolidated financial statements with respect to the year
ended March 31, 2007 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 28, 200745

Non-Consolidated Five-Year Summary
TONAMI TRANSPORTATION CO., LTD

Years ended March 31

2006

2007

Thousands of
U.S. dollars
2007

2003

2004

Millions of yen
2005¥ 97,246¥100,679¥ 99,504¥ 98,978¥ 99,082$839,322

Operating cost

92,51096,372

95,30895,66096,452817,043

Selling, general and administrative expenses

2,758

2,800

2,819

2,608

2,040

17,281

Operating income

1,978

1,507

1,377

710

590

4,998

Income (loss) before income taxes

8,231

1,769

1,813

(6,796)

1,635

13,850Net income (loss)

4,407

684

862

(6,026)

836

7,082

Capital expenditures

1,261

6,684

3,289

1,117

1,049

8,886

Depreciation expenses

2,051

1,796

1,860

1,697

1,816

15,383

9.09¥ (66.22) ¥9.19$ 0.0778

RESULTS OF OPERATIONS:
Operating revenues

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

¥

45.10

¥

6.96

¥

6.00

8.00

6.00

6.00

6.00

0.0508¥ 39,183¥ 33,883¥ 39,631¥ 39,113¥ 39,133$331,495

Net property and equipment

57,94262,26062,69555,12153,583453,901

Total assets

108,543

109,202

116,108

110,876

108,883

922,346

Total current liabilities

35,77830,10934,99334,92633,429283,177

Long-term liabilities, excluding of current portion thereof

25,214

31,61633,142

34,392

34,188289,606

Total net assets

47,55147,47747,972

41,55841,266

349,563

Number of share outstanding (thousand)

97,61097,61097,61097,61097,610

Number of employees

5,462

5,462

5,429

5,298

5,139

YEAR-END FINANCIAL POSITION:
Total current assets

OTHER YEAR-END DATA:

46

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

47

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

Directors
Yasuo Terabayashi
Yoshinobu Watanabe
Toshiyuki Koroku
Shigeyuki Okada
Yoshimi Nagahara
Kazuo Takata
Shinichi Izumi
Standing Statutory Auditors
Makoto Nagai
Nariyuki Aoki

Managing Director
Shigeki Sakamoto
Director and Adviser
Yohsuke Konishi

Statutory Auditors
Shinichiro Inushima
Toshio Yaeda
Yohji Ishiguro(As of June 28, 2007)

Corporate Data

Head Office2-12, Showa-machi 3-chome, Takaoka,
Toyama Prefecture 933-8566, Japan
Phone: (0766) 21-1073
Fax: (0766) 21-3640

Issued and Outstanding Shares
97,610,118 shares

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

48

Shareholders

7,945

Employees

5,139

Terminals

81

Warehouses

48

Motor Vehicles

5,534(As of March 31, 2007)

2007
Annual Report
For the year ended March 31, 2007

TONAMI TRANSPORTATION CO., LTD.

TONAMI TRANSPORTATION CO., LTD.

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

Printed in Japan on recycled paper